Asymmetrical Information - Megan McArdle
10.26.12 4:50 PM ET
How Much Will the Frankenstorm Cost?
"Frankenstorm", as it's now been dubbed, is being compared, unfavorably, to the infamous 1938 "Long Island Express" hurricane that did $620 million worth of damage--in 1938 dollars. In today's inflation adjusted dollars, that's over $10 billion.
But if the storm is actually as bad as people are suggesting it might be, then it will probably do much, much more damage than that. No, not because global warming is generating superstorms. The reason is much simpler that that: there's more stuff in the way, especially beachfront property. Hurricanes hitting the gulf coast can do fantastic amounts of damage, but the area is sparsely populated compared to the northeast corridor.
Hurricane Irene, which was pretty uneventful as hurricanes go, did $7 billion worth of damage a few years ago. A really bad storm, in an area that's not used to having hurricanes, could do a multiple of that.
And this storm seems to have the potential to be really bad. Jim Cantore of the Weather Channel calls it "unbelievable", and the rest of his tweet certainly sounds bad, though I have no idea what all the meteorological data means. New York City is posting an evacuation map. The lines have already formed at the grocery store, and the tree services are booked solid through Tuesday. The major cities on the East Coast now have a 40-50% probability of experiencing tropical-storm-force winds. If you live in the Northeast, and you haven't already, now would be a very good time to make sure that homeowner's insurance is up to date.
This is the downside of density: when something goes wrong, it happens to a lot more people. To be sure, density also allows you to harden against a storm--for example, by burying all your utility lines--in a way that's hard in rural areas. But as America's coastal cities get more and more populous, we can expect storms to get more and more expensive.
Global warming probably won't help, either. Hope that's very good homeowner's insurance.
And now if you'll excuse me, I think I'd better get to the grocery store.