It's not difficult to figure out that lowland areas near rivers have a tendency to flood — or that this can be very costly for home and business owners. To varying degrees, people tend to take these extra costs into account when deciding where to move or set up a new business. But by providing aid to rebuild flood-prone areas, federal and state governments reduce the potential costs of a flood, and thereby the risk associated with living and doing business there. This essentially becomes a subsidy for areas that are likely to be flooded.
Any astute student of economics knows what will happen next. Somewhere in the state, there are people who enjoy the many benefits of living next to a large river like the Mississippi — the boating and fishing opportunities, for instance. But, all things considered, many of these people would ordinarily consider it just a bit too risky to live in such an area. Economists characterize these people as being “on the margin.” When the costs associated with flooding are mitigated by the expectation of disaster assistance, some of the people on the safe side of the margin cross to the risky side — they now see living by the river as an attractive option. Flood relief spurs some marginal home buyers to move into flood-prone areas.
This happens not only with potential residents, but potential business owners, as well. The decreased risk brought by relief efforts means that businesses on the margin build new facilities in the flood plain rather than somewhere else, while businesses already in the area purchase new equipment and improve their buildings rather than limit possible losses.
Sunday, January 25, 2009
And that's a good thing, by the way. Things could have been a lot worse!
Scripps graduate Justina Cross is going about making a movie about how the election of President Obama. She's soliciting people to call in and tell her about Barack and how it relates to them. Here's just one of the fluffy questions she asks.
As someone who doesn't invest his life in the politics of our day, I must say I find it more than a tad bit creepy the level of support that has been going to our Dear Leader. Fortunately, Obama hasn't fallen too much into the socialism trap, by nominating dozens of ex-Clintonites to serve in his cabinet. Just take a look.
Category: Creation With the election of a new president, change is in the
air. Question: a) What kind of world do you want to live in…and what are some
things you can do to help create this world? b) Tell us about a moment that
helped you discover this talent or contribution that you can make to help create