What can I be sure will happen sooner or later? Yep, there will be a flood.
I could anticipate this inevitability, keep a supply of sandbags handy and build my house on stilts — an ungainly, limiting and potentially expensive option
Or I could insure against the consequences of flooding, cop the damage when the river overflows its banks, but return everything back to normal at home with the help of a payout. All well and good if I can obtain commercial insurance for this particular plot of land that the actuaries know only too well is prone to getting wet.
Or I could build a house on higher ground above the level of the biggest floods. This is obviously the most sensible option
Now suppose that the government gets involved. It decides that it is cheaper to allow people to build in flood prone areas than to move them elsewhere, further away from existing transport and utility infrastructure and from where they are needed for the economy. The jobs happen to be at businesses that also happen to have located themselves on the floodplain.
And then there is the stimulus of spending. The insurance payouts go towards rebuilding and all the new carpets that must be bought and fitted after each flood — all very good for the local economy.
All politicians know how important it is to keep money moving through the system. So government provides a subsidy to the insurance industry so that households can stay on the floodplain.
The result is people do get insurance and, mostly they stay put. It will be painfull when the next flood ravages their Ikea lounge furniture and through the process of claiming the payout but happy enough wielding the Allen key to construct the new lounge suite.
Meantime we have damaged and thrown away perfectly usable materials that we have replaced from never ending environmental resource supplies.
Sounds crazy — but it is true.