The Economics of Hurricanes- the Inconvenient Truth

A new working paper by Nordhaus- The Economics of Hurricanes in the United States;

"The year 2005 brought record numbers of hurricanes and storm damages to the United States. Was this a foretaste of increasingly destructive hurricanes in an era of global warming? This study examines the economic impacts of U.S. hurricanes. The major conclusions are the following: First, there appears to be an increase in the frequency and intensity of tropical cyclones in the North Atlantic. Second, there are substantial vulnerabilities to intense hurricanes in the Atlantic coastal United States. Damages appear to rise with the eighth power of maximum wind speed. Third, greenhouse warming is likely to lead to stronger hurricanes, but the evidence on hurricane frequency is unclear. We estimate that the average annual U.S. hurricane damages will increase by $8 billion at 2005 incomes (0.06 percent of GDP) due to global warming. However, this number may be underestimated by current storm models. Fourth, 2005 appears to have been a quadruple outlier, involving a record number of North Atlantic tropical cyclones, a large fraction of intense storms, a large fraction of the intense storms making landfall in the United States, and an intense storm hitting the most vulnerable high-value region in the country."

In the conclusion, Nordhaus writes;

"Finally, we should emphasize that the present economic analysis cannot capture the full social and cultural impacts of devastating hurricanes. We might note that America’s first bellicose Republican President, Thomas Jefferson, threatened to go to war with France and Spain over New Orleans. He thought it the key strategic location in America, writing, “There is on the globe one single spot, the possessor of which is our natural and habitual enemy. It is New Orleans.” While the city’s strategic importance has doubtlessly declined over the last two centuries, Jefferson’s view is a reminder that an economic reckoning cannot capture New Orleans’s position as a unique quarter of American culture and history."