Does the US have an obligation to rebuild New York's subway? Does New York have this obligation? Randal O'Toole (The Antiplanner) goes there: Should New York Rebuild the Subways? :
"As long as New York already had a subway, it probably made sense to maintain it. But building new subways, such as the Second Avenue subway which is costing more than $2 billion a mile, makes no sense. Will it make sense to perform costly repairs of the subways heavily damaged by Sandy?
There are those who argue that density has a great economic value and that all cities would be denser if it weren’t for barriers put in the way of density. On the other hand, if densities were lower, the damage from storms such as Sandy or other events such as earthquakes would be a lot lower.
Operating and maintaining New York’s transit system costs than $10 billion a year more than fare collections. While increasing fares by an average of $2.50 per ride could cover those costs, this wouldn’t be enough as the system isn’t being maintained to a state of good repair. Most of the subsidies come from auto users, out of either federal gas taxes or bridge tolls that are diverted to transit.
There are two alternatives to rebuilding the subways. The drastic alternative is to simply let the city fend for itself without subways. A more realistic alternative would be to convert the subways into underground busways. Electric buses could move just about as many people as the subways do with far less infrastructure.
Does the US have an obligation to bail out coastal regions which built where they shouldn't have? Matt Kahn goes there: Rebuilding New Jersey and Coastal Moral Hazard
" I predict that in the "no FEMA" equilibrium, that the state's residents and leaders would invest in taking many more precautions to reduce their exposure to flood and hurricane risk. Zoning laws would change to discourage construction in the riskiest areas and to reduce population density in those areas. Coastal home owners would be incentivized by the state to take much greater precautions to reduce ex-post damage. "
Comment: Just as there are positive externalities to density, there are negative externalities which are subsidized by others, and there is moral hazard there - overbuilding due to social insurance. Moralizing and "must"-ing as politicians are wont to do does not get us to the right answer, it just reaffirms the status quo of existing built form and real estate markets. There may be better solutions which we fail to seek in the rush to rebuild just as we were.