THE ECONOMIC CONSEQUENCES OF A CATASTROPHIC EARTHQUAKE

PROCEEDINGS OF A FORUM AUGUST 1 AND 2, 1990

Committee on Earthquake Engineering

Division of Natural Hazard Mitigation

Commission on Engineering and Technical Systems

National Research Council

NATIONAL ACADEMY PRESS
Washington, D.C.
1992



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The Economic Consequences of a Catastrophic Earthquake: Proceedings of a Forum August 1 and 2, 1990 THE ECONOMIC CONSEQUENCES OF A CATASTROPHIC EARTHQUAKE PROCEEDINGS OF A FORUM AUGUST 1 AND 2, 1990 Committee on Earthquake Engineering Division of Natural Hazard Mitigation Commission on Engineering and Technical Systems National Research Council NATIONAL ACADEMY PRESS Washington, D.C. 1992

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The Economic Consequences of a Catastrophic Earthquake: Proceedings of a Forum August 1 and 2, 1990 NOTICE: The project that is the subject of this report was approved by the Governing Board of the National Research Council, whose members are drawn from the councils of the National Academy of Sciences, the National Academy of Engineering, and the Institute of Medicine. The members of the committee responsible for the report were chosen for their special competences and with regard for appropriate balance. This report has been reviewed by a group other than the authors according to procedures approved by a Report Review Committee consisting of members of the National Academy of Sciences, the National Academy of Engineering, and the Institute of Medicine. Any opinions, findings, and conclusions or recommendations expressed in this report are those of the committee and do not necessarily reflect the views of the sponsoring agencies. Library of Congress Catalog Card Number 92-60712 International Standard Book Number 0-309-04639-4 Copies of this report are available from: National Academy Press 2101 Constitution Avenue, N.W. Washington, D.C. 20418 S-481 Printed in the United States of America

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The Economic Consequences of a Catastrophic Earthquake: Proceedings of a Forum August 1 and 2, 1990 COMMITTEE ON EARTHQUAKE ENGINEERING GEORGE W. HOUSNER (Chair), California Institute of Technology, Pasadena KEIITI AKI, Department of Geological Sciences, University of Southern California, Los Angeles CHRISTOPHER ARNOLD, Building Systems Development, Inc., San Mateo, California JAMES E. BEAVERS, Martin Marietta Energy Systems, Inc., Oak Ridge, Tennessee RAY W. CLOUGH, Department of Civil Engineering, University of California, Berkeley C. B. CROUSE, Dames & Moore, Seattle, Washington JOANNE NIGG, Disaster Research Center, University of Delaware, Newark METE A. SOZEN, Department of Civil Engineering, University of Illinois, Urbana-Champaign ROBERT V. WHITMAN, Department of Civil Engineering, Massachusetts Institute of Technology, Cambridge JAMES K. WIGHT, Department of Civil Engineering, University of Michigan, Ann Arbor T. LESLIE YOUD, Department of Civil Engineering, Brigham Young University, Provo, Utah Liaison Representatives WILLIAM H. ALLERTON, Division of Inspections, Federal Energy Regulatory Commission, Washington, D.C. WILLIAM A. ANDERSON, Program Director, Division of Biological and Critical Systems, National Science Foundation, Washington, D.C. C. CHESTER BIGELOW, Division of Advanced Technology Development, U.S. Department of Energy, Washington, D.C. STEPHEN BOYCE, Air Force Office of Scientific Research, Bolling Air Force Base, Washington, D.C. MANMOHAN S. CHAWLA, Naval Facilities Engineering Command, Washington, D.C. DAE H. CHUNG, Nuclear Systems Safety Program, Lawrence Livermore National Laboratory, Livermore, California FRED COLE, Office of U.S. Foreign Disaster Assistance, Agency for International Development, Washington, D.C. JAMES COOPER, Federal Highway Administration, U.S. Department of Transportation, Washington, D.C. JAMES F. COSTELLO, Mechanical/Structural Engineering Branch, Office of Nuclear Regulatory Research, U.S. Nuclear Regulatory Commission, Washington, D.C. RICHARD F. DAVIDSON, Civil Engineering, Geotechnical Branch, U.S. Army Corps of Engineers, U.S. Department of the Army, Washington, D.C.

