This brief summary begins by defining both real and financial indirect economic losses. Several important generalizations about regional economies are employed to explain why post-disaster recovery is a product of a unique combination of outside assistance and the preexisting state of the economy. The paper then assesses the indirect losses from a hypothetical large Midwestern earthquake, examines financial ripples and systemic losses, and evaluates claims about the vulnerability of the national insurance and financial markets. Direct vs. Indirect Loss Indirect loss is any loss other than direct loss. This seems tautological, however, it is important to begin with the obvious.
Direct loss is a loss linked directly to an earthquake.
It includes all damages, plus employment losses due directly to the closure of the damaged facility. Real ripple effects stem from supply shortages or sudden reductions in demand. The relative size of the ripple hinges on the geographic area of focus, and the time frame under scrutiny. Losses can be displaced both geographically and temporally. As will be shown in the following discussion, ripples must be negative for the nation, but can, with the receipt of outside assistance, prove positive for the impacted region.