The economics of Hurricane Sandy and other natural disasters
Alex Brandon, AP
SALT LAKE CITY — In the aftermath of Hurricane Sandy, economists are struggling to determine the impact of the storm. In a 2007 essay for the Journal of Economic Perspectives David Stromberg, associate professor of economics at the International Institute for Economic Studies in Sweden, argues that the economic analysis of natural disasters should be built on three factors. These are:
The incidence of the natural disasters themselves,
The number of people exposed to the disaster, and
The World Health Organization has been collecting data on natural disasters since 1975. For the purposes of WHO analysis, a natural disaster is defined as an event where 10 or more people are reported dead, 100 or more people are reported affected, a state of emergency is declared or there is a call for international assistance.
WHO's data shows that since 1975 the number of natural disasters increased until 2010 when they started to level off. The trend line for number of people killed has been dropping over time, with occasional spikes: the 2010 earthquake in Haiti, the 2007 cyclone that hit Myanmar and the major earthquake in China. And while the number of people killed in natural disasters has decreased, the number of people affected has grown exponentially. This is to be expected as a result of growing population levels, according to Timothy Taylor of the Conversable Economist. WHO's data also indicates that the the economic cost of the damages from the national disasters has steadily increased. This is not necessarily because storms are more severe, but because they are hitting places where there is more development.
The United Nations authored a 2010 study about cost-effective ways of minimizing the damages associated with natural disasters in low-income countries. These include early warning systems, advance planning, encouraging natural protections like minimizing deforestation or protecting wetlands, building codes, and flood control.
While the UN's report is focused on interventions in the developing world, its suggestions equally apply to developed countries like the United States. A recent article for the New York Times discusses proposals that would minimize the impact of natural distastes that have been floating around the New York area for years. These proposals include levy systems, storm surge barriers, floodgates in subways, moving people and economic activity away from low-lying areas, and in general having plans in place.
But, according to the New York Times, moving from planning to implementation is difficult.
“A fair question to ask is, have we been as focused as we need to be for emergency preparations,” a former official, who spoke on condition of anonymity so as not to jeopardize ties to the administration, told the New York Times. "We’ve just been lucky. We need hardening for the risk we’ve always faced. Until things happen, people aren’t willing to pay for it."
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