National Economic Impact Analysis of Terrorist Attacks and Natural Disasters

National Economic Impact Analysis of Terrorist Attacks and Natural Disasters

Edited by Harry W. Richardson, Jiyoung Park, James E. Moore II and Qisheng Pan

This book develops a national economic impact model to estimate the effects of simulated terrorist attacks and natural disasters on individual US States and economic sectors. The model, called NIEMO (The National Interstate Economic Model) looks at interindustry relationships and interregional trade. It is highly disaggregated making the model very accurate. The authors examine potential attack targets including theme parks, sporting events, bridges and tunnels in the national highway system as well as attempts to shoot down airplanes or spread foot-and-mouth disease. Covered natural disasters are almost all real world: Hurricane Katrina, the Joplin Tornado, the Gulf Oil Spill and Hurricane Sandy. The effects on State economies caused by the closing international borders in response to a global pandemic is also examined.

Chapter 1: Introduction

Harry W. Richardson and JiYoung Park

Subjects: economics and finance, methodology of economics, environment, disasters, politics and public policy, political economy, terrorism and security


The National Interstate Economic Model (NIEMO) used in this book was developed less than a decade ago but built upon a longer heritage of trying to implement a Multi-Regional Input-Output (MRIO) model. This book is dedicated to the memory of Wassily Leontief and Walter Isard who laid out what appeared to be an impossible but intriguing dream. Because of vastly improved databases and an amazing expansion of computer capacity, we believe that we have come close to recognizing their vision. Of course, conceptually we could go further. Rather than NIEMO’s 47 sectors x 52 regions, we could proceed to try and model 500+ sectors and 3,000 counties. This is nice to talk about, but of course impossible to do. The matrix would have 2.25 trillion cells, and even with ideal data structures in place would take years for one run. Also, there are no trade flow data at the county level, although the IMPLAN Group is experimenting with the idea. We rely on the Commodity Flow Survey for interstate flows (ORNL, 2000). In other words, our view is that we have achieved the maximum degree of spatial disaggregation available at this time. A next step might be to create a national metropolitan area model involving about 350 metropolitan areas rather than 3,000 counties, but even this step lies in the future.