NBSIR 74-473

Natural Disasters: Some Empirical

and Economic Considerations

G. Thomas Sav

Building Economics Section Center for Building Technology

Institute for Applied Technology

National Bureau of Standards

Washington, D. C. 20234

February, 1974

Final Report

Prepared for Office of Federal Building Technology

Center for Building Technology

Institute for Applied Technology

National Bureau of Standards

NBSIR 74-^473

NATURAL DISASTERS: SOME EMPIRICAL

AND ECONOMIC CONSIDERATIONS

G. Thomas Sav

Building Economics Section Center for Building Technology

Institute for Applied Technology

National Bureau of Standards

Washington, D. C. 20234

February, 1974

Final Report

Prepared for Office of Federal Building Technology

Center for Building Technology

Institute for Applied Technology

National Bureau of Standards

U. S. DEPARTMENT OF COMMERCE. Frederick B. Dent. Secretary

NATIONAL BUREAU OF STANDARDS. Richard W. Roberts. Director

PREFACE

This study was conducted for the Office of Federal Building Technology in the Center for

Building Technology, Institute for Applied Technology, National Bureau of Standards.

Dr. Charles Culver and Mr. Samuel Kramer, both of that Office, provided initial direction

for the study. Dr. Harold E. Marshall, Building Economics Section, contributed valuable

economic skills and editorial comments throughout the study. Dr. Peter Fo Colwell, also

of the Building Economics Section, was extremely helpful in his review of the paper.

Appreciation is extended for providing significant data for this study to the American Red

Cross, Washington, D.C.; the Federal Disaster Assistance Administration, Washington, B.C.;

and the National Climatic Center, Asheville, N.C.

i
ABSTRACT

This study examines the extent of some of the losses resulting from natural disasters. An estimate of these losses is necessary in order to determine the potential benefits that

might be realized from mitigating the negative economic impacts from natural disasters.

Absolute and relative losses resulting from hurricanes, floods, earthquakes and tornadoes

are examined. These data will help individuals, communities, and the Federal government

make better decisions as to how and to what extent protection against disasters should be

provided. The application of benefit-cost analysis for choosing the optimal level of protection against disasters is also discussed. Recommendations are made for further research

in determining the economic feasibility of various techniques designed to mitigate the

losses from disasters.

ii
TABLE OF CONTENTS

Page

PREFACE. i

ABSTRACT ii

LIST OF TABLES ........... iv

LIST OF FIGURES vi

1. INTRODUCTION 1

2. COSTS OF NATURAL DISASTERS

.....

3

2.1 HURRICANES 3

2 . 2 FLOODS 12

2.3 EARTHQUAKES 21

2.4 TORNADOES . . .

.

30

3. BENEFIT-COST ANALYSIS • 42

3.1 BENEFIT-COST MODELS FOR DISASTER MITIGATION 42

3.2 APPLICATION OF BENEFIT-COST ANALYSIS TO DISASTER MITIGATION . . 46

4. SUMMARY AND RECOMMENDATIONS 53

4.1 SUMMARY 53

4.2 RECOMMENDATIONS FOR FURTHER RESEARCH 58

APPENDIX: ECONOMIC EFFICIENCY: MAXIMIZING NET BENEFITS OR MINIMIZING

TOTAL COSTS (COSTS PLUS LOSSES)? 60

SELECTED BIBLIOGRAPHY. . 62

iii
LIST OF TABLES

Table Page

2.1 Loss of Life and Property Damage in the United States Due to Hurricanes, By Five-Year Periods, 1925-1969, and 1970 4

2.2 Estimated Lives Lost and Damages in the United States Due to North Atlantic Tropical Cyclones, By Year, 1915-1970 6

2.3 Lives Lost and Damages Due to Hurricane Wind and Storm Surge

Hazards Along the Gulf and South Atlantic Coastlines, 1900-1970= , 8

2.4 Data on Hurricanes Involving More than Five Families . , 11

2.5 Selected Data from Hurricane Agnes 13

2.6 Most Destructive Hurricanes in the United States, 1930-19 72. , , , 14

2,7 Dollar Losses Resulting from Floods, By State and Year, 1955-1971. 17

2.8 Number of Lives Lost and Amount of Property Damages in the

United States Due to Floods for Five-Year Periods, 1925-1969 . „ . 19

2.9 Average Number of Lives Lost and Amount of Property Damages

in the United States Due to Floods, By Month for the Period

1925-1971 20

2.10 Severe River Flood Disasters in the United States, 1935-1969 , , . 22

2.11 Casualities, Physical Damage, and Estimated Pecuniary Losses

Due to Agnes Floods. « o,,23

2.12 Selected Data for Floods and Flash Floods 24

2.13 Property Damages Resulting from Major U.S, Earthquakes,

1865-1971 26

2.14 Lives Lost and Value of Property Damages in the United States

Due to Earthquakes from 1925-1964 by Five-Year Periods, and

for 1965 , 29

2.15 Data for Five Severe Earthquakes in the United States. 31

2.16 Estimated Damages to Federal Facilities in Alaska Resulting

from the 1964 Earthquake ,32

2.17 Losses Due to the San Fernando Earthquake by Private and

Public Sector 33

2.18 Frequency of Tornadoes, Resulting Casualties, and Property

Losses, 1916-1972 34

iv

I
LIST OF TABLES—continued

Table Page

2.19 Selected Data on the Impact of Tornadoes that Affect More

Than Five Families o o .. 39

2.20 Casualties and Losses from Severe Tornadoes, 1955-1971 40

2.21 Property Damages Resulting from Individual Tornadoes 41

3.1 Damage Reduction Due to Increasing Percent of Population

Protecting Against Hurricanes 49

3.2 Damage Reduction with Population Growth and Increased

Protection by Population 50

V
LIST OF FIGURES

Figure Page

1*1 Annual Number of Disasters Causing Losses on Insured Property

in Excess of $1,000,000 c 2

2.1 Trends of Damages and Deaths Due to Hurricanes in the

United States o . . . . 5

2.2 Selected Hurricane Paths, Deaths, and Damages in the

United States, 1964-1970 7

2.3 Flood Losses in the United States by Major River Systems,

1925-1971 15

2.4 Number of Floods Resulting in Assistance from the American

Red Cross, 1955-1971 18

2.5 Seismic Risk Map of the United States = , , , . 27

2.6 Destructive Earthquakes in the United States through 1966 28

2.7 Tornado Incidence by State, 1953-1970 35

2.8 Distribution of Tornado Incidence and Resulting Deaths by

Months, 1953-1969 „ 37

2.9 Deaths Due to Tornadoes, by State, 1953-1969 38

3.1 Dollar Value of Total Benefits and Total Costs Versus Level of

Protection Against Natural Disasters ... o.,,43

3.2 Dollar Value of Marginal Benefits and Marginal Costs Versus

Level of Protection Against Natural Disasters 43

3.3 Dollar Value of Total Losses, Costs of Protection, and Total

costs versus Level of Protection Against Natural Disasters , , , . 45

3.4 Earthquake Damage—California Schools 47

3.5 Earthquake Damage—California Schools, Puget Sound (King County)

Schools, and Anchorage Schools 47

3.6 Hurricane Decision Matrixo .oo o..oo,,,51

4,1 Property Damages Resulting from Hurricanes, Floods, Tornadoes,

and Earthquakes. c......,o,.... o,,,.,54

vi
LIST OF FIGURES—continued

Figure Page

4.2 Number of Lives Lost Due to Hurricanes, Floods, Tornadoes,

and Earthquakes o 55

4.3 Comparisons of Property Damages and Number of Lives Lost for

Individual Diasters, 1970-1972 56

4.4 Comparisons of Number of Dwellings Destroyed and Damaged for

Individual Disasters, 1970-1972 57

vii

1. INTRODUCTION

Natural disasters cost the United States about a billion dollars each year. More recently,

these costs have exceeded the billion dollar level. In 1^73 more than $1.2 billion worth

of property was damaged as a result of natural disasters. During 1972 estimated property

damages amounted to $3.5 billion. Such losses tend to represent the cost of restoring

physical structures to their pre-disaster condition. However, they do not measure the full

economic impact of natural disasters. Dollar losses usually fail to include the losses in

human lives, losses due to human suffering, losses in productivity, losses in the tax base

and tax revenues, and social disruptions resulting from disasters.

3 The real property losses due to natural disasters show an increasing trend over time.

Figure 1.1 shows the annual number of disasters which caused losses (on insured property)

in excess of $1,000,000. An upward trend in the number of occurrences causing such losses

is also indicated by Figure 1.1. Several factors may be responsible for this trend. First

a demographic shift to disaster prone areas increases potential losses o Second, changing

property values are reflected in any time series comparison of nominal dollar property losses.

Another factor that might be responsible for increasing losses would be an increase in the

frequency and severity of natural phenomena; e.g., hurricanes, floods, earthquakes, and

tornadoes, A fourth possibili:;y is a reduction in society's level of disaster preparedness

relative to its increasing need for disaster protection.

Chapter 2 catalogues past losses from natural disasters. Four major types of natural

phenomena are examined: hurricanes, floods, earthquakes, and tornadoes. Because existing

sources have not been consistent in reporting past losses for a particular type of disaster

or among different types of disasters, this study is a selective survey of losses rather

than an extensive analysis of the economic impacts resulting from natural disasters.

A uniform approach is taken to describe the losses produced by each of the four natural

phenomena. First, the distribution of dollar losses with respect to time is discussed.

Next, an effort is made to extract a trend from the annual dollar losses and physical losses

(e.g., lives lost, families suffering loss, and buildings destroyed). Thirdly, comparison

is made of the losses incurred during several severe disasters in the United States.

Finally, there is a discussion of the impact that a single natural disaster generates.

Examples are provided for hurricanes, floods, and earthquakes.

In Chapter 3, benefit-cost analysis is discussed as a method of determining the' most

efficient level of disaster protection; i.e., the level of protection that maximizes

society's net benefits.

The final chapter compares the relative losses of different types of disasters And discusses

possible techniques for mitigating losses due to natural disasters. Recommendations for

further research are made on the basis of the conclusions drawn from this paper.

Federal Disaster Assistance Administration, News Release HUD No. 74-DA-l, January 4,

1974.

^Ibid.

3Douglas C. Dacy and Howard Kunreuther, The Economics of Natural Disasters (New York:

The Free Press, 1969), p. 12.

1
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Figure 1,1 Annual number of disasters causing losses on Insured property In excess of

$1,000,000.

Source: Don G. Friedman, "Prospective View of Natural Disasters in the United States," a paper presented at The System Safety Society Symposium, July 18, 1973.