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The Economic Consequences of a Catastrophic Earthquake: Proceedings of a Forum August 1 and 2, 1990 G. ROBERT FULLER, Compliance Branch, U.S. Department of Housing and Urban Development, Washington, D.C. WALTER W. HAYS, Office of Earthquakes, Volcanoes, and Engineering, U.S. Geological Survey, Reston, Virginia JAMES R. HILL, Natural Phenomena Hazards Mitigation Program, U.S. Department of Energy, Washington, D.C. PAUL KRUMPE, Office of U.S. Foreign Disaster Assistance, Agency for International Development, Washington, D.C. H. S. LEW, Center for Building Technology, National Institute of Standards and Technology, Gaithersburg, Maryland DON LINGER, Strategic Structures Branch, Defense Nuclear Agency, Washington, D.C. S.C. LIU, Earthquake Hazard Mitigation, Division of Biological and Critical Systems, National Science Foundation, Washington, D.C. UGO MORELLI, Office of Natural and Technological Hazards, Federal Emergency Management Agency, Washington, D.C. KENNETH J. SULLIVAN, Office of Natural and Technological Hazards Programs, State and Local Programs and Support, Federal Emergency Management Agency, Washington, D.C. J. LAWRENCE VON THUN, Bureau of Reclamation, U.S. Department of the Interior, Denver, Colorado SPENCER WU, Air Force Office of Scientific Research, U.S. Department of the Air Force, Washington, D.C. EDWARD YOUNGER, Structural Engineering Service, U.S. Department of Veterans Affairs, Washington, D.C. ARTHUR ZEIZEL, Office of Natural and Technological Hazards Programs, State and Local Programs and Support, Federal Emergency Management Agency, Washington, D.C. Staff RILEY M. CHUNG, Director SUSAN R. MCCUTCHEN, Administrative Assistant SHIRLEY J. WHITLEY, Project Assistant EDWARD LIPP, Editor Technical Editor CAROLETTA LOWE, Editorial Concepts, Columbia, Maryland

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The Economic Consequences of a Catastrophic Earthquake: Proceedings of a Forum August 1 and 2, 1990 ADVISORY GROUP FOR THE FORUM ON EARTHQUAKE ECONOMIC ISSUES JOANNE NIGG (Chair), Disaster Research Center, University of Delaware, Newark RICHARD N. BOISVERT, Department of Agricultural Economics, Cornell University, Ithaca, New York RICHARD K. EISNER, Bay Area Regional Earthquake Preparedness Project, Oakland, California HOWARD KUNREUTHER, Department of Decision Sciences, The Wharton School, University of Pennsylvania, Philadelphia SHIRLEY MATTINGLY, Office of Emergency Management, City of Los Angeles, California JEROME MILLIMAN (retired), Bureau of Economic and Business Research, University of Florida, Gainesville RISA PALM, Graduate School, University of Colorado, Boulder WILLIAM J. PETAK, Institute of Safety and Systems Management, University of Southern California, Los Angeles Liaison Representatives GARY JOHNSON, Office of Natural and Technological Hazards Programs, Federal Emergency Management Agency, Washington, D.C. EUGENE L. LECOMTE, The Earthquake Project, National Committee on Property Insurance, Boston, Massachusetts JAMES TAYLOR, Insurance Support Services, Federal Insurance Administration, Federal Emergency Management Agency, Washington, D.C. SPEAKERS CHRISTOPHER ARNOLD, Building Systems Development, Inc., San Mateo, California ROBERT G. CHAPPELL, State and Local Programs and Support, Federal Emergency Management Agency, Washington, D.C. LEONARD K. CHENG, Department of Economics, University of Florida, Gainesville HAROLD COCHRANE, Department of Economics, Colorado State University, Fort Collins NEIL DOHERTY, Department of Decision Sciences, The Wharton School, University of Pennsylvania, Philadelphia RONALD EGUCHI, Dames and Moore, Los Angeles, California DON G. FRIEDMAN, Corporate Strategy and Research, Travelers Insurance Company, Hartford, Connecticut ROBERT M. HAMILTON, U.S. Geological Survey, Reston, Virginia

