The Case Against FEMA

Matthew E. Kahn makes it:

For a minute, imagine that there was no FEMA and each geographic location was on its own, forced to use private insurance and state-level funds to rebuild after disasters. Such constraints would likely encourage less risk taking before a disaster. When coastal states saw that their own resources would be used to repair flood damage, for instance, [then] political leaders would have stronger incentives to discourage housing development in flood-prone areas and to encourage greater investments in precautions like tree trimming to reduce storm damage. The net effect of such a shift in the rules of the game could be a significant reduction the cost of natural disasters. Without FEMA, states and municipalities would have better incentives to make direct investments in protecting their territory. That seems to be a clear call to do away with the agency.

Reihan adds:

Kahn is well aware of the fact that FEMA cannot and should not be wound down over night. But he makes a compelling case that we should seriously rethink how we manage risk.