That question has complex answers. Since New Orleans was pretty much a ward of the government long before the flood, I don't expect much to change. Federal money will flow in as the water flows out, and it will end up in pretty much the same places it has for decades, mostly places that weren't intended.

In a hypothetical society that had been free-market for a hundred years, New Orleans at its present location might not exist. The government has made it possible for many people to live in places that no private insurance would deal with unless there was some huge tradeoff, and there's really no way to change that now. New Orleans isn't the only place like that on our coasts by a long shot.

It's possible New Orleans' lucrative position at the mouth of the Mississippi would have made it viable for private cooperatives to build the infrastructure required to protect it and insure it. I don't know.

"Gouging" is an interesting concept. It refers to a seller and a customer making a trade at a free-market price that an enlightend third party is not comfortable with.

In a situation where, say, hammers are very hard to come by, somebody who goes to the effort and possibly danger involved in hauling in hammers may put a very high price on them. If he sells them, the price was right. If he is ignored, the price is too high. Someone with a rarified idea of nobility and economics may declare that this is "gouging," and order the price of hammers to be set to the price one would pay if you could just walk into one of several competing hardware stores and pick one off a shelf of dozens.

Of course, there's no point in going to the trouble of hauling hammers into a disaster zone at the hardware store price, so no hammers will be brought in, the person who needs them will have none, and the third party goes away content in a job well done.