Nothing short of divine wrath tore through my beloved south over the last couple of weeks. No area was untouched and the breakout of tornadoes even found it’s way all the way up to the District and beyond. It’s one of the biggest and deadliest outbreaks in history, and will likely be the most expensive. With more than 300 dead and some still missing, the emotional damage is immense. But this blog isn’t the place for that. Instead we will focus on the economic damage.
I don’t need to explain how tornadoes cause damage, but you should know that the media does exaggerate it just a bit. Less informed people will think the entire south looks like Tuscaloosa. The worst tornadoes are about a mile wide and are capable of destroying about anything in it’s path. But the path is still quite small on a relative basis and they tend to only last for a few minutes. They are highly unstable and I’m sure researchers are working on ways to destabilize them further. The damage though is undeniable. However thanks to property laws, most everything would be insured. Homes, vehicles, buildings, and the like. There’s also quite a bit of agriculture that could be affected. Thousands of chickens were lost and no doubt some grains and cotton got uprooted. I feel for the chickens, but most farmland is also insured from losses, especially natural disasters. There are companies out there that estimate how much damage can be caused by natural disasters. They don’t do it for fun, insurance companies pay them to figure it out. The quoted number going around is between $2 and $5 billion.
This number likely does not include damage that wasn’t covered by insurance. Think about people that lost their jobs or businesses. Entire local economies have been taken back to the 1850s. FEMA is on the ground (under different management) and they’ve got a pretty sizable budget to help out. Likewise with the National Guard. But strained state and federal budgets don’t want to have to put money to work if they can avoid it. Roads and schools will have to be rebuilt. Infrastructure of power and phone lines have to be rebuilt too. And for everyone, it’s not like insurance checks come in the mail overnight. Even if they did, who says you still have a mail box?
The good news is once this money does go to work, it can actually reinvigorate the economy. This is contrary to what many might expect. Part of that has to do with how economies are measured, but other reasons are that idle money is put to use (personal savings, government funds, private investment) and people help each other rebuild. The human ability to rebuild from just about any disaster is awe-inspiring, and I expect nothing less in this case.
It’s important to note that while tornadoes are scary, deadly, and costly, they are not nearly as bad as hurricanes. We worry about them more because they’re unpredictable. With a hurricane you can see it coming days away and often have time to get out of town or hunker down. But hurricanes kill many more and the the economic toll is also higher. For comparison, Katrina was responsible for almost 2000 deaths and $81 billion in damage.
 By The Weakonomist |
The Weakonomist is the founder of Weakonomics. Clicking the picture of the puppy will tell you more about him. If you like what you're reading consider subscribing to the blog, following him on Twitter, and checking out the related posts below. Please consider a donation if you really enjoy Weakonomics. Also keep in mind that nothing I say can be construed as financial advice. |
Be First To Comment!