Economics‎ > ‎

Economic consequences of a major earthquake in Los Angeles

posted May 31, 2013, 8:43 PM by Simon Nguyen   [ updated May 31, 2013, 8:44 PM ]
Los Angeles is among the most earthquake-prone cities in the world. Earthquakes, though mostly small in magnitude, are daily occurrences in the city and its surrounding areas. The biggest earthquake ever recorded in Greater Los Angeles is the 1994 Northridge Earthquake. Till this day, the event remains one of the costliest natural disasters in U.S. history. What would be the economic consequences of the next major earthquake in the Los Angeles area?

Since the deadly quake, residents of Los Angeles have been on the lookout for the next earthquake of significant magnitude to strike the area. With the current L.A. population at a record high, a major seismic event in the area will certainly be catastrophic.

Not all earthquakes are equal, however, and magnitude is only part of the reason. Case in point, the 1952 Kamchatka earthquake was measured at 9.0 on the Richter scale but only caused some significant structural damages. On the other hand, the 2010 Haiti earthquake (with a magnitude of 7.0) caused massive damages and loss of lives. Population density and location appear to be better determinants of impact than seismic magnitude. The key difference between Kamchatka (Russia) and Haiti is that the former is sparsely populated, while the latter is one of the world’s most densely populated areas.

As Los Angeles is one of the densely populated metropolitan regions in the U.S., the impact of a major earthquake striking the area will likely resemble that of Haiti. Since California probably has the strictest building code in the world, structural damages and the human toll will be considerably less. Yet, the scale of destruction will certainly be many times greater than Hurricane Katrina which is currently the costliest and deadliest natural disaster in U.S. history.

While structural damages from a possible Los Angeles earthquake might be considerably less than the Haitian earthquake, the costs associated with it are likely to be much greater. Los Angeles is home to numerous top U.S. corporations and institutions; the L.A. region is unquestionably a key world economic center. A major seismic event in the area will severely disrupt business operations of many key industries, and put momentous strains on the world’s biggest economy. Quite frankly, the overall cost could easily be in the hundreds of billions or even in the trillions of dollars depending on the quake’s magnitude.

The human toll of a possible major earthquake is likely to be substantial as well. The Greater Los Angeles area is among the most populous in the world. In point of fact, the region has almost 2 times more people than the whole Haitian population. Imagine a 9.0 earthquake striking the megacity during rush hour and in high winds. There is no question the loss of lives will be colossal.

Finally, new California’s building codes in effect as a response to previous major earthquakes are mostly non-retroactive. There are still many old buildings and homes in the area that may not survive another strong seismic event. Consequently, the possible human toll could be much higher than most estimates.