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Floods and Economy

Published on June 28, 2010 by: in: Economy

It is always good to think in economic terms – even in the time of flood. It is always good to think economicallay – before the flood, after the flood and without the flood too. Upon the whole, if one thinks economically, they are usually flooded with interesting prospects.


In concern that we all should be flooded with prospects in economic terms, e.g. to achieve the same results with half the effort, I suggest abstaining for some time from writing provisional anti-flood bills.

However badly politicians would want to show off their sensitivity to men’s misery, it is worth considering the point of what one is going to do.

And I am much worried that in this wishful thinking, that there would not be any more floods, we can find expensive ideas which are unreasonable from the economic point of view.

Firstly, the anti-flood measures – pricey and longstanding investments. Secondly, the anti-flood measures taken before the flood become an insurance, though a wholesale one.

And there is no insurance that can protect us from the events, in case of which we want to get insurance. If I insure my home in case of fire, flood and burglary, still all of these events can happen. And the compensation is meant to restore the ‘status quo ante’ – the state before the event. Of course, I could dig my heels in – unlike an economist –  and hire fire-fighters, bodyguards and anybody else. But then I would… go bankrupt as the cost of protection in the long run would outweigh the worth of the protected object.

The same applies to embankments and other flood investments. Our investment should not exceed the worth of the protected objects. Since this flood is said to be the highest since 1870s, we should not try to insure by building embankments capable of stopping such a high but unusually rare wave. Otherwise we will make a classic economic mistake.

We should start thinking. We should measure the level of water in the floods we experience every several years and plan investment according to them. The rest is providence and we must help people afterwards.

And that is all about the economic principles. They will not resolve, though, the peculiar cases i.e. wrong permissions to settle in the bottomlands or even on flood plains. However, even there we should think economically. There is no use allowing sparsely populated grounds, which will be periodically threatened by floods. Since gigantic blocks of flats are already built, like in one of Wroclaw’s districts, the cost of removal could be so high that probably the additional flood protection would be reasonable.

In all our ventures we should avoid this fashionable stupidity, that the state is capable of averting absolutely every threat. The ultimate certainty that nothing wrong can happen is available on in one’s coffin. But there it is needless. It is worth remembering that life is hazard…

Translated by A. Kumycz

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About Jan Winiecki

Economist, professor of Aalborg University and European University Viadrina in Frankfurt, co-founder and president of the foundation of Adam Smith Center, former member of the EBRD board, co-founder and former president of the Polish Economic Society, laureate of Kisiel Prize.

Fredrich Naumann Foundation For The Freedom
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