Volume 2, Issue 2 p. 183-190

An economic approach to coping with flood damage

First published: June 1966
Citations: 44


A compulsory flood loss insurance scheme is one means of achieving efficient uses of flood plain lands. Insurance premiums proportional to risk and equal to both the private and the social cost of flood plain occupance will serve as a rationing device, eliminating economically unwarranted uses of flood plain lands on the one hand, while not prohibiting uses for which a flood plain location has merit on the other hand. In addition, reduction of flood loss insurance premiums can serve as a standard to measure the economic justification of alternative flood control measures and/or discrete increments in scale of protective works or other nonstructural flood control measures. A final advantage of flood loss insurance, which no alternative in flood management possesses, is indemnification for the residual damage potential against which it is not economic to seek protection. (Key words: Economics; flood control; flood plains; floods.)