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Management lessons from hurricanes Harvey and Irma

It is difficult to not be moved by the plight of so many Americans who have been adversely impacted by hurricanes Harvey and Irma. In this regard, television pictures of uprooted trees, destroyed homes and boats where there ought to be motor vehicles have left an indelible imprint in the minds of most of us. Now, as the affected areas begin the long process of recovery, it is instructive to ponder the lessons we can learn from the devastation caused by Harvey and Irma.

A key insight from the interdisciplinary field of ecological economics is that when we think about the management of a whole host of ecological-economic systems including but not limited to agriculture, fisheries, forests, and rangelands, our focus ought not to be on an equilibrium of the underlying system, because such systems generally are not in equilibrium. Instead, we ought to concentrate on the ability of a system to absorb both human induced and natural shocks and yet retain its basic character. This ability is known as Holling resilience, so named after the zoologist C.S. Holling who first discussed its salience.

A lot of research now shows that the world we live in is typically not in balance or in equilibrium. Therefore, in the face of natural shocks such as hurricanes Harvey and Irma, what is significant is our ability to withstand and adapt to unforeseen contingencies. In order to enhance this ability, we need to manage for resilience. In other words, we need to take steps to ensure that systems affected by natural and other kinds of shocks are resilient. Managing for resilience can be thought of as a general conceptual approach, but in the context of natural shocks such as hurricanes Harvey and Irma, three aspects of this approach are worth highlighting.

First, we need to stop building and rebuilding in locations that we know are flood prone. The basic problem here is a mismatch in the incentives facing two groups of people. Local governments set zoning laws and collect property taxes and local developers profit from property sales. Therefore, all else being equal, this group has an incentive to build. However, when a natural disaster such as a flood strikes, this group typically bears little or no responsibility for either the cleanup or the subsequent rebuilding. A second group, that is, taxpayers, pick up the tab through state and federal disaster assistance programs. This undesirable state of affairs can be altered by, for instance, the federal government committing to not provide disaster assistance to localities that repeatedly build or encourage building in flood prone locations.

Second, it is essential for the authorities to require that residents in flood prone areas purchase flood insurance. The economist Paul Ferraro has noted that only about one in ten homes in Harris County (where Houston is located) had flood insurance. This problem is more general. In many flood prone areas in the United States, people lack the requisite flood insurance even though, somewhat strangely, they are insured against fire which is a much lower risk. Clearly, the resilience of a flood prone location will not be increased by permitting residents to eschew flood insurance and then, in the aftermath of a flood, providing them with grants to rebuild damaged homes.

Third, and perhaps most significantly, it is high time for governments at all levels to face the science concerning climate change. While it is true that one cannot attribute the occurrence of a single natural shock such as a hurricane to climate change, there is no gainsaying the fact that our planet is warming and that this warming is, in no small measure, due to human factors. To manage effectively for resilience, we need to comprehend that in the future, extreme weather events are likely to be more frequent and destructive in ways that are not always predictable.

In sum and using the language of the former defense secretary Don Rumsfeld, a basic strength of the managing for resilience perspective is that it recognizes and emphasizes the trinity of “known knowns” (what we know we know), “known unknowns” (what we know we don’t know), and “unknown unknowns” ( what we don’t know that we don’t know).

Batabyal is the Arthur J. Gosnell professor of economics at the Rochester Institute of Technology, but these views are his own.

(c) 2017 Rochester Business Journal. To obtain permission to reprint this article, call 585-363-7269 or email madams@bridgetowermedia.com.

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