2
2. COSTS OF NATURAL DISASTERS

2.1 Hurricanes

The destruction caused by hurricanes is the result of high winds, of storm surges which are themselves produced by high winds, and of flooding produced by heavy rainfall. For days

after a hurricane has passed, its flood producing rains may continue to take lives and

destroy property. The destruction resulting from these floods may be proportionately

greater than that due to the winds produced during the hurricane. For example, Hurricane

Agnes produced devastating floods while its winds were relatively less damaging.

The real property losses resulting from hurricanes have been increasing through time. For

the period 1934-1964 Dacy and Kunreuther have estimated that hurricane damages have

increased annually at a raje of 4.5%; they also report that the annual rate of increase

since 1950 has been 10.5%o Table 2.1 shows that the property losses for the 1965-1969

period ($3,091 million) increased by more than 96% ($1,515 million) over the previous five

year period losses ($1,576 million). Figure 2.1 depicts this trend by five-year intervals

for the period 1915-1969 (Table 2.2 shows a year by year account of these losses and the

number of lives lost, 1915-1970). Dollar damages are measured in constant 1957-1959

dollars. One cause of the upward trend is probably the rapid economic development of the areas subject to hurricane dam^'ge.

In addition to increasing property damages there may be an increasing potential for the

loss of lives as the population density in hurricane prone areas increases (Figure 2.2

gives an indication of hurricane prone areas by showing the paths of six severe hurricanes,

1964-1970). However, Figure 2ol indicates deaths due to hurricanes have exhibited a decreasing trend over the years 1900-1969. This could be attributed to advancements in

hurricane watch and warning systems and their advancements in the dissemination of

information.

The numbers of lives lost and the damages resulting from individual hurricanes have been

anything but stable. Fluctuations in the magnitudes of impact from specific hurricanes is

evidenced in Table 2.3. Damages range from $170,000 and no lives reported lost (September

21-29, 1917) to $1,420,700 in damages and 256 lives lost (August 5-22, 1969).

Table 2.4 shows numbers of deaths, numbers of people injured, numbers of people given

emergency care, and numbers of people suffering losses as a result of hurricanes. These

losses have not been monetized. However, one could attempt to estimate the implicit

monetary value due, for example, to losses of human lives. One interpretation of the

social cost of a human life (human capital) is the net loss in the productive value which

that individual would provide to society over his expected remaining life span. However,

this cost does not reflect the pain and suffering or psychological impact which premature

deaths have on relatives and friends. Nor does it show, for example, the loss in a community's tax base due to deaths, injuries, or illnesses.

Douglas C. Dacy and Howard Kunreuther, The Economics of Natural Disasters (New York:

The Free Press, 1969), p. 17.

2 To determine the real value of dollar losses over time, a price index based on the

real purchasing power of a dollar in a given year should be used to inflate (or deflate)

nominal dollar values for other years.
TABLE 2.1

LOSS OF LIFE AND PROPERTY DAMAGE IN THE UNITED STATES DUE TO HURRICANES,

BY FIVE-YEAR PERIODS, 1925-1969, AND 1970

Years Property Loss

($1,000,000)

Number of Lives

Lost

1925-1929 133 2114

1930-1934 51 80

1935-1939 314 1026

1940-1944 222 149

1945-1949 298 67

1950-1954 802 217

1955-1959 539 660

1960-1964 1576 175

1965-1969 3091 412

1970 454 11

Source: Douglas C. Dacy and Howard Kunreuther, The Economics of Natural Disasters

(New York: The Free Press, 1969), p. 6, data for 1925-1964; and Executive

Office of the President, Office of Emergency Preparedness, Disaster

Preparedness , Vol. 3 (Washington, D. C.: Government Printing Office,

January 1972), p. 46, data for 1965-1969, and 1970.

4
2200

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Oinoi^OLnoinoiiSouSouS

Figure 2.1 Trends of damages and deaths due to hurricanes

in the United States

Source: Executive Office of the President, Office of Emergency Preparedness,

Disaster Preparedness , Vol. 3 (Washington, D.C. : Government

Printing Office; January 1972), p. 42.

5
TABLE 2,2

ESTIMATED LIVES LOST AND DAMAGES IN THE UNITED STATES DUE TO

NORTH ATLANTIC TROPICAL CYCLONES, BY YEAR, 1915-1970

Year

Number of

Lives Lost

Damages

($1,000,000) Year

Number of

Lives Lost

Damaiges

($1,000,0

1915

! 600 63.0

1

1 1943

1 16 16.8 1916 107 33.3 1944 64 165.0 1917 5 0.2 1945 7 80.1 1918 34 5.0 1946 0 5.2 1919 287 22.0 1947 53 135.8 1920 2 3.0 1948 3 18.4 1921 5 3.0 1949 4 58.8 1922 0 0 1950 19 35.9 1923 0 Minor 1951 0 2.0 1924 2 Minor 1952 3 2.8 1925 6 Minor 1953 2 6.2 1926 269 106.5 1954 193 755.5 1927 0 0 1955 218 984.5 1928 1,836 25.0 1956 21 26.5 1929 3 0.7 1957 395 152.1 1930 0 Minor 1958 2 11.2 1931 0 0 1959 24 23.1 1932 0 Q 1 S70U DD SIMA

1933 63 46.7 1961 46 331.0 1934 17 4.8 1962 4 1.1 1935 414 11.5 1963 10 13.0 1936 9 2.3 1964 49 515.2 1937 0 Minor 1965 75 1,446.0 1938 600 300.2 1966 54 15.0 1939 3 Minor 1967 18 200.0 1940 51 4.7 1968 9 10.0 1941 10 7.7 1969 256 1,420.0 1942 8 27.1 1970 11 454.0

Total 5,953 7,922.3

Source: Executive Office of the President, Office of Emergency Preparedness, Disaster

Preparedness , Vol. 3 (Washington, D. C: Government Printing Office,

January 1972), p. 46.

6
paw

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-Pre and Post Hurricane Stages -Hurricane Stage

DATES OF HURRICANE AREAS MOST AFFECTED DEATHS

(U.S. only) DAMAGE BYCATEGORY

1. August 20-September 5, 1964 CLEO

Southern Florida,

. Eastern Virginia

a

8

2. August 28-September 16, 1964 DORA

Wortheastern Florida, Southern Georgia

5' 8

3. September 28-October 5, 1964 HILDA

Louisiana 38 8

4. August 27-September 12, 1965 BETSY

Southern Florida, Louisiana

75 9

5. September 5-22, 1967 BEULAH

Southern Texas 15 8

6. August 14-22, 1969 CAMILLE

Mississippi, Louisiana, Alabama,

Virginia, West Virginia 255{68 missing 11-10-69) 9

7. July 30-August 5, 1970 CELIA^

Texas, N€w Mexico

11 8

Figure 2,2 Selected hurricane paths, deaths, and damages

in the United States, 1964-1970

^Damage Categories: Category 8 — $50 million to $500 million.

Category 9 — $500 million to $5 billion.

"*The track for Celia is not shown.

Source: Executive Office of the President, Office of Emergency Preparedness,

Disaster Preparedness , Vol. 3 (Washington, D.C.: Government

Printing Office, January 1972), p. 47.
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11
Dollar values are not reported for the destruction and damage to dwellings shown in

Table 2.4 The destruction or damage to a dwelling involves many cost categories.

In addition to the replacement costs of the home and belongings, there are costs in

inconvenience and discomfort that families experience in relocation and temporary housing.

Unemployed resources that result from natural disasters are also economic losses.

Table 2.5 includes the numbers of unemployed human resources related to the Agnes

hurricane (1972) for seven states. Associated with the individual loss of income from

unemployment is a decrease in tax revenues for the community. This occurs at a time

when increased tax revenues are needed to meet the increased demand for public revenues stemming from post disaster restoration activities.

To relieve pressure on local and state contributions for recovery from national disasters,

the Federal government provides aid through the President's Disaster Fund, Federal

Disaster Assistance Administration, Table 2,5 indicates the amounts obligated from the

Fund for the restoration of public facilities following the Agnes hurricane,

A study of the physical damage caused by Hurricane Agnes was conducted by Dun and Bradstreet,

The study reported that the damage to business and industry for Florida, Maryland, New York,

Pennsylvania, and Virginia amounted to $600 million. Since this figure excludes losses in

production and sales, it can be considered an underestimate of total losses.

Table 2,6 lists some of the most destructive hurricanes in the United States for the period

1930-1972, Since 1965 the three most destructive hurricanes have caused nearly $6 billion

in damages; Agnes contributed more than $3 billion of this total,

2,2 Floods

^

3 There are approximately 50 million acres of land prone to flooding in the United States,

The distribution of losses, however, varies geographically. Figure 2,3 divides the

United States into 14 major river systems and indicates the distribution of flood losses

by system for the period 1925-1971. The total losses for the period amounted to $10,4

billion. The >tissouri, North Atlantic, Ohio, and Pacific river systems experienced the

bulk (71%) of flood losses. The Missouri river system alone accounted for nearly 25% of

the total losses.

Executive Office of the President, Office of Emergency Preparedness, The Federal

Response to Tropical Storm Agnes , A Report to the Senate Subcommittee on Public Works,

Subcommittee on Disaster Relief, May 1973, p. 6.

2 It is not feasible in this report to separate flood losses into losses resulting from

river floods, hurricanes, and other natural phenomena. Therefore, there will be some double-counting of losses from the previous section.

3Executive Office of the President, Office of Emergency Preparedness, Disaster

Preparedness . Vol 3. (Washington, D.C. : Government Printing Office, January 1972), po 7.

12
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13
TABLE 2,6

MOST DESTRUCTIVE HURRICANES IN THE UNITED STATES, 1930-1972

Damage Number of

Hurricane Year ($1,000,000) . Deaths

Agnes 1972 3,097.8 117

Camille 1969 1,420.7 258

Betsy 1965 1,420.5 75

Diane 1955 831.7 184

Carol 1954 463.0 60

Celia 1970 453.8 11

Carla 1961 408.3 46

New England Storm 1938 387.1 600

Donna 1960 386.5 50

Hazel 1954 251.6 95

Source: U.S. Department of Commerce, National Oceanic and Atmospheric

Administration, Environmental Data Service, Climatological Data , National Summary 1972 , Vol. 23, p. 62.

