Perilocity

A Picture of Denial

Paul Kedrosky posted this picture of new house construction seen through the branches of a tree blackened by the 2003 California wildfires. I can't top that for a picture of denial.

-jsq

He says he got it from the NY Times, but there's no link, so I can't attribute it further.

Common Sense Lacking for Big Perils such as Georgia Hurricane or Worst Case Worm

Why it's not good to depend on common sense for really big perils:

The models these companies created differed from peril to peril, but they all had one thing in common: they accepted that the past was an imperfect guide to the future. No hurricane has hit the coast of Georgia, for instance, since detailed records have been kept. And so if you relied solely on the past, you would predict that no hurricane ever will hit the Georgia coast. But that makes no sense: the coastline above, in South Carolina, and below, in Florida, has been ravaged by storms. You are dealing with a physical process, says Robert Muir-Wood, the chief scientist for R.M.S. There is no physical reason why Georgia has not been hit. Georgias just been lucky. To evaluate the threat to a Georgia beach house, you need to see through Georgias luck. To do this, the R.M.S. modeler creates a history that never happened: he uses what he knows about actual hurricanes, plus what he knows about the forces that create and fuel hurricanes, to invent a 100,000-year history of hurricanes. Real history serves as a guide it enables him to see, for instance, that the odds of big hurricanes making landfall north of Cape Hatteras are far below the odds of them striking south of Cape Hatteras. It allows him to assign different odds to different stretches of coastline without making the random distinctions that actual hurricanes have made in the last 100 years. Generate a few hundred thousand hurricanes, and you generate not only dozens of massive hurricanes that hit Georgia but also a few that hit, say, Rhode Island.

— In Nature's Casino, By Michael Lewis, New York Times, August 26, 2007

And of course a hurricane did hit the Georgia coast before detailed records were kept, in 1898. The article notes that before Hurricane Andrew, insurers believed that a Florida hurricane would cost max a few billion. The actual cost was more like $15.5 billion, predicted only by one woman: Karen Clark, founder of A.I.R.

Sure, the Georgia coast doesn't have any single concentration of wealth like Miami. But it does have a swath of wealth that could be taken down by a single storm. And complacent owners who think it can't ever happen, just like people in Thailand didn't believe Smith Dharmasaroja before the 2004 Tsunami.

Meanwhile, on the Internet, the few insurers of Internet business continuity are winging it and most companies have no insurance at all, despite online crime becoming increasingly sophisticated, leveraging the global reach of the Internet, and the possibility of a global worm that could cause $100 billion damage still being out there.

-jsq .

Brooklyn Tornado

How soon they forget:

It wasn't just the tornado in Brooklyn -- the first in recorded history in the borough -- it was the huge quantities of rain that flooded basements and stranded rail and road commuters from Mineola to Midtown.

— End of the world as we know it? By Carl Macgowan, Newsday, 10:51 PM EDT, August 8, 2007

Sounds kind of like "who could have predicted it?"

Cheatgrass, Wildfires, and Serbia

Why are there so many wildfires in the U.S. west? Cheatgrass grows where land has been disturbed by overgrazing:

So basically 20,000 public lands welfare ranchers have a death grip on science policies applied to western public lands.

— comment by kt, July 17th, 2007 at 8:13 am commmenting on Why cheatgrass wins, by Ralph Maughan, Ralph Maughan's Wildlife News, July 16th, 2007

Hey, it could be worse!

Today was the hottest day in Serbia ever since the temperature has been measured, 45 C [113 F].

If we we Serbs were truly interested in our survival as a nation, we'd be scrambling to get some modern hardware for dealing with ecological catastrophes. It's been ten years since Milosevic sold off our forest fire-fighting aircraft and pocketed the money.

— Serbia and the Flames, Jasmina Tešanović, BoingBoing, Tuesday, July 24, 2007

This is what you get when you sell off the public good and the equipment to protect it to private interests: your country burning down.

-jsq

Wildfire Myopia

It looks like technological security isn't the only kind disorganized in government. The latest GAO report about wildfires seems like more smoke than fire:

This testimony summarizes several key actions that federal agencies need to complete or take to strengthen their management of the wildland fire program, including the need to (1) develop a long-term, cohesive strategy to reduce fuels and address wildland fire problems and (2) improve the management of their efforts to contain the costs of preparing for and responding to wildland fires.

...

