Which Economic Losses Are Counted?
Losses from natural hazards are normally divided into two major categories—direct losses and indirect losses. Economic losses are classified as stock losses (property damage) and flow losses (business interruption). There are direct and indirect versions of each. For example, direct property damage occurs from the seismic shaking from an earthquake whereas indirect property damage can occur from fires due to the rupture of a natural gas pipeline caused by the earthquake. Direct flow losses occur to those businesses in the affected area that had to shut down temporarily. Indirect flow losses refer to the disruption in the supply chain for other businesses as a result of the shutdown (a ripple effect caused by the interconnectedness of many supply chains regionally and globally). Other primary losses include the costs of repair and placement of structures, the cost of debris removal, loss of jobs, loss of rental income, and evacuation costs. Secondary losses such as those associated with decreased tax revenues, decline in property values, loss of attractiveness of tourist destinations, psychological trauma, and the damage to natural systems are not taken into account in loss tallies, yet these hidden costs may directly influence the affected community’s ability to manage disaster risk.
SOURCES: Heinz Center (1999), Rose (2004), Multihazard Mitigation Council (2005), NRC (2006a); Gall et al. (2009).
geographic distribution and impact of such losses at the local (community to state) scale. Currently, no comprehensive federal database or national archive for disaster loss data exists (Mileti, 1999; NRC, 1999; Cutter, 2001). The SHELDUS® (Spatial Hazard Event and Loss Database for the United States), compiled from existing federal data sources, is the closest approximation to a U.S. national inventory of direct disaster losses from natural hazards, but it also underestimates the total value of losses because indirect losses and business interruption are not included, for example. Such indirect losses can be substantial (see Box 3.4).
SHELDUS information can be used to examine patterns losses from natural hazards within the United States over the last 50 years. Figure 3.3 shows that these losses tend to be concentrated in a few regions and within a few states. The overall patterns highlight losses on the hurricane coast along the Gulf of Mexico extending from Texas to Florida and up the Atlantic Coast to the Carolinas. When normalized to losses per square mile (Figure 3.3b) the largest cumulative losses are concentrated in California, western Washington, the Gulf Coast and Florida, the Carolinas, the Northeast, and in the upper Midwest.