assignment e Assignment:Provide an approximate 1500-worddocument analyzing important concepts in the readings. Assume that you are writing for an uni -

assignment e
Assignment:Provide an approximate 1500-worddocument analyzing important concepts in the readings. Assume that you are writing for an uninformed reader that knows nothing about the topic and has not read what you read. Provide an introduction that gives the background of the resource that you are reviewing, so the reader will understand what they’re reading and why. Include the following topics for inclusion in this week’s discussion:
– Discuss Hazard Clustering including how do hazards ‘cluster’ and what are the impacts?
– Discuss how Hazard Clustering disasters impact the economy and growth?
– Discuss individual preparedness including are individuals adequately self-sufficient and concerned for their own welfare and safety?
– Discuss how governments can help individuals and society overall?
– What is the role of insurance? Is insurance sustainable in an environment of increasing risk?
– How are cities inherently hazardous?

The, World Bank, et al. Natural Hazards, UnNatural Disasters : The Economics of Effective Prevention, World Bank Publications, 2010. ProQuest Ebook Central,
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assignment e Assignment:Provide an approximate 1500-worddocument analyzing important concepts in the readings. Assume that you are writing for an uni

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Natural Hazards,
UnNatural Disasters

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Natural Hazards,
UnNatural Disasters

The Economics of
Effective Prevention

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2010 The International Bank for Reconstruction and Development /
The World Bank
1818 H Street NW
Washington DC 20433
Telephone: 202-473-1000
Internet: www.worldbank.org

1 2 3 4 13 12 11 10

This volume is a product of the staff of the International Bank for Reconstruction and Development / The World
Bank. The findings, interpretations, and conclusions expressed in this volume do not necessarily reflect 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 boundaries, colors,
denominations, and other information shown on any map in this work do not imply any judgement on the part of The
World Bank concerning the legal status of any territory or the endorsement or acceptance of such boundaries.

Rights and Permissions
The material in this publication is copyrighted. Copying and/or transmitting portions or all of this work without
permission may be a violation of applicable law. The International Bank for Reconstruction and Development / The
World Bank encourages dissemination of its work and will normally grant permission to reproduce portions of the
work promptly.
For permission to photocopy or reprint any part of this work, please send a request with complete information to
the Copyright Clearance Center Inc., 222 Rosewood Drive, Danvers, MA 01923, USA; telephone: 978-750-8400; fax:
978-750-4470; Internet: www.copyright.com
All other queries on rights and licenses, including subsidiary rights, should be addressed to the Office of the
Publisher, The World Bank, 1818 H Street NW, Washington, DC 20433, USA; fax: 202-522-2422; e-mail:
[emailprotected]

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. DisastersEconomic aspects. 2. Natural disastersEconomic aspects.
3. Emergency management. I. World Bank. II. United Nations.

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http://www.worldbank.org

http://www.copyright.com

mailto://[emailprotected]

HC79.D45N416 2011
363.347dc22

2010031475

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 generations the tradition of floor
and wall painting. This art form is linked historically with disasters. 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 floors and walls) to allow their
artwork to be sold. This art form is now recognized internationally.

Cover design: Serif Design Group

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Praise 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 floods,
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 disastersa topic
discussed at least ever since John Stuart Milland 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 officials who must cope with floods, 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 international cooperation,
and priority on helping human beings affected by disasters with compassion and dignity. With this report the World
Bank highlights what international actors, national governments, local authorities, and individuals should constantly
consider when discussing prevention measures. Governments must take the lead in implementing preventive
actions both directly, by allocating efficiently 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 Protection.

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 contains the tightest analytical and
empirical investigation into the question. Its a terrific book.

SIR PARTHA DASGUPTA, Frank Ramsey Professor of Economics, University of Cambridge

It is a sad commentary on how aid is media-driven that official aid agencies and NGOs will make a huge effort for

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disaster relief and virtually no effort for prevention. This report courageously makes the case for redressing the
balance. It dramatizes as never before that natural disasters are not so naturalprevention 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 Mans 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 practitioners concerned with disaster risk reduction
and recoveryeven more so in this age of frugal necessity. In building community safety and resilience, sensible
spending, greater transparency, and accountability are essential to do more, do better, and reach further in tackling
the most significant vulnerabilities that confront humanity. This report highlights the need for increased 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 growing 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 principles. 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 convincing 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 systems is clearly an investment in sustainable development, as demonstrated in many countries where
benefits 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 first to treat hazards from an
economic perspective of value-for-money. That lensdismal at it may seemprovides crucial insights on why we
should spend more on preventive action (and why we dont), 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 find it both fascinating and right on target! The deep problems result from terrible

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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 intelligent 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, market 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 definitive treatment of the subject as we are likely to obtain. The combination of economic analysis with factual
description, personal narratives, charts, data, photographs, and references makes a compelling multidisciplinary
case for different kinds of preventive efforts targeted on the specific 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 discussions are easily understood; and the
subject is compelling: how to understand hazards and how to cope, in advance and after, with earthquakes, storms,
floods, 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 dont 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 influence 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 terrific report.

