Katrina and Rita: The Impact of Exogenous Shocks on Risk Assessment

Texas A&M Research Foundation, College Station TX

Investigators

Abstract

How do different types of people respond to information gleaned from catastrophic events such as Hurricane Katrina and Hurricane Rita? In the wake of a catastrophic event, an individual's assessment of the risks encountered in his/her daily life is likely to be subject to frequent updating. Over time, one's updated risk assessment may result in a decision to move from a city at risk of hurricane damage to one that is perceived to be safer. With this project, the PIs intend to launch a survey of people that live in hurricane-threatened regions along the US Southeastern and Gulf Coasts. This survey will include an examination of at least four dimensions of an individual's choice to migrate or remain in a hurricane-threatened region: re-assessments of the probability and consequences of the exogenous event (the hurricane); perceptions and images of "place" associated with a region of residence that differ in the perceptions of individuals in that area; evaluations and beliefs concerning the policy programs put in place to mitigate future disasters, as well as the people responsible for managing them; and responses to the bundle of incentives that are structured to influence the recovery of a region after a major hurricane disaster. The objective of this project is to explore the economic, cultural, and institutional dimensions of an individual's risk assessment. The specific questions of focus are: How do people update their risk assessments after a catastrophic exogenous shock such as Hurricane Katrina or Hurricane Rita? What values or characteristics beyond risk assessment influence the formation of preferences? How does one's perception of government competence, combined with various types of government incentives, influence decision-making under uncertainty? This multi-dimensional study of decision-making under uncertainty has profound public policy implications. An efficient incentive system is one in which people who have the appetite for the risk select to stay in hurricane-threatened areas. In part this appetite may be influenced by perceptions of place. What is an efficient policy? Does an "economically efficient" policy have sociological implications? How will such a policy impact the socio-economic, cultural and racial make-up of a community?