14
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15
Total dollar losses for the period 1955-1971 vere approximately $5.9 billion. Table 2.7

apportions these losses to each state by year for the seventeen year period. Twice during

this period the annual losses exceeded $900 million; i,e,, in 1955 losses totaled

$995,5 million and in 1969 losses totaled $900,7 million. Figure 2,4 indicates the number

of occurrences of floods and flash floods associated with each state's total dollar flood

losses for 1955-1971,

In a 1957 cost-benefit analysis produced as a staff report by the Committee on Publi^ Works,

it was hypothesized that the "potential average annual flood loss was $911 million," In more recent years the estimated annual losses have been $1,5 to $2oO billion. By the year

2020, annual flood losses are expected to be $5 pillion (disregarding any "major" improvements in the current state of flood protection)

,

The total number of lives lost and the amount of property damages resulting from floods are shown in Table 2,8 for five-year intervals, 1925-1969, For the period 1925-1971, the

average monthly loss is shown in Table 2,9, The month of June has, on the average, produced

the most severe losses (13 deaths and $34,8 million in property damages). Average annual

loss of lives for the forty-seven year period was 83. Property damages averaged $223.4

million annually. By comparing the average annual property damages (Table 2,9) to each

year's damages (Table 2.7) it is seen that during the five year interval 1967-1971 the

yearly damages exceeded the average annual damage for each year except 1970. The yearly

loss for 1969 ($900.6 million) rose to four times the annual average loss ($223.4 million)

o

Losses due to floods are probably directly correlated to the population size of flood prone

areas. The Natural Disaster Warning Survey Group has estimated that 10 million people

occupy recognized f^ood plain areas and an additional 25 million are subject to the effects

of nearby flooding.

Flash flooding is thought to affect 2,500 communities in the United States.^

U.S. Department of Commerce, National Oceanic and Atmospheric Administration,

Environmental Data Service, Climatological Data^ National Summary, 1972 , Vol. 23, p. 114,

2 Douglas C. Dacy and Howard Kunreuther, The Economics of Natural Disasters (The Free

Press: New York, 1969), p. 14.

3Executive Office of the President, Office of Emergency Preparedness, Disaster

Preparedness , Vol. 1 (Washington, D.C.: Government Printing Office, January 1972), po 15,

4National Waterways Conference, Inc., letter to Chief, CEP PL 91-606 Disaster Study

Group, May 26, 1971; cited in Executive Office of the President, Office of Emergency

Preparedness, Disaster Preparedness , Vol, 1 (Washington, D,C,: Government Printing Office,

January 1972) ; po 15,

^Executive Office of the President, Office of Emergency Preparedness, Disaster

Preparedness , Vol, 3 (Washington, D,C.: Government Printing Office, January 1972), p. 8.

U.S, Department of Commerce, National Oceanic and Atmospheric Administration, Office

of Hydrology, A Plan for Improving the National River and Flood Forecast and Warning

Service (Silver Spring, Md,, 1969), p. 44.

16
i "S's HlSii iii" I'iis -'Ssg 'Sis's

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10,

eel

5,000

47,798 2,040

145 346 3b

9,

124

2,300 977

4,136

707 15

4,350 3,586

14,926

581 138

3,953 2,326

13,832 2,478 5,212 2,518 365 52 19

13,2603,

150 222 148 380 297 5O0 s

i

88

3,411

433,296

66 528

2,858

79 111

9,095 6,672 6,233

10,991 8,075

251 300 200 13

67,168 1,900

36,601

368

1,826 400 580

3,383 1.338

37

, 4

:\6

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310 625

31,808 1.090

12,878

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123,553

2,722 5,996 4.763 i

406 188

.

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,

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22,403 1,650 2,304 6,030 2,810

35,000

100

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890

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538 421

9,000

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24,267 1,200

100 611 47 i

1,695 «8

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550

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95 23

1,029 7922,629 4,619 4,416

15,093 17,583

125

1,192

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40,644

45

1,438 7771,168 6,622 3

1,044 7,251 588 579

1,125 1,090

98,259

433 581

1,910

14,235 1,096

375.218

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24,347

707 548

1,028 5773,098

904 07

1,671 250 528 4

,

300

2,706 2.781

11,628

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108

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12

2,283

705 140 470

1,608

28,001 1.577

592

1.868

361 i

723

11,330

143

11,321

432,293

144 397

4.184

30.504

20

32,462 29.792 1.044 5397,803 1,03133,976

253

1.369 4

4.833

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208 740

2,472

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1,012

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5,343 Si

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426 3

141

11,704 3,04412,327

240 370

35,47

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15,816 28,039

798

187.

101

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156

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11,817 4,169

136

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11,834

50

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513

8,266

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36,917

26 19

152 148

13,394 2,858

620

33,102

22,359

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413 299

5,397

89

6,262

20 64

5,937 1

,013

17,624

142 899 i

3,529 1,000

91

2,780

80

1,481 8,112

891 670

6,778 1,826

16,885 1,908 1,200 1,982

557 147

2,630

762

6,512 792

1,650

13 97

3,030

651 1

,

948

1,272 5,914 57

75,237

12,625

325

3,503

95

317

3,236 939

11,353 13,306 9,36913,397 13,969 6,074

800 552

15,918 27,375

674 891 608

1,400 1,217 3,463 757 612 369 1

3,263 2,840

281 231 130

3,455 1,442 3i

670 580 516 750

12,047

392

7,503 2,649 7,612 1,947 3

112

6,400 1,181

212 744

13,506

57

6,884

100

7,229 100 136 1912,638

360

3,072

72

3,417

226

8,093

211 370 996 i

s

i

100

3,090 4

160 500

1,506

13,958

128

4,0612,460

61 50

280

6,018 823,733 4,500 5,667 506 28

34,840 8,907

20

21,109

122

2,086 4 28

4,914 7091,791 s

872

6,202

33,063

240 60323 400 3

17,970 52,302 7,508 4,606 3,817 2,842 40 1713,826 38,718 1

3,004 3 42

3,201 4,867

169 363

3,582 680 128

18,101

10 50

1,170 3s

=

2,324

27,938

13

2,901 1,068

20,890 1,20666,748 1,6439,16493,233 4,147 9,128 2,693 9,618

33

5,983 166 788 100 7

35,665

310

1,048 60

3,969 3,

118

78,881

169 3139

1,664

11,052

326 i1

720 255

8,743 3,135

51

1,891

212

6,222 1,026 4,021

51 33

568 837

1,278

11

1,270 167 317 865 2371,089 8311,056 6,376 7,109 10

279

3,715

210

6,472 3,185 335 11 1

: i 3,379

",!

226 61

,

.

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117 105 1

!!

1

,

37

1

102

1,003 35

474

6,629

30

3,450

..

199,982

3,132 666 631,500 7,398

23,102 1,066

i.

30.072

625 2733 977

9.515

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141.381 28.830

74 11

977

5,165 226

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50

200 ;1

i illiliii iii i

17
Figure 2,4 Number of floods resulting in assistance from the

American Red Cross, 1955-1971

(Numbers with slash show "Floods/Flash Floods")

Source: Executive Office of the President, Office of Emergency Preparedness,

Disaster Preparedness , Vol. 3 (Washington, D.C. : Government

Printing Office, January 1972), p. 7.

18
TABLE 2.8

NUMBER OF LIVES LOST AND AMOUNT OF PROPERTY DAMAGES IN THE UNITED STATES

DUE TO FLOODS FOR FIVE-YEAR PERIODS, 1925-1969

Property Damages Number of

Years ($1,000, goo's) Lives Lost

1925-1929 495 579

1930-1934 76 146

1935-1939 966 783

1940-1944 481 315

1945-1949 133 304

1950-1954 1680 293

1955-1959 1695 498

1960-1964 1151 242

1965-1969 2520 239

Source: Douglas C. Dacy and Howard Kunreuther, The Economics of Natural

Disasters (New York: The Free Press, 1969), p. 6, 1925-1964;

Executive Office of the President, Office of Emergency Preparedness,

Disaster Preparedness , Vol. 3 (Washington, D.C. : Government

Printing Office, January 1972), p. 9; and American Red Cross,

Highlights of Disaster Relief Services , Fiscal Year 1964-1965,

1965-1966 and Annual Summary of Disaster Services Activities , 1966- 1967, 1967-1968, 1968-1969.

19
TABLE 2,9

AVERAGE NUMBER OF LIVES LOST AND AMOUNT OF PROPERTY DAMAGES IN THE

UNITED STATES DUE TO FLOODS, BY MONTH FOR THE PERIOD 1925-1971

Month

Average

Number of

Lives Lost

Property Damages

($1,000)

January 6 22,532

February 3 6,723

March 7 15,311

April 11 31,929

May 9 22,621

June 13 34,858

July 9 29,228

August 11 25,017

September 4 7,527

October 3 5,655

November 2 1,957

December 5 20,045

Annual Average 83 223,403

Source: U.S. Department of Commerce, National Oceanic and Atmospheric

Administration, Environmental Data Service, Climatological

Data, National Summary, 1972 (Asheville, N. C.), p. 110.

20
The losses generated by this type of flooding can be devastatingo For example, rains

accompanying Hurricane Camille (1969) created flash floods in Virginia which resulted in

the deaths of 150 persons and in property damages of $112 million.

A historical account of the more severe river floods occurring in the United States is given

by Table 2.10. The greatest property losses to date (1969) were produced by the KansasMissouri flood of 1951. Damages amounted to $923.2 million.

A detailed account of the resultant losses from a more recent flood (Agnes, 1972) is given . in Table 2,11. Damages to public and private property amounted to nearly $1.5 billiono

Combined with $601.2 million of damages to business and^industry (not shown in Table 2 oil),

Agnes floods produced a total $2.1 billion in damages. These damages are 120% greater

than the Kansas—Missouri floods of 1951.

It also happens that the communities surrounding a disaster area are affected in several

ways. For example, the Black Hills flood (1972) affected tourism and tax revenues of

nearby communities that were virtually untouched by the flood itself. Flooding did not

occur in the town of Wall, South Dakota, but Wall did experience a decline^in tourism and

a decrease of $50,000 in sales tax revenues for the third quarter of 1972. For a four

county area, a loss of $455,000 in tax revenues was reported. Further estimates indicate

a total decrease of $2 billion in sales tax revenues during the second and third quarters

for the four counties. ^

An account of the non-pecuniary losses resulting from floods and flash floods are given in

Table 2.12 for fiscal years 1960-1973. The effects of the Agnes floods can be seen in the

data for fiscal year 1972. A total of 519 persons were killed in that year; more than

156,000 families suffered losses; 7,346 dwellings were destroyed and 133,803 were damaged.

A record number of persons were also injured or ill (16,587) and were given emergency mass

care (604,071) that year.

2. 3 Earthquakes

It has been said that earthquakes present the "grgatest potential for catastrophic—even

cataclysmic—losses in concentrated urban areas." Losses are caused by the earth's

movements but additional losses result from earthquake produced fires, floods, landslides

Executive Office of the President, Office of Emergency Preparedness, Disaster

Preparedness, Vol, 1 (Washington, D.C.: Government Printing Office, January 1972), p. 25.

2 Executive Office of the President, Office of Emergency Preparedness, The Federal

Response to Tropical Storm Agnes (Washington, D.C.: Government Printing Office, May 1973),

pp, 6-8.

3U.S, Congress, Senate, Committee on Public Works, To Investigate the Adequacy and

Effectiveness of Federal Disaster Relief Legislation, Part 2, Hearings, before the 93rd

Cong,, 1st sess,, March 30 and 31, 1973, p, 340,

4 Ibid . , p. 341.

^ Ibid ..

