As someone who lives in "Tornado Alley", I'll suggest that like wars, natural disasters serve to spur activity in local economies when they happen. It is simply human nature to rebuild, it's human nature to be thrifty, and its human nature for sentiment to over rule facts and logic. Not much strategic planning is put in to rebuilding efforts. It's why you'll find new homes being put up on old foundations in tornado country. As in "Why waste a perfectly good concrete slab? ...and besides that, my children were born here!"
The scope of destruction aside, there are a great many individuals, businesses, and industries looking to profit off of the reconstruction of New Orleans.
Another point: Insurance companies will reinsure those living in the flood plain. You know why? They'll be able to charge significantly higher premiums to the citizens who remain to insure against an event that probably won't reoccur in scale for another 40 years, i.e. Hurricane Camille, before Katrina.
I'd suggest to you that the decision to rebuild is not one of common sense, or geology, or science, but rather one of emotion and above all else: economics.
And how often do we square up against those two very factors in our engineering jobs?...
Familiar foes to me, at least.