Natural Hazards, UnNatural Disasters
280 Pages

Natural Hazards, UnNatural Disasters


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Earthquakes, droughts, floods, and storms are natural hazards, but unnatural disasters are the deaths and damages that result from human acts of omission and commission. Every disaster is unique, but each exposes actions-by individuals and governments at different levels-that, had they been different, would have resulted in fewer deaths and less damage. Prevention is possible, and this book examines what it takes to do this cost-effectively.
It looks at disasters primarily through an economic lens. Economists emphasize self-interest to explain how people choose the amount of prevention, insurance, and coping. But lenses can distort as well as sharpen images, so the book also draws from other disciplines: psychology to examine how people may misperceive risks, political science to understand voting patterns, and nutrition science to see how stunting in children after a disaster impairs cognitive abilities and productivity as adults much later. Peering into the future, it shows that while urbanization and climate change will increase exposure to hazards, vulnerability can be reduced if cities are better managed.
This book will be of interest to government officials, urban planners, relief agencies, NGOs, donors, and other development practitioners .



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Published 10 November 2010
Reads 116
EAN13 9780821380505
Language English
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The Economics of
Effective PreventionNatural Hazards,
UnNatural DisastersNatural Hazards,
UnNatural Disasters
The Economics of
Effective Prevention
Washington, DC© 2010 The International Bank for Reconstruction and Development /
The World Bank
1818 H Street NW
Washington DC 20433
Telephone: 202-473-1000
All rights reserved
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This volume is a product of the staff of the International Bank for Reconstruction and Devel-
opment / The World Bank. The f ndings, interpretations, and conclusions expressed in this
volume do not necessarily ref ect the views of the Executive Directors of The World Bank or
the governments they represent.
The World Bank does not guarantee the accuracy of the data included in this work. The
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USA; fax: 202-522-2422; e-mail:
ISBN: 978-0-8213-8050-5
eISBN: 978-0-8213-8141-0
DOI: 10.1596/978-0-8213-8050-5
Library of Congress Cataloging-in-Publication Data
Natural hazards, unnatural disasters : the economics of effective prevention / The World Bank
and The United Nations.
p. cm.
Includes bibliographical references and index.
ISBN 978-0-8213-8050-5 — ISBN 978-0-8213-8141-0 (electronic)
1. Disasters—Economic aspects. 2. Natural disasters—Economic aspects.
3. Emergency management. I. World Bank. II. United Nations.
HC79.D45N416 2011
Cover art: The cover art is based on a Madhubani painting depicting the destruction
caused by the 2004 tsunami. This piece was created by Amrita Das, a female artist from
Madhubani District, Bihar, India, and is part of a private art collection.
For centuries, women from the Mithila region of Bihar have passed down through genera-
tions the tradition of f oor and wall painting. This art form is linked historically with disas-
ters. It became popular after a severe drought hit the region between 1966 and 1968. The
Indian government, in an attempt to help develop sources of income other than agriculture,
encouraged local women to paint on paper (rather than on f oors and walls) to allow their
artwork to be sold. This art form is now recognized internationally.
Cover design: Serif Design GroupPraise for
Natural Hazards, UnNatural Disasters
The Economics of Effective Prevention
“This report synthesizes our knowledge about the effects of natural hazards on human welfare,
particularly in its economic aspects. It is a remarkable combination of case studies, data on
many scales, and the application of economic principles to the problems posed by earthquakes,
abnormal weather, and the like. It provides a deep understanding of the relative roles of the
market, government intervention, and social institutions in determining and improving both the
prevention and the response to hazardous occurrences.”
—KENNETH J. ARROW, Nobel Prize in Economics, 1972
“This excellent and timely study is a wake-up call to all of us responsible for managing and
mitigating f oods, earthquakes, and other natural hazards.”
—BRUCE BABBIT, Former Secretary of the Interior, USA
“This book on natural hazards and unnatural disasters is very well done on a topic of supreme
and immediate importance. I particularly like the chapters on how quickly countries and regions
do recover from disasters—a topic discussed at least ever since John Stuart Mill—and how
good markets are in responding in terms of land and other values to the prospect of disasters. I
strongly recommend this book to non-economists as well as economists, and to government of-
f cials who must cope with f oods, oil spills, earthquakes, and other disasters.”
—GARY S. BECKER, Nobel Prize in Economics, 1992
“Three keywords come to mind after reading this World Bank report: prevention, strong inter-
national cooperation, and priority on helping human beings affected by disasters with compas-
sion and dignity. With this report the World Bank highlights what international actors, national
governments, local authorities, and individuals should constantly consider when discussing pre-
vention measures. Governments must take the lead in implementing preventive actions both
directly, by allocating eff ciently public resources, and indirectly, by showing people how to
protect themselves. This is the real challenge that not only the World Bank but all of us have to
face. This is the dream that we have and it can become true if we are ready to pay the (political)
price to achieve it. This ideal mirrors the belief and the actions undertaken by the Italian Civil
—GUIDO BERTOLASO, Head of the Italian Civil Protection
“How is it that some communities are able to soften the blows they face when rare natural events
hit them, whereas others experience huge suffering? Natural Hazards, UnNatural Disasters con-
tains the tightest analytical and empirical investigation into the question. It’s a terrif c book.”
—SIR PARTHA DASGUPTA, Frank Ramsey Professor of Economics,
University of Cambridge“It is a sad commentary on how aid is media-driven that off cial aid agencies and NGOs will
make a huge effort for disaster relief and virtually no effort for prevention. This report coura-
geously makes the case for redressing the balance. It dramatizes as never before that “natural
disasters” are not so natural—prevention failures cost myriad lives, usually among the poorest.
It issues a challenge: reverse the shameful neglect of prevention so as to save those lives.”
—WILLIAM EASTERLY, author of The White Man’s Burden (2006)
“It is the moral and ethical duty of all humanitarian and development workers to ensure that
every dollar is well spent. Thus this study is an essential primer for all policy makers and prac-
titioners concerned with disaster risk reduction and recovery—even more so in this age of fru-
gal necessity. In building community safety and resilience, sensible spending, greater transpar-
ency, and accountability are essential to do more, do better, and reach further in tackling the
most signif cant vulnerabilities that confront humanity. This report highlights the need for in-
creased resources and innovative partnerships, in line with the Red Cross and Red Crescent
experience, which shows that it really pays to invest in disaster prevention.”
—BEKELE GELETA, Secretary General of the International Federation of Red Cross
and Red Crescent Societies