^U.S. Department of Housing and Urban Development, Federal Insurance Administration,

Report on Earthquake Insurance to the Congress of the United States . Pursuant t o Section

Five of the Southeast Hurricane Disaster Relief Act of 1965 (Washington, D.C. 1971), p. 8,

21
TABLE 2.10

SEVERE RIVER FLOOD DISASTERS IN THE UNITED STATES, 1935-1969

Year Month Location

NuTnber

of Lives

Lost

Property

Damages

($1,000,000)

1935 May-July Republican and Kansas Rivers 110 18.0

July Upper Susquehanna 52 26.0

. 1936 March-April Eastern United States 107 270.0 1937 Jan.-Feb. Ohio and Lower Mississippi River Basins 137 417.7 1938 March Southern California 79 24.5 1939 July Licking and Kentucky Rivers 78 1.7 1940 August Southern Virgiriia and Carolinas, and

Eastern Tennessee 40 12.0 1943 April-Jun6 Maumee, Wabash, Upper Mississippi, Missouri, White, and Arkansas River Basins 60 172.0 1947 May-July Lower Missouri and Middle Mississippi River Basins 29 235.0 1948 May-June Columbia Basin 35 101.7 1950 June Central West Virginia 31 4.0 1951 June-July Kansas-Missouri 28 923.2 1955 August Hurricane floods in Northeast 187 714.1 December West Coast 61 154.5 1963 March Ohio River Basin 26 97.6 1964 June Montana 31 54.3 December California and Oregon 40 415.8 1965 June Sanderson, Texas, flash flood 26 2.7 1969 Jan.-Feb. California 60 399.2

July Northern Ohio 30 87.9 August James River Basin in Virginia 154 116.0

Source: Executive Office of the President, Office of Emergency Preparedness,

Disaster Preparedness , Vol. 3 (Washington, D.C., Government Printing

Office, January 1972), p. 8.

22
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and tsunamis. Since 1865, major earthquakes in the United States have produced $1.86

billion in property damages (Table 2.13). Since 1811, earthquakes have accounted for more

than 1,660 deaths. The San Francisco earthquake of 1906 caused $524 million dollars in

property damages ($500 million attributed to fire loss). Estimated damages resulting from

the Alaska earthquake of 1964 amounted to $500 million. In the 1971 San Fernando earthquake,

damages totaled $553 million.

Without some form of protection, damages are likely to be even greater in the future than

in the past if earthquakes continue to occur with the same frequency and intensity, because

positive population growth rates and economic development increase potential losses. For

example, the damages to dwellings resulting from another earthquake i^ San Francisco of the same intensity as the one in 1906 have been estimated at $25 billion.

The intensities of earthquakes and the damages produced provide a basis for the construction

of a seismic risk map as shown in Figure 2.5. Risk zones may vary from 0, no damage, to 3,

major damage. The figure shows that parts of Washington, Utah, Idaho, Montana, South

Carolina, the Northeast, the South Central states, and a major portion of California are subject to high seismic risk.

The location and intensity of earthquakes occurring in the United States through 1966 is

shown in Figure 2,6. A small dot (») indicates where the intensity was strong enough to affect more than 25,000 square miles; a large dot (#) indicates where the intensity was strong enough to affect more than 150,000 square miles or to cause damages ranging from

several thousand to $100,000; a small encircled dot, ^ , indicates where intensity was

strong enough to affect more than 500,000 square miles or to cause damages of $100,000 to $1,000,000; and a large encircled dot, ® , indicates where the intensity was strong enough

to affect more than 1 million square miles or to cause damages greater than $1,000,000,

Although California has experienced the majority of earthquakes, the figure shows that

earthquakes have occurred throughout the United States,

The record of lives lost and property damages due to earthquakes for five-year intervals is

shown in Table 2,14, Over the 41 year period from 1925-1965, a total of 318 lives were

lost and property was damaged in the amount of $592 million. During the 1960-1964 period

68% ($405 million) of the total property damages occurred and 36% (115) of the total number

of lives were lost. Another source reports that the Alaska earthquake of 1964 alone

caused $500 million in property damages and 131 deaths

»

Tsunamis are ocean waves produced by earthquakes, volcanic eruption, or submarine

disturbances,

2 U,S, Department of Housing and Urban Development, Federal Insurance Administration,

Report on Earthquake Insurance to the Congress of the United States, Pursuant to Section

Five of the Southeast Hurricane Disaster Relief Act of 1965 (Washington, D.C. 1971), p. 8,

•^Ibid . 4U.S. Department of Commerce, Environmental Science Services Administration, Coast and

Geodetic Survey, A Preliminary Study of Engineering S eismology Benefits , by Joseph D. Crumlish and George F. Wirth (Washington, D.C.: Government Printing Office, August 1967),

p. 7.

^Executive Office of the President, Office of Emergency Preparedness, Disaster

Preparedness , Vol. 1 (Washington, D.C.: Government Printing Office, January 1972), p. 73.

25
TABLE 2.13

PROPERTY DAMAGES RESULTING FROM MAJOR

U.S. EARTHQUAKES, 1865-1971

($1,000,000)

1865 San rrancisco, Calif . s

1868 San Francisco, Calif. .4 1872 Owens Valley, Calif. .3 1886 Charleston, S.C. 23.0 1892 Vacaville, Calif. .2 1898 Mare Island, Calif. I.4 1906 San Francisco, Calif. 24.0

Fire loss 500.0 1915 Imperial Valley, Calif. .9 1918 Puerto Rico (tsunami damage from 4.0 earthquake in Mona Passage) 1918 San Jacinto and Hemet, Calif . .2 1925 Santa Barbara, Calif. 8.0 1933 Long Beach, Calif. 40.0 1935 Helena, Mont. 4.0 1940 Imperial Valley, Calif. 6.0 1941 Santa Barbara, Calif. .1 1941 Torrance-Gardena, Calif. 1.0 1944 Cornwall, Canada-Massena, N.Y. 2.0 1946 Hawaii (tsunami damage from earthquake 25.0

in Aleutians) 1949 Puget Sound, Wash. 25.0 1949 Terminal Island, Calif, (oil wells only) 9.0 1951 Terminal Island, Calif, (oil wells only) 3.0 1952 Kern County, Calif. 60.0 1954 Eureka-Arcata, Calif. 2.1 1954 Wilkes-Barre, Pa. I.Q 1955 Terminal Island, Calif, (oil wells only) 3.0 1955 Oakland-Walnut Creek, Calif. 1.0 1957 Hawaii (tsunami damage from earthquake 3.0

In Aleutians) 1957 San Francisco, Calif. 1.0 1959 Hebgen Lake, Mont, (damage to timber 11.0 and roads) 1960 Hawaii and U.S. West Coast (tsunami 25.5 damage from earthquake off Chile coast) 1961 Terminallsland, Calif, (oil wells only) 4.5 1964 Alaska and U.S. West Coast (includes 5(X).0 tsunami damage from earthquake near Anchorage) 1965 Puget Sound, Wash. 12.5 1966 Dulce, N.Mex. .2 1969 Santa Rosa, Calif. 6.3 1971 San Fernando, Calif. 553.0

Total 1862.1

Source: Executive Office of the President, Office of Emergency Preparedness,

Disaster Preparedness , Vol. 3 (Washington, D.C.: Government Printing

Office, January 1972), p. 82.

26
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TABLE 2.14

LIVES LOST AND VALUE OF PROPERTY DAMAGES IN THE UNITED STATES

DUE TO EARTHQUAKES FROM 1925-1964 BY FIVE-YEAR PERIODS, AND FOR 1965

Years

Value of

Property Damages

(In Millions of Dollars) Lives Lost

1925-1929 8 13

1930-1934 40 117

1935-1939 4 4

1940-1944 7 9

1945-1949 34 8

1950-1954 65 15

1955- 1959 16 34

1960-1964 405 115

1965 13 3

TOTAL 592 318

Source: Douglas C. Dacy and Howard Kunreuther, The Economics of Natural Disasters

(New York: The Free Press, 1969), p. 6.

29
Table 2.15 lists the casualities, families affected, and physical damages to dwellings and v small businesses as a result of five severe earthquakes that occurred between 1959 and 1971.

The San Fernando earthquake caused only about half the number of deaths as the Alaska

earthquake, but more than 21 times the destruction and damage to dwellings. It should be

noted, however, that the San Fernando earthquake recorded a magnitude of 6.6 on the

^ Richter scale, while the Alaska earthquake recorded a magnitude of approximately 8.5,

Thus, the magnitude of an earthquake, as measured on the Richter scale, is not the sole

indicator of damage of an earthquake. Total damages, for example, are obviously related to population density,,

Tables 2.16 and 2.17 give more detailed information of the losses caused by the Alaska and

San Fernando earthquakes. Table 2.16 shows damages of $71,2 million to Federal facilities

alone from the Alaska earthquake. The losses due to the San Fernando earthquake. Table 2,17, are broken down into public and private sector losses. Dollar losses were shared about

equally for each sector with the private and public sectors incurring 52% ($259 million)

and 48% ($238 million), respectively.

2.4 Tornadoes

Tornadoes have caused the loss of more lives than any other natural disaster in the United

States. Over a 57 year period, 1916-1972, tornadoes took the lives of 10,500 persons,

resulting in an annual average of 184 deaths (Table 2.18). For the last 15 years, however.

Table 2.18 shows that the annual death toll has remained below the average (184 deaths) with

the exception ^f 1965. Since 1953, the annual average number of deaths due to tornadoes has

decreased 42%. The decrease can be attributed to advancements in a national warning

system.

Table 2.18 also shows that for the past 8 years the United States has experienced annual

tornado property losses of $50 million and more (category 8). For the last 31 years annual

losses have exceeded $5 million (category 7), These current dollar losses represent conser- vative estimates and in effect serve as a lower bound to annual property losses. The

usefulness of Table 2.18 may be found more in the frequency of tornadoes reported in various

categories. Each of 11 tornadoes in 1965 caused property damages of $5 million and over

(category 7 and over). During 1970 there were 6 such tornadoes and in 1971 there were 5,

Tornadoes occur in all 50 states,^ Figure 2,7 shows the incidence by state for

Executive Office of the President, Office of Emergency Preparedness, Disaster

Preparedness , Vol, 1 (Washington, D,C,: Government Printing Office, January 1972), p, 73,

2 Ibid , , p, 35,

^Ibid.

^Ibid.

^U.S. Department of Commerce, National Oceanic and Atmospheric Administration, National

Weather Service, Tornado Preparedness Planning (Washington, D.C. : Government Printing

Office, October 1970), p. 24.

