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JDR Vol.13 No.3 pp. 564-570
doi: 10.20965/jdr.2018.p0564
(2018)

Discussion:

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

Muneta Yokomatsu

Disaster Prevention Research Institute, Kyoto University
Gokasho, Uji, Kyoto 611-0011, Japan

Received:
May 31, 2017
Accepted:
March 9, 2018
Published:
June 1, 2018
Keywords:
production capital, direct damage, indirect damage, shadow price, dynamic economic model
Abstract

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.

References
  1. [1] K. Takeuchi and S. Tanaka, “Recovery from Catastrophe and Building Back Better,” J. Disaster Res., Vol.11, No.6, 2016.
  2. [2] O. J. Blanchard and S. Fisher, “Lectures on Macroeconomics,” MIT Press, 1989.
  3. [3] K. Nomura, “Measurement of Capital and Productivity in Japan,” Keio University Press, 2004 (in Japanese).
  4. [4] 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.
Cite this article as:
Muneta Yokomatsu, “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,” J. Disaster Res., Vol.13, No.3, pp. 564-570, 2018
Muneta Yokomatsu, J. Disaster Res., Vol.13, No.3, pp. 564-570, 2018

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Last updated on Jun. 19, 2018