Accounting for wildfires’ cost won’t be easy

  • By James McCusker
  • Wednesday, August 26, 2015 4:07pm
  • Business

The disastrous fires still ravaging our state have destroyed forests, homes, and businesses, devastated families, and taken the lives of brave firefighters. The battle to contain and extinguish these fires is still being fought in the smoke and heat by a growing army of professionals and volunteers.

The immensity of the fires and their widespread destruction and damage, along with the costs in dollars and human lives of the firefighting efforts, will undoubtedly have lasting effects on people’s lives as well as the economy. Accounting for all the costs isn’t easy.

As one example, if you have ever seen the movie, “Twelve O’Clock High” — and it is frequently shown on TV — you get a pretty good idea of the purpose and human cost of the U.S. daylight bombing effort in Europe during World War II.

Less familiar is the set of over 300 government-printed volumes called the “Strategic Bombing Survey,” which used captured statistics, military reports, and even interviews with manufacturing plant managers to evaluate the impact of the Allied bombing effort.

What is included in the survey, but left out of the movie, is that the daylight bombing raids which were central to the drama, mostly using Boeing B17s, were largely ineffective in curtailing German war production, and certainly not cost effective. This was especially true of the Schweinfurt ball bearing factory raids deep in into Germany, beyond the range of Allied fighter protection for the bombers, that were so central to “Twelve O’clock High.” Despite the visible damage done to targets, despite the bravery and sacrifice; despite the losses of bombers, crew members, and critically needed pilots, the bombing had little effect on the availability of ball bearings for German military vehicles or aircraft. (A later shift to Nazi oil supplies had a more decisive impact.)

The Strategic Bombing Survey did an excellent job of accounting for the costs and results. In the end, though, there was no accounting system that could measure the human losses in any comparable way. There still isn’t.

In the aftermath of natural disasters, like forest fires, tornadoes, earthquakes, and floods, we would expect at least the known costs would be accounted for and show up in our Gross Domestic Product (GDP). In the past they often did but perversely appeared to have a positive impact.

The reason why natural disasters seemed to boost the economy was the structure of the national accounts that form the basis of GDP. It began and remains primarily an income statement for all America, recording transactions and calculating national income and economic output.

Lacking a real balance sheet, though, the GDP system had difficulty dealing with the costs of natural disasters. From an economics standpoint, a disaster, natural or man-made, produces initial losses that are reductions in asset value. If your garage burns down, for example, the loss is equal to the market value of the building and its contents. The problem was that there was really no place to “book” this loss in the GDP accounts.

What would show up the GDP more noticeably, though, would be the materials, labor, and other construction costs to replace the garage. These would appear as increased sales and payrolls but, again, identified geographically or regionally as related to the disaster. The recovery then showed up clearly as a construction and income “bounce” while the initial loss that caused it did not.

These accounting issues were well known in the Bureau of Economic Analysis (BEA), the group within the U. S. Dept. of Commerce responsible for the GDP accounting system. A number of factors, though, caused a more intense focus on the economic costs and effects of natural disasters. These factors included increased density of shoreline development and population, the expansion of housing into previously undeveloped, forested areas, a growing dependence on federal assistance in disaster management and relief, and a still-puzzling apparent increase in weather-related disasters.

The BEA has been improving its coverage of the economic impact of natural disasters, and, as just one example, for the past six years it has included an estimate of economic losses in its calculation of the nation’s net savings.

Improvements like this are warmly welcomed by economists and analysts even though there is still a lot of work ahead to produce a meaningful balance-sheet approach to disaster accounting.

It is important to remember, though, that when it comes to disasters, economic accounting systems, no matter how precise, can only take us so far. Accounting values aren’t the only values in town; and certainly not the only ones in our hearts. In the end, just as in portrayals like “Twelve O’clock High” and in real-life, the human costs are left for us to carry, not count.

James McCusker is a Bothell economist, educator and consultant. He also writes a column for the monthly Herald Business Journal.

Talk to us

> Give us your news tips.

> Send us a letter to the editor.

> More Herald contact information.

More in Business

Black Press Media operates Sound Publishing, the largest community news organization in Washington State with dailies and community news outlets in Alaska.
Black Press Media concludes transition of ownership

Black Press Media, which operates Sound Publishing, completed its sale Monday (March 25), following the formerly announced corporate restructuring.

