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Involve catastrophic decisions and bear great risk and yet there can be no clear answer. For example, if a person gets a divorce, shutters a plant, sells a losing investment, or closes their business, will he or she be better off? The following case incorporates nearly all of the material you have covered this far and presents an example of one such choice where nearly all of the alternatives have a significant downside risk.


Hallegatte, an environmentalist, assigns a probability (p) of a Katrina-like hurricane of 1/130 in his cost-benefit analysis for flood protection. However, the levees that protect New Orleans also put other regions at greater risk. You may assume the frequency of other floods is greater than Katrina-like events (Vastag & Rein, 2011).
The new levees that were built in response to Katrina cost approximately fourteen billion dollars (in 2010). This is in addition to the direct costs of Katrina (eighty-one billion dollars in 2005).
50 percent of New Orleans is at or below sea level.
A 100-year event means that there is a 63 percent chance that such an event will occur within a 100-year period.
The following are the interested (anchored and/or biased) constituencies:
Residents of New Orleans—both those that can move and those who cannot move
Residents of the surrounding floodplains at risk from New Orleans levees
The Mayor of New Orleans
The federal government—specifically taxpayers and the Federal Emergency Management Agency (FEMA) 

Part A: Economic Conditions of New Orleans

Hurricane Katrina was a destructive tropical cyclone in United States in 2005. The centre of this cyclone crossed the southeast portion of New Orleans. The storm swell caused approximately 23 breaches in navigation canal levees and floodwalls and drainage canal. Most of the residents of New Orleans were shifted before the attack. However, some people also remained in the city as they did not have personal transport. There were some other people, who did not know the news (Lewis et al., 2017). This disaster deeply influenced a large segment of the economy, population and politics of the overall United States. Moreover, it showed the failure of flood protection system of federal government. During this cyclone, communication, building and roads and levee failed drastically. Many people had lost their life. This report will discuss on the economic conditions of New Orleans, based on cost-benefit analysis. Moreover, cost-benefit analysis will be done based on constituencies of this state. Those constituencies are residents of New Orleans, resident of other surrounding parts, the Mayor of this city of Louisiana and the federal government. Based on this cost-benefit analysis, a relevant expected utility will be estimated. In the second part of the report, a discussion for and against rebuilding of the city of New Orleans will be discussed.

Economic condition:

The economic condition of New Orleans was chiefly depended on port. The number of population was increased and the economy was in its peak position during the 19th century. However, due to industrialisation and increasing methods to transport goods, the economic condition of this city decreased steadily (Fields, Thomas & Wagner, 2017). Hence, the city based on three major industries. These were entertainment, transportation and public service. These economic sectors with entire economy faced a huge loss after this natural disaster. After Katrina, the number of labour force has decreased and wages also decreased drastically. The entire economy faced huge amount of unemployment. The service sector was negatively affected to a large extend. However, after that natural disaster, the demand of construction sector increased noticeably. The sector was demanded hugely to construct and repair homes and roads. After Katrina, the labour force decreased rapidly and the number of unemployment was high (DeWaard, Curtis & Fussell, 2016). On the other side, demand level was also very high.

There were some suggestions regarding the usage of natural capital to improve the economic condition of New Orleans. The city tried to improve their wet land. Hence, an opposition was arrived to rebuild the flooded lands. Restoring wetlands were profitable for the economy. As the Mississippi delta gives largest fisheries and flyway terminus in the United States, the city can earn profit from those ecological industries. Moreover, by increasing the wetland, the city could make a natural barrier. This barrier will protect them from future storms. It was estimated that if the city restored their wetland before Katrina, then it would earn $ 6 billion, every year (Bessette, 2017). While the city is trying to rebuild their economic condition by improving tourists’ spot, natural capital could also help the country’s economy to increase further.

