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Playing against Nature: Integrating Science and Economics to Mitigate Natural Hazards in an Uncertain World

ISBN: 978-1-118-62082-3
278 pages
May 2014, American Geophysical Union
Playing against Nature: Integrating Science and Economics to Mitigate Natural Hazards in an Uncertain World (1118620828) cover image


Defending society against natural hazards is a high-stakes game of chance against nature, involving tough decisions. How should a developing nation allocate its budget between building schools for towns without ones or making existing schools earthquake-resistant? Does it make more sense to build levees to protect against floods, or to prevent development in the areas at risk? Would more lives be saved by making hospitals earthquake-resistant, or using the funds for patient care? What should scientists tell the public when – as occurred in L’Aquila, Italy and Mammoth Lakes, California – there is a real but small risk of an upcoming earthquake or volcanic eruption?  Recent hurricanes, earthquakes, and tsunamis show that society often handles such choices poorly. Sometimes nature surprises us, when an earthquake, hurricane, or flood is bigger or has greater effects than expected from detailed hazard assessments. In other cases, nature outsmarts us, doing great damage despite expensive mitigation measures or causing us to divert limited resources to mitigate hazards that are overestimated. Much of the problem comes from the fact that formulating effective natural hazard policy involves combining science, economics, and risk analysis to analyze a problem and explore the costs and benefits of different options, in situations where the future is very uncertain. Because mitigation policies are typically chosen without such analysis, the results are often disappointing. This book uses general principles and case studies to explore how we can do better by taking an integrated view of natural hazards issues, rather than treating the relevant geoscience, engineering, economics, and policy formulation separately. Thought-provoking questions at the end of each chapter invite readers to confront the complex issues involved.

Readership: Instructors, researchers, practitioners, and students interested in geoscience, engineering, economics, or policy issues relevant to natural hazards. Suitable for upper-level undergraduate or graduate courses.

Additional resources can be found at: http://www.wiley.com/go/Stein/Playingagainstnature

