Frances, Ivan and Jeanne have come and gone, and in their wake have left thousands without homes and many others without lives.
As the people whose lives have been devastated by the storms struggle to rebuild, they can rest easy knowing that relief is on the way.
Federal aid is almost always awarded in times like these.
It goes a long way to soften the blow dealt to those affected by the storms, which is only fitting since the guarantee of federal disaster relief is a reason that so many people were in the storms’ paths in the first place.
But isn’t that like blaming insurance for car accidents?
Not at all.
When people drive recklessly and total their cars, they do so despite the cost of insurance, not because of it.Most people drive safer because they know reckless driving will increase their insurance costs.
Although federal disaster relief is often compared with insurance, the only thing they really have in common is both pay out sums of money.
Incentives and costs of federal disaster relief and insurance are wildly different. If this type of federal aid covered the damage done to people’s cars-as opposed to damage done by natural disasters-would you really be surprised to see more people driving crazy? Would less people take driver safety courses? And would there be fewer five-star safety rated cars on the market?
One of the societal benefits of insurance is it encourages safe behavior.
Federal disaster relief, on the other hand, allows people to continue engaging in risky behavior.
In addition to encouraging its citizens to engage in risky behavior, federal disaster relief also punishes those who choose not to live in disaster-prone areas.
Money is taken from those who choose not to live in a dangerous area and given to those who put their lives and their property at risk.
Insurance not only places the extra cost of living in a dangerous area on those who choose to do so, but it also creates real wealth in the process.
The federal government simply redistributes the money from one group to another.
In this scenario, no new jobs or opportunities are created and the best possible case is that there will be no net loss of wealth in the transfer.
Compare the actions of the government to that of insurance companies.
Insurance companies are given money by their customers and invest that money. So when the time comes, insurance companies liquidate a portion of the wealth that has been created and use that money to pay back its customers.
Although federal disaster relief is quite popular with politicians and is a good example of government helping its citizens, it needs to be kept in mind that what’s important is not the intentions of an action, but rather that action’s real result.
The government’s federal disaster aid may have been intended to increase people’s well being, but what it really does is make it more difficult for its citizens to ascertain how much of a risk they are actually taking.
Daniel Watkins is a senior computer information systems student from Hepzhibah, Ga. Contact him