Maygen Hetherington, executive director of the Historic Downtown Snohomish Association, laughs during an interview in her office on Thursday, Feb. 15, 2024, in Snohomish, Washington. (Ryan Berry / The Herald)
Maygen Hetherington: tireless advocate for the city of Snohomish

Historic Downtown Snohomish Association receives the Opportunity Lives Here award from Economic Alliance.

FILE - Washington Secretary of State Steve Hobbs poses in front of photos of the 15 people who previously held the office on Nov. 22, 2021, after he was sworn in at the Capitol in Olympia, Wash. Hobbs faces several challengers as he runs for election to the office he was appointed to last fall. (AP Photo/Ted S. Warren, File)
Secretary of State Steve Hobbs: ‘I wanted to serve my country’

Hobbs, a former Lake Stevens senator, is the recipient of the Henry M. Jackson Award from Economic Alliance Snohomish County.

Mark Duffy poses for a photo in his office at the Mountain Pacific Bank headquarters on Wednesday, Feb. 14, 2024 in Everett, Washington. (Annie Barker / The Herald)
Mark Duffy: Building a hometown bank; giving kids an opportunity

Mountain Pacific Bank’s founder is the recipient of the Fluke Award from Economic Alliance Snohomish County.

Barb Tolbert poses for a photo at Silver Scoop Ice Cream on Thursday, Feb. 29, 2024 in Arlington, Washington. (Annie Barker / The Herald)
Barb Tolbert: Former mayor piloted Arlington out of economic brink

Tolbert won the Elson S. Floyd Award, honoring a leader who has “created lasting opportunities” for the underserved.

Photo provided by 
Economic Alliance
Economic Alliance presented one of the Washington Rising Stem Awards to Katie Larios, a senior at Mountlake Terrace High School.
Mountlake Terrace High School senior wins state STEM award

Katie Larios was honored at an Economic Alliance gathering: “A champion for other young women of color in STEM.”

The Westwood Rainier is one of the seven ships in the Westwood line. The ships serve ports in the Pacific Northwest and Northeast Asia. (Photo provided by Swire Shipping)
Westwood Shipping Lines, an Everett mainstay, has new name

The four green-hulled Westwood vessels will keep their names, but the ships will display the Swire Shipping flag.

A Keyport ship docked at Lake Union in Seattle in June 2018. The ship spends most of the year in Alaska harvesting Golden King crab in the Bering Sea. During the summer it ties up for maintenance and repairs at Lake Union. (Keyport LLC)
In crabbers’ turbulent moment, Edmonds seafood processor ‘saved our season’

When a processing plant in Alaska closed, Edmonds-based business Keyport stepped up to solve a “no-win situation.”

Angela Harris, Executive Director of the Port of Edmonds, stands at the port’s marina on Wednesday, Jan. 24, 2024, in Edmonds, Washington. (Ryan Berry / The Herald)
Leadership, love for the Port of Edmonds got exec the job

Shoring up an aging seawall is the first order of business for Angela Harris, the first woman to lead the Edmonds port.

The Cascade Warbirds fly over Naval Station Everett. (Sue Misao / The Herald file)
Bothell High School senior awarded $2,500 to keep on flying

Cascade Warbirds scholarship helps students 16-21 continue flight training and earn a private pilot’s certificate.

Rachel Gardner, the owner of Musicology Co., a new music boutique record store on Thursday, Jan. 18, 2024 in Edmonds, Washington. Musicology Co. will open in February, selling used and new vinyl, CDs and other music-related merchandise. (Olivia Vanni / The Herald)
New Edmonds record shop intends to be a ‘destination for every musician’

Rachel Gardner opened Musicology Co. this month, filling a record store gap in Edmonds.

MyMyToyStore.com owner Tom Harrison at his brick and mortar storefront on Tuesday, Sept. 6, 2022 in Everett, Washington. (Olivia Vanni / The Herald)
Burst pipe permanently closes downtown Everett toy store

After a pipe flooded the store, MyMyToystore in downtown Everett closed. Owner Tom Harrison is already on to his next venture.

Support local journalism

If you value local news, make a gift now to support the trusted journalism you get in The Daily Herald. Donations processed in this system are not tax deductible.