Dr. Joost Santos has been a fan of Benjamin Franklin’s aphorism “An ounce of prevention is worth a pound of cure” since he first heard it in grade school. In a sense, that maxim sums up his latest study, a cost-benefit analysis of disaster mitigation grants that he conducted for the National Institute of Building Sciences (NIBS).
Dr. Santos studies disaster risk management, developing hybrid models from the fields of systems engineering and economics to learn how to predict the ripple effects of disasters across interdependent infrastructure and economic systems. His models combine optimization and probabilistic risk analysis techniques from systems engineering with the Leontief economic input-out model to try to answer a variety of questions, such as how to minimize production disruptions in the aftermath of disasters or how to allocate emergency responders across highway networks following a disaster.
“The novelty of the extended Leontief model is its ability to predict and forecast how failures in one system can cascade to other systems due to their interdependencies,” remarks Dr. Santos. “If we are able to better understand that, then we’ll be able to better assess and manage the dire consequences of a disaster.”
For example, when a hurricane sweeps through an area and causes widespread flooding or the failure of the electric power system, there will be cascading effects to the economy because some of the affected work sites may be manufacturing plants that have to be shut down. The resulting cessation in output automatically will create failures in other systems.
Dr. Santos’ recently completed project for NIBS estimated the benefit-to-cost ratio of grants from FEMA, the U.S. Economic Development Administration, and the U.S. Department of Housing and Urban Development in mitigating the consequences of disasters. He and his colleagues from SPA Risk, the University of North Texas, the University of Colorado-Boulder, Indiana University-Purdue University Polis Center, and Imagecat collected 23 years of data on grants the three agencies provided to mitigate floods, hurricanes, earthquakes, and fires. The researchers also looked at international building codes (I-Codes) for non-residential buildings, combined the FEMA data with the I-Codes, and computed a 6:1 benefit-to-cost ratio for mitigation funding: every one dollar investment toward exceeding the I-Codes will save the U.S. six dollars in future disaster costs.
Putting this result in perspective, Dr. Santos explains, “The ratio is quite significant, because it’s a multiplier of six. If we’re talking about Hurricane Katrina, for example, business interruption losses alone were estimated to be $45 billion. Investing $7.5 billion before Hurricane Katrina would have wiped out those losses.”
This study was particularly satisfying to Dr. Santos because of its potential impact on policy. “I appreciate how output from my research is directly contributing to policy,” he says. “Those ratios are a big deal, because Congress uses them in making budgetary decisions on future disaster risk management investments. We expect this study to receive a lot of attention.”