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October 10, 2007



But would policy decisions about flood defences be made on the back of probability assessments, even if they were possible? I suspect that electoral calculations would still count more.

Mark Wadsworth

1. Nobody knows how soon or how bad next floods will be.

2. ABI have vested interest in better flood defences.

3. Homeowners have vested interest in better flood defences and also in lower insurance premiums.

4. Dam builders and the like have vested interest in building dams.

Solution - provided it's homeowners paying for flood defences via land value tax, and their additional land value tax is less than the corresponding reduction in insurance premiums, everybody wins.

Even if it never floods again, it's nice to be able to sleep at night. That must be worth something, even if, with the benefits of 20/20 hindsight in thousands of years time, it turns out it was a waste of money.


Here's a solution: don't buy a house on a floodplain, or if you do, recognise you're taking a risk, and get private insurance.


Surely the pricing mechanism will take care of the problem. After all comparable houses in or out of flood plain areas ought to show the challenge that potential floods bring. The pricing mechanism will then, as it were, provide an inbuilt insurance premium. I.e. the price reduction for a house in a flood plain will be X,000 less & this will 'pay' for the damage caused. This assumes (wild optimism) that the price differential is then invested as a sort of eschew fund for potential future losses.


"3. Our assessment of risk is coloured by recent events."
The "our" here must mean people who are not expert in the area where the risk is to be assessed. Evidence, however, appears to suggest that there is a lag between expert assessment of increased risk in a situation where "the process generating events changes over time" and the application of new or enhanced defence measures. While that may give the appearance of incompetence (and sometimes that is proved later, maybe is on the way now with Lady Whatsit's claim yesterday that this year we had the wrong kind of floods), it is the nature of governments that decisions to mitigate risk often take a long time. The moral is in mat's comment.


Dreamingspire makes a very good point there Chris - the flooding experts had been warning about these risks for quite a while, and the decentralised wisdom of crowds ignored them. To me, this at least on the face of it looks like an own goal for markets vs. central planners.

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