Book Review – Handbook on the Economics of Disasters

In the Handbook on the Economics of Disasters, edited by Mark Skidmore, the authors address research developments for the economics of natural disasters. This book introduces innovative theoretical frameworks in disaster economic impact evaluation, discusses the economic consequences of disaster events, and introduces economic-related tools and methods for disaster reduction and recovery. Throughout the book, the authors recognize the role of human beings in disaster events and examine how individual behaviors and risk preference affect local economic recovery after disasters, rather than solely focusing on built environment losses. This volume presents up-to-date case studies in each chapter that utilize current data within the last five years. For example, it assesses economic patterns before and after the COVID-19 pandemic. The book further expands the discussion of natural disasters to include events such as the Fukushima nuclear accident.

To provide readers a systematic understanding about disaster economics, Dr. Skidmore’s book is structured in three parts, across 22 chapters. The stage is set with the considerations for economic disaster theories and decision-making processes (Part I. Theoretical Considerations in Evaluating Disaster Impacts, Chapters 3–6), then current research on economic and social findings is presented (Part II. Evaluation of Disaster Consequences, Chapters 7–14), and finally, the authors recommend economic solutions for increasing disaster resilience (Part III. Risk Management, Resiliency and Vulnerability, Chapters 15–22). Each chapter features a myriad of authors to address timely research questions. The individual chapters are well-organized into a coherent, unified handbook. The book provides a resource to readers from multiple disciplines and varying levels of familiarity with disaster economics. For those without any background in disasters or economics, the book offers interesting conversations related to perceptions from disaster-affected people (Chapters 5 and 6), general overviews of conditions before and after large-scale disaster events (Chapters 7, 8, 14 and 21), and a discussion on the negative and positive impacts of disasters on local economies (Chapters 9, 10, 12 and 22). For individuals with knowledge related to the disaster economics, especially students, researchers and educators, the book sheds light on current research findings and methods with detailed model parameter settings (Chapters 3, 14, 17 and 19), approaches to assessing the socio-economic consequences of disasters (Chapters 8, 9, 10 and 11) and potential economic tools for policy makers to enhance disaster recovery (Chapters 18–22).

Part I of the handbook provides the theoretical framework for evaluating disaster impacts at three scales: Micro-, meso- and macro-economies. The authors cross-compare popular models, such as Input–Output (IO) models, the General Equilibrium (CGE) model and agent-based models (ABM), which assist readers in understanding applicable scenarios for disaster economic impact evaluation. The authors also address individual reactions towards hazards from a risk preference perspective which provides evidence for policymakers in increasing individual resilience for natural hazards. Noteworthy coverage in the book is provided to risk preference theory in explaining human behaviors in disasters, innovatively combining three hazard-related themes including insurance purchases, location choice and adaptation strategies. It is posited, in the book, that risk-loving individuals tend to prefer to live in hazard prone areas and are less adaptive to hazard mitigation, so they require more incentives in purchasing insurance compared to the more risk-averse.

Incorporating several disaster-related economic theories, Part II develops a thorough set of the economic consequences of disasters and presents evaluation processes and indicators within two sections: economic impacts (Chapters 7–11), and social impacts (Chapters 12–14). The economic impact assessment section uses the COVID-19 pandemic as a distinctive bifurcation point for disaster economic impact analysis. Pre-COVID-19 disasters are shown to influence both macro and micro-economic indicators and display a “V-shaped” recovery pattern. However, this pattern is not shown in post-COVID-19 economic recovery. After pointing out this difference, Dr. Skidmore’s book then provides a broader picture about pre-COVID-19 natural disasters impact on the economy through time (short-, medium and long-term) and by created categories (geophysical, meteorological, hydrological and climatological), and uses the United States as an example to illustrate how natural disasters have impacted industrial GDP. As for social impact evaluation, each chapter is developed and reacts to survey results after a disaster event which seek to answer (1) what are the changes in self-reported well-being after natural disasters? (2) how do individual and social preferences affect human behavior after natural disasters? and (3) what are the significant demographic factors in post-disaster migrations?

Readers can also learn potential economic tools for disaster risk management and reduction, which are shared by researchers in Part III within a four-section layout, including insurance (Chapters 15 and 16), risk assessment and reduction (Chapters 17 and 18), resilience and vulnerability (Chapters 19 and 20) and recovery and response (Chapters 21 and 22). Part I addresses the importance of property insurance in disaster risk reduction from both buyer and supplier. Part II provides models with high accuracy in disaster risk assessment such as ABM and weather information modification. Part III supplies empirical evidence for policymakers about how to improve resilience at three economic scales, including micro (firm level), meso (industry) and macro (indirect interactions among sectors). Finally, Part IV is a reflection on the lessons learned from small business recovery after events such as Hurricane Katrina and the COVID-19 pandemic, as well as entrepreneurial responses towards disasters. As a culmination, this section emphasizes the importance of U.S Small Business Administration loans in small business recovery and strategies in dealing with uncertainty from entrepreneurship.

This book is a useful tool for grasping disaster impacts on the economy, especially the recovery pattern changes over disaster events, including the COVID-19 pandemic. It provides a systematic understanding about the socio-economic factors in disaster risk assessment and reduction which can influence the research context of not only urban planning, but landscape architecture, urban design, geography and other geospatial and hazard-related disciplines.