Interesting, I thought, was the effect of the Tsunami on the Indonesian stock market.
Absolutely none, as far as I can see.
Posted on 02/20/2005 12:03:06 PM PST by billorites
The Indian Ocean tsunami illustrates a type of disaster to which policymakers pay too little attention—a disaster that has a very low or unknown probability of occurring, but that if it does occur creates enormous losses. Great as the death toll, physical and emotional suffering of survivors, and property damage caused by the recent tsunami are, even greater losses could be inflicted by other disasters of low (but not negligible) or unknown probability. The asteroid that exploded above Siberia in 1908 with the force of a hydrogen bomb might have killed millions of people had it exploded above a major city. Yet that asteroid was only about 200 feet in diameter, and a much larger one (among the thousands of dangerously large asteroids in orbits that intersect the earth’s orbit) could strike the earth and cause the total extinction of the human race through a combination of shock waves, fire, tsunamis, and blockage of sunlight, wherever it struck. Other catastrophic risks include, besides earthquakes such as the one that caused the recent tsunami, natural epidemics (the 1918–1919 Spanish influenza epidemic killed between 20 and 40 million people), nuclear or biological attacks by terrorists, certain types of lab accident, and abrupt global warming. The probability of catastrophes resulting, whether or not intentionally, from human activity appears to be increasing because of the rapidity and direction of technological advances.
The fact that a catastrophe is very unlikely to occur is not a rational justification for ignoring the risk of its occurrence. Suppose that a tsunami as destructive as the Indian Ocean one occurs on average once a century and kills 150,000 people. That is an average of 1,500 deaths per year. Even without attempting a sophisticated estimate of the value of life to the people exposed to the risk, one can say with some confidence that if an annual death toll of 1,500 could be substantially reduced at moderate cost, the investment would be worthwhile. A combination of educating the residents of low-lying coastal areas about the warning signs of a tsunami (tremors and a sudden recession in the ocean), establishing a warning system involving emergency broadcasts, telephoned warnings, and air-raid-type sirens, and improving emergency response systems, would have saved many of the people killed by the Indian Ocean tsunami, probably at a total cost below any reasonable estimate of the average losses that can be expected from tsunamis. Relocating people away from coasts would be even more efficacious, but except in the most vulnerable areas or in areas in which residential or commercial uses have only marginal value, the costs would probably exceed the benefits. For annual costs of protection must be matched with annual, not total, expected costs of tsunamis.
In my book Catastrophe: Risk and Response (Oxford University Press 2004), I try to be more precise about how one might determine the costs of catastrophes. There is now a substantial economic literature inferring the value of life from the costs people are willing to incur to avoid small risks of death; if from behavior toward risk one infers that a person would pay $70 to avoid a 1 in 100,000 risk of death, his value of life would be estimated at $7 million ($70/.00001), which is in fact the median estimate of the value of life of an American. Because value of life is positively correlated with income, this figure cannot be used to estimate the value of life of most of the people killed by the Indian Ocean tsunami. A further complication is that the studies may not be robust with respect to risks of death much smaller than the 1 in 10,000 to 1 in 100,000 range of most of the studies; we do not know what the risk of death from a tsunami was to the people killed. Additional complications come from the fact that undoubtedly more than 150,000 people have died or will die—and the total may never be known—and that there is vast suffering and property damage that must also be quantified, as well as estimates needed of just how effective precautionary measures of various scope and expense would have been. The risks of smaller but also still destructive tsunamis that such measures might protect against must also be factored in; nor am I confident about my “once a century” risk estimate. Nevertheless, it seems apparent that the total cost figure of the recent tsunami will come in at an amount great enough to indicate that there were indeed precautionary measures to take that would have been cost-justified.
Why, then, weren’t such measures taken in anticipation of a tsunami on the scale that occurred? Tsunamis are a common consequence of earthquakes, which themselves are common; and tsunamis can have other causes besides earthquakes—a major asteroid strike in an ocean would create a tsunami that would dwarf the Indian Ocean one.
There are a number of reasons for such neglect. First, although a once-in-a-century event is as likely to occur at the beginning of the century as at any other time, it is much less likely to occur in the first decade of the century than later. Politicians with limited terms of office and thus foreshortened political horizons are likely to discount low-risk disaster possibilities, since the risk of damage to their careers from failing to take precautionary measures is truncated. Second, to the extent that effective precautions require governmental action, the fact that government is a centralized system of control makes it difficult for officials to respond to the full spectrum of possible risks against which cost-justified measures might be taken. The officials, given the variety of matters to which they must attend, are likely to have a high threshold of attention below which risks are simply ignored. Third, where risks are regional or global rather than local, many national governments, especially in the poorer and smaller countries, may drag their heels in the hope of taking a free ride on the larger and richer countries. Knowing this, the latter countries may be reluctant to take precautionary measures and by doing so reward and thus encourage free riding. Fourth, countries are poor often because of weak, inefficient, or corrupt government, characteristics that may disable poor nations from taking cost-justified precautions. Fifth, people have difficulty thinking in terms of probabilities, especially very low probabilities, which they tend therefore to write off. This weakens political support for incurring the costs of taking precautionary measures against low-probability disasters.
The operation of some of these factors is illustrated by the refusal of the Pacific nations, which do have a tsunami warning system, to extend their system to the Indian Ocean prior to the recent catastrophe. Tsunamis are more common in the Pacific, and most of the Pacific nations do not abut on the Indian Ocean, but even if the risk of an Indian Ocean tsunami was only a tenth of that of a Pacific Ocean tsunami (a figure I have seen in a newspaper article), it was still worth taking precautions against; but there is a tendency to write down slight risks to zero.
An even more dramatic example of neglect of low-probability/high-cost risks concerns the asteroid menace, which is analytically similar to the menace of tsunamis. NASA, with an annual budget of more than $10 billion, spends only $4 million a year on mapping dangerously close large asteroids, and at that rate may not complete the task for another decade, even though such mapping is the key to an asteroid defense because it may give us years of warning. Deflecting an asteroid from its orbit when it is still millions of miles from the earth is a feasible undertaking. In both cases, slight risks of terrible disasters are largely ignored essentially for political reasons.
In part because tsunamis are one of the risks of an asteroid collision, the Indian Ocean disaster has stimulated new intereset in asteroid defense. This is welcome. The fact that a disaster of a particular type has not occurred recently or even within human memory (or even ever) is a bad reason to ignore it. The risk may be slight, but if the consequences should it materialize are great enough, the expected cost of disaster may be sufficient to warrant defensive measures.
NO FREE RIDES! These countries take in millions in tourist revenue. If they are concerned about such things, they can issue a RFP for a warning system and solicit bids for such. The US is NOT OBLIGATED to provide worldwide warning systems for the planet.
I can't believe there are some moronic lawyers who have actually filed suit in US federal court, claiming damages because the US failed to adequately warn the Asian sphere!
Interesting, I thought, was the effect of the Tsunami on the Indonesian stock market.
Absolutely none, as far as I can see.
May we count on hillary's_fat_a** to make a contribution?
They get tourist dollars (and, doubtless, get gov't monies to enhance their particular country's tourist industries), they can spring a little bit to help prevent those rich tourists (and locals, AND infrastructure) from getting wiped-out.
You build on the beach, and live on the beach, and make it your business to attract all the paying tourists to spend their $$$ at the beach: you take your chances and should have enough self-interest to make sure they keep alive (and coming back) to a location where cyclones and tidal waves are bound to happen.
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