Figure 2 shows how the generalized loss envelope changes to reflect a national accounting stance. If the region produces critical materials for which ready substitutes are unavailable, then local indirect losses can spill over to affect the national economy. Hence, it is possible for indirect loss to exceed that sustained by the region alone. Second, the national economy is impacted in that external aid has to be financed. So from the vantage point of the nation as a whole indirect loss must exist .
Indirect gains are an illusion, a byproduct of focusing only on the stricken region.
The following simple example is provided as an illustration of how constraints amplify indirect losses. Suppose that the Memphis economy is fully constrained, and there are no means for circumventing forward or backward linked losses. No excess capacity exists within the disaster stricken area, and trade with other regions cannot provide the needed supplies or markets. Something like this might result from the loss of high voltage transmissions towers, or a vital natural gas pipeline. In such a situation, the output of transportation services, the sector which includes pipeline services, declines by 30 percent.