MEMORANDUM TO A CONCERNED FINANCE MINISTER
Subject: Natural Hazards, UnNatural Disasters: The Economics of Effective Prevention
T
his memo introduces a report that you may find useful and interesting. Focusing on preventing death and destruction from “natural” disasters, it concludes that governments can appreciably increase prevention. The good news is that prevention is often cost-effective. It requires many actions, and some important ones are under government control. But they are not always obvious. Improving the public delivery of some services, like reliable public transport, allows people to move from unsafe areas close to work to safer locations. Reducing deforestation prevents heavy rains from washing mud, rock, and debris into populated areas. This report suggests how such measures and related spending could be identified and made effective. Effective spending is complex, and cost-benefit analysis (underused) helps, but institutions that increase the public’s involvement and oversight are vital. Large benefits result from greater transparency in all aspects of government decision making. How the public responds to such prevention measures depends on its trust in the government. Such trust flows from credible institutions, which the report persistently underscores. Prevention pays, but you do not always have to pay more for prevention. A relatively easy and effective measure is for governments to make information about hazards and risks easily accessible (such as maps of flood plains and seismic fault lines). Allowing markets to work better also helps because much information is embedded in prices. Controls on prices, trade, and the like and excessive tax rates have harmful effects, and correcting them goes a long way in increasing prevention.
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