30
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31
TABLE 2.16

ESTIMATED DAMAGES TO FEDERAL FACILITIES IN ALASKA

RESULTING FROM THE 1964 EARTHQUAKE

federal Agency Dept. of Defense

Dept. of Interior Dept. of Commerce

Federal Aviation Agency

Dept. of Health, Education, and Welfare General Services Administration TOTAL

Primary Loss Barracks and other facilities at Fort Richardson, Elmendorf

Air Force Base, and Kodiak

Naval Station Alaska Railroad Damaged facilities Facilities at Anchorage

International Airport

Public Health Service, Native

Hospital

Office supplies and equipment

Estimated Damage iiMilUun) 35.6

31.5

1.8

1.3

.6

.4

Source: Douglas C. Dacy and Howard Kunreuther, The Economics of Natural

Disasters (New York: The Free Press, 1969), p. 126.

32
TABLE 2.17

LOSSES DUE TO THE SAN FERNANDO EARTHQUAKE

BY PRIVATE AND PUBLIC SECTOR

Sector Losses

Private Sector:

Buildings, excluding land and contents:

Los Angeles City

San Fernando City

Elsewhere

Non-building structures, excluding land

TOTAL

Public Sector:

Los Angeles City

San Fernando City

Los Angeles County

Other local jurisdictions

Porter Ranch (aftershock damage)

Utilities

TOTAL

GRAND TOTAL

$170,300,000

35,500,000

18,500,000

35,000,000

103,300,000

200,000

100,000,000

5,000,000

8,000,000

22,000,000

$259,300,000

238,500,000

$497,800,000

Source: U.S. Department of Commerce, National Oceanic and Atmospheric Administration,

Environmental Research Laboratories, A Study of Earthquake Losses in the

San Francisco Bay Area , A Report Prepared for the Office of Emergency Preparedness, Part B, p. 17.

33
TABLE 2,18

FREQUENCY OF TORNADOES, RESULTING CASUALITTES, AND PROPERTY LOSSES, 1916-1972

YbAfl Number

Tornafloei Tornado

Days

Total Deaths

K^ost Dedtlu

id SiiiQle Toriiado

T»wi Vnn* k* wuumet or TDnuoots n

Category

6

Catei^<.»rv 0 Cateyofv

7 inJ (\a

1916 90 36 150 30 6 7 1 0 1917 121 38 509 101 7 21 9 0 1918 81 45 135 36 7 20 5 0 1919 64 35 206 59 10 2 0 1920 87 50 498 87 14 10 0

1921 105 55 202 61 7 22 3 0 1922 108 64 135 16 7 27 5 0 1923 102 59 109 23 21 1 0 192« no 57 376 85 26 11 1 1925 119 65 794 689 34 2 1

1926 111 57 144 23 28 0 0 1927 163 62 540 92 7 42 9 1 1928 203 79 92 14 7 40 7 0 1929 197 74 274 40 48 4 0 1930 192 72 179 A 1 38 6 0

1931 94 57 36 6 6 14. 1 0 1932 151 67 394 37 7 23 1 1 1933 258 96 362 34 7 46 9 0 1934 14 7 77 47 6 6 10 3 0 1935 180 77 70 11 6 29 0 0

1935 151 71 552 216 7 17 5 1 1937 147 75 29 5 6 24 0 0 1938 213 76 183 32 7 29 6 0 1939 152 75 87 27 21 3 0 19A0 124 62 65 18 13 2 0

1941 118 57 53 25 24 1 0 1942 167 66 384 65 7 42 10 0 1943 152 61 58 5 7 28 B 0 1944 169 68 275 100 50 9 0 1945 121 66 210 69' 21 10 1

1946 106 65 78 15 7 29 7 0 1947 165 78 313 169 7 46 7 1 1948 183 68 140 33 7 62 ] 1 2 1949 249 80 212 58 7 54 13 0 1950 199 88 70 18 47 9 0

1951 272 113 34 6 7 35 11 2 1952 236 98 230 57 7 53 19 0 1953 437 136 516 116 63 18 7 1954 549 159 35 6 7 63 8 1 1955 593 153 125 80 74 13 1

1956 532 155 83 25 7 83 24 1 1957 864 154 191 44 129 26 3 1958 565 166 66 19 7 70 3 1 1959 589 156 58 21 7 70 4 1 1960 618 172 47 16 ' 65 11 1

i961 682 169 51 16 7 103 21 1 1962 658 152 28 17 7 51 10 0 1963 461 141 31 5 7 77 15 1 1964 713 156 73 22 7 113 17 5 1965 899 181 298 44 8 126 30 11

1966 5 70 150 99 58 8 79 13 4 1967 912 173 116 33 8 125 33 8 1968 661 171 131 34 8 82 26 6 1969 604 155 66 32 8 98 16 3 1970 649 171 73 26 8 97 24 6

1971 888 192 156 58 8 71 30 5 1972 741 194 27 6 8 100 28 1 Means

:

659

1 1953-72

1

163 114 87 19 3

NOTE: — The above estimated losses are baaed on values at time of occurrence:

G-Stonn damages in categories:

5. $50,000 to $500,000 7. $5 minion to $50 million

6, $500,000 to $5 million 8. $50 million and over. Source: Executive Office of the President, Office of Emergency Preparedness,

Disaster Preparedness , Vol. 3 (Washington, D. C, Government Printing

Office, January 1972), p. 30.

3A
tornadoes Lower figure is mean annual tornadoes per 10.000 square n-iiles Zone of highest incidence

Figure 2.7 Tornado Incidence by State, 1953-1970

Source: U.S. Department of Coimnerce, National Oceanic and Atmospheric Administration,

National Weather Service, Tornado Preparedness Planning (Washington, D.C.:

Government Printing Office, October 1970), p. 26.

35
1953-1970. Although Texas has experienced the greatest number of tornadoes (1,879),

Oklahoma reportedly has a greater number of tornadoes (8,7) per 10,000 square miles than

does any other state. In general the southeastern and midwestern states experienced the

highest annual average number of tornadoes for the period.

In addition to being widespread, tornadoes occur freqi^ently throughout the year, as shown in

Figure 2o8. The peak tornado months are April, May, and June. For the period 1953-1969,

2,465 tornadoes struck in the peak month of May. The number of tornado deaths has been

correspondingly high during these months. For April, May, and June the total number of

deaths during the same period was 578, 547, and 367, respectively. Figure 2,9 indicates

that the states with the highest fatalities (per 10,000 square miles) are Indiana (40),

Michigan (37), and Alabama (35),

The annual Impact of tornadoes as reported by the American Red Cross is shown in Table 2,19,

Since fiscal year 1965 an average of more than 8,300 families per year have suffered

losses from tornadoes. Over the 14 year period described in Table 2,19, tornadoes destroyed

and damaged an average of 6,871 dwellings per year,

Casualltles and losses for Individual tornadoes are reported in Table 2,20, The most

devastating tornado disaster for the period was from a group of storms called the Palm

Sunday Tornadoes, which resulted in 202 deaths and 1,813 destroyed dwellings (more than

twice the number destroyed by any other tornado during the period).

The pecuniary losses to properties as a result of some individual tornadoes are listed in

Table 2.21. On four occasions since 1965, tornadoes caused property damages of $100 million

and more. The damages produced by the Palm Sunday Tornadoes, previously mentioned,

amounted to $200 million.

Annual dollar losses resulting from tornadoes have not been reported in such a manner so as

to give researchers all the data they need for evaluating tornadoes. Broad categories of

dollar losses, such as those shown in Table 2.18, are usually the best statistics availableo

For example, in 1965 and 1970 Table 2.18 shows losses of $50 million and over (category 8).

Yet if we compare these figures with the property damages shown in Table 2.21, we find that

in 1965 the Palm Sunday Tornadoes produced $200 million In property damages and that in

1970 the tornadoes in Lubbock, Texas, caused $135 million in property damages. The $50

million and over category now appears very Inappropriate for reporting tornado losses.

"''These statistics are not necessarily complete, since some tornadoes that occur in

unpopulated areas are not recorded.

36
2600

2400

2200

2000

1800

1600

1400

1200

1000

800

600

400

200

1629.

2465

.2163

DEATHS

\

I

^ TORNADOES

I1/

\

\

\

\

\

\

/

1214

769 \

.j82

\

318V

49

360 Vs.

42!

263

.82

351

JAN FEB' MAR APR MAY JUNE JULY AUG SEPT OCT NOV DEC

Figure 2.8 Distribution of Tornado Incidence and Resulting Deaths

By Months, 1953-1969

Source: U.S. Department of Coimnerce, National Oceanic and Atmospheric Administration

National Weather Service, Tornado Preparedness Planning (Washington, D.C.:

Government Printing Office, October 1970), p. 28.

37
Figure 2.9 Deaths Due to Tornadoes, By State, 1953-1969

Source: U.S. Department of Conunerce, National Oceanic and Atmospheric Administration,

National Weather Service, Tornado Preparedness Planning (Washington, D.C.:

Government Printing Office, October 1970), p. 26.

38
606Q

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39
TABLE 2.20

CASUALTIES AND LOSSES FROM SEVERE TORNADOES, 1955-1971

DATE PERSONS DWELLI NGS TOTAL NO. NAME OF DISASTER OPERATION OCCURRED Q

UJ

_J

INJURED

Or

I

LL

HOSPI

TAL.

DESTROYED

DAMAGED

FAMILIES . SUFFE:^ING 1 LOSS

OKLA. KANSAS TORNADOES 5/25/5^ 101 572 225 433 584 1199

OKLA. .KANSAS, MO. TORNADOES

7 208 62 A7 ^77 691+

1 MISSOURI - KANSAS TORNADOES 5/20/57 54 kk8 163 625 1256 2261

MISSISSIPPI - ALABAMA

TORNADOES

I 2/26/58 15 123 62 1^3 276 ii /-ill 494

WEST CENTRAL WISCONSIN

TORNADOES

6/4/58 27 239 117 177 317 557

Palm Sunday Tornadoes

- IimDIANA, OHIO - MAJOR

- KENTUCKY, W.VA. - minor

ii/1 1 /65 202 2047 636 1813 2876 51+92

1

! EASTERN KANSAS TORNADOES , 6/8/66 17 '^57 103 885 3317 5096

LUBBOCK, TEXAS TORNADO 5/1 1 /70 26 1672 107 5^9 2033 3300 !

WEST CENTRAL MISSISSIPPI

' TORNADOES

2/21/71 117 1083 k3k 658 I0l4 2487

Source: Data from American Red Cross.

