A Commentary on “Recovery from Catastrophe and Building Back Better (Takeuchi and Tanaka, 2016)” – Structure of Damage of Production Capital Stock on Normative Economic Process
Disaster Prevention Research Institute, Kyoto University
Gokasho, Uji, Kyoto 611-0011, Japan
In the field of disaster prevention, disaster loss is often classified into “direct loss” and “indirect loss.” As such, “total loss” is often calculated as a sum of “direct loss” and “indirect loss,” where “direct loss” is defined as a “loss of capital (assets) as a stock” and “indirect loss” is defined as “loss arising out of decline in postdisaster production as a flow.” However, the loss here is calculated twice. The calculation is incorrect if “indirect loss” refers to, in particular, the lost profit of a firm that has lost a production facility that is considered as a stock. The reason is that the “value of capital stock” is nothing but the present value of a product that the stock will produce in the future. Therefore, an “indirect loss” defined in the above manner corresponds to a decrease in stock value. Using a dynamic economic model, this article provides a basic structure, “value of loss in capital stock lost by a disaster” = “total decline of production after a disaster.” This article also presents a relational expression in consideration of the restoration cost of a production facility, and concludes that a more multifaceted and functional damage information system needs to be developed in the future.
-  K. Takeuchi and S. Tanaka, “Recovery from Catastrophe and Building Back Better,” J. Disaster Res., Vol.11, No.6, 2016.
-  O. J. Blanchard and S. Fisher, “Lectures on Macroeconomics,” MIT Press, 1989.
-  K. Nomura, “Measurement of Capital and Productivity in Japan,” Keio University Press, 2004 (in Japanese).
-  M. Yokomatsu, K. Kobayashi, and R. Ejiri, “Formulating an Infrastructure Accounting System,” The Management and Measurement of Infrastructure, Chapter 14, pp. 301-328, Edward Elgar, 2007.
This article is published under a Creative Commons Attribution-NoDerivatives 4.0 Internationa License.