Flood protection is often presumed to be a public good and hence a government responsibility. Unfortunately, the full costs of publicly-funded flood control efforts are often obscured. Moreover, reliance on government protection can create false impressions that individual risks have been minimized, thus encouraging more personal and business investment in disaster-prone regions. Reimbursing these losses after a disaster perpetuates a cycle in which resources spent to protect communities from flood damage can instead increase vulnerability and create a climate of “moral hazard” where people fail to take appropriate actions to reduce risk. As New Orleans continues to rebuild from the damage of Hurricane Katrina, there is a need to consider comprehensive approaches that will provide decision makers at all levels with incentives to manage flood risk more effectively. This paper offers guidance for developing more rational, risk-based government policies for flood protection, approaches that could be less costly and place fewer people and their livelihoods at risk.
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