Matthew Kahn, author of the excellent Climatopolis, a hard-headed look at how cities and societies might adapt to a changing climate, has a post that is as important as it is short, and my guess is that it will be badly misinterpreted by many readers. Kahn’s essential point — that the downsides of FEMA and the federal backstop for regions hit by climate-related emergencies might outweigh the upsides — will never be made by a serious candidate for national office, but it strikes me as entirely correct, if discomfiting. The following is a brief summary of Kahn’s argument:
(1) What if there were no FEMA? State and local governments and private insurers would be fully responsible for disaster recovery. The enormous financial risk this would entail would presumably lead state and local officials to want to discourage intensive development in flood-prone areas, and perhaps to impose more strenuous building codes. In Climatopolis, Kahn describes the subsidies the federal and government offers to developers building in flood-prone areas along the Mississippi, in coastal Florida, and elsehwere. This practice would have to be greatly curtailed. Over time, Kahn suggests, this shift away from short-sighted policies would have a net effect of reducing the cost of natural disasters.
(2) FEMA and the federal government more broadly tends to step in after a natural disaster to reinvest in the affected region, as we saw in post-Katrina New Orleans. Without this reinvestment, firms and entire sectors might be inclined to migrate to less vulnerable regions, e.g., the financial sector in New York city might decamp to higher ground, if the expected cost of natural disasters outweighed the returns from the agglomeration of talent and consumption externalities, etc. But Kahn notes that this would encourage New York city officials to invest more resources in “hardening” the region against natural disasters — by building barriers against surges, by embracing something like Vishaan Chakrabarti’s LoLo concept, etc.
Towards the end of the post, Kahn writes the following:
The national investment strategy in the face of climate change shouldn’t only be about protecting what’s already there by mitigating risk, it should be about adapting to the new realities we face and nudging individuals and firms to seek out safer alternatives.
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.
Update! Via the great Brandon Fuller, I see that Kahn has elaborated on his FEMA argument at his Environmental and Urban Economics blog:
Adaptation represents a large suite of policies including moving to higher ground and public investment projects in Sea Walls and small ball steps of improving existing infrastructure. Adaptation will be encouraged if Sandy is a wakeup call for the region and if cities and states that are affected by Sandy have “skin in the game” to rebuild in a more resilient way. Yes, NYC is an old city but there is no reason why in rebuilding Southern Manhattan that the “old city” should emerge again. We learn from our mistakes as we learn about the robustness of our infrastructure and as we learn about what climate change will do to our coastal cities. The net effect of this adaptation is a robust national economy that is able to withstand the new shocks posed by climate change.
My guess is that Kahn’s stock as a public intellectual will continue to rise.