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The Economic Consequences of a Catastrophic Earthquake: Proceedings of a Forum August 1 and 2, 1990 ROBERT W. KLING, Department of Economics, Colorado State University, Fort Collins HOWARD KUNREUTHER, Department of Decision Sciences, The Wharton School, University of Pennsylvania, Philadelphia TAPAN MUNROE, Pacific Gas and Electric Company, San Francisco, California RICHARD J. ROTH, Jr., California Department of Insurance, Los Angeles BARBARA D. STEWART, Stewart Economics, Inc., Chapel Hill, North Carolina KATHLEEN TIERNEY, Disaster Research Center, University of Delaware, Newark L. THOMAS TOBIN, Seismic Safety Commission, Sacramento, California ANTHONY M. YEZER, Department of Economics, George Washington University, Washington, D.C. Original transcription of Proceedings by C.A.S.E.T. Associates, Fairfax, Virginia

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The Economic Consequences of a Catastrophic Earthquake: Proceedings of a Forum August 1 and 2, 1990 Table of Contents     EXECUTIVE SUMMARY   1 1   WHAT IS KNOWN ABOUT SEISMIC RISK NATIONALLY?   11     Presentation of Robert M. Hamilton   11     General Discussion of Chapter 1   33 2   WHAT ARE LIKELY CATEGORIES OF LOSS AND DAMAGE?WHAT ARE LIKELY CATEGORIES OF LOSS AND DAMAGE?   35     Presentation of Christopher Arnold   36     Presentation of Don G. Friedman   49     Presentation of Kathleen Tierney   77     Presentation of Robert W. Kling   82     General Discussion of Chapter 2   98 3   OVERVIEW OF ECONOMIC RESEARCH ON EARTHQUAKE CONSEQUENCES   100     Presentation of Harold Cochrane   100     General Discussion of Chapter 3   110 4   DIFFERENTIAL IMPACT OF EARTHQUAKE EVENTS   112     Presentation of Anthony M. Yezer   112     Presentation of Howard Kunreuther   117     General Discussion of Chapter 4   122 5   RESOURCE SHIFTS FOLLOWING A CATASTROPHIC EARTHQUAKE   128     Presentation of Ronald Eguchi   128     Presentation of Tapan Munroe   133     General Discussion of Chapter 5   138 6   THE "RIPPLE EFFECT"   141     Presentation of Barbara D. Stewart   141     Presentation of Leonard K. Cheng   145     General Discussion of Chapter 6   149 7   HOW DO CURRENT RELIEF POLICIES AFFECT RECOVERY EFFORTS?   156     Presentation of L. Thomas Tobin   156     Presentation of Robert G. Chappell   162     Presentation of Richard J. Roth, Jr.   168     General Discussion of Chapter 7   174     REFERENCES   178

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The Economic Consequences of a Catastrophic Earthquake: Proceedings of a Forum August 1 and 2, 1990 List of Illustrations Figures: FIGURE 1-1   Global distribution of seismicity.   13 FIGURE 1-2   Earthquakes and global tectonics.   14 FIGURE 1-3   Schematic cross section illustrating plate tectonics processes.   15 FIGURE 1-4   The North American plate.   16 FIGURE 1-5   Major (M>7) California Earthquakes (1812–1989).   16 FIGURE 1-6   The San Andreas fault system.   17 FIGURE 1-7   The Loma Prieta earthquake.   18 FIGURE 1-8   Cross section of seismicity along the San Andreas fault.   20 FIGURE 1-9   Loma Prieta earthquakes (October 17–19, 1989).   21 FIGURE 1-10   Preliminary probabilities of large San Andreas earthquakes (1988–2018).   21 FIGURE 1-11   Collapsed section of the Bay Bridge.   22 FIGURE 1-12   Multistory building in the Marina District.   22 FIGURE 1-13   Liquefaction in the Marina District.   23 FIGURE 1-14   Collapsed bridge in Salinas River valley.   24 FIGURE 1-15   Nimitz Freeway, showing collapsed pilings.   25 FIGURE 1-16   Chasms in the Santa Cruz Mountains.   26 FIGURE 1-17   Collapsed house at Boulder Creek.   27 FIGURE 1-18   San Francisco Bay area: predicted maximum earthquake intensity.   27

