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CHAPTER 3

Prevention by Individuals

his chapter examines how people choose prevention measures individually, and the next chapter, collectively. It begins with a simple analytical framework to

understand how much prevention individuals choose to undertake, how much insurance to purchase, and how much residual risk to bear. It then concentrates on whether individuals undertake enough prevention. People are guided by information—much of it embedded in prices—and limited by

their budgets: they undertake prevention up to the point when the expected benefits (avoiding losses) exceed the measures’ costs. Yet people differ, and their choices are not identical even when confronted with similar budget constraints. Some choices reflect distorted prices and others inadequate knowledge of the hazards or newer technologies of prevention. Individuals also differ in their risk aversion. Many live in exposed areas known to be hazardous—whether in poverty in Bangladesh or in affluence along the Florida coast. Observing this, some conclude that people are fatalistic or myopic. Recent findings that people misperceive risks lend credence to the view that people do not always act in their own interests, but there are also more prosaic explanations. A detailed empirical study finds that property values in Bogota, Colombia, reflect

hazard risks after correcting for proximity to work and access to such conveniences as public transport. This is consistent with risk being perceived correctly and suggests people make informed choices—even if some seem harsh when people live in riskier locations. But structures that are safe could, with sufficient care and expense, be built in risky areas (on hillslopes, in seismic areas). But when a person’s ownership of property is not secure, the possibility of eviction or demolition erodes the incentive to invest in safe structures. Of 1.2 million land titles distributed in 1996 Peru, land titling is associated with a 68 percent increase in housing renovation within four years (Field 2005). Insecurity of land holdings is not the only thing that erodes incentives to build well:

rent controls or other similar regulations diminish a landlord’s incentive to maintain buildings. Neglected buildings collapse in earthquakes and severe storms kill occupants. The harmful effects of such controls and distorting taxes (such as stamp duties on transactions) accumulate over decades. They have led to poor land use and building size and location (decaying industries on land that could be put to better use). They have also contributed to a housing shortage, leaving the poor to live in unsafe shanty towns that mushroom in and around prospering cities. And they have starved

The, World Bank, Bank World, and Nations (UN) United. Natural Hazards, UnNatural Disasters, edited by World Bank The, et al., World Bank Publications, 2010. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/apus/detail.action?docID=606027. Created from apus on 2017-04-04 13:23:23.

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cities of tax revenues, so the needed infrastructure is not built, or is built on the cheap.

Prevention, insurance, and coping: A simple framework Ehrlich and Becker (1972) explain how a person chooses how much risk to bear and how to reduce it given the choices they have (De Ferranti and others 2000; Gill, Packard, and Yermo 2005; Baeza and Packard 2006). The person (or family) can take prevention measures (“self-protection” in their paper) that reduce the loss from a hazard (living on an upper floor or building on a higher plinth to avoid losses from a flood), and buy insurance that compensates for losses when they occur. They also distinguish self-insurance, when the person hopes to be able to absorb a loss, from market insurance, which pays a specified sum when the event occurs. Prevention entails measures that have a cost, and insurance entails a premium, and a person chooses the level and combination that best moderates consumption fluctuations. Everyone makes such choices every day in many settings, and each person may

choose differently. Some buy a costlier car built to reduce the risk of a fatal accident, others a cheaper flimsy car—and insurance. Similarly, some farmers self-insure by planting different crops in dispersed plots, sacrificing some yield by doing so. Informal arrangements (reciprocity with neighbors) reduce the losses from a broken leg or the death of an ox, but they cannot fully handle the risk of a disaster that simultaneously affects the entire local community. Market insurance helps in such cases because it extends beyond the local community. When prevention is “excessively” costly, insurance allows people to make transfers in specified “states of the world” (e.g. if an earthquake occurs). Put differently, people generally choose the desired amount of prevention given

their income—but a few may spend excessively to avoid all risks, and others too little. Taking risks implies that they will occasionally have adverse outcomes and must “cope” with them. Table 3.1 summarizes how people prevent, insure, and cope as individuals, communities, and through governments (coping collectively is “relief and recovery”).

Table 3.1 Individuals and governments prevent, insure, and cope with disasters

Measure Individuals/household Community Government and international organizations

Prevention

• Owning multiple assets and with many sources of income;

• Investments to protect and maintain assets (timely repairs);

• Relocating to safer areas as a group;

• Community-training programs;

• Local public goods and services (community-based information systems, small-scale irrigation and infrastructure projects).

• Good analysis and a system to convey information about risk (disaster risk profiles, raising public awareness, early warning systems);

• Public works;

• Well specified and enforced property rights and, by extension, predictable policies and political

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• Permanent migration.

systems.

Self- insurance

• Owning both financial and nonfinancial assets (livestock, stored grain, durables).

• Local borrowing and savings schemes;

• Rotating access to common property resources.

• Facilitating markets for different assets, including household goods;

• Ready access to prevailing market prices;

• Adequate physical and social infrastructure.

Market insurance

• Property and catastrophe insurance;

• Agricultural insurance.

• Microfinance (semi-formal); • Savings and credit associations;

• Cereal and grain banks.

• Sovereign budget insurance and catastrophe bonds.

Coping (relief and recovery)

• Temporal migration intensification or expansion of household labour;

• Draw on stocks of social capital (credit, food, charity/begging);

• Running down stocks of human and physical capital;

• Reducing or minimizing household expenditures.

• Rotating savings and credit associations (ROSCAs);

• Inter-household transfers and private remittances;

• Public employment guarantee schemes.

• Safety nets (cash transfers and public works);

• Social investment projects (social funds);

• Disaster aid funds or food donor assistance (contingent loans).

Source: World Bank staff, based on Gill and Ilahi 2000.

Prevention: Do individuals do enough? This section takes two approaches, both limited, to attempt to answer the question. The first examines the financial merits of specific prevention measures, and whether they are “widely” undertaken. The second approach examines whether observed market prices reflect known risks: if they do, one is more confident that people act appropriately in their self-interest. A study commissioned for the report examined the costs and benefits of specific

retrofitting measures that homeowners could take against different natural disasters in hazard-prone areas of four low- and middle-income countries (box 3.1) (IIASA/RMS/Wharton 2009). Figure 3.1 shows benefit-cost ratios for the four examples using assumed (but

reasonably typical) costs: elevating a house with mixed wall, concrete floor, and The, World Bank, Bank World, and Nations (UN) United. Natural Hazards, UnNatural Disasters, edited by World Bank The, et al., World Bank Publications, 2010. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/apus/detail.action?docID=606027. Created from apus on 2017-04-04 13:23:23.

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asbestos roof by one meter in Jakarta; protecting windows and doors in a wood frame house in Canaries, St. Lucia; retrofitting a five-story building to increase quake resiliency in Istanbul; and flood-proofing a brick house by building with new brick on a raised plinth in the Rohini Basin, Uttar Pradesh, India. The benefit-cost ratio is shown for a range of assumed discount rates (0–15 percent) and different expected durations of the structure (1, 5, 10, and 25 years). Prevention seems cost-effective for the above measures in all four cases if the structure lasts 10 years or more.1 For shorter time periods, cost effectiveness depends on the discount rate (for high discount rates, the benefit-cost ratio is less than one for some of these measures, implying that prevention is not financially viable). Are people undertaking such prevention? Some do, others do not. A survey of 254

adults from five locales in Istanbul after Turkey’s 1999 earthquake on risk perceptions and attitudes towards prevention found that while people were aware of the risk, only a fifth of respondents said they had taken some preventive action: 13 percent inside the home and 9 percent for the building (Fis¸ek and others 2002). Only about half those who had taken no action invoked high costs (a possible proxy for a tight budget constraint) as a reason for inaction.2 Such seemingly inconsistent behavior warrants an explanation, and many are turning to the recent findings of behavioral economics.

