Valuing Community in a Cost-Benefit World

Elizabeth Brown continues our conversation regarding New Orleans' redevelopment plan in light of subsidiarity; she questions my skepticism of the utility of a straight cost-benefit analysis when it comes to the redevelopment of the Ninth Ward given that such analysis is legally required:

Since they are required to undertake cost-benefit analyses, how should FEMA or the state and local officials calculate the “cultural cost” of the Ninth Ward? It was originally a cypress swamp and was not settled until after the Civil War. It was the last part of New Orleans that was settled. Even in 1950, only half of the Lower Ninth Ward was developed. The ward grew until 1965 when it was flooded by Hurricane Betsy. Many residents and businesses left after that hurricane and the area began to decline. Given that the Ninth Ward had been in decline since 1965, should FEMA and state and local officials attempt to take into account the fact that its cultural contributions might have been waning? Given that most of the residents of the Ninth Ward are poor or lower middle class and lacked flood insurance, the majority of residents might never return because they cannot afford to rebuild. Individuals undertake cost-benefit analyses too. If barely half the residents return, how valuable a community will it be to New Orleans?  Will it be worth the billions and billions of dollars that it will cost to make the levies protecting it strong enough to withstand a Level 5 Hurricane?

How should FEMA and state and local officials account for the fact that, if brought out, most of the residents of the Ninth Ward probably might simply move to other parts of New Orleans and will enrich their new communities and continue to enrich the city itself? The endowment effect certainly causes people to value what they have (or had) more than it might really be worth. This cognitive bias certainly would support policies like saving the Ninth Ward. Such biases, if they exist, need to recognized and accounted for when undertaking any cost-benefit analysis.  New Orleans as a whole might be better off if the former residents of the Ninth Ward were no longer isolated in the Ninth Ward but spread to other parts of the city to enrich other communities.

Again, these are good contributions to any evaluation of the redevelopment plan.  A couple of points bear emphasizing: first, the difficulty in assigning a value to the cultural significance of the Ninth Ward underscores the appeal of empowering members of that community to assign value through their decisions whether or not to return and rebuild.  I'm not against giving government checks to residents; rather, I'm against giving them government checks and categorically forbidding them from using the check to rebuild in their current neighborhood.  Second, New Orleans might be better off if Ninth Ward residents were spread around the city to enrich other communities, but the top-down dispersal of residents is highly problematic.  Any such redistribution of social capital should occur bottom-up, through residents' own decision-making.

When the city of Chicago started tearing down public housing projects and pushing residents into other areas of the city and suburbs, I conducted housing-rights seminars for the residents.  Many were terrified and/or crestfallen at the prospect of leaving the only community they had known; others couldn't wait to get out.  So I'm not suggesting a blanket characterization of how Ninth Ward residents value the preservation of their community.  It might be that Ninth Ward residents can't wait to get out of an economically depressed area. Subsidiarity, at least as I interpret it, would want residents to decide for themselves, and the New Orleans proposal allows them to do so, albeit imperfectly.  Perhaps the government checks should be reduced for residents who decide to return to the Ninth Ward, shifting a portion (but certainly not all) of the levees' cost to them.  There is nothing wrong with seeking to internalize the cost of decision-making in our efforts to empower local decision-makers.  But we should be careful that we don't start making the decisions for them.

Rob