Government subsidies cause much avoidable damage. Politicians say they just want to “help” people. But giving people hand‐outs invariably changes their behavior and often induces them to make harmful decisions. The negative side effects of subsidies ripple outwards in every direction leading to calls for more help, more regulations, and more government. The politicians never accept any blame, and their impulse is to layer more subsidy Band‐Aids on top.
In environmental policy, I’ve written about how subsidies, including federal flood insurance and infrastructure spending, have induced people to live in dangerous flood zones along rivers and seacoasts. Since 1970, the number of Americans living in Special Flood Hazard Areas has increased from 10 million to more than 16 million. Government policies drew them in.
Stanford’s Jeffrey Ball writes in the Wall Street Journal that a parallel set of insurance and infrastructure subsidies has induced Californians to live in dangerous fire zones, greatly exacerbating the damage caused by recent wildfires:
The historically deadly wildfires that have roared through California this fall, and a string of similarly destructive ones over the past two years, are boosting calls to do more to slow climate change. But another underlying problem has contributed to the fires’ tragic damage: For decades, California, supposedly the greenest of states, has artificially lowered the cost of encroaching on nature by living in the woods.
Permissive building codes, low insurance rates and soaring taxpayer spending on firefighting and other services have provided an economic framework that has encouraged people to flee the state’s increasingly expensive cities for their leafy fringes.
… For years, Cal Fire, the state wildfire‐fighting agency, has been spending increasing sums to put out wildfires, as has the U.S. Forest Service. Already by 2006, according to an audit, most of the money the forest service was spending to put out large fires was “directly linked to protecting private property” in the wildland‐urban interface. Meanwhile, at public cost, government has been encouraging more development by pushing infrastructure—roads, utilities, rescue services—ever farther into the forest.
… Once a house is built in California’s [wildland‐urban interface areas], the state’s unusually low insurance rates have the effect of shifting much of the real cost. The average California homeowner pays about $1,000 a year in homeowner’s insurance—about half the level in Florida or Texas, two other states with markedly rising incidences of natural disasters believed linked to climate change.
That is a result of state policy, not an accident. California has an elected state insurance commissioner, one of 11 in the country who are elected, who caps the rates private insurance companies may charge.
… Other government payments further tilt the economics. Taxpayer‐funded state grants commonly pay for brush‐removal and other fire‐prevention efforts in high‐risk areas. When fires happen, taxpayers foot the bill to put them out. In 2011, the state began charging a fee to WUI homeowners to fund firefighting and prevention, causing an outcry; in 2017, it was rescinded as part of a larger piece of environmental legislation.
For more on government failure, see here.
