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Certainly we will help. But what sort of help?** However, I think the subsidized insurance encourages development in places where it shouldn't.

Of course it does. It's classic moral hazard. It's inherent whenever government provides assistance that mitigates the risk of doing something. The question is what government does when it has already agreed to socialize the losses. It's an issue that comes up in lots of contexts, most recently with health care.

Here, the feds are not going to abandon flood-ravaged areas. Given that commitment, then, which is the more efficient solution - require flood-proofing new development and payment of special premiums as a condition to receiving federal flood insurance, or just respond on an ad hoc basis with disaster relief? The former runs the risk of moral hazard, but the latter may end up being far more costly.

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