A walk on the behavioral side

Traditional economists explain peoples’ choices invoking prices and incomes, rarely questioning whether people choose wisely. A growing body of work in cognitive psychology lends credence to these doubts. These disciplines have come together as behavioral economics, and its findings have important implications for how we view risk. Kahneman and Tversky (1979) pioneered this field, and the biases that they and

others have since found go by different labels. Rabin (1998, 2002) surveys this vast and growing literature and lists several systematic biases. People have a loss aversion bias: they care more about the costs of undertaking some action (could be retrofitting or buying insurance) than about its gains, even if these are equal-sized. Ricciardi (2007) surveys the behavioral finance literature, which finds the average investor perceives the pain of a loss twice as much as the pleasure from an equivalent gain. This loss aversion bias is related to the status quo bias: people prefer things as they are to changes that involve losses of some goods, even if these losses are more than fully compensated. It is less clear how such biases translate into prevention measures. Is paying for prevention the immediate loss (in which case there may be insufficient prevention), or is the expected damage the loss that weighs on people (in which case prevention measures would be undertaken)?

Box 3.1 Evaluating the costs and benefits of structural mitigation measures The commonly used metric for measuring the hazard risk of an asset or portfolio of assets is the exceedance

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probability (EP) curve. An EP curve indicates the probability that a given loss will occur in a given year. Most risk models involve four main modules:

A hazard module characterizes the hazard in a probabilistic manner. Often the events that can impact the risk are described—estimating location, magnitude, and associated annual probability among other characteristics. An exposure module describes a structure or multiple structures that may be damaged. Key characteristics that describe a structure’s susceptibility to damage are defined. A vulnerability module estimates the damage to the exposure at risk, given the magnitude of the hazard. A financial loss module draws on these first three modules to create loss estimates that have a given probability of exceedance.

Based on these modules, an EP curve can be constructed as depicted in the figure below, where the likelihood that losses will exceed Li is given by Pi. The x-axis shows the magnitude of the loss (for example, in dollars) and the y-axis shows the probability that annual losses will exceed this level (Grossi and Kunreuther 2005, Hochrainer 2006).

Box figure 3.1. Example of an exceedance probability (EP) curve

For each case study, relevant measures were selected for reducing losses from the disaster. EP curves were constructed for a representative house or houses with and without the preventive measure in place. Benefits were quantified through reductions in the gross average annual loss (area under the EP curve) after preventive measures are applied to a structure and discounted over the relevant time horizon. Cost estimates of each preventive measure were derived from various sources. Combining these estimates, benefit-cost ratios were calculated.3 Measures are effective when the benefit-cost ratios exceed one.

Source: IIASA/RMS/Wharton 2009.

Figure 3.1 Private preventive measures pay

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Note: The figure refers to the following examples: elevating a house with mixed wall, concrete floor, and asbestos roof by one meter in Jakarta; protecting windows and doors in a wood frame house in Canaries, St. Lucia; retrofitting a five-story building to increase quake resiliency in Istanbul; and flood-proofing a brick house by building with new brick on a raised plinth in India. Source: IIASA/RMS/Wharton 2009.

Experiments also find that people attach greater value to something they already own (“endowment effect”) than they did before having it—even when selling or buying involves no transaction cost. Kahneman, Knetsch, and Thaler (1990) gave mugs worth $5 each to a group of students, and offered to buy them back. Students exchanged their mugs for almost twice what another (statistically identical) group not given the mugs bid for them ($7 vs. $3.50). People seem to prefer what they already possess, and this endowment effect appears in many settings. It suggests inertia or the psychological cost of change: new efforts at prevention are less likely than protective measures already in place, but it does not say whether existing measures are sufficient. Kahneman and Tversky have also exposed systematic misperceptions of

probabilities and risks: people overestimate low probability events and underestimate large probability events. This would imply that Turks may overestimate earthquake risks and, if these translate into action, would overprotect their properties while Bangladeshis would underestimate the risk of floods and under protect their homes and assets.

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But the biases are not consistently related to the frequency of events: people underestimate the risks they have not experienced and overestimate those that they have. Those who have driven without incident have a lower perception of the risk of an automobile accident than those who had a recent accident. Similarly, the perceptions of risk rise after an earthquake, an infrequent event, and people take more precautions (Jackson 1981). The perceived risk of an airplane crash or a terrorist attack is especially high after one has occurred, and hearing about an event raises risk perceptions less than experiencing it. Hung, Shaw, and Kobayashi (2007) found that those living outside the river dyke in Hanoi who experienced the catastrophic floods of 1971 expected future floods more than others. People are misled by how questions are phrased in a survey or how information is

presented, so “framing” matters. In the classic “Asian disease” experiment, people were asked to choose between two undesirable options to counteract a disease threatening 600 people. Tversky and Kahneman (1981) showed how people chose different alternatives, even though the choices had the same consequences, depending on how the outcomes were described (saving people or people dying). Yamagishi (1997) found that people generally think a disease to be less dangerous when fatalities are conveyed as percentage probabilities (12.86 percent) than as proportions or fractions (1,286 out of 10,000). Keller, Siegrist, and Gutscher (2006) found that psychology students in the University of Zurich perceived a higher threat of flood when flood was presented as a 40-year risk (with 33 percent probability of flood) as opposed to an annual risk (with 1 percent probability of flood). A survey conducted in the United States in 2006 finds that most respondents

assess their risks as “below average” (Viscusi and Zeckhauser 2006). Those in riskier areas who experienced disasters estimate their risks to be higher, but not as high as they should statistically. Put differently, these people appeared to underestimate their risks even though the survey was conducted when the World Trade Center attacks and Hurricane Katrina were neither fresh nor forgotten.

More prosaic explanations

Behavioral economics is interesting, especially the research under way. But should policies change when we know that answers to a survey depend on how the question is phrased and how behavior in experimental settings is inconsistent? Behavioral economics finds biases in both directions. Did Istanbul’s current residents experience the 1999 Marmara earthquake (in which case they overestimate the likelihood of an earthquake) or hear about it (in which case they underestimate the odds)? And if any bias depends on distance, would perceptions cross international boundaries into neighboring Greece? There are at least three more prosaic explanations for why people may take fewer

prevention measures than others think they should. First, people without security of ownership (this includes renters) will be reluctant to incur the expense of prevention—

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even if they know the benefits—because they would not benefit if evicted. Insecure ownership is widespread, and the country spotlight on Turkey illustrates the prevalence of buildings without permits, often on land to which they do not have clear title. Similarly, landlords would not incur the expense if rents were controlled or rent increases were restricted (as with laws that limit rent escalation in a lease). Second, if retrofitting capacity were limited, perhaps because only a few have the

resources, skills, or special equipment necessary, it would take several years to retrofit the existing stock of buildings—even if retrofitting were cost-effective. A survey like that of post-quake Istanbul cited earlier would find that only a fraction of the buildings were retrofitted. But it is difficult to infer myopia from a snapshot, and subsequent surveys may find an increase in retrofitted buildings. Third, even if retrofitting were cost-effective now, there is an “option value” to

waiting if retrofitting technology itself changes rapidly and costs are expected to decline. Even if the financial returns to retrofitting were high, the returns from postponing the retrofit may be greater still because lower cost technology may soon be available. Under these circumstances, owners who do not retrofit are being far- sighted, not myopic (though tenants would live with the risk of postponing the retrofit). It would be inappropriate to make “policy recommendations” based on such

ambiguous evidence: more searching studies are needed to know whether people systematically ignore risks and why people appear to neglect prevention.

