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Natural Hazards, UnNatural Disasters: The Economics of Effective Prevention
competitive elections (the conventional notion of democracy). Also critical is the degree to which citizens are informed and the ability of politicians to make credible commitments to (most) citizens. Key components of political credibility are political parties that allow citizens to hold them accountable for success or failure and that allow individual politicians to make credible promises to pursue public policies in the broad public interest. Across both non-democracies and democracies, the existence of “institutionalized” political parties is significantly associated with reductions in disaster mortality. For example, mortality from earthquakes falls by 6 percent for an additional year of competitive elections and by 2 percent when the average party age rises by a year. Institutionalized party systems are therefore more likely to respond to citizens’ needs, with or without competitive elections. Some non-democracies embrace institutionalized ruling parties, bureaucracies, or militaries that facilitate effective responses to disaster; others do not. The broad finding is consistent with Sen’s (1982) observation that democracy helps in responding to emergencies and disasters because voters hold governments accountable. But voting alone is neither necessary nor sufficient. A wide variety of political systems can serve the purpose, and “institutions” are needed to inform all concerned about the alternative prevention measures available, their cost, and their effectiveness. Incentives matter, and political competition could drive the spread of information; but some institutions work better than others for reasons not fully understood. Cost-benefit analysis: A subtle and sensitive scalpel
Information and new technology increases choices, but how to choose among them? Collective choice requires alternatives to be narrowed and, if not ranked, their distributional implications examined. Cost-benefit analysis is especially useful when the issues are complex and there are several competing proposals. An investment whose benefits exceed the costs should be undertaken; and if there are competing proposals, the one with the highest benefit-cost ratio should be preferred.6 Cost-benefit analysis is a well-known tool, particularly useful for governments seeking to compare alternatives (such as the private sector’s profit measure). Its use has declined over the years, even at the World Bank (Garcia, forthcoming 2010). To arrive at the right choice when prevention saves lives requires valuing them. Valuing lives may be abhorrent to many and is always controversial. But ignoring it implicitly considers people useless—and it would be unethical and unfortunate if property is protected but lives are not. For example, background work done for the report shows how, if the value of lives saved were ignored, retrofitting buildings in the Turkish district of Atakoy would not be cost-effective, with a benefit-cost ratio lower than 1. Background work done for the report finds that including a value of life of $750,000 in the benefits, however, tips the scales toward retrofitting (IIASA/RMS/Wharton 2009). And only by including the value of lives saved (at $400,000 each) did earthquake strengthening measures for apartment