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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, floods, 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 approach 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 flow 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 supporting 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 first systematic analysis of the management of extreme risks from a worldwide
comparative perspective. It is a major contribution to an increasingly important field.

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 demonstrates, 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 flood 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 documentation, 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 volume. 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 field.

ERNESTO ZEDILLO, Former President of Mexico; Director, Yale Center for the Study of Globalization

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Contents

Acknowledgments xv

MEMORANDUM TO A CONCERNED FINANCE MINISTER xix

Overview 1

1. Fluctuating Deaths, Rising Damagesthe Numbers 23

3.3 million deaths in the 40 years to 2010 26

Disasters can strike anywhere 27

Damages are rising 27

More so in rich countries, less in poor 27

Small island economies are hit hard 29

Deaths expand Africadamages shrink it 31

Multiple hazards, clustering in different ways 32

Spotlight 1 on Bangladesh: The antecedents of lives saved 34

2. Measuring Disasters Many Effects 41

Individuals over the edge 43

Conflicts: Cause or consequence? 48

Welfare falls, but what are the effects on output? And for how long? 52

Aggregate and sectoral effects on economic output and growth in the long
term 54

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Measuring the damage: Twice over and half under? 57

Spotlight 2 on Turkey: Where civilizations and tectonic plates meet 64

3. Prevention by Individuals 69

Prevention, insurance, and coping: A simple framework 70

Prevention: Do individuals do enough? 72

Prices reflect hazard risks when land and real estate markets work 76

Improving individuals decisions: What can governments do? 84

Spotlight 3 on Haiti: Preventing Haitis horrors 99

4. Prevention through Governments 105

How much do governments spend? 106

Who really decides government spending? 110

How to improve collective prevention measures 115

Spotlight 4 on Ethiopia: Deaths from droughts or Derg? 134

5. Insurance and Coping 141

Insurance: Useful if the premium is priced right 143

Should governments borrow, set aside funds, or buy insurance? 148

Quick and direct help for families 154

Spotlight 5 on the 2004 Tsunami: Warnings: The most effective prevention? 164

6. Coming Game-Changers? Burgeoning Cities, Climate Change, and
Climate-Induced Catastrophes

169

Cities: Rising exposure 170

Climate change: Changing hazards, changing damages 174

Climate-related catastrophes: Deep-future disasters with a global footprint 181

Connecting the three Cs: Cities, climate, catastrophes 186

MEMORANDUM TO A CONCERNED CITIZEN 191

Notes and References 199

Index 239
The, World Bank, et al. Natural Hazards, UnNatural Disasters : The Economics of Effective Prevention, World Bank Publications, 2010. ProQuest Ebook Central,
http://ebookcentral.proquest.com/lib/apus/detail.action?docID=606027.
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Boxes

1.1 The framework for the report 24

1.2 Understanding the terms in the report 25

1.3 Global natural hazard databases: Varied purposes, varying details 26

2.1 Previous studies find a medley of effects of output and growth 53

2.2 Revenues and expenditures: Disasters fiscal consequences 61

3.1 Evaluating the costs and benefits of structural mitigation measures 73

3.2 Assessing risk in Central America 86

3.3 A centurys struggle for sound buildings in Italy 87

3.4 Building codes BC and their later kin 91

4.1 India and anti-drought funds 114

4.2 Valuing life: Worthless, priceless, or useless statistic? 117

4.3 WMOs 200607 country-level assessment 123

4.4 Communications to the community 125

4.5 The United States tries to identify critical infrastructure 126

4.6 Costs and benefits of mangroves or shrimp ponds on the Thai coast 131

5.1 Catastrophe risk in insurance and financial markets 147

5.2 The World Banks catastrophe risk deferred drawdown option (CAT
DDO) 150

5.3 Mobilizing Haitis diaspora 157

6.1 Estimating additional damages from climate change-induced tropical
cyclones 176

6.2 Within country effects: The case of the United States 179

6.3 Estimating additional damages from climate change-induced extreme
events (other than tropical cyclones)

180

6.4 Geoengineerings potential and pitfalls 185

Figures

1 Number of countries that archive data for specific hazards 4

2 Property prices for comparable properties are higher in locations farther
The, World Bank, et al. Natural Hazards, UnNatural Disasters : The Economics of Effective Prevention, World Bank Publications, 2010. ProQuest Ebook Central,
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from earthquake risk in Bogota 5

