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Does New York Need a Redesign?

"Going forward we are going to have to anticipate these types of extreme weather patterns," New York Governor Andrew Cuomo said in a press conference Tuesday morning. "And we have to think about how we redesign the system so that this doesn't happen again."

Photo by Adam Jeffery for CNBC

This is a line of reasoning that I expect will become quite common in the days and weeks following the Sandy disaster. Experts will hold forth on the inadequacies of pre-disaster preparation, the costs of repair, and the need for infrastructure improvements to avoid a repeat of Sandy's damage.

Evaluating the need for redesign, however, cannot just turn on the now all too obvious possibility that extreme damage can be done to our transportation and energy infrastructure by extreme weather events. Of course no one wants to ever again endure what we're going through right now but that does not, in itself, provide a good guide for policy. (Read More: Economic Impact of Sandy's Havoc Not Yet Clear)

The cost of a protective redesign of, say, the New York City subway system must be evaluated in light of the benefits of additional protection when disaster strike and the likelihood of a similar event. You could, for instance, protect a storm like Sandy from causing this kind of damage by simply relocating New York City far from the coast or by erecting a retractable bubble over the city. But the costs would be greater than any reasonably expected benefits.

In addition, we have to weigh each redesign's costs and benefits against the costs of foregoing other public projects, including providing for the needy in non-emergency situations and improving non-critical (but economically important) infrastructure. In short, we've got to conduct basic cost-benefit analysis.

It's altogether possible that we have exactly the right level of resiliency when it comes to natural disasters. As bad as things are, we weren't so vulnerable that we completely lost control of our city. The final costs are still unknown but they were not total. New York, New Jersey and even Atlantic City are not lost.

Most likely, the political dividing line in this debate will be over the question of the likelihood of extreme events. Governor Cuomo has let us know where he stands, saying "After what happened and after what's been happening for the past few years, I don't think anyone can sit back and say I'm shocked about a weather pattern. There's no weather pattern that can shock me."

Of course, it does seem extraordinary that the New York area has been hit by two devastating hurricanes in two years. There's a temptation to say that the once-rare event is now common. Look! It keeps happening!

Obviously, however, the sample size of two events in two years is too small. Over any reasonable broad timeline, events like Sandy are extremely rare. Sandy is, in fact, unique. Con Ed and the MTA say nothing like this has happened before in history.

A single event can change our view of the possibility of it occurring, which is what Black Swan events do. But they should not change our view of the probability of it occurring (unless we had assigned a probability of zero). Having a single coinland on its edge doesn't mean we should believe that edge landings are as common as heads and tails.

This is how this will become political: those committed to policy changes in favor of attempts to ameliorate climate change will see the Sandy disaster as supporting their views. Those committed to extensive infrastructure spending, will cite Sandy in support of their view. And, of course, there is a huge overlap between those two groups of people (it's tempting to say they are, in fact, one and the same group.)

It's probably too much to hope that we won't base our decisions about redesigning our power and transportation infrastructure on the emotional appeal to avoid future Sandys. Absent further reason to believe that Sandy is not a once in a hundred year event, we'll likely avoid future Sandys for quite some time just because rare events remain rare.

In truth, however, no one can say for sure when this type of disaster can happen again. The future inconveniently refuses to reveal itself to the present, even through the long lens of the past. We shouldn't pretend to know more than we do.

But even in light of uncertainty, the fragility of a system is not simply a function of the damage that can be done by an extreme event.

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