Quantifying the Devastation
First off…thoughts and support to all those affected by the devastation wrought by Hurricane Sandy. As the storm moves on from New York and New Jersey, she leaves a path of destruction in one of most densely populated regions in the United States. Financial markets were at a standstill for days. Power is out for millions on the Mid-Atlantic. Economists – wanting to quantify everything – have already started to pose the question, how will Sandy affect the economy? Numbers seem such a crude medium for talking about a natural disaster like this, but in many ways, it’s all we have.
First, let’s look at how much the storm will cost. To be sure, Sandy will be costly for insurance companies; current estimates of the damage are between US$5 and US$10 billion, making Sandy the fifth most expensive storm. Katrina holds the title as “most costly storm” with US$46.6 billion in insurance losses. If you add damages to infrastructure and public property into insured losses, Sandy’s total damages are estimated to be around US$20 billion. Then, you have to measure Sandy’s effects stoppages in production and slowdowns in sales. Typically, these halts in production and sales are temporary. But, some sales will not be recovered or shifted. For example, restaurant purchases cannot be made up after the storm.
