The Oil Drum

Frankly, this is a classic case of a situation that can't be judged purely on economic terms.  How do you tell an entire city of that size, and particularly one with that much history and unique culture, that their city has been declared dead because the dollar cost to rebuild it is too great?  I honestly don't think I could do it, at any price.

You'd have to have substantially more destruction to warrant abandoning the whole city.  No matter how bad the destruction is now, there's still lots of value there.  Bad joke, but the "sunk costs" of an American city are HUGE.  All the roads, for example.  The sewers, power grid, pumping stations, and the buildings that will survive with only moderate-to-light damage.  Some infrastructure will be damaged, but much of it can be repaired for much less than replacement cost.  Ditto for housing and businesses.  Wood frame houses will be destroyed by flooding but many other structures may need only a long hose, some new drywall, and electrical and plumbing repairs.

There's over 600,000 people in the NO area - they can't all leave.  And although the flooding will hit the old center of the city hardest, look on Google Earth - the suburbs of NO extend outward quite a distance, and those on the south side of the river or farther west will escape with little damage beyond that done directly by the hurricane (and direct hurricane damage is a risk no matter where you are on the Gulf Coast).

In any event, lots of folks will probably decide to move away, even if only a short distance up-river or to higher elevations.  For those that stay, the costs will rise, both emotionally due to continued anxiety and loss, and economically due to increased flood-control and emergency contingency costs - like LOTS more shelters - and falling property values.

It would, however, make sense to divert all or part of the Mississippi River into a new path away from the urban area and reduce the overall threat the city faces.  That would require LOTS of new or moved infrastructure, but still less than moving the entire city.