40
TABLE 2.21

PROPERTY DAMAGES RESULTING FROM INDIVIDUAL TORNADOES

Year Disaster Property Damages

($1,000,000)

1 QCK Palm Sunday Tornadoes ZUU

Topelca, Kansas

1967 St. Louis County, Missouri 15

1968 Charles City, Iowa 30

1969 Salina, Kansas 10

1970 Lubbock, Texas 135

1971 Mississippi Delta Tornadoes 20

1972 Vancouver, Washington 5-6

1973 North Central, Georgia 113

Source: U.S. Department of Commerce, National Oceanic and Atmospheric Administration,

Environmental Data Service, General Summary of Tornadoes 1965, 1966, 1967 , 1968, 1969, 1970, 1971, 1972 (Washington, D.C.: Government Printing Office);

and Storm Data and Unusual Weather Phenomena , March 1973.

41
3. BENEFIT-COST ANALYSIS

The previous chapter discussed the past dollar losses and other consequences of natural

disasters. The reasons for studying these past losses is to determine the potential

benefits that might be realized from protection against future disasters. Society can purchase protection through various techniques that are effective in reducing future losses.

The problem facing society is one of deciding how much disaster protection it is economical

to buy. The present chapter will apply a well-known method, called benefit-cost analysis,

for choosing society's optimal level of protection against natural disasters.

Benefit-cost analysis can also be applied to determining the proper channeling of research

money into disaster mitigation programs « This is accomplished by examining the potential

benefits and costs of alternative research strategies. It is desirable to determine if the

potential benefits from various research programs will justify their costs. When several

research possibilities exist, a benefit-cost analysis provides a rational approach for

choosing among research projects.

The first section of this chapter discusses the principles of benefit-cost analysis and

their application to evaluating alternative levels of protection against natural disasters.

The second section will examine the results of two studies in disaster mitigation,

3.1 Benefit-Cost Models for Disaster Mitigation

Alternative levels of protection against natural disasters provide certain benefits and

costs for society. Social benefits are the reduction of future potential losses resulting

from natural disasters. The costs (opportunity costs) society must incur to achieve these

benefits are the benefits foregone by taking resources out of their alternative uses and

applying them to disaster protection. To use resources efficiently, society must choose the

optimal level of protection that maximizes the difference between the present value of total

benefits and total costs. A benefit-cost model can be used to determine society's optimal

level of protection against natural disasters.

The essential features of a benefit-cost model can be illustrated by graphical analysis. In Figure 3,1 the horizontal axis measures alternative levels of protection, P. The vertical

axis measures the dollar value of total benefits and total costs for corresponding levels

of protection. The total benefits curve is shown increasing at a decreasing rate. This is a tenable proposition as long as equal increments of protection result in successively

smaller reductions in losses.

The total costs of protection in Figure 3.1 are depicted as increasing at an increasing

rate. This reflects diseconomies of scale that result when equal increments in productive

resources yield diminishing increments in disaster protection.

The decision rule for optimization in benefit-cost analysis is to choose that program or level of protection which maximizes the difference between total benefits and total costs;

Because of a positive rate of time preference, the potential benefits and costs do

not have the same value in the future as they do today. Based on society's valuation of

future relative prices, a future stream of benefits and costs can be discounted to their

present value. Throughout the following benefit-cost analysis all dollar values of

benefits and costs will be taken to be present values.

42

I
Dollar Value of Total

Benefits and Total Costs

p P* P Level of Protection

Figure 3.1 Dollar Value of Total Benefits and Total Costs versus level of protection against natural disasters

Dollar Value of Marginal

Benefits and Marginal Costs

P p* p Level of Protection

Figure 3.2 Dollar Value of Marginal Benefits and Marginal

Costs versus Level of Protection Against Natural Disasters

43
I.e., maximizes net benefits. This criterion can be restated as choosing that level of * protection which equates marginal benefits to marginal costs. Figure 3,1 shows that

society's optimal level of disaster protection occurs at P*, where net benefits are maximized.

Correspondingly, figure 3.2 shows that marginal benefits jyst equal marginal costs of

protection at P*. Any level of protection greater than P , for example P° in Figures 3,1

and 3.2, indicates that society is over-protecting against disasters, P° represents an inefficient allocation of society's scarce resources. By instituting lower levels of

protection (moving toward P*) society's reduction in costs is more than the reduction in

benefits. Net benefits will be increased (Figure 3.1) and an equality between marginal

benefits and marginal costs will be approached (Figure 3,2), Similarly, any level of

protection less than P*, say P in Figures 3,1 and 3,2, is a signal that society is underprotecting against natural disasters. By increasing the level of protection from P to P*,

net benefits increase, marginal benefits a-.viroach nar^inal costs, and a more efficient

allocation of resources results. Once P* is achieved no other level of protection willi

produce a more efficient choice for society.

3 An equally useful method of determining society's optimal level of protection against

natural disasters involves total cost minimization, where total costs are defined to include more than just the costs of protection. Figure 3.3 will be used to illustrate this method.

The horizontal axis measures alternative levels of protection (P) and the vertical axis measures the corresponding dollar values (discounted to the present) of costs of protection,

total losses, and total costs (costs of protection plus total losses). The costs of protection curve of Figure 3.3 is identical to the total costs of protection curve appearing in

Figure 3.1. A total losses curve is shown decreasing at a decreasing rate for increasing

levels of protection; i.e., equal increments of protection add successively smaller reductions in losses. Decreasing total losses are vertically added to increasing costs of protection in order to derive a third curve, labeled total costs. Under the cost minimization

principle, the optimal level of disaster protection is achieved when total costs (costs of

protection plus total losses) are minimized. This is shown to occur at P** in Figure 3.3.

The cost minimization method produces a result precisely the same as the benefit-cogt method

for selecting the optimal level of protection; i.e., P**(Figure 3.3) is equal to P*

(Figures 3.1 and 3.2)

There may be a temptation to do one of the following in a benefit-cost analysis: 1)

maximize total benefits or 2) require only that total benefits exceed total costs. The

first will cause an inefficient allocation of resources and a non-optimal level of protection. The second will also more than likely cause a non-optimal choice.

2Marginal benefits and marginal costs are the additions to total benefits and total

costs resulting from a small change in the level of protection. To derive the marginal

benefits curve and marginal costs curve we calculate the rate of change in total benefits

and total costs at alternative levels of protection. Mathematically, the marginal curves

are the first derivatives of the total curves.

3Although not referred to as cost minimization, this method can be found in Clifford S,

Russell's article "Losses from Natural Disasters," Land Economics , Vol, 46 (November 1970),

pp. 383-393.

Note that the total benefits curve previously discussed is derived using the total

losses curve. The total benefits curve is merely the total losses curve subtracted from

the level of losses incurred in the absence of any protection. See appendix.

^See appendix for a mathematical proof of this statement.

44
Dollar Value of Total

Losses, Costs of Protection,

and Total Costs^

Total Costs

Costs of Protection

Total Losses

Level of Protection

Figure 3.3 Dollar Value of Total Losses, Costs of Protection,

and Total Costs versus Level of Protection Against Natural

Disasters

Total costs equal costs of protection plus total losses

45
By protecting at a level greater than P**, costs of protection increase by more than total

losses decrease. Total costs (costs of protection plus total losses) increase (a movement

upward and to the right occurs along the total costs curve) and are no longer at a minimum.

When the level of protection against natural disasters is reduced below P**, total losses

increase by an amount greater than the decrease in costs of protection. Again, total costs

increase and deviate from the possible minimum. Any level of protection different from P**

results in a movement away from minimum total cost and hence a non-optimal level of protection against natural disasters.

In this section we have examined two approaches for determining the optimal level of protection. The level of protection considered In both may be produced by a combination of

available techniques or by only one technique of protection. Thus it is emphasized that,

when several approaches do in fact exist, they must all be included in the optimization

problem; otherwise, an optimal solution may not be achieved.

3.2 Application of Benefit-Cost Analysis to Disaster Mitigation

In this section the essential features of two studies concerned with mitigating the losses

from disasters will be discussed. The studies apply two techniques to two different types

of problems. The studies reviewed are 1) A Preliminary Study of Engineering Seismology

Benefits , and 2) Application of Economic Analyses to Hurricane Warnings to Residential and

Retail Activities in the U.S. Gulf of Mexico Coastal Region.

A Preliminary Study of Engineering Seismology Benefits "^ investigates the determination of the

economic benefits derived from engineering seismology. The report estimates the economic

benefits realized from the passage of the California Field Act. This act was passed by the

California State Legislature following the Long Beach earthquake in 1933. It revised the

building codes so that all California schools constructed after 1933 would be able to better

withstand the effects of earthquakes.

The study compares earthquake damages among schools constructed before the 1933 code revision

and schools constructed after (with) the revision. Estimated dollar damages were calculated

for 59 schools and four earthquakes. The earthquakes included Imperial Valley (1940),

Torrance-Sardina (1941), Kern County (1952), and Daly City (1957), Earthquake magnitudes as measured by the Richter scale were 7.1, 5.4, 7.7, and 5.3 respectively. The dollar damage

as a percent of building value at the time of the earthquake was computed for each school.

The damage was determined by estimating the cost of restoring a school to its pre-earthquake

condition.

Figure 3.4 plots damages as a percentage of building value for different earthquake intensities for schools built prior to 1933 (upper curve) and for schools built later than 1933

(lower curve). For each intensity rating, the curves show the average school damage as a percent of building value. California schools constructed under the earthquake-resistant

regulations of the Field Act sustained considerably less damage, as a percent of building

^.S. Department of Commerce, Environmental Science Services Administration, Coast and

Geodetic Survey, A Preliminary Study of Engineering Seismology Benefits (Washington, D.C.

Government Printing Office; August 1967).

2 Ibid , , p, 15,

46
DAMAGE

(% OF VALUEj CALIFORNIA SCHOOLS- 59 EXAMPLES 90

DAMAGE

(% OF VALUE) 90

CALIFORNIA SCHOOLS - 59 EXAMPLES PUGET SOUND (KING COUNTY) SCHOOLS • 154 EXAMPLES

ALL ANCHORAGE SCHOOLS

VI VII °° VIII EARTHQUAKE INTENSITY (MODIFIED MERCAUl SCALE) Figure 3«5 —Eorlhquoke domoge—Colifornia schools, Pogcl Sound

(King County) schools, and Anchorage schools.

47
value, than schools constructed prior to the code revision. While the former schools

experienced an average damage-to-value percentage of 0,4 at an intensity of VIII, the latter

schools experienced a 67,2 damage-to-value percentage at the same intensity.

The benefits derived from instituting an earthquake-resistant building code are significant,

as Figure 3,4 indicates. However, the costs of code revision have been neglected. Consequently, it has not been determined whether or not the benefits derived from providing

earthquake protection through code revision exceed or fall short of the costs for such protection. This, in turn, leads to the question of whether or not society implemented the

optimal level of protection against the effects of earthquakes, or whether society is over- protecting (too stringent a code) or underprotecting (in which case a more stringent code

should be enforced)

.

