Zhang: This is the idea of “moral hazard”: When you’re protected from the consequences of your actions, you take more risks.
Boustan: Right, like there’s going to be big government payout, and that encourages people to stay put in places that are risky. You know you’ll get your FEMA payout. We actually didn’t have any difference of course in the migration response before and after FEMA.
But of course, this is really just a before and after, and there’s a lot things about the ’40s, ’50s, and ’60s, that could be different about the ’80s, ’90s, and 2000s. In particular, you can really see the number of disasters and severity of disasters increasing. There are two things going on that could be kind of confounding. On one hand, there’s government response. On the other hand, disaster activity is getting worse. We can’t really separate those two things, but it looks like because disasters are getting worse, there’s just as much of a migration response more recently than there was in the ’30s, ’40s, and ’50s.