The 5.4 quake in the Chino Hills, California, yesterday, hit an area that has been significantly suburbanized over the last decade (insert old fogey “I remember when …” speech here). Why was the damage so minimal?
Largely because of building codes. These are some of the newest housing and retail areas in the state, and they were largely built to some of the toughest quake safety building codes in the nation, including stuff after the 1992 Northridge Quake. Market forces didn’t make that happen — people generally assume a house is built to some level of safety, and aside from very old houses, I suspect most people don’t ask for the quake protection specs of places they’re buying in California. As the market in earthquake insurance demonstrates, in a truly “free” market, most people would just cross their fingers and then dig out after a quake hits. But instead, based on a proven need to help public safety, the government (state and local) imposed a financial burden on builders (which, of course, they passed on to their customers). And, in this case, it worked. I strongly suspect the aggregate costs of those code requirements was lower than the damage (physical and social) that would have been done had there been no such code protections.
I do believe in the power of free markets, and in the wisdom (in some areas) of those markets as an aggregation of consumer interests and choices. But there are certainly areas where it’s appropriate for the government (as our representatives) to step in and raise the bar for everyone. The markets are wisest in the short term and for immediate needs; for the long-term and for widespread societal health, they are rarely up to the job.