NCPA - National Center for Policy Analysis


October 14, 2005

The federal government should give up the idea of rebuilding New Orleans into the city it once was, says columnist Virginia Postrel. Instead, it should allow people to rebuild their own lives wherever they choose.

Lessons can be learned from the 1995 earthquake that hit Kobe, Japan. The earthquake destroyed 100,000 buildings and severely damaged infrastructure. But one year later:

  • Kobe was exporting 83 percent of its previous level and handling as many imports as before the quake.
  • Within 18 months, manufacturing was at 98 percent of where it was prior to the quake.
  • However, the city's physical and economic structure changed; for example, the plastic shoe industry was gone for good, and air freight expanded at the expense of the port.

The reason? Some buildings were outdated and would cost more to replace than their worth. Since economies are in constant flux, businesses adapted new technologies and new capital needs that would have eventually occurred anyway, says Postrel.

The lesson here is that the U.S. government wants to spend $100 billion to rebuild the "old" New Orleans, but according to Harvard University economist Edward L. Glaeser, the idea is foolish:

  • The Port of New Orleans employs 7,500 people but most of them are highly skilled; the oil and gas industries employ even fewer local residents.
  • New Orleans was built on the water-based advantages it had in the 19th century, not today's century.

A better option would be to let individuals decide where to live and work. Indeed, $100 billion in the form of $75,000 for each man, woman and child in the New Orleans metro area could be spent more efficiently.

Source: Virginia Postrel, "When Disasters Act as Accelerators of Change," New York Times, October 6, 2005.


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