Economic Analysis of the Consequences of a Potential Anthrax Terrorist Attack in The Pacific Northwest: Business Income Losses and Real Estate Price Declines.

Principal Investigator: 
Performance Period: 
October 2011 to September 2012
Commercialization Status: 
N/A
Abstract: 
An anthrax attack on a major metropolitan area of the U.S. such as Seattle would have devastating direct consequences.  These would include massive death and injury, contamination of buildings, and cessation of economic activity in the affected area.  Immense sums would need to be expended on health care and decontamination.  The indirect effects would likely be even greater.  Ordinary resources losses stemming from ripple, or multiplier, effects would more than double the declines in economic output, employment and income.  Property value decreases would take place not only in the affected area, but in the rest of the economy due to the ensuing economic downtrend.  Further economic losses would stem directly and indirectly from fear.  Many people would avoid the affected area and even neighboring areas out of concern for the spread of contamination, thus spatially broadening the decline in property values.  In addition to the short-term effects from the social amplification of risk, long-run stigma effects could last for many years.  A recent study comparing ordinary resource loss and behavioral effects of a radiological dispersion device (RDD) attack in a major metropolitan area, Los Angeles, estimated that the latter type of effects could be more than an order of magnitude greater than the former if stigma effects were to last at least  a decade (Giesecke et al., 2011).              The situation could very well lead to the creation of "black holes" in the middle of a major city attacked by use of an insidious mechanism involving radiological, biological, or chemical agents.  This would obviously be a great psychological, cultural, personal and economic loss to individuals, the region, and the nation as a whole.  While major efforts to prevent such attacks are a high priority, some attention needs to be placed on how to minimize the short-term and long-term consequences of such events.  Enhancing resilience is one approach.  This would involve individuals and group (both private and public sector) efforts to use remaining resources as efficiently as possible and to hasten the speed of recovery (including expediting the clean-up process) (Rose, 2009).  Individual initiative would help promote recovery, but the obstacles would be greater in this case than in many others.  Just fear of long-lasting anthrax contamination would lead many people to leave the Seattle area permanently.  A precipitous drop in real estate prices would put many business, apartment, and home owners "under water" in their mortgages, causing them to consider defaulting and starting fresh in another city or state.  Even those remaining might require incentives to return to or visit the affected area.  Workers might require higher wages and investors require a higher rate of return.  Resident shoppers and tourists would likely require price discounts in restaurants and hotels, as well as goods produced in the contaminated area.  This would significantly raise the cost of doing business, which, in turn, would decrease local purchasing power and make Seattle's exports less competitive.  These various factors are what underlie the order of magnitude increase in negative economic consequences in the LA RDD example.