January 1, 2008
The geographic scope of the economic impacts of most natural and man-made disasters in the United States is regional rather than local or national. This is not to diminish the individual suffering or the national concern. It stems from the fact that even local impacts ripple spatially to the boundaries of larger economic trading areas. It also stems from the vast size of the U.S. and the limits of man-made and even natural forces. Thus, the appropriate geographic area for analysis is often the county or county group, though not necessarily within the boundaries of a single state. A major earthquake on the San Andreas Fault is no exception. A factor that extends disaster losses beyond the area of the initial stimulus is the interdependence of the economy. One view of interdependence is the production pyramid, which characterizes the economy as consisting of layers of building blocks. Primary commodities, such as minerals, agricultural crops, and forest products, are at the foundation of this economic edifice because they are at the starting point of the production process. Intertwined with all the layers are roads, utilities, and communication networks that provide the lifelines of logistic support for even the most basic economic activity. Thus, all goods and services in the economy are interdependent, but infrastructure may be the most critical. But infrastructure is not necessarily best characterized by the rigidity of road, pipeline, or transmission networks. Instead, it possesses features of resilience, or flexibility and the ability to rebound. The purpose of this project will be to analyze the economic impacts of a major earthquake on the San Andreas fault. The study will utilize the results of research by geologists, geographers and engineers on the spatial pattern of damage to the built environment. It will then translate these property damage (or stock loss) estimates into business interruption (or flow loss) estimates at the regional level. The analysis will be based on the use of input-output (I-O) analysis, still the most widely used tool of regional economic impact analysis, and computable general equilibrium (CGE) analysis, a state of the art approach that captures most of the advantageous features of I-O and overcomes many of its limitations. Both of these modeling approaches are adept at tracing economic interdependencies that can cause total regional economic impacts to be several times greater than direct impacts.