In this excerpt, Erwann Michel-Kerjan, one of the authors of At War with the Weather, outlines lessons for the U.S. regarding extreme event preparation following the "Japanese Perfect Storm." Visit Wharton Magazine to read Erwann’s full post .
This massive earthquake in Japan is one more in a tragic series of recent devastating quakes beginning with Haiti in January 2010, Chile in February 2010 and New Zealand last month. While it is not clear how these events are interrelated, if at all, this certainly poses the question of whether other countries, or other communities, are prepared to handle quakes of similar magnitude.
Is California ready for a $100 billion earthquake this year? I doubt it. Research shows that only 10 percent of Californians have quake insurance (due in part to quake insurance being a costly product, coupled with individuals’ beliefs that a quake “won’t happen to them”). Given the current fiscal crisis in that state, if a quake does happen, who would pay for the damages to the uninsured 90 percent?
Is America ready? Unfortunately, we are not. After Hurricane Katrina, it seemed as though the question of how to better manage and finance large-scale catastrophes would be seriously considered by the highest level of decision makers. But then other crises occurred, and attention to natural disasters somewhat faded. This is the conclusion of our recent book, co-authored with my colleague Howard Kunreuther and several others, At War with the Weather.
We know what to do. What is lacking is the motivation to act, now. The Japanese Perfect Storm is just the latest reminder that we could be next on the extreme event list.