Prices reflect hazard risks when land and real estate markets work If property values reflect hazard risks correctly, people can make informed choices based on prices that guide their decisions on where to live and what prevention measures to undertake. To examine empirically whether property values indeed reflect such risks, one must correct for other desirable qualities (location, view, and other amenities) that also influence property prices. Moreover, unlike stocks (equities) that trade frequently on a centralized exchange, every house and building is unique and trades infrequently. Even when property changes hands, the recorded price may not be accurate if there are taxes or other adverse consequences. And even if prices were recorded accurately, houses that trade in consecutive periods may differ considerably in size, quality, and location. So it is difficult to construct price indices without making some assumptions. Consequently, the price indices may appear to change sluggishly even if the prices (bid and ask) respond quickly to information and to changing market conditions, and econometric techniques must respect these limits of the data. Even so, many studies find that property prices reflect the risk of hazards. Istanbul property values in 2000 were lower near the fault lines in the Sea of

Marmara than those farther away (Onder, Dokmeci, and Keskin 2004). In contrast, proximity to the fault line did not matter for 1995 property value data. The 1999

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earthquake may have made people aware of earthquake risks, so more recent property prices reflect this. But as the Turkey Spotlight shows, there have been many quakes through history, and a more likely explanation is that after the 1999 earthquake, many fault lines were newly identified and publicized. Similarly in the United States, flood zone disclosure is mandatory in some areas of

North Carolina, so buyers are aware of flood risk before buying a property. Using a hedonic property price model, Bin, Landry, and Meyer (2009) find that the property market reflects geographic differentials in flood risk, reducing property values on average by 7.3 percent. The market capitalizes risk as flood insurance premia equal the discount in property values. Bin and Polasky (2004) examine the effect of Hurricane Floyd on property values in North Carolina (September 1999, affecting 2 million people and causing $6 billion in property damage). Few properties were insured before the hurricane, and the prices of houses in the floodplain fell between 4 and 12 percent. This decline was more than the capitalized insurance premia, suggesting that home owners bore costs that exceeded the insured value. (The reduction of the property values on average was $7,460 and the increase in premia for flood insurance was $6,880.) A background paper for this report examines whether property prices reflect

seismic risks in Bogota, Colombia (Lall and Deichmann 2009). Hedonic models allow measurement of the extent to which land and house prices capitalize the attractions like size, views, and amenities (Lancaster 1966; Rosen 1974), and this technique could also capture the effect of disaster risks. Some 800,000 buildings in Bogota that differed in their exposure to seismic risk were matched on a range of characteristics (such as size, construction quality, distance from the city center, and whether residential, commercial, or industrial).4 This technique implies that the only difference among comparable properties is their level of hazard risk. This allows us to assess whether property values are lower in riskier areas, and if they are, that suggests capitalizing disamenities from hazard risk.

Figure 3.2 Property prices for comparable properties are higher in locations farther from earthquake risk in Bogota

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Source: Lall and Deichman 2009.

Property values per unit of construction were compared in the 10 most seismically risky neighborhoods, grouped by distance from the riskiest area (Figure 3.2). Properties in areas adjoining the riskiest neighborhoods are valued 13,434 pesos higher than in the riskiest area, with the price difference increasing with distance: 28,265 pesos for the second quintile and 124,533 pesos for the farthest quintile of neighborhoods. So, land and property values reflect seismic risks in a poor country, a remarkable

finding that casts doubt over assertions that people are myopic and ignore hazard risks. Office rents also reflect hazard risks. Gomez-Ibañez and Ruiz Nuñez (2007)

gathered data on office rents in the central business district of 155 cities around the world in 2005, along with information that could affect rentals such as construction wage rates, steel and cement prices, metropolitan populations, and incomes. These data were linked to that on disasters hotspots to see whether office rents are sensitive to disaster risks. Rents are lower (by 30 percent) in earthquake-prone cities, but not in cities prone

to floods and cyclones. The results suggest that, where markets function, prices tend to reflect hazard risk.

But what these studies do not distinguish is whether prices reflect risk stemming from exposure (in a hazardous site) or vulnerability (building characteristics that influence damage). This may well be an artificial distinction since technological advances make it increasingly possible to build safe buildings in hazardous areas. There is suggestive evidence, however, that prices reflect even vulnerability—at least when information about vulnerability (building characteristics) is readily available. Nakagawa and others (2007) use a 1998 hazard map of the Tokyo Metropolitan Area to examine the extent to which rents reflect earthquake risk and seismic-resistant construction. The Building Standard Law amended in 1981 to improve buildings’ seismic resistance applied only to new construction. Rents on older buildings (likely less safe) were lower in the risky areas. In Tehran, Willis and Asgary (1997) found by interviewing real estate agents that earthquake-resistant houses in all city districts are significantly more expensive than others. This evidence suggests that vulnerability-reducing measures also tend to be

capitalized into property values—at least when they are revealed through hazard- location maps or data on building quality: expenditures in such measures are likely to be recovered through increases in property prices. And such investments are likely to increase with economic density because people have more to lose with disruptions from natural hazards. Just as we should be careful about inferring too much about aggregate behavior

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from individual—and often idiosyncratic—behavior, we ought to be cautious about deducing individual behavior from aggregate analyses. Still, the discussion here underscores the role of markets in capitalizing hazard risk into property prices, and the role of prices and information in helping individuals perceive risks and make informed choices. Tokyo is a city where rental and land markets operate reasonably well. When such markets are stifled—as in many developing countries—that reduces the incentives for individuals to undertake such risk reduction measures.

Smothered markets dampen prevention incentives

Prices incorporate a lot of information—even about hazard risk, as just shown—and people make better decisions when markets are allowed to function. So, the importance of making hazard risk information available cannot be overemphasized. Perhaps because of this significance, the political will to not have information on rising levels of risk publicized is often strong. For example, even though FEMA in the United States has updated coastal flood maps for the U.S. Gulf, it cannot get coastal communities to accept them because the information would reduce property prices. Systematic mechanisms for tracking information related to the changing nature of risk, and translating it into risk-related property valuations, would go a long way to increase the incentives for prevention.5

The markets relevant for safe buildings are those not only for land but also for related goods and services: if cement prices are controlled, a black market emerges where prices exceed what they would otherwise be. And if cement were allocated to selected villages or people (deemed deserving or vulnerable), many would surreptitiously sell and not use it because of the high prevailing prices. Although people know that their mud huts may wash away for want of cement, they make the difficult tradeoff if the proceeds could be better used to feed a starving family or buy medicine for a sick child. Important markets have been smothered in many countries, sometimes

inadvertently. For example, price and rent controls imposed by the British Empire during World War II remain in some cities (such as Cairo and Mumbai).6 Mumbai’s building predicament shows how vested interests became deeply entrenched long after that war ended and countries became independent. Buildings in Mumbai collapse during the heavy monsoon downpours because they have deteriorated for decades and because of feeble attempts to improve the situation. Rent controls in Mumbai may have initially benefited tenants at the expense of

landlords, but over time everyone suffers. Rent controls cause landlords to forgo maintenance and neglect their properties, and tenants not only live in dilapidated buildings but die when they collapse in heavy rains. Even if tenants are willing to either pay higher rents or to maintain the building, each tries to not pay his share of the expense (free riding), especially if appropriate retrofitting involves structural changes to the entire residential structure and not to individual apartments. Tenants also may

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lack the legal authority to make changes to their building’s structure. And even when tenants overcome free riding (and the tenants of the entire building agree), they may lack the title to obtain a mortgage. Tenants with funds soon move to newer and safer buildings, and those who remain are often poor with few alternatives. Tenants in rent- controlled apartments often sublet without the landlord’s agreement, but they would demand the present value of the lower rent in return (“key money” in New York; “pugree” in Mumbai). Their legal right to do so varies, and in Mumbai the sums are so large and the tax rates are so high that this “black money” is rarely declared. Rent controls are not unique to Mumbai or developing countries (Seligman 1989).

