Estimating the financial loss caused by natural disasters is a difficult task. This calculation is a complex process, with highs and lows. Here are some estimation methods in this regard.
According to a report published by the Turkish Enterprise and Business Confederation, the damage caused by the earthquake in eastern Turkey was estimated at 84 billion dollars (80 billion euros), which is about 10 percent of Turkey’s gross domestic product.
In Turkey alone, approximately $70.8 billion was lost due to collapsed buildings, with $10.4 billion lost to national income and $2.9 billion in lost working days. The US data analytics firm Veersk says the economic losses from the earthquake are at least $20 billion, with many other estimates in between.
How is this earthquake calculated and why are the estimates so different? Let us now try to clear this confusion.
What is the value of human life?
According to Melanie Gall of Arizona State University, there are generally two ways to calculate the economic impact of such disasters. One way is direct effects, i.e. damages that occur immediately, such as damage to homes and injuries. Gale told DW that direct losses can be estimated by professional analysts hired by insurance companies.
Another type is indirect effects, which are those that arise from the secondary effects of an accident or natural disaster, such as business losses during shutdowns, loss of income for workers and post-traumatic stress disorder (PTSD). ) unemployment of persons suffering from Such losses are usually calculated using an economic model.
“In most cases these estimates don’t come from professional appraisers,” says Gale. Insurance companies and insurance trade associations typically provide first estimates, which focus on property damage. Is. Insurance companies base these estimates on a comparison of insured and uninsured property. Thus, they try to understand how much total damage was done.
Adam Rose, a senior research fellow at the Center for Risk and Economic Analytics for Hazards and Contingencies at the University of Southern California, is an expert on such assessments. They have developed a software for this purpose, called the Economic Consequences Analysis Tool, or ECAT. “A precise estimate of damage from any disaster can only be determined after a careful case study, which takes months or years to complete,” Rose told DW.
Rose’s software can be used only when some basic information about the initial scale of the disaster is available. One issue, according to Rose, is the value of human life, which usually includes a large portion of a person’s earnings. He says that the loss of life in developing countries like Turkey cannot be compared to the loss in a developed country.
Among the categories examined are business disruption, a reduction in economic activity measured either in terms of lost income, or a combination of lost wages and profits as well as personal income or employment at the microeconomic level. “The above three categories do not include human suffering, such as the number of people living without electricity or clean water,” Rose added.
John Bateman, public affairs officer of the NOAA Satellite and Information Service in the US, also says that many costs are not counted. These would include natural capital or environmental degradation, costs related to mental or physical health care, and the cost of lost supply chains.
How accurate is the data?
According to Rose, initial estimates of damage from a disaster are often made within a few days but can be refined later as more data becomes available. , bridges and utilities are neglected.”
Rose says such estimates can be more refined based on data collected by satellites and spy planes. According to him, in addition to this, three more factors need to be considered. The first consideration is the damage to the supply chain caused by such disasters. For example, earthquakes in Taiwan have damaged semiconductor factories in the past, affecting electronics production in the US and other countries.
Another is how quickly and efficiently businesses get back on their feet after a disaster, such as relocation or using less water and electricity. Disaster management experts refer to this method of reducing the risks arising from a disaster as “adaptation”.
Third is what happens to people who live in disaster areas. If they flee the area on their own or after being forced to do so by government evacuation orders, the local economy loses its labor base and demand for goods and services declines. This can also happen in a country like Turkey because people will be afraid to return to work in places where they feel unsafe.
The poor are more affected
Rose says that damage estimates from natural disasters are often overstated or underestimated. They attribute this to political factors. Rose explained that some people exaggerate to get more aid and compensation, while some governments understate spending to avoid embarrassment as they try to justify their policies.
According to insurance company Swiss Re, the long-term development impact of disasters generally depends on how direct losses lead to indirect and secondary costs and how the country’s economic capacity to withstand losses is.
Research over the past 30 years has shown that the poor are generally the most affected by disasters. Poor people live in high-risk areas without the resources to take measures to rebuild or rehabilitate.
According to UN Secretary-General Antonio Guterres, weak governance, increasing poverty, loss of biodiversity, damaged ecosystems and haphazard urbanization are the reasons for increasing losses in the form of natural disasters.
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