For cost-containment efforts to be effective, the agencies need to integrate cost-containment goals with the other goals of the wildland fire program--such as protecting life, resources, and property--and to recognize that trade-offs will be needed to meet desired goals within the context of fiscal constraints.

— Wildland Fire Management: A Cohesive Strategy and Clear Cost-Containment Goals Are Needed for Federal Agencies to Manage Wildland Fire Activities Effectively, GAO-07-1017T, U.S. General Accounting Office, June 19, 2007

How about a strategy for integrating wildfire planning into subdivision planning, or cost allocations from homeowner wildfire insurance?

Wildfires and Climate

Somebody's been paying attention to global warming and wildfires:

...the Association of Fire Ecology said climate change will limit humans' ability to manage wildland fire.

“Under future drought and high heat scenarios,” the declaration reads, “fires may become larger more quickly and be more difficult to manage. Fire suppression costs may continue to increase, with decreasing effectiveness under extreme fire weather and fuel conditions. Extreme fire events are likely to occur more frequently.”

— Fire ecology group: Climate change will limit wildfire management By Perry Backus, the Missoulian, 31 August 2006

Burned vs. Burned Up

Regarding the Georgia and Florida swamp and pine fires, one of the main questions is at what point does preservation offer greater economic gain than resource extraction. Looking at the big picture brings out two points:

ActionBioscience.org: The figure "$33 trillion" was once projected as the value of ecosystems globally. What do you think of this type of economic analysis?

Polasky: The $33-trillion figure refers to one of the earliest studies that was done on the value of ecosystem services. The lead author was Robert Costanza. He and his coauthors tried to get at the notion of how we can establish on a global basis what the value of ecosystem services is. They came up with a number 33 trillion [USD] plus or minus a few trillion. There are a number of problems with the study. The most basic one is the question of what you are talking about when you consider all the ecosystem services of Earth. The entire system is our life support system. So what is our life support system worth? You don’t really have to have a scientific study in order to answer that question. The real value of the study was not the $33-trillion figure, which who knows what that means, but that it spurred people to focus on these issues.

Such values can be big, and the dollar value isn't the only consideration. There is a bit of risk in that we can't do without the biosphere, and some risk management is in order. Even beyond that obvious non-dollar value, there are further questions of species diversity and esthetics. Do we really want to kill off an ecosystem when we don't really know what it's doing for us, and do we all want to live surrounded by concrete?

Your Risk Swamp

Chandler commented on Wildfire Precedents about how some timber companies had mismanaged underbrush cleanup. That's probably true in some places, but the details of the forestry and fire problems in the west and in the southeast are different. Fire is the usual method to clear underbrush in southeastern pine forests, But not the kind of fires we're seeing this year.

WIldfire Precedents

I'm having a little difficulty finding historical statistics on wildfires. Here's someone's understanding:

My understanding is that the size of this fire is almost unprecedented with the exception being a fire in 1955 that consumed 58,000 acres.

The wind changed today. I can smell the smoke of my neighbor’s land again. The ash is falling again, too. Bitter snows.

— The Waycross Wildfire 2, jimmorrow, April 23, 2007

When he wrote that towards the end of April, 55,000 acres had been burnt near Waycross, Georgia.

Super-Cat Fear?

Warren Buffett notes that neither he nor anyone else knows whether the many big hurricanes of 2004 and 2005 were an aberration or the beginning of a trend, but super catastrophe bonds are the likely insurance response.

Don’t think, however, that we have lost our taste for risk. We remain prepared to lose $6 billion in a single event, if we have been paid appropriately for assuming that risk. We are not willing, though, to take on even very small exposures at prices that don’t reflect our evaluation of loss probabilities. Appropriate prices don’t guarantee profits in any given year, but inappropriate prices most certainly guarantee eventual losses. Rates have recently fallen because a flood of capital has entered the super-cat field. We have therefore sharply reduced our wind exposures. Our behavior here parallels that which we employ in financial markets: Be fearful when others are greedy, and be greedy when others are fearful.

— To the Shareholders of Berkshire Hathaway Inc, Warren Buffett, Annual Report, Berkshire Hathaway, 28 Feb 2007

So the current super-cat market is unsure because a lot of capital has entered, yet not as many events happened last year as expected.

-jsq

PS: Seen in Warren Buffett on Risk Management, Gunnar Peterson, 1 Raindrop, 2 March 2007.