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Table of Contents

Preface xi

Acknowledgments xiv

Note on Further Reading and Sources xvi

About the Companion Website xviii

1 A Tricky, High-Stakes Game 1

1.1 Where We Are Today 1

1.2 What We Need to Do Better 6

1.3 How Can We Do Better? 14

Questions 17

Further Reading and Sources 19

References 20

2 When Nature Won 22

2.1 The Best-Laid Plans 22

2.2 Why Hazard Assessment Went Wrong 24

2.3 How Mitigation Fared 30

2.4 The Challenges Ahead 32

Questions 35

Further Reading and Sources 35

References 36

3 Nature Bats Last 38

3.1 Prediction Is Hard 38

3.2 Forecasts, Predictions, and Warnings 40

3.3 Earthquake Prediction 45

3.4 Chaos 50

Questions 53

Further Reading and Sources 54

References 55

4 Uncertainty and Probability 57

4.1 Basic Ideas 57

4.2 Compound Events 60

4.3 The Gaussian Distribution 64

4.4 Probability vs Statistics 68

4.5 Shallow and Deep Uncertainties 70

Questions 72

Further Reading and Sources 73

References 74

5 Communicating What We Know and What We Don’t 75

5.1 Recognizing and Admitting Uncertainties 75

5.2 Precision and Accuracy 81

5.3 Testing Forecasts 83

5.4 Communicating Forecasts 86

Questions 93

Further Reading and Sources 94

References 95

6 Human Disasters 97

6.1 Assessing Hazards 97

6.2 Vulnerability and Interconnections 99

6.3 The 2008 US Financial Disaster 101

6.4 Pseudodisasters and Groupthink 105

6.5 Disaster Chic 109

Questions 110

Further Reading and Sources 112

References 113

7 How Much Is Enough? 115

7.1 Rational Policy Making 115

7.2 Lessons from National Defense 119

7.3 Making Choices 122

7.4 Uncertainty and Risk Aversion 124

7.5 Present and Future Value 126

7.6 Valuing Lives 129

7.7 Implications for Natural Hazard Mitigation 131

Questions 132

Further Reading and Sources 134

References 135Contents ix

8 Guessing the Odds 136

8.1 Big Events Are Rare 136

8.2 Time-Independent Probability Models 140

8.3 Time-Dependent Probability Models 145

Questions 149

Further Reading and Sources 150

References 150

9 When’s the Next Earthquake? 151

9.1 A Very Tough Problem 151

9.2 Earthquake Frequency-Magnitude Relation 152

9.3 Earthquake Cycle Model 158

9.4 Computing Earthquake Probabilities 168

9.5 Shaky Probabilities 170

Questions 172

Further Reading and Sources 174

References 175

10 Assessing Hazards 176

10.1 Five Tough Questions 176

10.2 Uncertainties 177

10.3 How Is the Hazard Defi ned? 178

10.4 Where Will Large Earthquakes Occur? 182

10.5 When Will Large Earthquakes Occur? 187

10.6 How Big Will the Large Earthquakes Be? 190

10.7 How Much Shaking? 194

10.8 Dealing With the Uncertainties 196

10.9 Next Steps 200

Questions 201

Further Reading and Sources 201

References 202

11 Mitigating Hazards 204

11.1 Approaches 204

11.2 Accepting Risk 205

11.3 Transferring Risk 206

11.4 Avoiding Risk 207

11.5 Mitigating Risk 208

11.6 Combined Strategies 213

Questions 214

Further Reading and Sources 217

References 217

12 Choosing Mitigation Policies 220

12.1 Making Choices 220

12.2 House Fire Mitigation 223

12.3 Losses from Hazards 227

12.4 Optimal Natural Hazard Mitigation 228

12.5 Nonoptimal Natural Hazard Mitigation 232

12.6 Mitigation Given Uncertainties 233

12.7 Robust Policy Making 235

Questions 238

Further Reading and Sources 239

References 240

13 Doing Better 241

13.1 Final Thoughts 241

13.2 Community Decision Making 242

13.3 Improved Organization 244

Questions 248

Further Reading and Sources 249

References 249

Index 251

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Author Information

Seth Stein, Deering Professor of Geological Sciences at Northwestern University, is a seismologist interested in the science of large earthquakes and earthquake hazard mitigation. He has been awarded the James B. Macelwane Medal of the American Geophysical Union, the George Woollard Award of the Geological Society of America, the Stephan Mueller Medal of the European Geosciences Union, the Price Medal of the Royal Astronomical Society and a Humboldt Foundation Research Award.

The late Jerome Stein, who was Eastman Professor of Economics at Brown University, had interests including decision theory and formation of public policy.

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“That Rumsfeld’s pithy and precise summary of the nature of uncertainty in policymaking is often cited as opaque and obscurant shows more than anything the need for a book like this.”  (Survival Global Politics & Strategy,  1 February 2015)

“This is truly an amazing book! The product of a unique collaboration between a renowned economist and renowned seismologist (who happen to be father and son), Playing against Nature lays out a clear story, in easy-to-read prose, of what natural disasters are, what the limitations of risk prediction can be, and how society's response to them has to account for the reality that we have limited economic resources.  The authors present fascinating case studies to illustrate examples of where predictions have failed, and why.  They also take a bold step by showing how natural disasters and economic disasters provide similar challenges, and provide a clear description of how risk should be assessed, and how it can be mitigated reasonably.  This is a book that researchers, policy makers, and the general public should read.  It can even serve as valuable text for the new generation of interdisciplinary college courses addressing the interface between science and social science.”
(Stephen Marshak, Professor and Director of the School of Earth Society and Environment, University of Illinois at Urbana-Champaign)

“I very highly recommend this book for anyone dealing with or interested in natural hazards assessment and mitigation. It is a tour de force with examples, descriptions, illustrations, reference lists, and explanations for understanding natural disasters and negotiating the often perilous and misguided approaches for hazards mitigation. This book is a huge achievement in that it has collected an enormous amount of relevant information, case studies, economics and engineering factors, loss statistics, references, and even study guides and questions for students. It is both highly technical with all the probability and statistics formulations needed to express necessary relationships but on the other hand, so well written that professionals in government, business, and education will find it exceedingly readable. In my everyday work experience, I attempt to communicate principles of hazard occurrences and risks. This book gives me far more useable material than I have ever had to achieve my goals for advising public officials, teaching university students, and educating citizens. This is the best resource in existence for understanding natural hazards and hazard mitigation.”
(James C. Cobb, State Geologist and Director, Kentucky Geological Survey, University of Kentucky)

Playing against Nature is a virtuoso performance by a father-son duo. A distinguished economist and seismologist have produced a pioneering work that promises to enhance our ability to integrate assessment science, cost-benefit analysis and mitigation design and engineering. The result will be more informed, bottom-up, hazard mitigation policies. This outstandingly researched book is highly readable and destined to become a classic.”
(Steve H. Hanke, Professor of Applied Economics, The Johns Hopkins University)

“Elegantly written in Seth Stein's usual memorable prose, Playing against Nature treats jointly seismic and economic catastrophes in a thought-provoking and readable way. How blindingly obvious something can be after the event! Ringing oh so very true, it provides insight into why science and scientists don't get things right all the time. Enriched with gems of quotes, and an unusual mix of hard science and philosophy, Playing against Nature will make a great supporting text for any course on hazards – geologic, engineering, political or economic – and judging from current trends, we could all use as much understanding of this topic as possible.” 
(Gillian R. Foulger, Professor of Geophysics, University of Durham)

“Authored by a remarkable father and son team, Playing against Nature is a comprehensive, lucid assessment of the interplay between natural hazards and economics of many kinds.  As world population continues to increase to more and more unsustainable numbers, and demand for economic growth plagues the world, human activities continue to place us in more and greater vulnerability as Earth processes go on, as they have over deep time.   We need to better recognize and thus more responsibly prepare for inevitable natural events.  Blunt, forceful, and true statements (e.g., “Humans have to live with natural hazards” and “Hazards are geological facts that are not under human control”) characterize Playing against Nature and make reading this contribution, by anyone, a sobering and enlightening experience.  I highly recommend Playing against Nature to those who care about the future of the human race.”
(John Geissman, Professor of Geosciences, University of Texas at Dallas)