They exist in about 40 countries, including many developed countries (Global Property Guide 2009). Rent control laws have remained in place in one form or the other in New York City since 1943, where there are about a million rent-regulated and 50,000 rent-controlled apartments (Council of the City of New York 2009). As recently as 2009, legislation was passed in New York that limits the ability of landlords statewide to increase rents. Such legislation is expected to return to regulation many household units previously attracting market rent (Peters 2009). Rent controls are not the only market distortion. Real estate transactions in many

countries incur a stamp tax—the same that spurred American colonies to rebel in the 1770s.7 The ad valorem is on sales (at a punitive 20 percent rate until quite recently), not on owning property. But taxing transactions reduces property sales and encourages undervaluation when new owners register their claim in the city office, where registrars often do not dispute it, perhaps in exchange for a bribe. So, true market prices are difficult to discern. The revenues are not large, but they do not accrue to the city that provides the infrastructure and services (water supply, garbage collection). Worse, real estate is often transferred or bequeathed without being recorded, making the land register out of date. So, borrowing against property is difficult. More pernicious than low revenues accruing to a part of government that does not provide city services is the poor land use that results—a particular problem in rapidly transforming cities. Decrepit “sick” industries that barely operate (such as once-profitable textile mills) remain on large land tracts in prime locations with easy access to old roads and railway lines while new industries locate where workers cannot easily commute. A city cannot provide services without revenue, and Indian cities depend on what

the state or central government transfers. And when the city’s residents do not pay taxes directly to the city administration, officials are not always responsive to their needs. To prevent excessive demands on existing and ancient infrastructure, the city of Mumbai restricts a structure’s floor-area ratio or “FAR” (a building’s total floor area divided by the lot size) to 2.0 for a four-story building, preventing the construction of tall buildings. Mumbai planners went against the grain of markets: floor-area ratios were 4.5 when introduced in 1964 and instead of allowing denser development to

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accommodate urban growth, they were reduced to 1.3 in 1991. Mumbai’s buildings have fewer floors than other major cities: a third that of Shanghai and less than a fifth that of Moscow. The potential gains from denser development are so large that some developers have offered to pay for infrastructure in exchange for being allowed to construct taller buildings. But such deals can easily spawn more corruption. Besides, tackling infrastructure in an ad hoc rather than a well-planned way would result in more difficulties down the road. So land use is dismal: growth is accommodated outward not upward, putting greater demands on transport. These difficulties are not unique to Mumbai. Bertaud and Brueckner examine the

welfare costs in Bangalore, an even faster growing Indian city where traffic congestion threatens continuing prosperity (Bertaud and Brueckner 2004). Other cities have attempted to regulate development densities, reducing housing supply on suitable land. In 1979, the federal government in Brazil established the basic legislation at the national level for developing, approving, and registering urban land subdivisions. Among these parameters: a minimum lot size of 125 square meters, with minimum frontage of 5 meters, and a compulsory donation of 35 percent of development area for public uses and open spaces. This effectively zoned many poor people out of the formal land and housing market (Lall, Wang, and Da Mata 2007).

Disparities, discount rates, and the poor

Poor people face disproportionately high hazard risks: the aggregate statistics in chapter 1 show this, and the developments in Mumbai illustrate why. Evidence from Bogota shows that the poor tend to cluster in more hazardous areas. Map 3.1 shows areas of differing seismic risk. Map 3.2 shows that the poor live in the most earthquake prone-areas: on average, twice as risky. What can one infer from this? Property prices reflect seismic risks, so risky

property is cheaper to rent or buy. Not surprisingly, the poor live in these areas—not just in Bogota but elsewhere. As property prices in the worst affected areas fell after Hurricane Andrew in 1992, more low-income households moved to these locations (Smith and others 2006). This is a pattern repeated around the world: the poor often live in dangerous areas and slums are often at risk for disasters.

Map 3.1 An earthquake risk index for Bogota

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Source: Lall and Deichmann 2009.

It is sometimes asserted that the poor are (besides being cash constrained) myopic and have a higher discount rate than the rich. Yet those who have carefully examined how the poor live find they save an impressive proportion of their meager incomes (Collins and others 2009). Using 250 detailed, yearlong “financial diaries,” they show that villagers and slum dwellers in Bangladesh, India, and South Africa maintained that even those living on less than a dollar a day save large proportions of their meager incomes. Such savings are entrusted to friends and relatives and do not directly find their way to banks or other formal financial intermediaries. The poor routinely make huge sacrifices for future gains—moving far from their rural families to squalid urban settings to earn money to send home and provide their children with more food and better education. Scrounging through the rubbish bins as rag-pickers is still working, and living in the drainage ditches may not be an intertemporal choice but a location decision that combines cheap land and housing with proximity to employment centers. The poor’s choices are limited by the absence of adequate public goods, such as public infrastructure: most cities in poor countries lack reliable buses, and many regulations deter collective taxi and mini bus services.

Map 3.2 Poor people live closer to hazard-prone areas in Bogota

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Source: Lall and Deichmann 2009.

A study of informal settlements in Jakarta before, during, and after the February 2007 floods found that people know the risks they face (Texier 2008). Some 68 percent of respondents knew the high risk of flooding, but more than 40 percent preferred to stay despite the dangers, not to move and risk losing their jobs. Similar evidence from Pune, India, shows that poor households prefer to have easier access to jobs, even though many of the slums are on riverbanks prone to flooding or on hilltops subject to mudslides. Some 45 percent of houses in Santo Domingo’s largest slum are on a river flood plain and vulnerable when it rains (Fay and others 2003). Poor families on steeply sloped land in Caracas and Rio de Janeiro are vulnerable to landslides. The poor bear the brunt of the cumulative effects of such policies (tax structure,

city financing arrangements, and so on). In a city like Mumbai, they typically live in slums that mushroom on vacant land, much of it owned by the state and central government (directly or indirectly, such as the sewage authority or railways). Worse, the slum’s garbage is dumped in adjoining drainage ditches that become clogged; so rains result in floods that the poor drown in. These lands were set aside for good reasons (drainage, flood overflows), but it is difficult to prevent squatters and almost

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impossible to evict them. The Indian Slum Areas (Improvement and Clearance) Act of 1954 is a central government law that the city and state have no stomach to enforce. Slum dwellers pay thugs “rent” or “protection money,” and the thugs buy off the local constables with a bribe, deliver electoral votes to grateful politicians, and intimidate rival candidates seeking change. Under these circumstances, suggestions to strengthen or enforce the building code to prevent buildings from collapsing during the heavy monsoon rains would likely hurt those it is trying to help.

Improving individuals’ decisions: What can governments do?

