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Adapting to Urban Terror Risk vs. Urban Climate Change Risk

Saturday, March 25, 2017 11:44
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(Before It's News)

The NY Times has published a touching piece about London in the aftermath of the recent terror attack.  Several years ago, I published a piece that contrasts adaptation to terror risk versus climate change risk.  I think it is useful to restate my key points (here is an unpublished draft).

1.  The rational terrorist chooses a set of targets such that there is no predictable pattern of the attacks. In the language of time series statistics, there is no serial correlation in the attack targets. If you hijack airplanes on 9/11/01 then you hit another target at a later date.  Why?   The victim is likely to over invest and to make airports (post 9/11) too safe.  This investment costs time and $ and also leaves other alternative targets more vulnerable.   True terror is created by popping up in unexpected places.

2.  In the case of climate change,  there is a serial correlation to shocks.  The same geographic areas are hit with similar shocks over and over.  This predictability creates both learning and allows firms and households to update their evolving beliefs about these risks.  I will be talking about this at Brookings on Monday.

The spatial predictability of climate shocks make them more easy to adapt to then the “random” terror shocks.  You can think about the strategic game that the victims play against the terrorists versus against Mother Nature. In the former case, the terrorists are aware that surprise greatly helps their cause. Since Mother Nature is not a strategic opponent, she just strikes without thinking through how to cause real harm.  This predictability allows forward looking households and investors to plan accordingly and this investment under uncertainty helps us to adapt.


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