“In the wake of recent natural disasters and economic crises, the authors question the inability of specialists—of earth and planetary sciences on one side and economists on the other—to predict such events. Beyond these two spheres, this work also reveals a bridge between seemingly distinct fields of science, which meet as soon as one starts to focus on concepts that are fundamental for both, such as hazard, risk or vulnerability. This book discusses the laws of probability and the most appropriate models for predicting rare events; it also offers strategies to optimize mitigation plans. Playing against Nature thus is an innovative work that should encourage researchers in different disciplines to collaborate. It may also become a useful tool for graduate students. This book furthermore constitutes an ideal reference work for policy makers.”
(Serge Rey, Professor of Economics, University of Pau)

“Insightful and provocative, Playing against Nature by Stein and Stein explains in a brilliant yet playful way why experts missed many of the recent natural and manmade disasters, from the 2011 Tohoku earthquake to the 2008 financial crisis. It makes an enjoyable read for anyone who has ever wondered how society prepares and responds to natural disasters. The authors, an economist father and a geophysicist son, provide a unique perspective of how scientific study of natural disasters interplays with policy making for hazard mitigation.  As a student of earthquake science, I found many arguments and facts in the book compelling and intriguing. Facing many unknowns and with limited resources, we are gambling with nature in hazard preparation and mitigation, as the authors put it. We may not expect to win every hand, but we need to understand our odds.  Playing against Nature offers a fresh way to look at nature’s games.  It should be helpful to professionals, and delightful to everyone who opens the book.”
(Mian Liu, Curators' Distinguished Professor in Geological Sciences, University of Missouri)

 “How can policy defend society better against natural disasters whose probabilities are uncertain and in flux?  In Playing against Nature, Seth Stein, a geologist, and his late father Jerome, an economist, joined forces.  Their book is a clear Guide for the Perplexed, combining scholarship and exposition to show how to prepare more wisely for hurricanes, earthquakes, and tsunamis.”
(Shlomo Maital, Professor Emeritus, Institute for Advanced Studies in Science and Technology, Technion-Israel Institute of Technology)

“What do natural disasters and economic disasters have in common, and how is it possible to efficiently mitigate their effects? You will find the answer in this scholarly book. But there is more to it than meets the eye: this important monograph is based on what I call "the Steins’ synergy" (after the late Jerome Stein, an economist, and his son Seth Stein, a geoscientist). The interaction between these two scientists has been such that the combined result of their joint research, reported in this book, is much greater than the sum of the individual results: the quintessential example of what interdisciplinarity can achieve.”
(Giancarlo Gandolfo, Professor, Accademia Nazionale dei Lincei, Rome, Research Fellow, CESifo, Munich, Professor of International Economics, Sapienza University of Rome (retired))

“’Nature’s smarter than us’ might be a good subtitle for this well-written and illustrated tome by a father-son team. Reviewing numerous natural disasters from Katrina to Haiti to Sandy to the Japan earthquake, the authors find most disaster responses to be seriously wanting. Their accounts of nature at its most violent range from humorous to appalling. The solution: a better understanding of the uncertainties of disaster response, free of politics, tradition and too narrow science.”
(Orrin H. Pilkey, Professor Emeritus of Earth and Ocean Sciences, Duke University)

“There are many books about geological hazards, and a few about their economic consequences. However, this book actually addresses the elephant in the room: ‘why are hazard assessments failing’, and ‘what strategies can we use to minimize losses from disasters themselves and from efforts to mitigate them?’  Playing against Nature addresses these questions from the unique perspective of a rare father and son team, each of whom is world renowned and prolific scientists in their respective fields of economics and geophysics.  If, as a society, we are really interested in winning the game of man against nature, we need to learn how to win the game of man versus himself.  This book points the way to win this battle by objectively dealing with uncertainties in natural hazard assessments and being ‘careful, thoughtful gamblers.’”
(Ron Harris, Professor of Geological Sciences, Brigham Young University)

"In an age of increasing costs of natural hazards and decreasing economic resources to do anything about it, this is exactly the book that scientists, economists, and politicians need to read.

This book provides a rational basis for making difficult choices on how to allocate financial resources to prepare for future natural hazards.

Humans are becoming more susceptible to the risks of natural hazards. Not only are populations are increasing, but increasing urbanization and industrial development make the potential cost and death toll of many natural hazards much greater than in past centuries. With limited resources, how should societies respond to these risks? How should they allocate funds, limit development, or regulate construction? Playing Against Nature provides a sound evidence-based approach to answering these and many other related questions, and should be required reading by every political administration."
(Professor Michael Wysession, Chair of the Earth Science Literacy Initiative, Washington University)

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