Adam Rose and Dan Wei Awarded Sir Richard Stone Best Article Prize

Adam Rose and Dan Wei Awarded Sir Richard Stone Best Article Prize

CREATE Affiliates and USC Price School of Public Policy research professors Adam Rose and Dan Wei recently received the Sir Richard Stone Prize for their article, “Estimating the Economic Consequences of a Port Shutdown: The Special Role of Resilience,” published in the journal Economic Systems Research in 2013. ESR is the official journal of the International Input-Output Association, which awarded the Prize. The Association, founded in the late 1980s, is devoted to research on interindustry modeling, which focuses on sectoral interdependence within and across economies. These models include input-output analysis, social accounting matrices, multisector programming models, computable general equilibrium analysis, and large-scale macroeconometric models.  This award is named after Nobel laureate Richard A. Stone, who, among several other major contributions, developed the concept of the social accounting matrix (SAM), which extends the industry oriented input-output (I-O) framework to include a full system of economic accounts, primarily institutional ones, associated with households disaggregated by socioeconomic type, business enterprises, government enterprises, and cross-border trade. 

The paper involved research funded by the US Coast Guard through CREATE on enhancing the economic consequence analysis components of its Maritime Security Risk Analysis Model (MSRAM).  The analysis involved the refinement of demand-side and supply-side I-O to examine the broad regional and national economic impacts of a 90-day disruption at the twin ports at Beaumont and Port Arthur, Texas.  The use of I-O, and other interindustry approaches, facilitates the estimation of upstream and downstream supply-chain impacts. Professor Rose noted that: “I have predominantly been using relatively more complex computable general equilibrium (CGE) models for the past 25 years, but I-O was most appropriate to this application.  Given the short disruption period, there are limited opportunities for input substitution and limited roles for prices and markets, factors that are typically not well addressed in I-O models but that are of limited relevance here. Moreover, unlike CGE models, which are very facile and difficult to decompose, the I-O approach forced us to carefully delineate various demand-side supply-side shocks to the system. However, the most innovative aspect of the research was the incorporation of resilience into the analytical framework. By resilience, I refer to tactics that can reduce business interruption losses by utilizing remaining resources more efficiently and recovering at an accelerated pace.” Professor Wei noted that:  “Resilience tactics we examined included ship-rerouting, use of inventories, conservation, access to the Strategic Petroleum Reserve, export diversion and production recapture. Overall, we estimated that resilience could reduce the potential losses by 68% at the Port region level and by as much as 95% at the national level.”

The paper served as the basis of further studies by Rose and Wei of port disruptions relating to California tsunami events funded by the US Geological Survey and the USC METRANS Center using CGE analysis.  More recently, the authors have teamed with Donald Paul, Director of USC’S Energy Institute, to refine their I-O analysis, especially on the resilience side, to focus on the disruption of petroleum imports and exports from Port Arthur/Beaumont.  The latter research was funded by the DHS Critical Infrastructure Resilience Institute, headquartered at the University of Illinois, of which Professor Rose is also a faculty affiliate. The results indicated an even higher level of resilience than before, due primarily to the shale oil boom and buildup of associated storage and pipeline capacity in the Gulf Coast Region.

Professor Rose has been a leader in interindustry modeling. He was the first to develop pollution abatement coefficients and to develop interrelational income distribution multipliers (how income changes for one income bracket ripple through the economy and affect all other brackets) using primary data. He applied I-O to estimate the economic impacts of nearly 20 major energy technologies, including one of the first studies on renewables.  He is also one of the fathers of I-O Structural Decomposition Analysis (SDA).  More recently, his method of choice has been CGE modeling, which overcomes the typical limitations of I-O by the incorporation of non-linearities, behavioral motivations, the role of prices and markets, and explicit resource constraints. He has pioneered the incorporation of resilience into these models, and, together with CREATE faculty affiliates James Giesecke, Bill Burns and Paul Slovic, has included behavioral responses to terrorism and natural disasters.

Rose noted: "CREATE has a proud history of research in interindustry modeling. Former affiliates, Peter Gordon, Harry Richardson and James More did pioneering work in the development of I-O modeling and its application to disasters, primarily in conjunction with their PhD student JiYoung Park (now an Associate Professor at the University at Buffalo) on the development of the National Interstate Economic Model (NIEMO).  CREATE also counts as one of its affiliates a world leader in CGE modeling, Peter Dixon of Victoria University in Australia.”

The journal Economic Systems Research is now approaching its 30th year of existence and has broadened its focus over time. It is now ranked third among hundreds of economics journals in terms of its impact factor. One of the main reasons is its appeal to non-economists, primarily engineers and environmental scientists, who find the concept of interdependence to be especially important, and who can readily work with the simplest version of these models — input-output analysis.  After initial advances by economists and regional scientists in broadening SAMs to include natural resources and the environment, engineers, ecologists and those in several other fields have further extended the development and application of this modeling framework. In addition, they have undertaken extensive analyses of the factors driving changes in energy use and pollution emissions using I-O SDA.

The 2013 ESR Article and related papers and reports can be accessed at the following link:

Adam Rose & Dan Wei (2013)

Economic Impacts of a California Tsunami

Major Port Disruptions

Role of Seaports in U.S. Energy Security