Liberty is Prosperity

Friday, September 02, 2005

Privately Funded Secure Levees

This is a response to Tyler Cowen's post at Marginal Revolution, "A short history of FEMA".

Levees are more than earthen mounds holding back water- they are the best real estate in town.

Many industries need to be on the water. High end residences are desirable on the water.

So a private solution to this problem is to sell the perimeter of New Orleans to a developer who can then develop the levee real estate, probablly using land leases, in a way that makes sure that each user's leasehold is protected with the positive externality that everything "in the bowl" is then protected. The levees would tend to be very large, because that means more premium real estate- they would extend as far away from the water as the economic benefit of the location would allow.

The users of the premium levee real estate would end up paying very high rents for their premium property. Every levee user has incentive to protect their piece of levee for their own benefit. Everyone else gets the free ride of flood protection.