“This book is a must-read for policy makers and concerned individuals all over the world. For
too long, leaders have done too little to prevent the transformation of natural hazards into
(un)natural disasters, and then moved too slowly once they occur. And now the risks are grow-
ing with rapid urbanization and climate change. This book organizes vast amounts of material
into compelling analyses and clear messages, and the authors put forward pragmatic policy
suggestions that blend market incentives with ‘smart’ regulation and sound governance princi-
ples. They need to be taken seriously.”
—SRI MULYANI INDRAWATI, Managing Director, World Bank;
Former Minister of Finance, Indonesia

“Warning people of impending hazards saves lives and livelihoods. But we can still do better as
shown in this excellent report! With clear arguments, statements, and evidence, it is a convinc-
ing call for governments the world over to improve the detection and forecasting of hazards
risks, and to develop better warnings for sectoral planning to reduce human and economic
losses that are setting back socio-economic development. Improvement of early warning sys-
tems is clearly an investment in sustainable development, as demonstrated in many countries
where benef ts exceed costs many times over.”
—MICHEL JARRAUD, Secretary General of the World Meteorological Organization

“When a natural hazard strikes innocent victims, people from around the world pitch in to
help. It is incumbent on policy makers to make sure that this generosity is well-used. This report
is one of the f rst to treat hazards from an economic perspective of value-for-money. That lens—
dismal at it may seem—provides crucial insights on why we should spend more on preventive
action (and why we don’t), on why reliance on formal rules and planning does not always
work, and on why we need to think of disaster risk prevention in broader developmental terms.
The report provides a detailed, welcome, and timely blueprint for reducing disasters in a period
when natural hazards appear to be on the rise.”
—HOMI KHARAS, Senior Fellow, Brookings Institution “I have just read your report and f nd it both fascinating and right on target! The deep prob-
lems result from . . . terrible governance over a long time, which then destroys the trust that
individuals have in their government and in each other. Rebuilding is not just of the physical
world but also the much tougher job of rebuilding trust and social capital. I wish that the steps
toward achieving that tough job were easy and quick, but they are not. You are doing very
important work.”
—ELINOR OSTROM, Nobel Prize in Economics, 2009
“Neither adverse economic shocks nor natural hazards are avoidable, but citizens, economic
agents and governments can do a lot to limit or mitigate their worst effects through an intelli-
gent combination of prevention, insurance, and sensible coping. This book is a primer on how
to deal with natural hazard risks so they do not become natural ‘disasters,’ as is aptly suggested
by the title. It emphasizes what governments can do to promote effective prevention. . . . It also
examines the role of catastrophic insurance and shows that in spite of its key importance, mar-
ket and government failures are quite pervasive in this area.”
—GUILLERMO PERRY, Former Minister of Finance and Public Credit, Colombia
“This book-length report by staff of the World Bank on the economics of preventing (un)natural
disasters is as nearly a def nitive treatment of the subject as we are likely to obtain. The combi-
nation of economic analysis with factual description, personal narratives, charts, data, photo-
graphs, and references makes a compelling multidisciplinary case for different kinds of preven-
tive efforts targeted on the specif c causes and likely consequences of potential disasters in every
part of the globe.”
—RICHARD POSNER, author of Catastrophe: Risk and Response (2004)
“This report is a gem. The language is clear and simple; the organization is logical; the verbal
illustrations are impressive; the maps and diagrams are comprehensible; the theoretical discus-
sions are easily understood; and the subject is compelling: how to understand hazards and how
to cope, in advance and after, with earthquakes, storms, f oods, droughts, and extreme events. It
is a model to be studied and emulated. It is a team effort, contradicting the popular notion that
a camel is a horse described by a committee. I don’t remember reading any other 248 pages on
