Edited by Harry W Richardson, Peter Gordon and James E. Moore II
Chapter 15: Regional Economic Impacts of a Terrorist Attack on the Water System of Los Angeles: A Computable General Disequilibrium Analysis
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 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...
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