Geographical Moral Hazard

I was recently asked, while on a road trip to the Grand Canyon, what I thought about the Supai villagers' helicopter rescue from the bottom of the Grand Canyon. If you don't know the story: 170 members of The Havasupai Tribe that lives in a[n apparently vulnerable] section of the Grand Canyon had to be rescued by helicopter this past August during a flood.

And in case you're curious, here's a timeline of my thoughts about people living in somewhat dangerous, remote and/or not-easily-accessible-to-emergency-crews places:

August 2008:
"Why would people live in the bottom of the Grand Canyon? Nuts."

August 2008, 1 minute later:
"We're using helicopters to rescue people who chose to live at the bottom of the Grand Canyon? Sure, we can't just let them die, but shouldn't there be some sort of 'no-rescue' credible threat to prevent people from living down there without their own escape plan, so other people don't have to pay to rescue them when an obvious and inevitable danger appears?"

September 2008:
"Hmmm... Yes. Yes, indeed, I am generally opposed to people living in dangerous places without their own escape routes/plans."

November 29, 2008, during a road trip to the Grand Canyon:
"...Why not just live on the top of an active volcano, then? I mean, if the government has committed to rescue you no matter what you do, then what incentive is there to develop your own escape plans (AKA Helicopters/Lava Sleds/etc.)? This is geographical moral hazard, and I'm anti-that."

Today - December 11, 2008:
"Wait a second. Is it possibly a legitimate government function to mitigate the risks of moving to potentially dangerous locations? Could there be some benefit to this?

If there is some benefit from geographical diversity (there is), and if trailblazin', pioneering humans that settle a new, but dangerous, location don't often have the means by themselves to arrange a complete rescue for each of their trailblazin' members (but only an incomplete rescue), then I could assume that there is some need for an organized body that lowers the risks (just enough) of exploring and settling new locations.

Now there are two relevant questions:

1. Does the cost of an inevitable complete rescue outweigh the benefits (short, long and very long term benefits included) of Living Dangerously?

2. If there is a legitimate need for a dangerous location risk mitigation service, who should carry it out? Can it be a private organization (insurance), or is this one o' them 'government-only' things?

And here are the correct answers:

1. No. The long term benefits of exploration outweigh any potential rescue costs.

2. Private insurance could do the job, but humans plan on too short a timeline and have too little information about the value of potential benefits of new geography to price them correctly. Usually the benefits to human exploration are gained by those who come after the trailblazers and harness resources/new knowledge/experience/etc, and these people wouldn't want to pay the insurance fees of their forefathers...


In other words, government should be making rescue commitments to people who settle hazardous locations.

Good job.