Cost-Benefit Analysis

After analysing the economic condition of New Orleans, a cost-benefit analysis can be seen. The entire economy faced huge loss during this natural disaster. Moreover, after Katrina, the city took more than 10 years to cover its entire economic conditions. During this storm, the city faced huge economical losses. People lost their jobs and unemployment rate was very high. During this phase, New Orleans and its surrounding cities suffered a lot. Hence, economically, U.S bore huge amount of costs. However, after the flood, the number of wetland in this city has increased. This could help the economic condition of entire city and for the state, as well. By using those wetlands, people can earn revenues from natural industries. Hence, this natural industry can bring economic benefit for the city’s economic conditions (Barbieri & Edwards, 2017). Except tourism industry, the city can earn revenue from fisheries as other industries were destroyed by the storm. Moreover, those wetlands create a natural barrier that can prevent another storm, in future. On the other hand, the economy will bear some costs if wetlands are not reconstructed. Manufacturing industries would face loss. If the country supports wetland as their natural barrier, then the city will not construct any artificial barrier to prevent the storm (Lewis, 2017). This will further make loss for this construction industry of the city. Hence, to rebuild the New ORrleans; there are some costs and some benefits, as well. As a result, a controversy has arrived for and against the rebuild of city.

People of New Orleans suffered a lot from this cyclone. Due to this disaster, many people were separated from their family members including children. People, who fled from New Orleans, spent months without income (Rivera, 2016). Their homes were destroyed and they almost had nothing as possession. Hence, a massive migration had occurred during this period. The number of population has decreased in New Orleans, significantly.

Hence, residents of New Orleans affected drastically by this storm. Other people, who live around the floodplains, also suffered a lot. They lost their home and property. Moreover, a massive health problem has occurred due to this disaster. People become refuge and become depended on government aid. As the government of United States could not fulfil their needs, a political disturbance had arrived (Miller, Jonkman & Ledden, 2015). The government created the Federal emergency Management Agency (FEMA) to deal with those natural disasters. However, this agency could not even control this massive disaster due to lack of inefficiency.

Hence, the every person faced a huge loss and the entire economy saw apolitical disturbance. People lost their faith on government as they could not meet their needs. The government should invest more funds to rescue the condition of people. The government would invest huge amount of money to build a flood protection system. However, the government should invest money to protect wellbeing of public.

When the federal, state and local governments debated with each other, during Katrina, some community took their own decision and successfully execute themselves by redeveloping their plans. People of unflooded area could return to their home. However, people of flooded area could not return to their home. Hence, they tried to rebuild their hometown after that natural disaster. Moreover, after the incident, the Mayor’s electoral future was in doubt. Racism also occurred during this period (Marable & Clarke, 2016). As millions of people, including citizen of New Orleans, were living along the corridor of Mississippi, flood become the nightmare for them. This flood helps to increase the livelihoods of farmers and fishermen of Louisiana. If the government decides to build levees, than the city will go under the dirty water. Moreover the people of those areas are expecting more natural disaster.

Affects on People

As the government does not have enough funds to support each citizen of New Orleans to rebuild their home, there should be some affects on people. It will very difficult for citizens to go back to their home by reconstructing it. Moreover, the job opportunity and wage rate has also decreased. Hence, it will be better for those citizens of this city and cities to estimate a cost-benefit analysis to take the further decision (Fussell, 2015). The city can face another disaster at any time. Hence, the future of this city and citizens are very uncertain. They can face another huge loose in upcoming years. On the other side, people of less destroyed proton are trying to rebuild their home and recovering their possession. With the help of some organisations, those citizens are trying to rebuild the economic condition of the city. They are trying to recover their community life and social justice. Moreover, the political party also analyses their costs and benefits related to this city (Marable & Clarke, 2016). Due to huge number of homeless people, the government felt to destroy the system. Hence, each section has their own analyses and they will bear individual impact. However, both the government and citizens will consider the ultimate utility, which they will get from this cost-benefit analysis.

After Hurricane Katrina, President declared to rebuild the city once again. Moreover, he promised to rebuild the communities and home of citizens. Decision makers suggested various public spending to rebuild New Orleans. However, there are a lot of controversies that whether the government should pay to rebuild or not. Economists supported to provide free disaster insurance for high risk areas to prevent the disaster. People, who lived in high risk areas, should get insurance from an economic point of view.