3 Underspending on maintenance implies an enormous infrastructure
rehabilitation backlog in Sub-Saharan Africa 7

4 Three modes of operation of the SMART Tunnel 7

5 The visible border between Haiti and the Dominican Republic 9

6 Disasters receive about a fifth of total humanitarian assistance 10

7 Private preventive measures pay 14

8 Post-disaster spending fluctuates more than pre-disaster spending 17

9 Climate change shortens the return period of large storms 21

1.1 Deaths fluctuatethe number of people affected is on the rise 27

1.2 Disasters affect all regions 28

1.3 Disasters almost everywhere (19702010) 28

1.4 Droughts deadliest in Africa, earthquakes elsewhere 29

1.5 Damage on the rise in the last two decades (global damage from
hazards, 19702010) 29

1.6 More damage in rich countries, mostly from earthquakes and storms 30

1.7 Many small island developing states are among the 25 countries with
damages above 1 percent of GDP 30

2.1 Undernourished children become shorter adults 45

2.2 Post-traumatic stress reaction (PTSR) scores fall over time in all
tsunami-affected areas 47

2.3 A possible post-disaster GDP path 52

3.1 Private preventive measures pay 74

3.2 Property prices for comparable properties are higher in locations
farther from earthquake risk in Bogota 78

3.3 Corruption perception by industry 96

3.4 Debris embedded in a concrete support beam 97

3.5 Honeycombing showing shoddy construction 97

4.1 Post-disaster spending fluctuates more than pre-disaster spending 107

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4.2 Underspending on maintenance implies an enormous infrastructure
rehabilitation backlog in Sub-Saharan Africa

108

4.3 Per capita spending is greater for physical capital 109

4.4 Vietnams recurrent spending is a low and declining share of total
transport expenditure 110

4.5 Presidential disaster declarations: Peaks often coincide with
presidential election years 112

4.6 Increasing the accuracy of weather forecasts 119

4.7 Internationally coordinated network of WMO and 189 national
meteorological and hydrological services 120

4.8 Coordinating data collection is complex: A section of the Global
Telecommunication System (for Europe) to share data and warnings 122

4.9 Three modes of operation of the SMART Tunnel 127

5.1 Managing and transferring financial risks to the market 149

5.2 OECD remittance recipients in Ghana have sturdier housing and better
communication amenities 156

5.3 International remittance recipients in Ethiopia are less likely to depend
on food aid or sell productive assets during food shortages 156

5.4 Timeline of key events in the Horn of Africa drought in 200506 160

5.5 Disasters receive about a fifth of total humanitarian assistance 163

6.1 Current (2008) and projected (2100) damages from extreme events
without climate change 175

6.2 Climate change shortens the return period of large storms 178

6.3 Greater Jakarta area orographic map with rainfall regime 188

6.4 Fifteen years of urbanization in Jakarta, before and after 188

Maps

1 Deaths shrink Asia and the Americasbut expand Africa 11

2 Damages shrink Africa but expand middle-income countries 12

3 Exposure to cyclones and earthquakes in large cities may rise from 680
million people in 2000 to 1.5 billion people by 2050 20

1.1 Deaths shrink Asia and the Americasbut expand Africa 31

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1.2 Damages shrink Africa but expand middle-income countries 31

1.3 Where hazards have struck 33

3.1 An earthquake risk index for Bogota 82

3.2 Poor people live closer to hazard-prone areas in Bogota 83

4.1 Red dots indicate where few, if any, synoptic weather observations are
being received 121

5.1 The Caribbean regionin harms way 151

6.1 Cities projected to have more than 100,000 people by the year 2050 171

6.2 Exposure to cyclones and earthquakes in large cities may rise from
680 million people in 2000 to 1.5 billion people by 2050 172

Tables

2.1 Stunted children have lower cognitive scores 46

2.2 Civil war, rainfall, and the rule of law 51

2.3 Growth effect of a typical (median) disaster 55

2.4 Growth effect of a typical (median) severe disaster 56

3.1 Individuals and governments prevent, insure, and cope with disasters 71

4.1 Natural hazards and protection 129

5.1 Post-disaster safety nets are common 161

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Acknowledgments

he report has been prepared by a team led by Apurva Sanghi, comprising S.
Ramachandran, Alejandro de la Fuente, Martina Tonizzo, Sebnem Sahin, and

Bianca Adam. S. Ramachandran made major contributions to the writing of the
report. An extended team comprising individuals from more than 25 organizations
contributed to relevant background work: Jose-Miguel Albala-Bertrand, Javier Baez,
Daniel Bitran, Brian Blankespoor, Henrike Brecht, Shun Chonabayashi, Luc
Christiansen, Maureen Cropper, Jesus Cuaresma, Uwe Deichmann, Sergio Dellanna,
Stefan Dercon, Amod Dixit, Kerry Emanuel, Jocelyn Finlay, Thomas Fomby, Jed
Friedman, Suzette Galinato, Maryam Golnaraghi, Lucy Hancock, Stefan Hochrainer,
Yuki Ikeda, Nick Ingwersen, George Joseph, Hemang Karelia, Shyam KC, Philip
Keefer, Charles Kenny, Carolyn Kousky, Randall Kuhn, Daniel Kull, Howard
Kunreuther, Somik Lall, Stephen Ling, Joanne Linner

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