Get land and real estate markets to work

This can go a long way to inducing people to locate in appropriate areas and undertake prevention. Markets cannot work when transactions are taxed at prohibitive rates. A city should raise revenue with a low tax rate on a wide base; but its administration should be simple. And although a tax on property values has much merit, ascertaining appropriate values requires a functioning property market, and perhaps even changes to central government taxation. An ad valorem tax on property value not only raises revenue without misallocating resources but also provides the incentive to put land to its best use. The most appropriate economic density of urban development would then follow. Taiwan, China; Hong Kong SAR, China; and Singapore became major commercial centers in large part because much of their fiscal revenues are from taxing land values (World Bank 2008). Hong Kong SAR, China, therefore did not tax trade and commerce heavily, and other cities such as Johannesburg and Sydney tax real estate only through land values. Some cities in Pennsylvania have a two-rate system, with land values taxed at a higher rate than improvements (buildings). Property taxes account for up to 30 percent of local revenues in many European countries. It will not be easy to remove the panoply of distortions, because many now benefit

vested interests. Nor is knowing what to change first obvious. Such issues are outside the scope of this report; but even if such changes were made and people responded promptly (a fear of reversal may slow the response, especially because the politician’s successor is not bound), a measureable improvement in building quality can take years. New construction is a small fraction of the existing building stock in established cities, and if a building lasted 50 years, only 2 percent would be replaced in any year. Better policies will show their benefits more quickly in the newer developments, such as “infill” redevelopment where decayed industries stand and in peri-urban areas (Pelling 2003).8

For the poor, the government could greatly expand their choices, and this is more subtle than dictating what people should choose. Security of property (clear titles often help) allows people to invest in prevention measures, but this does not imply giving title to flood plains on which people have encroached. Indeed, in the United

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States, where property generally has clear title and well defined rights, FEMA purchased privately owned land in the flood plains to move people to safer locations. Land in safer locations must be made available—along with adequate and reliable public transport and other services. But locations cannot be easily categorized as “dangerous” or “safe”: with the right design and construction, safe structures can be built on hillsides; but appropriate choices are likely only when many markets (including that for construction materials) are allowed to function.

Make hazard risk information more easily available

The government must map flood plains and fault lines, disclose them, and consult the public to decide which areas are unsuited for buildings (chapter 4 discusses what it takes to collect and analyze hazard information). Some government entities routinely collect information and data on hazards (flood plains, seismic fault lines) and properties (city records), but most are inaccessible to the public. This is even though technological advances—such as the abundance of free, simple, and open source software (for example, PostGIS, Geoserver, Mapserver, the GeoNode.org project)— make collecting and sharing information easy. Prospective dwellers must be made aware of the risks of living in buildings close to

active fault lines and on vulnerable soils. This requires investment in geological surveys and hazard monitoring stations, and dissemination of the resulting information as a public good. Providing information to landlords can also boost the chances of retrofitting, if landlords revise their cost-benefit calculations based on more precise probabilities of earthquake risk. And even if the revised (accurate) probability does not change the calculation, the public disclosure of the fact that building owners decide to build in high-risk areas or that they do not retrofit buildings in those areas appropriately, could spur public shaming. This could boost the probability of adopting appropriate disaster prevention measures (World Bank 2000).9

However, the seemingly simple act of collecting and providing information is not easy. Background papers for this report found obtaining disaster and related data from various public agencies in cities difficult, even though donors often funded the collection and automation of such data. Sometimes “security, commercial, and privacy” reasons are invoked, but only a few security interests are legitimate. Taking photographs from airplanes and at airports is illegal in India (a World War I measure), while far better and more sensitive images are routinely available from satellite imagery and accessible through the Internet. Sometimes commercial interests take precedence over public good aspects. Some countries have begun the long but important process of mapping hazards, vulnerability, and modeling risk (box 3.2).

Box 3.2 Assessing risk in Central America Many Central American countries are on seismic fault lines and in the path of hurricanes. Determining their exposure and vulnerability is the first step in prevention and for insurance markets to develop. Much of the data

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http://GeoNode.org

and techniques to analyze risks are common to all of them; so sharing these data and what governments learn as they proceed would benefit all involved. The Central American Probabilistic Risk Assessment (CAPRA) is a set of evaluation techniques and a

communication platform to help governments make decisions. It begins with a catalogue of past events and resulting losses along with an inventory of assets (such as population, housing, and infrastructure) that are exposed to various hazards. The frequency of hurricanes, earthquakes, volcanoes, floods, tsunamis, and landslides are in the database, and probabilistic risk assessment models permit calculating loss exceedance curves or risk maps by hazard, sector, and period. A National Risk Atlas can illustrate the various hazards and risks, and the risk can be communicated and managed. The platform’s architecture has been developed by regional experts to be open, free, and modular, so a user

could adjust it to each country’s circumstances. It allows existing initiatives to be incorporated and avoids duplicating efforts. The Center for the Prevention of Natural Disasters in Central America led the efforts, supported by the United Nations’ International Strategy for Disaster Reduction and the World Bank (through the Global Facility for Disaster Reduction and Recovery). The first phase, begun in February 2008 with Costa Rica and Nicaragua, is being extended to other Central

American countries.

Source: World Bank staff.

Implement better building practices

Many die when buildings and infrastructure collapse during earthquakes, severe storms, and mudslides. Hazards reveal the weakness of buildings and other structures like bridges that, constructed differently, would have sustained less damage. A common emotional reaction is to blame private landlords, but many owner-occupied and government-owned buildings and structures also collapse. Corruption and builders are also blamed and public outrage and cries for the government to “do something” often result in such “stroke of the pen” measures as stronger building codes that are less effective than they sound. This section discusses the role of building codes, examining what it takes to have

better buildings and structures, not easy even in developed countries, such as Italy (box 3.3). Building well is not necessarily more expensive, but it does require all involved to be well informed about the physical properties of materials. Once built, mistakes become an unfortunate legacy, and retrofitting is technically difficult and expensive. Cities with a large stock of poorly built structures, whether in Italy or Turkey, will remain vulnerable—even if new buildings are better constructed.

Box 3.3 A century’s struggle for sound buildings in Italy

The Italian peninsula is seismically active—but even 2,000 years ago, the Romans designed and built large buildings so well that many still survive. Building skills waxed and waned over the centuries, and periodic earthquakes prompted people to act, sometimes through government edicts. Seismic areas began to be systematically identified after a particularly destructive 1908 earthquake in the

southern part of Italy killed 90 percent of Messina’s (Sicily) 130,000 inhabitants and a third of the 45,000 inhabitants of Reggio Calabria (mainland). In 1928, building regulations were introduced in seismic areas but applied only to new buildings and to where quakes occurred after 1908 (that had been mapped). Not confined to these areas, earthquakes continued to take a heavy toll. World War II destroyed many buildings and a construction boom followed. Cities grew, and earthquakes