A similar study was conducted for school buildings in Puget Sound, Washington. Damages to school buildings were compared on a pre-1949 and post-1949 construction basis. Since 1949

Seattle has been under the auspices of the Uniform Building Code and a provision for

earthquake-resistant construction. As a result, school buildings constructed after 1949

have experienced smaller damages as a percent of their building value than have school

buildings constructed before 1949 (see Figure 3,5), The benefits are well defined, but

again the social and economic costs of code revision are disregarded in the analysis.

Another empirical study that provides an example of benefit-cost analysis is Application of

Economic Analysis to Hurrlcane^Warnings to Residential and Retail Activities in the U,S,

Gulf of Mexico Coastal Region , This study applies the principles of game theory to decisions involving improved hurricane prediction and warning systems—a technique of

protection against hurricanes. An estimated savings of $15.2 million (as a lower bound

estimate) can be realized in the flr^t year from reducing the error of present prediction

and warning, according to the study.

People who receive hurricane warnings do not always act rationally. Some do not take protective action against potential effects the storm has on homes and businesses. Anderson

and Burnham have calculated the potential savings from averting damages when increased

proportions of the population take protective action (Table 3.1). Table 3.2 shows the

estimated savings from averting damages when the population grows annually at 5% and an additional 10%, 20%, 60% and 100% of the people who do not take protective action now decide

to take protection. Taking year 1 as an example, 20% of the current population presently

take protective action when alerted, 80% do not. Let us assume, however, that 10% of the

80% who do not protect now decide to take protective action. Thus, 20% + (10% x 80%) or

28% now take protection. With population growing at an annual rate of 5%, an estimated

$3.18 million in damages can be averted. By year 4, when 100% of the new population takes

protective action, savings can amount to $13.33 million.

The report also develops a game theory approach to the decision of whether or not to protect.

The general model is presented in Figure 3.6, Given the probability (p) of a hurricane

The reason for the inverse relationship between damage and intensity beyond an intensity of VIII is explained in the report as being caused by variation in sample size.

2Lee G. Anderson and John M. Burnham, "Application of Economic Analysis to Hurricane

Warnings to Residential and Retail Activities in the U.S. Gulf of Mexico Coastal Region,"

Monthly Weather Review, February 1973, pp. 126-131.

•^Ibid. . p. 126.

48
TABLE 3.1

DAMAGE REDUCTION DUE TO INCREASING PERCENT

OF POPULATION PROTECTING AGAINST HURRICANES

Proportion of Alterted Population Damage Averted

That Takes Protective Action

(%) ($1,000,000)

20 2.16

40 4.32

60 6.48

80 8.64

100 10.80

Source: Lee G. Anderson and John M. Burnham, "Application of Economic Analysis

to Hurricane Warnings to Residential and Retail Activities In the U.S. Gulf of Mexico Coastal Region," Monthly Weather Review . February 1973,

p. 127.

49
TABLE 3.2

DAMAGE REDUCTION WITH POPULATION GROWTH AND

INCREASED PROTECTION BY POPULATION

(1) (2) (3)^ (4) (5)°

Percent of Increased Percent of Population Damage

Population Percent of New Population Growth Averted

Now Protecting Population Protecting Rate ($1,000,000)

Protecting (%)

Year 1 20 10 28 5 3.18

Year 2 20 20 36 5 A. 29

Year 3 20 60 68 5 . 8.50

Year 4 20 100 • 100 5 13.13

^Col. 1 + Col. 2* (100% - Col. 1).

^Col. 3

• (1.05)*^ $10.8 million, where t = 1, 2, 3, 4.

Source: Lee G, Anderson and John M. Burnham, "Application of Economic Analyses to Hurricane Warnings In the U.S. Gulf of Mexico Coastal Region," Monthly Weather

Review , February 1973, p. 127.

50
Hurricane

Strikes

No Hurricane

Strikes

Protective

Action

Taken

aL + C C

No Protective

Action

Taken

L 0

C = cost of protection

L = dollar losses resulting from a hurricane

a = the proportion of L which cannot be reduced through

protective action

Figure 3,6 Hurricane decision matrix

Source: Lee G. Anderson and John M. Bumham, "Application of Economic Analysis

to Hurricane Warnings to Residential and Retail Activities In the U.S.

Gulf of Mexico Coastal Region," Monthly Weather Review . February 1973,

p. 127.

51
passing over a given area at a given time, then the hurricane forecast should be given only

if

p(aL + C) + (l-p)C < pL,

where C = cost of protection,

L = dollar losses resulting from a hurricane, and

a = the proportion of L which cannot be reduced through protective action.

The left hand side of the inequality represents the expected cost of protecting. The right

hand side represents the expected cost of not protecting.

Q Anderson and Burnham also show that the above expression can be reduced to p > —r: — . (1 - a)L

So a forecast warning should not be given unless the probability of the storm striking an area (p) is greater than C

(1 - a)L

The approach can be adapted to the analysis of individual decisions regarding protection

against any type of natural disaster. Given the probability of a natural disaster striking,

an individual can assess the values of C, L, and a and thus determine whether or not it

pays to protect against the potential losses of the disaster. Based on an individual's

relative valuation of C, L, and a, it becomes feasible for the individual to protect

against the disaster only when p > C . (1 - a)L

52
4. SUMMARY AND RECOMMENDATIONS

4.1 Summary

An understanding of the relative losses resulting from various types of disasters and

individual occurences of disasters is useful to both the individual and society. The

individual will be better prepared to assess the potential losses of various disasters and

how and to what extent he should protect himself from such losses. Society, in its efforts

to mitigate the losses from disasters, will have better information on the basis of which

to determine the levels of protection against disasters which maximize net benefits. The

following section summarizes and compares the monetary a^d non-monetary losses associated

with the four types of disasters discussed in Chapter 2.

The dollar values of property damages resulting from hurricanes and floods for five-year

periods between 1950 and 1969 are shown in Figure 4.1. Comparative damages for tornadoes

and earthquakes are shown for five-year periods between 1950 and 1964. Between floods and

hurricanes, floods caused the greatest amount of total damages ($7046 million from floods

compared to $6008 million from hurricanes) „ Also, during the period 1950-1954 flooding

caused more total property damage than hurricanes, earthquakes, or tornadoes.

Figure 4.2 shows the comparative number of lives lost for the four types of disasters

during the period 1950 to 1969. Tornadoes caused the greatest total loss of lives (2,348)

and also caused the most deaths in any five-year period.

The decreasing trend in the number of lives lost from disasters in general is not evident

in Figure 4.2, The short time period covered or the large five-year intervals may distort

the trend other researchers have uncovered. Figure 2,1, Chapter 2 of this report, shows

a strong downward trend of lives lost due to hurricanes. This trend, however, is not as apparent for other tjrpes of natural disasters.

Assuming that the quality of the statistics reported has not changed significantly between

1969 and 1972, we can compare the relative losses resulting from severe individual disasters.

Figures 4.3 and 4.4 show the comparative losses resulting from Hurricane Camille (1969), the

Agnes Floods (1973), the San Fernando Earthquake (1971), and the Lubbock, Texas Tornado (1970).

The disaster with the greatest property damages among the four occurences shown in Figure

4,3 was the Agnes Floods ($2,100 million). The number of lives lost during these floods

numbered 122. Hurri cane Camille took 47% more lives (258) than did the Agnes floods, but

caused 32% less property damage ($1,420.7 million).

Figure 4.4 shows the comparative number of dwellings destroyed and damaged by each of the

four disasters o Hurricane Camille accounted for 48% of the total number of dwellings

destroyed by the four disasters (6013 out of a total of 12,534). The Agnes Floods

destroyed 42% or 5,222 of the total dwellings.

The comparative description of losses from disasters is not as consistent as it might

be because of the changing quantity and quality of statistics reported over the years.

2 See Douglas C, Dacy and Howard Kunreuther, The Economics of Natural Disasters

(New York: The Free Press, 1969), p, 7,

3The total value of property damages attributed to Tropical Storm Agnes is

$3,097.8 million (see Table 2.6, Chapter 2).

53
Property Damages

($1,000,000)

4,000 .

0)c

o

•HU

U 0^O

3,000.

2,000.

1,000.

CO -ao

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CM

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rH iH 1-1 i-i r-l i-H ft

Figure 4,1 Property Damages Resulting from

Hurricanes, Floods, Tornadoes and Earthquakes

54
Number of

Lives

Lost

900

800

700

600

500

400 -

300

200

100

COc

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LO in >^ vD in in VD VD in in VD v£> in in vO VD

0^ o> o> ON o^ ON ON ON ON ON ON ON ON ON ON ON

rH iH 1-1 1-1 iH iH 1-4 1-1 iH iH iH 1-1 iH iH

Figure 4.2 Number of lives lost due to hurricanes,

floods, tornadoes, and earthquakes

Puget Sound, Washington earthquake only.

55
Property Damages

($1,000,000)

4,000

3,000

2,000

1,000 -

CO TlO

Q

r-l rH

•H [14 B

TO CO u

0) 60 c < to •H o

o

u .H 3

cr

4-1

(-1 W 0 d T3 0 TO St c u

iH « c c H

Cfl TO p 0) H

^*

r-i tj in O m J3

XI3m

m

iH ~1

Number of

Lives Lost

260

240

220

200

180

160

140

120

100

80

60

40

20

TO3

cr

4-1 U

TO W

c

•ac

TOC

C

TO

(/3

O

TO

!^oH

cn

TOX

(U

u

oa

3

Figure 4.3 Comparisons of property damages and

number of lives lost for individual disasters, 1970-1972

^Deaths due to hurricane winds and flooding were not reported separate

56
Number of

Dwellings

Destroyed

7,000

6,000

5,000

4,000

3,000

2,000

1,000

m

a;c

60 <

1

cr ^

i-i rt W

c

-oc

<oc

u

0; fac

CO

<3-

Number of

Dwellings

Damaged

60,000

40,000

20,000

>—

1

•H

•H D* B x:

CO 4J u

CO ar

Q) -a u

P o

to o o

o i-i to •H fa c o

tfl U) c CO 3 (D Vj c

a: C dJ fa o < H

c

iri n! cc <t eg CO to vD X O vO 01 in

<f

<fm

6-

0-)

Figure 4.4 Comparisons of number of

dwellings destroyed and damaged

for individual disasters, 1970-1972

Includes major damage only.
The difference in the number of dwellings damaged by each disaster was small, except for

the Lubbock, Texas tornado, which caused damage to only 2,033 dwellings compared to 50,457 by Hurricane Camille, 37,834 by the Agnes Floods, and 44,662 by the San Fernando

Earthquake.