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The Economic Consequences of a Catastrophic Earthquake: Proceedings of a Forum August 1 and 2, 1990 FIGURE 1-19   Earthquakes of intensity > VII or felt area > 450,000 km2.   28 FIGURE 1-20   Felt areas of some large U.S. earthquakes.   29 FIGURE 1-21   Terrain map of the eastern United States.   30 FIGURE 1-22   Gravity map of the eastern United States.   30 FIGURE 1-23   Seismic activity in the New Madrid region.   31 FIGURE 1-24   Magnetic field in the New Madrid region.   31 FIGURE 2-1   Earthquake-damage-loss estimation.   39 FIGURE 2-2   Loss ratio versus modified Mercalli intensity (mean damage ratio curves).   40 FIGURE 2-3   Expert responses to round one damage factor questionnaire for Facility Class 18—low-rise moment-resisting ductile concrete-frame buildings.   42 FIGURE 2-4   Expert responses to round two damage factor questionnaire for Facility Class 18—low-rise moment-resisting ductile concrete-frame buildings.   42 FIGURE 2-5   Fragility curves for wood-frame buildings.   43 FIGURE 2-6   Intensity-damage relationships for unreinforced masonry buildings.   44 FIGURE 2-7   Composite map of the highest modified Mercalli intensity that might be observed at each location if the magnitude of a simulated earthquake held constant at 8.6 and its epicenter were shifted in increments along the New Madrid seismic zone.   58 FIGURE 2-8   Loss-producing potential of a recurrence of the December 16, 1811, New Madrid earthquake.   60 FIGURE 2-9   Loss-producing potential of a recurrence of the 1886 Charleston, South Carolina earthquake.   61 FIGURE 2-10   Loss-producing potential of a recurrence of the 1755 Cape Ann (Boston), Massachusetts earthquake.   62

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The Economic Consequences of a Catastrophic Earthquake: Proceedings of a Forum August 1 and 2, 1990 FIGURE 2-11   Loss-producing potential of a recurrence of a stronger (magnitude 6.7) Cape Ann (Boston), Massachusetts earthquake.   63 FIGURE 2-12   Estimated damage to buildings caused by ground motion and fire following an earthquake, versus earthquake magnitude. Damage, expressed in terms of the catastrophe index (Table 2-5), is based on vulnerability scenarios 1 and 3.   74 FIGURE 2-13   Effect of a local labor demand increase.   93 FIGURE 2-14   Effect of a local labor demand decrease.   94 FIGURE 2-15   Social capital lost from relocation.   96 FIGURE 2-16   Losses to workers from lower labor demand.   97 FIGURE 3-1   Flow of payments in a simple, three-sector economy.   102 FIGURE 5-1   San Francisco Bay Area economic indicators (1985 = 100).   135 Tables: TABLE 2-1   Construction Classes Used in the ISO and NOAA/USGS Methods   38 TABLE 2-2   Injury and Death Rates in Relation to Damage   45 TABLE 2-3   Comparison of Some Building Damage Ratios (D/R)   46 TABLE 2-4   Percentage of Past Hurricanes with a Simulated 1990 Recurrence that Produce Various Loss Potentials when Grouped by Storm Intensity   54 TABLE 2-5   Catastrophe Index Resulting from the Simulated Present-Day Recurrence of 247 Past Hurricanes (1871–1990) Listed Versus Each Storm's Saffir-Simpson Intensity at Landfall   55