New Orleans should be restored for its cultural values. It is one of the largest ports in this world. The city has historic value, simple compassion and cultural uniqueness. Those have lost due to the storm. Hence, it is important to restore the city. Moreover, the location of city is good. New Orleans is nicely located at the head of the Mississippi river. Moreover, the U.S government has a moral obligation to rebuild the city. In this case, the government either can provide insurance to its citizens or can provide checks (Rivera, 2016). By this, they can take their own decisions that how they will spend their money. As there is a huge difference between rebuilding lives and rebuilding of communities, the government should take decision with its limited funds that what it will do. Hence, in this case, the government should consider the cost-benefit analysis. If the government is deciding to rebuild the city, this decision will completely depend on the citizens of the New Orleans. Hence, form the government’s point of view, there is a huge controversy that whether the city will be rebuild or not.

As levees could not protect the city from the storm, there will be another chance for this city to destroy in future. As the city faced massive damage, it will be very difficult for the government to reconstruct the entire city with its limited funds. People of some less affected areas went back to their home and reconstruct those homes by themselves. However, reconstruction of entire area with wetland and other will be very costly.  Moreover, port and other infrastructural facilities are also destroyed by the storm. Hence, due to this lack of development, political disturbances have also occurred (Marable & Clarke, 2016). If citizen of this city takes initiatives to recover their home-town, than a recovery can be possible. For example, the city is hosting conventions and promoting their tourism industry. The electricity condition was also very poor and people could not get proper drinking water. Hence, after analysing the whole concept, it will be very difficult to determine that whether the city will be reconstructed or not. To analyse those situation, proper cost-benefit analysis will be affective and helpful. The government will consider its cost side and benefit portion to take decision about the reconstruction (Gallagher & Hartley, 2017). On the other hand, people of New Orleans will also analyse their cost and benefit regarding this reconstructions. The government and citizens should take this decisions based on some factors. Those factors will be geographical position of New Orleans, financial conditions of the government and future chances of natural disaster of this country.  

Conclusion:

New Orleans faced huge difficulties due to the natural disaster. Katrina finished almost every part of the city. Moreover, the political, social and economical conditions of the city have also destroyed. On the other side, a major debate has raised for and against the reconstruction of the city. In this context, cost-benefit analysis will be affective for the citizens and for the government. By analysing this method, both government and citizens will take decision that whether reconstruction will be needed or not. At the end, the government and the citizens will take this decision, where they will get maximum utility. If they will be benefitted by reconstructing the entire city, then they will do so.

Reference:

Barbieri, S., & Edwards, J. H. (2017). Middle-class flight from post-Katrina New Orleans: A theoretical analysis of inequality and schooling. Regional Science and Urban Economics, 64, 12-29.

Bessette, D. L., Mayer, L. A., Cwik, B., Vezér, M., Keller, K., Lempert, R. J., & Tuana, N. (2017). Building a values?informed mental model for new orleans climate risk management. Risk Analysis, 37(10), 1993-2004.

DeWaard, J., Curtis, K. J., & Fussell, E. (2016). Population recovery in New Orleans after Hurricane Katrina: Exploring the potential role of stage migration in migration systems. Population and environment, 37(4), 449-463.

Fields, B., Thomas, J., & Wagner, J. A. (2017). Living with Water in the Era of Climate Change: Lessons from the Lafitte Greenway in Post-Katrina New Orleans. Journal of Planning Education and Research, 37(3), 309-321.

Fussell, E. (2015). The long-term recovery of New Orleans’ population after Hurricane Katrina. American Behavioral Scientist, 59(10), 1231-1245.

Gallagher, J., & Hartley, D. (2017). Household finance after a natural disaster: The case of Hurricane Katrina. American Economic Journal: Economic Policy, 9(3), 199-228.

Lewis, J. A., Zipperer, W. C., Ernstson, H., Bernik, B., Hazen, R., Elmqvist, T., & Blum, M. J. (2017). Socioecological disparities in New Orleans following Hurricane Katrina. Ecosphere, 8(9).

Marable, M., & Clarke, K. (Eds.). (2016). Seeking higher ground: the Hurricane Katrina crisis, race, and public policy reader. Springer.

Miller, A., Jonkman, S. N., & Ledden, M. V. (2015). Risk to life due to flooding in post-Katrina New Orleans. Natural hazards and earth system sciences, 15(1), 59-73.

Rivera, J. D. (2016). Disaster's Impact on Livelihood and Cultural Survival: Losses, Opportunities, and Mitigation by Michèle Companion (Ed.). Risk, Hazards & Crisis in Public Policy, 7(3), 146-155.

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