If the primary concern in disaster protection is to reduce the dollar property damages and

the destruction of dwellings caused by natural disasters, then initial efforts might be

directed toward mitigating the effects of hurricanes and floods. These two types of

disasters have resulted in relatively higher property damages and destruction of dwellings

than have earthquakes and tornadoes. If the concern is for reducing the loss of lives,

then it may be more effective to invest in techniques for the mitigation of losses due to tornadoes, which have caused the greatest loss of lives. These conclusions, however, are based on an assessment of the potential benefits (reduction in losses) that might be

realized by protecting against the adverse effects of natural disasters, with no examination

of the costs of protection. Furthermore, there are various techniques of protection which

need to be considered for any analysis of disaster protection,

4.2 Recommendations for Further Research

Additional research is needed to determine the real losses (i.e., in real dollar terms) that

individuals and society experience from natural disasters o Research is also necessary to determine 1) the future potential losses which natural disasters pose to various areas of

the country and 2) the costs of alternative techniques for protecting against these losses.

This additional research knowledge can be used as input for more comprehensive benefit-cost

studies of alternative techniques of mitigating losses due to a variety of natural disasters.

Further research is also needed in the investigation of the economics and technology of

different techniques of protection against disasters. Shoreline management practices that

prevent building in flood-prone areas seem a viable alternative to the conventional

engineering structures for reducing hurricane losses along the shoreline."'" Dwellings

can be better protected against flood waters through improved flood-proofing techniques or through location of buildings away from the reach of flood waters. Tornado losses can be

reduced by providing better emergency shelters, more accurate prediction and warning

systems, and structural modifications of existing and future buildings. Finally, earthquake

losses can be reduced through improved earthquake-resistant construction, better land use management, and improved prediction techniques.

Research efforts can be applied to determining the technical effectiveness of disaster

resistant provisions in building codes for reducing the losses from disasters. The

economic consequences of instituting minimum building standards must be researched. Also,

various economic incentives may exist to induce individual homeowners to purchase a given

For a discussion of present shoreline protection policies and of recommendations to achieve more effective protection, see: U.S. Department of Commerce, National Bureau of

Standards, Cost Sharing as an Incentive to Attain the Objectives of Shoreline Protection , by Harold E. Marshall (Washington, D.C.,: Government Printing Office, December 1973).

58
level of protection against disasters. These incentives must be considered in lieu of or

as complementary to building standards.

Although there are numerous techniques available for mitigating the losses from disasters,

further research is needed to determine new and better techniques, reliability of existing

techniques, improvements in existing techniques, and combinations of techniques that are mo economically efficient for mitigating the losses due to natural disasters.

59
APPENDIX

Economic Efficiency; Maximizing Net Benefits or Minimizing Total Costs (Costs Plus Losses)?

This appendix is a mathematical note to show that minimizing total costs (costs of protection

plus total losses) and maximizing net benefits (total benefits minus total costs) are two different techniques for achieving the same outcome—economic efficiency.

Cost minimization (see Figure 3.3) minimizes total costs (C) , where total costs are the sum

of the costs of protection (c) and total losses (£) . Both c and t depend on the level of • protection (P) against disasters. Symbolically,

c = c(P)

and I = -£(P)

,

where c' (P) > o .

and £'(P) < o.

Formulating the minimization problem we obtain,

MIN C = c(P) + -^(P)

.

The first order condition requires that

c'(P) + £'(P) = o

or c'(P) =-£'(P).

Economically speaking, we want to add increments of protection, P, until the increase in

costs, c'(P) from the last increment just equals the decrease in losses, V (V)

.

The efficiency criterion of the benefit-cost method (see Figure 3.1) is to maximize net

benefits (B) ; i.e., total benefits minus total costs. Total costs of protection, c(P), are the same costs of protection that are considered under the cost minimization method.

Total benefits are defined as the total losses that would occur {t ) in the absence of any

disaster protection minus the total losses, -^(P) , that occur as the result of protecting

at the same level P. Since c(P) and -^(P) are the same functions as those in the cost

minimization method, they also behave the same. Thus c' (P) > o and (P) < o. The

maximization problem can now be formulated as follows:

MAX B = - - c(P) .

'

Deriving the first order conditions for maximization we obtain,

-^'(P) - c'(P) = o

or c'(P) = -V iV)

(since is a constant^ its derivative with respect to P is zero) .

60
The conditions for economic efficiency, marginal costs equal to marginal losses, are the same as those under the cost minimization method. However, in the cost-benefit method we choose to call marginal losses marginal benefits since they are derived from total

benefits. Furthermore, marginal benefits are merely the negative of marginal losses ; i.e..

dr^^ - £(P) 1_ dUv)

dp dP

or -l'(p) = -

,

61
SELECTED BIBLIOGRPAHY

American National Red Cross. Highlights of Disaster Relief Services , Fiscal Year 1959-60,

1961-62, 1962-63, 1963-64, 1964-65, and 1965-66.

. Annual Summary of Disaster Services Activities . 1966-67, 1967-68, 1968-69,

1969-70, 1970-71, 1971-72, and 1972-73.

Anderson, Lee G, and Burnham, John M. "Applications of Economic Analysis to Hurricane

Warnings to Residential and Retail Activities in the U.S. Gulf of Mexico Coastal

Region." Monthly Weather Review , February 1973, pp. 126-131.

Dacy, Douglas C,, and Kunreuther, Howard, The Economics of Natural Disasters . New York:

The Free Press, 1969.

Executive Office of the President. Office of Emergency Preparedness, The Federal Response

to Tropical Storm Agnes . A Report to the Senate Subcommittee on Public Works.

Subcommittee on Disaster Relief. May 1973.

Disaster Preparedness . Vol, 1. Washington, D.C.: Government Printing

Office, January 1972.

. Disaster Preparedness . Volo 3. Washington, D.C.: Government Printing

Office, January 1972.

Friedman, Don G. "Prospective View of Natural Disasters in the United States," Paper

presented at the Systems Safety Society Symposium, July 18, 1973,

. "Analysis for Earthquake Insurance." Paper presented at the Earthquake

Research Affiliates Conference, California Institute of Technology,

April 3, 1973.

Kunreuther, Howard. "The Case for Comprehensive Disaster Insurance," Journal of Law and

Economics , XI (April, 1968), pp. 133-163.

, Recovery from Natural Disasters, Insurance or Federal Aid ?. Washington,

D.C.: American Enterprise Institute for Public Policy Research, December 1973.

Russell, Clifford S., "Losses from Natural Hazards." Land Economics , Vol, 46 (Nov, 1970),

pp, 383-393.

U.S. Congress. Senate. Committee on Public Works. To Investigate the Adequacy and

Effectiveness of Federal Disaster Relief Legislation, Part 2. Hearings before

the 93rd Cong., 1st. sess., March 30 and 31, 1973.

U.S. Congress. Senate. Commitee on Public Works. To Investigate the Adequacy and

Effectiveness of Federal Disaster Relief Legislation, Part 3 . Hearings before

the 93rd Cong., 1st. sess.. May 11 and 12, 1973.

U.S. Department of Commerce. Environmental Science Services Administration. Coast and

Geodetic Survey. A Preliminary Study of Engineering Seismology Benefits , by

Joseph D. Crumllsh and George F, Wlrth, Washington, D.C.: Government Printing

Office, August 1967.

62
U.So Department of Commerce, National Bureau of Standards. Technical Analysis Division,

Cost Sharing as an Incentive to Attain the Objectives of Shoreline Protection , by Harold Eo Marshall, Washington, D.C. NBSIR 73-294,

December 1973.

U.S. Department of Commerce, National Oceanic and Atmospheric Administration. Environmental Data Service. Climatological Data, National Summary 1972 ^Vol<, 23,

- General Summary of Tornadoes 1965, 1966, 1967, 1968, 1969, 1970, 1971, 1972o

Asheville, NcCo

'

, Storm Data and Unusual Weather Phenomena, Asheville, NoC, March 1973o

UoS, Department of Commerce. National Oceanic and Atmospheric Administration, Environmental Research Laboratories. A Study of Earthquake Losses in the San Francisco

Bay Area; Data and Analysis . A Report Prepared for the Office of Emergency

Preparedness, Part B, 1972.

UoS. Department of Commerce. National Oceanic and Atmospheric Administration,, National

Weather Service. Tornado Preparedness Planning. Washington, DoC: Government

Printing Office, Oct. 1970.

U.S. Department of Commerce. National Oceanic and Atmospheric Administration, Office of

Hydrology,, A Plan for Improving the National River and Flood Forecast and

Warning Service . Silver Spring, Md. 1969.

U.S. Department of Housing and Urban Developmento Federal Insurance Administration.

Report on Earthquake Insurance to the Congress of the United States o Pursuant

to Section Five of the Southeast Hurricane Disaster Act of 1965 , Washington, DoC, 1971,

63
N8S-1 14A (REV. 7-73)

U.J. DEPT. OF COMM. BIBLIOGRAPHIC DATA

SHEET

1. pi;mi.ication ok report no. NBSIR 74-473

2. Gov't Accession

No.

3, Recipient's Acces.'iion No.

4. TITLL: and .SUBTlTt.li Natural Disasters: Some Empirical and Economic Considerations5. Publication Date

"Polrmi Q "wr 10*7/.

6. Performing Organization Code

7. AUTHOR(S)

G. Thomas Sav

8. Performing Ori;an. Report No. NBSIR 74-473

9. PERFORMING ORGANIZATION NAME AND ADDRESS

NATIONAL BUREAU OF STANDARDS

DEPARTMENT OF COMMERCE

WASHINGTON, D.C. 20234

10. Proiect/Task/Work Unit No.

11. Contract /Grant No.

12. Sponsoring Organization Name and Complete Address (Street, City, State, ZIP)

Office of Federal Building Technology Washington, D.C.

Center for Building Technology 20234

Building 226, Room A-266

National Bureau of Standards

13. Type of Report Si Period Covered

Final

14. Sponsoring Agency Code

15. SUPPLEMENTARY NOTES

16. ABSTRACT (A 200-word or less factual summary ot most significant information. If document includes a significant

bibliography or literature survey, mention it here.)

Tnis study examines the extent of some of the losses resulting from natural

disasters. An estimate of these losses is necessary in order to determine the

potential benefits that might be realized from mitigating the negative economic

impacts from natural disasters. Absolute and relative losses resulting from

hurricanes, floods, earthquakes, and tornadoes are examined. This data will

help individuals, communities, and the Federal government make better decisions

as to how and what extent protection against disasters should be provided. The

application of benefit-cost analysis for choosing the optimal level of protection

against disasters is also discussed. Recommendations are made for further

research in determining the economic feasibility of various techniques designed

to mitigate the losses from disasters.

17. KEY WORDS (six to twelve entries; alphabetical order; capitalize only the first letter of the first key word unless a proper name; separated by semicolons

)

Benefit-cost analysis; disaster mitigation; earthquakes; economics; efficient; floods;

hurricanes; natural disasters; optimal; tornadoes; total cost minimization.

18. AVAILABILITY Unlimited

1 For Official Distribution. Do Not Release to NTIS

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i ^ Order From National Technical Information Service (NTIS)

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