Is it me or are there more disasters in the US?

Is it just me, or do you also think the number of major natural disasters is increasing each year?  Disasters make news.  Are they just being over-hyped by the onslaught of 24/7 reporting?

The U.S. government’s National Oceanic and Atmospheric Administration (NOAA) actually maintains a website that answers this question.   NOAA’s list of billion dollar weather and climate disasters goes back to 1980 and records the date, place, deaths and total cost.  Since 1980 there have been 212 disasters, which NOAA calculates have a combined cost of over US$ 1.2 trillion.

Analyzing the NOAA data shows that the number of billion dollar disasters has been increasing over time.  The typical year during the 1980s had on average 2.7 huge disasters occur in the U.S.  A decade later during the 1990s, the average year had 4.6 disasters.  The first decade of the 2000s saw an average of 5.4 major disasters each year.  Finally, during the 2010s, a decade which is not finished yet, the typical year has seen 10.5 disasters that have exceeded the billion dollar mark.

Number of Billion Dollar Disasters from 1980 to 2017

How much is the number increasing?  My statistical analysis of NOAA’s data shows every four years since 1980 the country has gained approximately one additional billion dollar disaster.

The data are reliable

The government has gone to great efforts to make sure the data are reliable.  The data do not cover just one type of disaster like hurricanes.  Instead, they track all kinds of large disasters beyond hurricanes such as winter storms, droughts, heat waves, tornados, floods, hail and wildfires.  The data even include periods of subfreezing temperatures that have destroyed billions of dollars of crops and killed large amounts of livestock.

The government also ensures the costs are measured accurately.  The total cost of each event includes both losses covered and not covered by insurance.  The losses include damage to buildings, roads and infrastructure, as well as items destroyed within buildings when a major disaster strikes.  The figures even include some amounts lost by businesses because they were temporarily forced to shut down.

The figures, however, do not assign any value to lives lost.  Even if a storm kills hundreds, no adjustment is made for these deaths.

Finally, the figures are adjusted for inflation.  This is very important because a billion dollars in 1980 is actually equivalent to $3.15 billion today after adjusting for price changes.  Hollywood movies consistently break box office records because the industry does not adjust ticket sales for inflation.  Without adjusting for inflation, disasters would consistently look more expensive over time and like Hollywood constantly shatter records for damage.

Do the numbers present a true picture?

Even with the inflation adjustment, a key reason we have more billion dollar disasters is that the economy is much bigger today than it was in the 1980s.  When the economy was smaller, disasters caused less economic damage.  There were fewer homes, factories and office buildings to destroy so it was harder for a natural disaster to cause a billion dollars of damage.

Since 1980, the U.S. economy has more than doubled. The economy grew from $6.5 trillion back then to $17 trillion as measured by inflation-adjusted GDP. To account for this, the NOAA data should be adjusted for the economy’s size. In other words, a storm happening today will cause more damage than an identical one occurring decades earlier simply because there is more to destroy.

A simple adjustment that incorporates economic growth divides each year’s inflation-adjusted GDP figure by the 1980 value and multiplies the answer by $1 billion. This results in a figure, in each year, that equates to the minimum amount of damage needed to be economically equivalent to $1 billion of destruction in 1980.

For example, the resulting figure for 2010 is $2.3 billion. Or put another way, a storm that caused $1 billion in damage in 1980 would have caused about $2.3 billion worth in 2010.

While this isn’t a perfect adjustment and assumes all parts of the economy grow at roughly the same rate, it creates a more accurate measure of meaningfully billion-dollar disasters than the official data.

Excluding storms under the adjusted cutoff and redoing the statistical analysis shows we gain an additional billion-dollar disaster about every 25 years, not every four years. So the frequency of these natural disasters is increasing, but not nearly as fast as the raw NOAA data suggest.

Given the number of disasters is rising government officials should think about strengthening building codes.  If commercial and residential buildings are designed to handle a higher chance of being inundated by water, wind and fire the cost of cleaning up and time needed to recover from natural disasters will fall.

Conclusion

People tend to overestimate the impact of small probability events.  Many people think they have a chance at winning giant lotteries, otherwise no one would buy tickets.  Disasters are just like lotteries except people lose when their number comes up, not win.  While millions of people are affected by a hurricane like the one that just hit Texas, hundreds of millions were not in the hurricane’s path.  However, the news and dramatic live coverage make all of us worry that we are in danger.

There is an increase in the number of billion-dollar disasters over time.  While it is not as fast as the official government statistics appear to show, neither is it a fantasy cooked up by the media or environmental wackos.

How worried should you be?  Being more worried over time is not the smart thing to do.  Instead, be prepared.  You never know when disaster might strike.  Make a plan.  Have spare water, flashlights, food and your important papers accessible in one place in case it is time to flee.

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Note:  A more formal academic version of this post can be found on my “working paper” page or by clicking here.

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