While the suffering of the individuals in New Orleans and on the Gulf Coast is real and needs to be addressed urgently, when the dust settles we need to address a basic fact. While this disaster was unstoppable, it was also not a surprise. Residents knew that this hurricane was coming for days, and city planners have known that a hurricane like this one would come someday for centuries. This was probably not even a 100 year event. Category 4 hurricanes routinely hit the Gulf Coast and South Atlantic Coast.
New Orleans is below sea level. It will be hit by another hurricane. Indeed, it will be hit by major hurricanes every few decades for the foreseeable future. As we are learning today, levees and pumps are an imperfect solution to this problem. The question is, what attitude should we take towards the rebuilding process?
In Colorado, some columnists are fond of the concept of a stupid zone. Let people build homes in forests likely to ignite in wildfires, a stupid zone. That is their decision, but government and business policymakers don't have to encourage actions that will nearly inevitably lead to a crisis in the future and require government and others to intervene to alleviate that crisis. Make it policy that houses like that won't be insurable, won't get insured mortgages, and won't receive fire protection. We'll evacuate the people, but that's it. That's the libertarian view anyway. The more paternalistic view is that we should prohibit people from doing things that don't make long term sense.
Should we really let people errect mobile homes near the Gulf Coast, knowing how those structure tend to be affected by hurricanes? Shouldn't building codes require backup power and water systems? Does it make sense to rebuild flooded neighborhoods which are below sea level at all? Is New Orleans one big stupid zone?
The flood insurance and flood disaster relief program along the Mississippi River now conditions some of its relief on not rebuilding homes in the flood plain. Should a similar approach be taken in the Big Easy?