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periodically took their toll: the 1968 Belice earthquake in Sicily killed 370 people, injured more than 1,000, and made 70,000 homeless. The patchwork of regulations was replaced by a comprehensive law in 1974 making the Ministry of Public Works responsible for national anti-seismic regulations. The Ministry, with the help of the National Research Center (CNR in Italian) that had been studying the effects of the 1976 Friuli (northeast) and the 1980 Sicily earthquakes, updated the seismic map recording fault zones even where an earthquake had not (yet) occurred. When the Italian bureaucracy was decentralized in the 1990s, responsibility for seismic regulation was shared: the central government set the general criteria to identify seismic areas and the regional authorities demarcated them. This arrangement changed again after 27 children and a teacher died in a school collapse in southern Italy

after a relatively mild earthquake in October 2002 (5.4 Richter scale). Revisions to the Italian building code underway since early 2000 to reflect the rapid advances in seismic research and building technology accelerated, and the seismic map of 2004 distinguished areas with four categories of risk. The national government reduced the regional and city governments’ discretion over building regulations for three more ris ky areas, partly reflecting the preferences of the political parties that formed the shifting coalition government and perhaps to protect people against local authorities’ diluting the standards. These changes did make quakes less deadly. But on April 7, 2009, another mild (5.5 Richter scale)

earthquake became the deadliest in 30 years, killing almost 300 people in L’Aquila, Abruzzo region’s largest city just off the main seismic fault line that runs down the spine of the peninsula. Some old buildings collapsed, but many apartment buildings constructed during the 1950s and 1960s also collapsed, and these were built of reinforced cement concrete. Concrete, widely used since Roman times, is strong in compression but weak in tension. So rein-forcing

parts of beams and columns subject to tension using steel bars (which withstand tension well) allows larger structures to be built economically. Such reinforced concrete takes static loads well; but it is brittle and withstands lateral forces (released in earthquakes) poorly—unless specifically designed to do so. The head of Italy’s Society of Engineers observed that many structures built in the 1950s and 1960s are vulnerable because the concrete did not use effective reinforcement techniques (though they may have conformed to the building codes of the time). Retrofitting such buildings is expensive and often not worthwhile. Public anger erupted when even the “state of the art” San Salvatore regional hospital, which opened in 2000,

had to be closed just when it was most needed. The damage may have been more superficial than structural, and an inquiry is underway, but blame is being passed around. News reports quote a Milanese architect describing provincial counterparts as “surveyors with no more than a diploma.” Such understandable anger is often misdirected, and even a century ago in San Francisco, accu-sations of

corruption flew when large sections of the grand and costly City Hall collapsed in the 1906 earthquake. While corruption was rampant in the city, the state, and even the national government at the time, a careful subsequent analysis tells a more complex tale (Tobriner 2006). The building was designed with newly developed steel reinforcement frames, but funds ran short (some may well have been stolen) during its extended construction, and no additional sums were authorized. The committee overseeing its construction, aware that the public expected a completed building, changed its design after construction had begun to reduce costs. It retained the heavy and ornate features in the façade and sacrificed the less visible structural features. Poor decisions and oversight (including the public’s overseeing committee decisions) were responsible. Making better public decisions is the role of institutions—one of the central themes of this report.

Source: World Bank staff.

What role for a building code?

Many developed countries have good building codes, and many developing countries have none (or ignore them), making it natural to propose building codes in countries without one. Engineers and architects find a building code as useful and convenient as the tables that list the strength of various cross-sections of steel beams. Codes as convenient starting designs or rules of thumb may be helpful. But should they be mandated, carrying the force of law with penalties for violations, as minimum

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standards in every situation? It is quite appropriate for one government agency to tell another less

knowledgeable about construction: so there is no debate when the Ministry of Construction or the Public Works Department insists that the Ministry of Education build schools a certain way. These strictures could extend to buildings constructed or financed by donors and NGOs that help the government deliver public services. It may also be appropriate to make a builder liable for hefty damages if the building does not adhere to a code if the government, as owner, gives the builder leeway in design or construction: this is being proposed in Madagascar, where government schools serve as shelters against annual cyclones that cause many deaths. Countries with a different legal structure may not need a code to establish builders’ negligence (or owners’ liability if a building collapses). While the government as owner has the right to specify what it wants done, should

it, as regulator, insist on how private owners should build? This is often advocated even in countries where government owned buildings collapse more often than those privately owned. Economists are often swayed by theoretical arguments, and we examine them

before turning to some practical concerns. Economists may accept that a private owner has an incentive to build a good structure, but invoke externalities—the owner may not incur the expense of building well if others bear the cost of a building collapse. One classic example often invoked of a public good that a government should supply is lighthouses. However, Ronald Coase (1974), in a seminal article, notes that although economists often use lighthouses as examples of public goods, governments did not build lighthouses until very recently. Instead, lighthouses were built at considerable expense in remote and difficult locations to help ships ply dangerous waters and were financed by various associations of shipping companies (whose competitors would also benefit) and associations of seamen’s widows and orphans (who would not get their loved ones back). Cohen and Noll (1981) construct an elaborate model to determine the optimal

building code in seismic areas, motivating the discussion by correctly stating that fires caused 90 percent of the damage following the 1906 San Francisco earthquake, leaving the reader with the impression that fire spread (the externality). A careful history of the San Francisco earthquake shows that numerous fires started simultaneously: 95 percent of residential chimneys were damaged, gas mains burst in numerous locations, street lanterns fell, and boilers exploded starting fires in multiple locations. People were overwhelmed, and there was not enough water to put out the fires. Economists also invoke asymmetric information—that one party to a contract (such

as renter or home buyer) knows less than the other (the landlord or developer)—to explain “market failures” that government interventions could correct. Despite

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Akerlof’s (1970) elegant analysis of a market for lemons, used car markets thrive with dealers offering warranties, and workplaces have bulletin boards that allow employees to rely implicitly on their colleagues’ honesty. Similarly, every society deals differently with the enormous informational asymmetry in choosing a spouse: dating or living together first is accepted in some settings while extended family networks gather information and arrange a match in others. It is important to recognize the diverse arrangements that people devise without

fixating on one that a few countries have found useful. Elinor Ostrom, whose work is better known after her 2009 Nobel Prize in economics, has long studied such mechanisms that have the advantage of self-enforcement. In some countries, builders establish a reputation for quality. In others, banks or insurers set standards for buildings they finance or insure. And in some, people rely on government, either through state ownership or regulations. History matters and arrangements are path-dependent, but important underlying

differences influence what is effective and appropriate. Germany industrialized earlier and became more urban than France or Italy. This both influenced and reflected the mobility of labor and the type of dwellings (single family homes, abutting townhouses, and building with multi- ple units) and their ownership. Only 40 percent of German homes are owner-occupied, while the proportion is 68 percent in the United States, 80 percent in Spain, and 78 percent in Mexico.10 Rentals both require and reflect the ability to enforce contracts (such as evicting defaulting tenants without undue delay or expense). A building code is but one cog in this complex mechanism that differs from one

country to another, and copying one cog does not ensure its working in a different mechanism. Some may recognize this but nevertheless seek a strong building code to “set a goal.” But this can do more harm than good, especially when laws are easier to write than to enforce. The code may provide a false sense of security if hazards are infrequent and violations go undetected, making the code obsolete. Codes are rarely revised, not just because of bureaucratic lethargy, but because arriving at a consensus is time consuming and difficult. On the other hand, no one cares about codes that will be ignored, which may be why some governments are quick to adopt them at donors’ bidding; but donors are subsequently frustrated when the codes are not enforced. And worse, if laws meant to protect become an excuse to harass (and cudgels in the hands of the corrupt), laws and regulations come to be seen as hurdles to be overcome. It is not surprising that building codes are poorly enforced: the World Bank’s Doing Business reports use them to measure delays indicating the extent to which businesses are hindered. Box 3.4 provides a thumbnail sketch of codes’ differing roles in history.

Better building practices and the differing roles of codes

Questioning an ubiquitous or central role for a building code is not to deny the The, World Bank, Bank World, and Nations (UN) United. Natural Hazards, UnNatural Disasters, edited by World Bank The, et al., World Bank Publications, 2010. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/apus/detail.action?docID=606027. Created from apus on 2017-04-04 13:23:23.

