Money

By James Kwak
I was browsing for Christmas presents and came across a brilliant xkcd cartoon, “Money.” (Click on it to zoom in.) It includes all sorts of fun bits like this (this is just a small excerpt; you can buy a poster-size version of the whole thing):

But this was actually my favorite part:

I’ve written elsewhere about the government’s role in collecting hurricane data (including flying planes into hurricanes) and plotting their course and intensity. I think this is one of those things that we just assume the government should do—protect us from hurricanes—yet we conveniently forget about when we talk about evil big government spending.
The source for that data is a blog post by Jeff Masters, co-founder of the Weather Underground (and a former Hurricane Hunters pilot). In short, because of improvements in the way the National Hurricane Center forecasts hurricane paths, the NHC can issue much tighter forecasts than twenty years ago. In the case of Hurricane Irene (the one that hit the East Coast in late August), that meant that seven hundred miles of coastline in the Southeast (Florida, Georgia, and South Carolina) did not get official hurricane warnings; twenty years earlier, because the models weren’t as good, they would have gotten warnings. Masters cites an estimate that over-warning costs $1 million per mile of coastline, for a total savings of $700 million from one storm.
The $1 million per mile estimate is hard to pin down. The paper Masters cites is John C. Whitehead, “One Million Dollars Per Mile? The Opportunity Costs of Hurricane Evacuation,” Ocean & Coastal Management 46 (2003): 1069–83. But although Whitehead calls the $1 million per mile estimate “over-quoted,” he actually argues that it is too high.* Still, he estimates that a mandatory evacuation order for a category 3 hurricane (which I believe Irene was when it hit North Carolina) would generate $32 million in evacuation costs, in 1998 dollars, and a voluntary evacuation would cost $6 million (Table 9, p. 1080). Given the greater length of the Florida coastline, its much higher population density (see map below, which I grabbed from here), population growth since 2003, and inflation since 1998, it’s highly likely that the cost savings from avoiding over-warning run well into the tens if not hundreds of millions of dollars, even assuming just a voluntary evacuation. Whitehead’s estimate also excludes lost wages and presumably lost economic output (p. 1079); this is reasonable for his estimate of evacuation costs, but those costs should be included if you’re estimating the total costs of over-warning, not just the cost of evacuation. Including those potential costs makes the total cost savings even higher.

So when you pay your taxes, that’s one of the things you’re getting.
(I guess some libertarian will argue that this is an unjustified subsidy to people who live along hurricane-prone coasts. To which I would say that people value living on those coasts, and the incremental value they derive from living in Miami as opposed to, say, Oklahoma City, is probably far higher than the $20 million per year spent on hurricane forecasting research. This is different from the subsidy for federal flood insurance because, in that case, you could simply extract part of that incremental value by pricing the insurance appropriately; since hurricane forecasting ability is a public good, it would be harder to force people living on the coast to pay for it.)
* As an aside, I’m not sure that the $1 million per mile is “over-quoted” to begin with. Whitehead’s source is a personal communication. When you Google “‘one million dollars per mile’ hurricane,” mainly you get a lot of references to Whitehead’s paper. But it could just be that Whitehead’s paper swamped previous references to the rule-of-thumb estimate (which would indicate that it wasn’t that widespread an estimate to begin with).