Mar 26, 2011

by the way . . . Economic Implications of the Earthquake in Japan

In the last post I linked to an article about Gary Becker's work. In his blog, Gary Becker talks about the economic implications of the recent earthquake in Japan. He argues: 
I do not expect this disaster, despite its severity, to have major effects on the Japanese economy, but it will have a big impact on the nuclear power industry, and may help different countries better prepare for very rare but destructive natural events.
 . . .
The fundamental loss to the Japanese people from this earthquake-tsunami-nuclear disaster is the destruction and damage to people and property. Perhaps in the end about 20,000 people would have been killed, and many others would be severely injured, including the unfortunates who were exposed to high levels of radiation. Twenty thousands deaths are a terrible loss, but they are only a small subtraction from the economy since they constitute about 0.016% of the Japanese population of some 127 million people. Studies of what people in a country like Japan would be willing to pay to avoid highly rare destructive events like that of a magnitude 9.0 Richter scale earthquake combined with a major tsunami suggest that these 20,000 deaths would be valued by about $3 million per death (many of those who died are older and have shorter remaining lives). The total cost of 20,000 deaths would then be $60 billion, a large sum to be sure, but again very small relative to Japan’s GDP of about $5 trillion. 
The growing worldwide boom for nuclear energy will surely end. 
Read more.

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