Modeling Considerations in the Analysis of Risk Management Strategies

Abstract

Worldwide data for the last fifty years or so show a rising trend in the annual frequency of natural disasters and the associated annual fatalities (Glickman and Golding, 1992). Population growth is one of the major reasons for this rise, because as more people inhabit vulnerable areas the storms, floods, tornadoes, earthquakes and other natural hazards that strike those areas will produce more deaths and property damage, notwithstanding improvements in early warning and emergency preparedness. In fact, the observation has been made that natural disasters are really man-made since the hazards that produce them only cause any deaths or property damage because human beings have chosen to develop and inhabit the affected areas. In the case of the Mississippi Valley, where floods have been recurrent in recent years, concerns have been raised as to whether the federal government should subsidize individual risk-taking behavior by repeatedly providing disaster relief to people who choose again and again to rebuild their homes in flood-prone areas.