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importance of good building practices—or a role for governments. To do this usefully, a code could be specific in two ways. One (“normative”) is to specify the standards to be met, such as withstanding wind speeds of x kilometers per hour. But enforcement requires a facility to test the design before authorizing construction and a system of inspection to verify that what is built conforms to the approved design. Few governments have such testing capabilities. And if tests are delegated to a university or engineering association, there must be a trustworthy system to prevent counterfeit certificates or buying permits and passing inspections with bribes. The second way (“prescriptive”) is to specify how to build, such as foundation at least y meters deep, or walls z centimeters thick with reinforcement bars. But this also requires inspection capabilities. Governments can help institute those capabilities, and in conjunction with other complementary measures, improve building practices, as in Pakistan and in Sri Lanka.11

Pakistan: Improving and not ignoring vernacular architecture

Most housing in developing countries is constructed without architects or engineers (“vernacular” buildings or architecture). People build their own homes or contract and oversee workmen who do. Available materials, their prices, worker skills, and construction techniques all change—sometimes rapidly. Reinforced concrete has become ubiquitous with the introduction of manufactured cement and steel rods, leading to the decline of wood framed structures. As residents from Italy to Istanbul are discovering, deaths and destruction from earthquakes rise as buildings without sufficient lateral strength and flexibility collapse. Concrete could be made resilient with sufficient care in design and construction, but all too often, traditional building practices are discarded and modern ones embraced without knowing their different characteristics. Newer concrete structures can fail—in Italy, Istanbul, Kashmir, and Gujarat—when earthquakes strike while traditional buildings remain standing (Jigyasu 2008).

Box 3.4 Building codes BC and their later kin Building codes are not new. They have appeared—and disappeared—periodically. Hammurabi’s code in 1750 BC sought, among other things, to make Sumerian buildings safe by adding punitive penalties to the builders’ liabilities for any resulting damage:

If a builder does not construct a house well and it falls and kills the owner, then the builder shall be put to death If the owner’s son is killed, the builder’s son shall be put to death. If the owner’s slave is killed, the builder shall pay the owner, slave for slave. If it ruins goods, the builder shall compensate the owner for all that has been ruined, and shall re- erect the house at his own expense. If the walls of an incomplete house collapse, the builder shall rebuild the walls at his own expense.

Unlike Hammurabi’s code specifying penalties, recent building codes specify what a safe building must have (thickness of walls, depth of foundation). But not all countries with a code got them for the same reasons, and

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such codes are not always mandatory for private owners. Wooden houses were common in the United States, and while they resist earthquakes if constructed well

(walls fastened to stiffen the structure against lateral movement), they are susceptible to fires that were common because wood, and later coal, were used to heat and cook. Fires spread rapidly when houses, especially those in poor neighborhoods, were built with a common wall (townhouses). Privately owned fire companies extinguished fires, but doused only homes that subscribed to their services (indicated by a medallion outside each house, and neighbors often chose different companies). There were endless disputes, some violent, when the fire company that a passerby summoned simply watched because the medallion was not its own: clearly not the best arrangement. Many city governments responded to residents’ concerns and took over the task of extinguishing fires. Some

also instituted fire codes that specified such relevant items as chimney size and material, and the type of roof. Fires became less frequent as wood and coal gave way to kerosene and oil, and then to gas and electricity. Cheaper transport allowed people to move to the suburbs in the 20th century, and fires rarely spread when houses are built far apart. But as with many regulations, vested interests sought to use them to their advantage: brick-layers in

California—threatened by newer emerging technologies (steel and reinforced concrete)—prevailed in drafting the 1933 code, even though unreinforced brick buildings are dangerous in seismically active areas. Fire codes evolved into building codes, and the interests they protect are often apparent: many codes specified who does the construction and repair (such as licensed plumbers), not what is done. Nevertheless, such regulations are not onerous in the United States because courts are reluctant to infringe on the rights of owners to do what they please. Codes remain as a convenience because other laws (such as laws on renting) refer to the standards they set without creditors and insurers having to specify them. Places where stone or brick was the main construction material had no need for codes—unless in a seismic

area. All stone balconies were banned after a 1763 earthquake in Palermo, Italy. Such regulations, not always effective, can be captured by vested interests. But they are also path-dependent, allowing both improvements (as peoples’ oversight becomes more effective) and the accretion of other unrelated features. It is well recognized that the content of a code should be appropriate, but its role depends on many other elements in a country. Regulations are supplemented and often substituted by other arrangements as well: licensing professions (strict in Germany) and trade associations (widely prevalent in Britain until a few decades ago) augment standards sought in a building code. So the code’s role in implementing better building practices will differ from country to country. “Building to

code” in developed countries now often signifies minimal standards that most buildings easily surpass, but having a code to bring the few laggards into line is different—and easier than improving building quality of the majority.

Source: World Bank staff.

The devastating 7.6 magnitude earthquake that struck the northern mountainous parts of Pakistan in October 2005 killed 73,300 people, seriously injured 62,400, and displaced 3.5 million from their homes. Of the estimated $3.5 billion reconstruction cost, almost half was for housing. Some 462,000 private homes were completely destroyed, another 99,300 severely damaged, many perched precariously on hillsides. Entire villages were cut off when 6,440 kilometers of roads were damaged. The few houses of concrete, whose brittle properties have already been described, collapsed as did others of “kutcha” construction—stone masonry with heavy roofs. The government, quickly deciding that people should be entrusted to rebuild their

own houses, assisted them financially and with technical advice on seismically resilient structures. This was a wise decision but controversial because NGOs were eager to rebuild. The government decided on a uniform grant equivalent to $2,900 for

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every family whose house was destroyed (450,000 households received this), and $1,250 for damaged homes (110,000 households). In addition, grants of $300 per household for livelihood support went to about 260,000 families, and $1,660 for deaths to $250 for minor injuries went to about 200,000 families. The total of $1.7 billion was sizable, and to reduce theft and corruption as it wended its way to the affected families, the funds were deposited directly in a bank account that the beneficiary opened. The government created the Earthquake Reconstruction and Rehabilitation

Authority (ERRA) to provide grants directly to the affected families conditional on houses being built to acceptable standards. Donors who helped fund the ERRA wanted the rebuilt houses to conform to a building code, and several multilateral donors consulted engineering experts in developed countries with experience in seismic design. Their advice on the minimum size and appropriate placement of reinforcement bars was undoubtedly good. But it was clear to those on the ground that such codes were unlikely to be adhered to. Although Pakistan has many engineers, few were trained in seismically resistant structures: university curricula simply did not cover the topic. Nor did engineers ply their trade in the remote communities affected. Only traditional techniques would enable houses to be rebuilt quickly. Some international financial institutions, including the World Bank, were reluctant to

finance houses because they were not convinced that indigenous buildings could be safe. They were familiar with industrial materials of known properties and designs. Few Pakistani engineers understood the strength of the local materials or the techniques of local construction. Persuading skeptics that sound structures could be built with traditional materials and techniques took long discussions under ERRA’s aegis, consultations with centers of excellence from around the world, demonstrations of the techniques by local craftsmen, and smaller scale models on shaking tables. The houses that collapsed were of kutcha construction, not the traditional

techniques in areas known to be earthquake prone. As the population grew and wood became scarce and costly, builders largely abandoned the intricacies of traditional building techniques (Langenbach 2009).12 Two traditional construction techniques considered seismically safe are dhajji, with timber frames common in Kashmir and Bhatar, with timber-reinforced dry stone masonry in the Northwestern Frontier Province. Each of these traditional quake-resistant building techniques had been developed over centuries making good use of local lumber and other materials, and some local builders were still familiar with their construction. The National Engineering Services of Pakistan, the country’s largest engineering

consulting firm and the government’s general consultant on reconstruction, played a central role in developing safe housing guidelines for local construction techniques. They initially used the Californian codes that specified metal devices to connect

