- The Big Picture - http://www.ritholtz.com/blog - The Welfare
Costs of Superstorm Sandy Posted By Guest Author On December 21,
2012 @ 6:00 am In Think Tank | Comments Disabled Tallying the
physical damage takes time, but it can be measured fairly
accurately. Assessing a shortfall in economic activity, although
a bit tricky to estimate, is also fairly straightforward,
conceptually. Measuring welfare (or “utility ”) is a concept
often discussed among economists—which makes it all the more
ironic that it’s often overlooked in the aftermath of disasters.
Part of the reason economists do not address these costs is that
they’re difficult to measure in terms of dollars. So how exactly
should we think about welfare in this context? Let’s start with
an illustration of something tangible—a family childhood
scrapbook. The accounting cost or “market value” of such a
memento may be modest, say $10. But the value to its owner would
likely be much higher…if it were lost in a flood and its owner
would be willing to pay $500