University of Southern California

Measuring Economic Resilience to Disasters

Date: December 27, 2012

Resilience has become a popular buzzword, and that has detracted from its potential to reduce losses from disasters. Researchers at CREATE have studied the topic for several years and made several major advances.

First, they have provided a definition of the term that is consistent with definitions from the perspectives of engineering, ecology, sociology, and organizational behavior. Essentially, resilience in general can be defined as actions that enable a system to maintain function and recover rapidly. From an economic perspective, this corresponds to using remaining resources as efficiently as possible and to investing in the repair and reconstruction promptly and wisely.

More importantly, CREATE researchers have developed an operational metric for resilience. For the static version--maintaining function--the metric is the avoided damages divided by the maximum potential damages. This metric has been applied by Adam Rose and his research team in a number of studies of actual events (e.g., the 2001 World Trade Center attacks, and London subway/bus bombings) and simulated disasters (e.g., disruption of the Los Angeles water and power systems, shutdown of a major seaport, and impacts of a catastrophic earthquake). For example, the researchers found that resilience just from the relocation of businesses reduced potential business interruption losses from the World Trade Center attacks by 72 percent in the aftermath of 9/11.

Adam Rose, CREATE's Economics research theme lead who has completed numerous projects for the center many of which can be found HERE, made a presentation entitled, "Measuring Economic Resilience to Disasters," at the Santa Fe Institute's (SFI) Annual Trustees and Business Network Symposium. The November 2012 Business Network and Trustee Symposium focused on the topic of resilience and its role in ecosystems, financial markets, social systems, and other networks.

SFI is a world-class research organization focusing on interdisciplinary approaches to "complexity". In-house faculty at SFI are leaders in various related fields, and the organization boasts faculty affiliates from universities such as Harvard and Yale, as well as affiliates from the World Bank and several major private companies.

Dr. Rose shared the program with researchers from a broad spectrum of fields, including others who spoke about disasters, as well as speakers focusing on resilience in response to climate change, financial crises, and the evolution of businesses.

Dr. Rose's work on computable general equilibrium (CGE) modeling fit well within the SFI focus on complexity. A simple interpretation of complexity focuses on interdependence of systems. In fact, CGE models treat the economy as a set of interconnected supply chains connected through individual behavior and markets.