a deadly serious subject that were so informative and so easily digested. Congratulations to the
authors and all their advisors and reviewers.”
—THOMAS C. SCHELLING, Nobel Prize in Economics, 2005
“This is an excellent piece of work with really practical lessons that will inf uence the way
disasters are handled—and indeed prevented. The report could inform and illuminate policy
analyses in a way that would make a gigantic difference to the lives of vulnerable people. I
welcome it warmly.”
—AMARTYA SEN, Nobel Prize in Economics, 1998
“The main thesis of this report, that prevention matters and requires just as much intelligence
as funds, is correct. But not all risks can be prevented, and the report does a brilliant job of
analyzing how we share or cope with residual risk. I recommend this report to any reader who
wants to understand the true nature of catastrophe risk and insurance markets beyond the
relatively mundane issues of supply, demand, and the market-clearing price for risk. This report might even help students of the subprime mortgage debacle understand what really went wrong
as that market lost all sight of the principles laid out in this terrif c report.”
—JOHN SEO, Co-founder, Fermat Capital Management, LLC;
Former State-Appointed Advisor to the Florida Hurricane Catastrophe Fund
“I happened to read this careful, thoughtful, studious report near the beginning of hurricane
season. There will be another hurricane season next year and the year after. There will also be
droughts, f oods, and earthquakes. Responses will be more effective, before and after the event,
and damage will be less if governments, relief organizations, and others learn from this study.
Ignorance is not bliss in hurricane season.”
—ROBERT M. SOLOW, Nobel Prize in Economics, 1987
“Natural Hazards, UnNatural Disasters provides policy makers with a new and valuable ap-
proach that focuses on the economics of reducing deaths and destruction from natural hazards.
In a critical analysis across a range of topics, the report takes on a number of sacred cows by
emphasizing the critical role of incentives (both private and public), freely functioning markets,
the free f ow of information, institutional arrangements, and the possibilities and limits to
governmental actions. The report lays out the economics of hazards reduction for the non-
specialist, draws on the latest literature, and supplements that literature with numerous sup-
porting new empirical and analytical studies. It will be a standard reference in the hazards
policy and research community.”
—RODNEY WEIHER, Former Chief Economist, NOAA

“This book represents the f rst systematic analysis of the management of extreme risks from a
worldwide comparative perspective. It is a major contribution to an increasingly important f eld.”
—MARTIN WEITZMAN, Professor of Economics, Harvard University

“The world is continually beset with so-called natural disasters, with triggering events ranging
from shaking earth and scorching weather, to severe storms and surging rivers. Such disasters
impose a massive toll of human suffering, particularly on the poor. But the losses come not
primarily from the actions of nature. Rather, as this wide ranging and insightful analysis dem-
onstrates, they derive from the synergy of natural forces and misguided choices by humans. We
enhance risks by channeling rivers and spewing greenhouse gases, and expose ourselves to the
risks that prevail by building cities in f ood zones and in manners vulnerable to earthquakes.
And where dangers do exist, we often deal ineffectively by choosing recovery over prevention
when the latter would be far less costly, and by failing to meld public and private mitigation
efforts in cost- effective fashion. This study, remarkable for its clear thought and thorough doc-
umentation, could change the way we cope with the calamities.”
—RICHARD ZECKHAUSER, Frank P. Ramsey Professor of Political Economy,
Harvard University

“As someone who repeatedly had to deal with the devastating consequences of severe natural
hazards at the highest level of responsibility, I can appreciate the enormous value of this vol-
ume. It is long overdue. Its sound analysis and sensible policy prescriptions make this report
mandatory reading for any person with duty, or plain interest, in this f eld.”
—ERNESTO ZEDILLO, Former President of Mexico;
Director, Yale Center for the Study of Globalization