First, there should be no compensation to affluent people who could have insured against their loss, whether or not they actually bought insurance. Second, in determining compensation for uninsurable losses (or losses by people who cannot afford insurance), the amount should be determined by reference to the practices of insurance companies. Just because a person loses his house in a flood that destroys hundreds of thousands of other houses, rather than in a fire that destroys just his house, is no reason for the taxpayer to reimburse him for the loss.
Becker‘s tone is gentler, but his proposed remedy is actually harsher:
I believe it is best in deciding who merits compensation from disaster to apply to victims the same criteria used to determine who is eligible for welfare, Medicaid, and other government transfer programs. For example, families that because of Katrina lost most of their assets, became unemployed, or became sick would qualify for one or more of these programs, regardless of their circumstances before Katrina hit. Using the usual criteria that determines eligibility for welfare, medical, and other assistance, these families would automatically be helped without the need to have any special relief program.
This debate has clear consequences for Australia, where in the absence of drought insurance or a HECS-style scheme for farmers, public policy can only respond by boosting handouts to farmers when times are tough.