If you had made this sort of observation in the first place, i might not have made my somewhat snarky comment, although, as LSLGuy notes, if you want to eliminate perverse incentives in the economic system, you’re going to have to look well beyond catastrophic flood insurance.
My more general point was that simply stating the names of economic principles does not really contribute to the discussion in a very meaningful way, especially when those very principles had already formed the basis of a considerable number of arguments made in prior posts.
Furthermore, simply rattling off economic principles and then drawing simplistic conclusions from them ignores the fact that economists and policy makers need to take into account not just the positive but the normative when deciding issues like this. There are any number of places in the economy where the positive (in the scientific sense) economic data might lead us to conclude that something is unadvisable, but where normative ideas about fairness or equity or plain old human decency dictate that we ignore or work around the perverse economic incentives. If your preference is to worship the god of economic efficiency above all other things, then that’s your right, but i prefer the notion that economic policy should serve people and society, rather than the other way round.
That doesn’t mean that we should ignore perverse incentives, and we should also be willing to consider that there may be ways to reach our normative goals while also respecting and addressing problems like free riding and moral hazard and externalities, but it is incredibly simplistic to assume that any policy exhibiting those characteristics is, by definition, undesirable policy.