Of Disasters Natural And Keynesian
Natura And Keynesian Disasters
It seems that every week we are treated to a breathless dissertation of some natural disaster or other that is going to doom us. A few months ago I commented on one such impending crisis. Every so often I like to look at my stock portfolio, and it gets me thinking about disasters again.
A common theme is a possible causative role for human activity. Indeed, there are reasonable physical mechanisms by which human activities may contribute to natural disasters. We have altered the composition of the atmosphere to measurable effect, and some believe that some component of recent climate variability is due to this action.
Human activity and earthquakes
Does human activity cause earthquakes?
We have known for a long time that injection of liquids into areas where there are tectonic stresses may reduce friction enough to trigger earthquakes--and direct relationships between (thus far, small) swarms of earthquakes and fluid injections at depth by the oil industry has been demonstrated in southwestern Ontario (Mereu et al., 1986), Colorado (Major and Simon, 1969), and other places--although no connection has ever been established between such action and large earthquakes.
The construction of large hydroelectric projects, which fills vast reservoirs with water, changes local mass balance and fluid pressures at depth, which has been suggested as a trigger for large earthquakes, such as the large Gujarat earthquake in January 2001. This mechanism has not been positively established as a trigger.
Given the amount of human activity, we might expect that there are more earthquakes now than in the past. It certainly seems that way reading the papers. Agencies like USGS (United States Geological Survey) and BGS (British Geological Survey) are valuable sources for data on geophysical disasters so that we may determine whether there is any correlation between catastrophes and human activities.
NUMBER OF EARTHQUAKES PER YEAR MAGNITUDE 7.0 OR GREATER
1900 - 1999
1900 13 1930 13 1960 22 1990 13
1901 14 1931 26 1961 18 1991 10
1902 8 1932 13 1962 15 1992N 23
1903 10 1933 14 1963 20 1993M 16
1904 16 1934 22 1964 15 1994 15
1905 26 1935 24 1965 22 1995E 25
1906 32 1936 21 1966 19 1996 22
1907 27 1937 22 1967 16 1997 20
1908 18 1938 26 1968 30 1998 16
1909 32 1939 21 1969 27 1999 23
1910 36 1940 23 1970 29
1911 24 1941 24 1971 23
1912 22 1942 27 1972 20
1913 23 1943* 41 1973 16
1914 22 1944 31 1974 21
1915 18 1945 27 1975 21
1916 25 1946 35 1976$ 25
1917 21 1947 26 1977 16
1918 21 1948 28 1978 18
1919 14 1949 36 1979 15
1920 8 1950 39 1980 18
1921 11 1951 21 1981 14
1922 14 1952 17 1982 10
1923 23 1953 22 1983 15
1924 18 1954 17 1984 8
1925 17 1955 19 1985 15
1926 19 1956 15 1986# 6
1927 20 1957 34 1987 11
1928 22 1958 10 1988 8
1929 19 1959 15 1989 7
Total 1900-1997 = 1960 events = 20 per year
* Most active year since 1900
# Least active year since 1900
$ Year with most people killed since 1900 (295,000 - 699,000;
dominated by the Tangshan quake with casualty estimate from
255,000 - 655,000)
N First full year of operation on NSN/digital recording system
M Year moment magnitude quotes were introduced
E Year energy magnitude quotes were introduced
Statistics were compiled from the Earthquake Data Base System of the
U.S. Geological Survey, National Earthquake Information Center, Golden CO
The table above used to appear on the USGS website years ago--but I can no longer find it. Part of it appears here.
Magnitude 7 quakes are pretty large, and it is reasonable to assume that we would be aware of them anywhere in the world going back to the beginning of the last century. We could not do the same sort of study for small earthquakes, as a those in remote settings would go undetected.
The maximum number of large earthquakes in the last hundred or so years occurred in 1943. There is no detectable correlation between large earthquakes on a global scale and human activity, although local correlations may exist which have not yet been established.
Human activity and catastrophe
However as we peruse the Munich Re statistics, we note that the economic costs of natural disasters do correlate with human activity. This correlation is due to the rapid spread of occupation of previously marginal lands, and the greater concentrations of wealth and developed property in geologically dangerous areas.
Comparison of distribution of insurable losses worldwide in 2011 and from 1980 to 2011. Figures from Munich Re annual report.
For instance, we note that there has been a remarkable increase in the fraction of insured losses due to natural catastrophes in Asia. From 1980 to 2011, Asia was responsible for 13% of insured losses worldwide. But in 2011 alone, the fraction of worldwide losses in Asia spiked to 44%. A lot of this was due to the damage done by the Tohoku earthquake and tsunami, but this was only responsible for 30% of Asia's insurable losses. This increase in importance is a reflection of the rapid growth of property values in Asia.
Data source here; graphic from Munich Re annual report.
We see a steady climb in the number of US Federal disaster declarations over the past sixty years. Are we to conclude that there have been more disasters? Or is it simply that more people have been impacted by them? If so, why?
Over the last 25 years it looks like US tornado activity is up, but worldwide hurricane activity is down. Global earthquakes, as we saw above, don't really have a trend. But there has been a definite increase in the number of declared disasters in the US. These have not been caused by an increase in the number of disasters. What we are seeing is the effect of the growth of suburbs and the expansion of expensive coastal properties in hurricane-prone areas of the United States.
In tornado-prone areas, sprawl like that depicted above greatly increases the chances that houses are impacted by tornadoes. Similarly, sprawl into forested areas increases the likelihood of forest fires consuming the neighbourhood; sprawl up the sides of hills increases the likely impacts of landslides, etc.
Keynesianism and the growth of suburbs
The symbiosis between the Keynesian expansion of the economy and the growth of suburbs in US cities has been ably discussed by Beauregard (2006). Sprawl was driven by the flow of money, the "American dream" of owning a home in the suburbs, and facilitated by the widespread ownership of cars. The suburbs were designed with cars in mind.
The growth of suburbs fulfilled two roles. Lots of houses were available for new buyers, which kept prices down; and city governments discovered that developer's fees and the new land taxes initially exceeded the maintenance cost of the new roads and infrastructure built to support them,. Unfortunately, as time passed and the infrastructure aged, soon maintenance costs exceeded tax revenues, necessitating another round of growth. Suburbs were able to maintain the required level of growth for a few decades, but we are reaching the point everywhere (it seems) where there cannot be enough new growth to maintain our crumbling infrastructure.
The mindset of the "ownership society" really drove demand for housing, and the best places to expand were in the southwest, so that cities like Phoenix and Las Vegas really grew. Low interest rates plus easy money led to a bubble in house prices and an explosion of sprawl.
The Austrian school of economics teaches us that easy money leads to malinvestment. Suburban growth certainly seems to qualify. Our urban sprawl malinvestment has left us with the interwoven problems of unlivable cities, financial crisis, and increased death and destruction from natural disasters.
Beauregard, R. A., 2006. When America became suburban. University of Minnesota Press, Minneapolis, 271 p.
Major, M. W. and R. B. Simon, 1968. A Seismic Study of the Denver (Derby) Earthquakes, 63 Q. Colo. School Mines 9.
Mereu, R. F., J. Brunet, K. Morissey, B. Price & A. Yapp, 1986. A study of Microearthquakes of the Gobles Oil Field Area of Southwestern Ontario, 76 Bull. Seismol. Soc. Am. 1215.
Nicholson, C. and R. L. Wesson, 1990. Earthquake Hazard Associated with Deep Well Injection--A Report to the U.S. Environmental Protection Agency, U.S. Geol. Surv. Bull. #1951.