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01/04/2005

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» The economics of tsunami risk in a nutshell from The Acorn
Answers from the dismal science The Becker-Posner blog has excellent posts on the economics of catastrophic risk. Here is an excerpt.Nevertheless, it seems apparent that the total cost figure of the recent tsunami will come in at an amount great eno... [Read More]

» CATASTROPHE AND RESPONSE from Pejmanesque
The issue of the week at the Becker-Posner blog is catastrophes and humankind's response to them. This is of particular interest given Judge Posner's recent book and the subject matter it discusses. It is only natural, therefore, that Posner begins... [Read More]

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John Palmer

Professor Becker's discussion of self-protection and moral hazard has considerable relevance for hurricane and earthquake victims in the U.S. as well. I'm often puzzled as to why people choose to live along the gulf coast or the San Andreas fault -- and then expect others to provide assistance when they are hurt by a hurricane or earthquake.

T Sarkka

I just had the same question on my mind as Mr. Palmer: why there are millions of people living on the US West Coast along the San Andreas fault, only waiting for the Big One? What would be the impacts of a major earth quake there, killing,say 150 000 people? Are they now happy because they are insured and they can wait government programs to help them in case of disaster?
I would appreciate an answer by prof. Becker.

Glen Raphael

T Sarkka:
People live on the US West Coast because it's a nice place to live. Earthquakes aren't particularly scary if you grow up in an area that has them. What would happen in a major quake? Same thing that always happens: Some buildings would fall down or develop cracks, some people would die, the survivors would rebuild and get on with their lives. Californians live and work in buildings that are designed to survive earthquakes with minimal damage, and every year we get better at building them. Given another century or two of economic and technological progress, even a Big One probably won't do much harm.

PIITC

" the disappearance in a short time, of all traces of mischief done by.. the United Nations"


All nations do have an insurance company - the United Nations. We pay our annual insurance premiums (the UN budgets) and then later on, the "co-payments" (the UNs relief aid). The question here is to its economic efficiency - how a meta-mega behemoth that has survived the planet's dramatic economic changes of 'glasnost', 'Perestroika', 'the fall of the Berlin Wall' and China's market emergence has survived with gross inefficiencies and ineptitude. The very recent 'Food-for-Oil' debacle is examplary in its history.


Conservatively, putting its bureacratic overhead at 15% - the estimated $4bn Tsunami relief cost will see a loss of $600m. That is a staggering amount that can substantially pay for education in the devasted South Asian countries. If education is "an effective way for poorer nations to respond in the longer run" then we are dearly paying for UN's maladies.

Stephen

Dr. Becker touches on the social and economic opportunity created by massive destruction. I thought of Christopher Wren rebuilding London, and the unified reconstruction of Chicago after the "Mrs. O'Leary's" fire. The threat of sudden collapse seems an inevitable natural process -- the gold mine runs out, long term drought destroys the crops, the river delta alters course, the ice recedes, etc.

I've always wondered about the mechanisms for efficient use of capital during redevelopment. Are there any structured analyses of critical success factors when municipalities or nations recover from disaster? Under what conditions might a disaster lead to local or regional collapse?

Michael

What about the implications of all the private donations of people to relief organisations and whether their use is directly aimed at the destroyed regions or not?!
I'd very much a appreciate a comment on that from both!

Franz

why have my comments been deleted?
I just wanted to know your opinion on the impact of the donations which go to relief organisations and where it remains unknown when and for what exactly it will be used?

Ryan

"There are two ways to protect against natural and other disasters: one is through insurance that helps compensate persons badly hurt by loss of family member or property... The best response in these cases is to have an effective insurance system for those badly harmed."

I must respectfully dissent. This assumes that tsumanis et. al, however unlikely to occur, are inevitably going to kill all or most of the people along the shores of various countries.
Ok, if that's the case, than there is an alternative to insurance: Build low-income housing away from the coast, using the private donations that have flowed in since Dec. 26.
In fact, hire local builders to construct these new homes - that will stimulate the economy much more so than a few extra jobs at Nike would.

I'm not saying this is the best or only solution, but it seems unproductive to suggest that the (mostly) poor who live along the coast with no warning system in please are doomed to death every century or so. This death sentence is all the more unfair given the relative inequality of the people living along the coast lines.

Insurance isn't a bad thing per se, but it's not the only solution. People have auto insurance in the event of accidents, but that does not mean we shouldn't look toward building safer cars.

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