Rethinking value

Linked to the right mindset, good governance, good data and meaningful inclusion, in our case study research we see that many (though not all) of the root causes of disaster vulnerabilities are tied to economics, which is linked to securing the right investment / funding. We are working on a paper that explores the link between economics and avoiding disasters.

Consider the following examples:

1. The economics of avoiding wildfire disasters

Whether people fortify their house with measures to protect them against wildfire sometimes comes down to economics: are they prepared to pay for it or not? Whether people choose to live in an area that has a known threat of wildfire is in part influenced by the economics of their chosen lifestyle. And more broadly, wildfire prevention is often directly down to how much money and resources decision makers are willing to invest. 

2. The economics of avoiding flooding disasters

Why do people live in flood plains, and why do local authorities allow it to be the case? It sometimes comes down to economics, and the value of land. Some people in some parts of the world have little choice but to live in a flood-prone area. When this is the case, is the investment in flood prevention appropriate? Are their properties designed to withstand flooding (such as floors being raised above ground)? The extent of flood prevention and flood resilience might come down to economics and how much people are willing to invest to reduce their vulnerability to a level that is acceptable to them (i.e. their tolerance for risk).

3. The economics of avoiding earthquake disasters

In some earthquake-prone regions of the world there is a great deal of focus on investing in the physical built environment (infrastructure, buildings et al) to be earthquake-resistant (up to a certain threshold) and to hence avoid a disaster incurring major loss of life. There is also a socio-economic focus in these places, to focus on societal and community needs if an earthquake occurs. Unfortunately, some parts of the world do not apply this rigour. Cheap construction and the flouting of regulations and known good practices leads to earthquake vulnerabilities. This is fundamentally an economic choice that does not value life.

4. The economics of avoiding extreme heat disasters

Extreme heat is causing many problems around the world. Yet people are still moving to, and living in areas where the threat of heat is known. For example, urban areas are known to exhibit the urban heat island effect – the air just above the surface heats up because of all the hard, absorbing materials we use to build our urban centres, with too little in the way of green and blue natural areas that can provide cooling The reasons might fundamentally be one of economics - for a job and a lifestyle. The value of land and the economic incentive to maximise financial profit also fuels choices, such as types of construction materials, that  amplify  heat effect in urban areas. We can become more resilient to heat if we choose to plan, develop, design and build our urban environments differently.

5. The economics of supply and demand, and linkages to air quality

Economic policy and decisions have a bearing on disasters.

For example, transboundary haze in Southeast Asia is caused by the burning of land, to clear it to grow crops (particularly palm oil) that are used to make goods and products. In most places where this type of activity takes place, people have very little choice but to do it in order to earn a living – economics drives the clearing of land rather than the protection of it. 

As another air quality example that is tied to economics, in many cities a lack of incentives and an unwillingness to invest in public transport (e.g. rail, subways, buses) leads to higher pollution levels and shortened lives and a general loss of quality of life compared to cities that are investing appropriately in public transport.

6. The economics of insurance (covering all the above)

Insurance does not always incentivise stopping a situation or an event from occurring, but if it is set up well it can greatly aide swift recovery from a wildfire, a flood, an earthquake, extreme heat or something else.

Insurance markets are being challenged by the cost of claims (claims inflation), claims vs perils allowance and the cost of reinsurance. These three factors are making insurance more expensive. 

In some parts of the world, insurers are pulling out of offering services. How insurance evolves in the disaster context is influenced by economics.

Can the setting of new economics targets alter our disaster vulnerability and threat profile?

Since economic policy and decision-making can have a bearing on disaster vulnerabilities and threats, are there ways we can set economic targets to tackle the root causes of many vulnerabilities and threats that exist around the world? We will be exploring this question in due course.