I think something has been missed out of this article: namely the effectivenesss of aid as a means of redistribution from rich to poor. The fact that a person is living in a flood zone means that they are much more likely to be poor, in a similar way to the fact that if they are out of work, there is an increassed chance of poverty, so we subsidise people who are out of work (here in the UK at least), even though doing so creates unfortunate discincentive effects. The difference is that living in a flood zone is considerably more costly, even given the aid relief on offer, than sitting at home watching cable t.v., such that people are far more likely to be incentivised not to work than they are to be incentivised to live in a disaster zone, given the same expected net gain. Thus, aid relief is a great means to subsidise the least well off, since it approximates a lump sum subsidy far better than most income transfers. Admiitedly, this results in some people being priced out of living in a disaster zone and becoming homeless, but this is also not too bad, since being homeless is also a good indicator of poor economic welfare that it is costly to imitate; all we need to do is give council houses to the homeless to offset the negative effects on them of giving them aid. Incidentally , I agree that giving them the cash would be better; not helping them at all on the other hand would not. If Prof. Landsburg has time for a response, I would love to hear it.