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The Economic Consequences of a Catastrophic Earthquake: Proceedings of a Forum August 1 and 2, 1990 TABLE 2-6   Occurrence Date, Location, and Magnitude of the Ten Largest Earthquakes that Affected the Central and Eastern United States and Southern Canada in Historic Times   57 TABLE 2-7   Estimate of the Number of Persons Who Would be Exposed to Various Levels of Ground-Motion Severity Caused by Each of the Scenario Earthquakes   65 TABLE 2-8   Estimate of the Number of Fatalities Caused by Each of the Hypothetical Earthquakes and the Three Fatality-Vulnerability Scenarios   68 TABLE 2-9   Estimated Building-Damage Losses by State Resulting from a 1990 Recurrence of the December 16, 1811, New Madrid Earthquake with a Richter Magnitude 8.6, Based on Damage-Vulnerability Scenario 2   72 TABLE 2-10   Probability of Earthquake Occurrence in the Decade Before the Year 2001 (in Percentages)   73 TABLE 2-11a   Estimated 1990 Fatality and Building Damage Potentials in the Central and Eastern United States Resulting from Simulated Earthquakes of Various Magnitudes Centered at the Location of the 1811 New Madrid, 1886 Charleston, and 1755 Cape Ann Events, Based on the Scenario 2 Vulnerability Relationship: Number of Fatalities   75 TABLE 2-11b   Estimated 1990 Fatality and Building Damage Potentials in the Central and Eastern United States Resulting from Simulated Earthquakes of Various Magnitudes Centered at the Location of the 1811 New Madrid, 1886 Charleston, and 1755 Cape Ann Events, Based on the Scenario 2 Vulnerability Relationship: Building Damage (Millions of Dollars)   76 TABLE 2-12   Per Trip Costs and Per Capita Visits   89 TABLE 2-13   Visits Demanded at Various Cost Increments   90 TABLE 5-1   Economic Impact of the Loma Prieta Earthquake   134 TABLE 5-2   Economic Impact of the Loma Prieta Earthquake   137

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The Economic Consequences of a Catastrophic Earthquake: Proceedings of a Forum August 1 and 2, 1990 The National Academy of Sciences is a private, nonprofit, self-perpe tuating society of distinguished scholars engaged in scientific and engineering research, dedicated to the furtherance of science and technology and to their use for the general welfare. Upon the authority of the charter granted to it by the Congress in 1863, the Academy has a mandate that requires it to advise the federal government on scientific and technical matters. Dr. Frank Press is president of the National Academy of Sciences. The National Academy of Engineering was established in 1964, under the charter of the National Academy of Sciences, as a parallel organization of outstanding engineers. It is autonomous in its administration and in the selection of its members, sharing with the National Academy of Sciences the responsibility for advising the federal government. The National Academy of Engineering also sponsors engineering programs aimed at meeting national needs, encourages education and research, and recognizes the superior achievements of engineers. Dr. Robert M. White is president of the National Academy of Engineering. The Institute of Medicine was established in 1970 by the National Academy of Sciences to secure the services of eminent members of appropriate professions in the examination of policy matters pertaining to the health of the public. The Institute acts under the responsibility given to the National Academy of Sciences by its congressional charter to be an adviser to the federal government and, upon its own initiative, to identify issues of medical care, research, and education. Dr. Kenneth Shine is president of the Institute of Medicine. The National Research Council was established by the National Academy of Sciences in 1916 to associate the broad community of science and technology with the Academy's purposes of furthering knowledge and of advising the federal government. Functioning in accordance with general policies determined by the Academy, the Council has become the principal operating agency of both the National Academy of Sciences and the National Academy of Engineering in providing services to the government, the public, and the scientific and engineering communities. The Council is administered jointly by both Academies and the Institute of Medicine. Dr. Frank Press and Dr. Robert M. White are chairman and vice-chairman, respectively, of the National Research Council.

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The Economic Consequences of a Catastrophic Earthquake: Proceedings of a Forum August 1 and 2, 1990 The Economic Consequences of a Catastrophic Earthquake

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