The Economics of Safety and Security

One of the most horrifying comments through the entire Japanese mega-catastrophe was that by CNBC anchor Larry Kudlow, as reported in a March 20, 2011 New York Times article by Jeff Sommer with the title: “A Crisis That Markets Can’t Grasp – As Japan’s Disaster Evolves, Wall Street Keeps Recalculating.” Kudlow said, and then apologized for the following statement: “The human toll here looks to be much worse than the economic toll, and we can be grateful for that.”

While unfeeling and unforgiveable, Kudlow’s comment reflects an issue that has generally plagued safety and security economics, namely, attaching an economic value to human injury, suffering and loss of life. One of the main reasons that it seemed so much simpler to justify expenditures on safety systems (though the Fukushima Dai-ichi nuclear power plant may be the exception that proves the rule) is that the value of a human life is usually considered to be so much greater than mere economic loss, despite the views of the Larry Kudlows of this world.

The fiasco in response to the Fukushima “accident” is perhaps best illustrated by an article on the front page of the March 19-20, 2011 WSJ Weekend section with the title “Bid to ‘Protect Assets’ Slowed Reactor Fight.” The article, by Northiko Shirouzu, Phred Dvorak, Yuka Hayashi and Andrew Morse, begins with the following:

“Crucial efforts to tame Japan’s crippled nuclear plant were delayed by concerns over damaging valuable power assets and by initial passivity on the part of the government …”

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