The Economic Costs and Consequences of Terrorism
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The Economic Costs and Consequences of Terrorism

Edited by Harry W Richardson, Peter Gordon and James E. Moore II

This landmark book covers a range of issues concerning the consequences of terrorist attacks. Beginning with a discussion of new policies and strategies, it then delves into specific areas of concern, modeling a range of possible scenarios and ways to mitigate or pre-empt damages.
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Chapter 15: Regional Economic Impacts of a Terrorist Attack on the Water System of Los Angeles: A Computable General Disequilibrium Analysis

Adam Rose, Gbadebo Oladosu and Shu-Yi Liao


* Adam Rose, Gbadebo Oladosu and Shu-Yi Liao Hurricane Katrina has dramatized how the lack of potable water contributes to human suffering. However, water is critical to the economy as well. Most businesses are directly dependent on water in some way, and others are dependent on water indirectly through their suppliers and customers. Water also is crucial to public safety. This has not only the obvious ramifications for businesses in the case of actual fires, but also the more widespread forced closing of high-rise office buildings, and hence many business operations, as a precautionary measure when sprinkler systems cannot be served and ordinary fire equipment would be ineffective because of its height access limit. Estimation of economic impacts of utility lifeline disruptions has become more prevalent in recent years, though most of the literature has focused on electricity outages. Moreover, none of these analyses except Rose and Liao (2005) have factored in economic resilience, or the ability to mute the maximum impacts through inherent and adaptive responses at the level of the firm, industry or regional economy. Failure to consider resilience could lead to a gross overestimation of water outage risk (potential losses multiplied by the probability of occurrence). Mitigation, or the prevention of the occurrence of the threat, is typically the focus of risk reduction, but enhancing resilience may be a far less expensive alternative. The purpose of this chapter is to estimate the direct and indirect economic impacts of an extended water service outage caused...

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