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timbers, but later adopted the excellent joints that local carpenters used without any metal. This was not the only contribution of local carpenters: they insisted, for example, that it was better for the base plate (the timber tying the bottom of the box) to lie on a dry stone, not concrete plinth (capillary action allows water to seep up), to allow drainage, preventing the timber from decay. Once the international financial institutions agreed to fund such construction, ERRA

began training construction workers. The army corps of engineers and Pakistani architects and technicians taught quake-resistant design and construction to 300,000 workers in three years.13 Working with the UN’s International Strategy for Disaster Reduction and other partners, the National Society of Earthquake Technology, a Nepalese NGO of earthquake engineers, and the Citizen’s Foundation, a Pakistani NGO, brought their unique mix of community-based artisans’ training and seismically resistant construction techniques that included (but was not exclusively) vernacular architecture. Many trainees were local artisans; others were migrant workers who had moved to the area seeking employment, who, after training and working would spread the skills as they moved elsewhere. As people began rebuilding their homes, many families chose reinforced masonry

using cement blocks. Almost overnight, hundreds of small cement block factories mushroomed by the roadside throughout the area. Men and mules carried manufactured building materials like cement and steel over steep mountain paths to get to the affected villages, greatly adding to the cost of materials. Cement blocks had never been used at this scale, and it quickly became evident that the blocks were often of inferior quality. ERRA then instituted quality control mechanisms with mobile testing units; but it also recognized that home owners had a tremendous incentive to avoid these substandard blocks if they could tell the difference. So it began a public information campaign about the importance of quality, both to manufacturers (given information on how to make sufficiently strong blocks) and customers (asked not to buy them if they shattered when dropped from shoulder height). Quality quickly improved. Advice was occasionally ignored, sometimes for good reasons. In a few areas,

technical specialists were disappointed to see that their advice for lighter roofs and walls was ignored. And homes were rebuilt with thick mud and stone walls that proved deadly in the earthquake—but gun battles are more common than earthquakes in the area, and thick walls offer better protection against bullets. This underscored the larger point that homeowners are good judges of their circumstances. Four years after the earthquake, ERRA reports that more than 90 percent of the

400,000 rebuilt houses complied with safe construction guidelines (not a code mandated by law), and more than 30 percent used vernacular architecture. So, tens of thousands of families who preferred traditional techniques rebuilt with greater

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safety and are more aware of disasters and the importance of prevention—much more than if others had rebuilt their houses for them. People learned not only the importance of earthquake-resistant construction but also what it takes (construction details) to ensure it. Such construction has also boosted both the standing and understanding of skilled craftsmen, who will likely pass these skills on to the next generation of builders. Pakistan shows that building practices ensure safer structures, that this takes many skills, and that it is possible even with artisan materials and local construction techniques.

Sri Lanka: Building seismically resistant structures

Italy was among many countries helping the Sri Lankan government rebuild after the December 2004 tsunami. A team from Italy’s civil protection unit was entrusted with reconstructing 12 schools and two hospitals, all government buildings. The Ministries of Education and Health in Colombo approved the concept and working drawings; and the proposed structural design incorporated recent developments in building seismically resilient structures. Such structures must dissipate, not resist, energy released by an earthquake and

have braced supporting pillars to withstand lateral forces. A recent development is to make the columns strong but elastic and to intentionally weaken the beams at a well- defined plastic hinge to yield to excessive forces and gently deform without causing excessive injuries. Such techniques allow buildings to resist forces up to a particular level and to reduce injuries when they fail under stronger forces. Appropriately placed transverse reinforcing bars are securely tied before the concrete is cast. And the structure’s strength also depends on the composition of cement, sand, and aggregate mixture and the care during curing. Such buildings require careful design and construction but are not much costlier. The Italian team had many technical discussions with Sri Lankan engineers who

were keen to learn these recent advances that had not yet entered the curriculum of local engineering universities. The Sri Lankan building code—based on relatively recent British standards, where seismic risks are not a major concern—does not incorporate modern engineering designs that the Eurocode endorses.14 Sri Lankan universities do not research such topics; so the country’s building code is adapted from other countries. But better engineering specifications alone would not improve local building practices, especially those using local building materials and construction techniques. Once the plans were finalized and such technical requirements as the number and

size of reinforcement bars were set, guidelines were defined for private construction firms to submit bids. The biggest effort was in monitoring every aspect of the construction because builders have an incentive to skimp on the specified materials, especially when this cannot be easily detected in the finished building. The local builders and construction workers were familiar with normal reinforced concrete

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construction. But they needed close supervision in the placement and fastening of reinforcement bars for the design that allowed the planned deformation. The hospital building was finished on time and budget.

Corruption and safety

Detailed systematic data are difficult to find, but some descriptions of disasters note that publicly owned buildings collapse while private buildings of similar size and vintage remain standing. The engineering and architectural history of San Francisco notes that many large hotel and bank buildings survived in 1906 while the City Hall did not. Similarly, news accounts in 2008 note that government schools in Sichuan collapsed, while commercial buildings of the same size and vintage nearby did not. Corruption, the usual suspect, is unfortunately common, especially in public

construction (Figure 3.3). In photographs from some projects supervised by the World Bank where corruption was suspected, it is easy to see the inclusion of debris in the concrete (material not removed before the concrete is poured) and air bubbles (showing insufficient tamping before it sets) (figures 3.4 and 3.5) (Kenny and Musatova 2008). Is this corruption or lack of supervision? The photographs are evidence of inadequate supervision during construction (hasty concrete pour, an absent foreman, inexperienced workers, or absent equipment), not necessarily corruption (Olken 2005).15

Figure 3.3 Corruption perception by industry

Source: Kenny 2009.

Corruption is reprehensible but does not excuse or explain poor supervision and management. Stolen funds (corruption) make a building costlier, not necessarily weaker: buildings may fail less in a country with high corruption but with good building

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practices. As the San Francisco City Hall collapse in 1906 showed, defects in design and shortcomings in supervision are commonly—but not uniquely—associated with public ownership (even of enterprises) (World Bank 1995).16 This is especially the case in countries where public involvement and oversight of government are deficient.

Three lessons

Three lessons can be drawn from the experiences of Italy, Sri Lanka, and Pakistan as well as from the San Francisco earthquake of a century ago. First, safe buildings require better construction practices. A building involves many people (owner, financer, designer, workers, overseers), any one of whom could cut corners and subvert a good structure. Each person responds to complex incentives, not all financial, but the owner oversees and manages the process and ultimately benefits; happily for the hospital in Sri Lanka, engineers supervised the construction closely. Perhaps the hospital cannot be “scaled up,” but if a few Sri Lankan engineers became aware of the new techniques, and if teaching and research in local universities were encouraged, better design and construction would follow. But this requires patience, persistence, and local champions.

Figure 3.4 Debris embedded in a concrete support beam

Source: Kenny 2009.

Figure 3.5 “Honeycombing” showing shoddy construction

Source: Kenny 2009.

Second, owners have the incentive to build well. The government as owner has to ensure that its agents are properly overseen, so the appropriate agency should specify how other government entities should build. The government as owner could

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build well, and this is more likely when its officials do their jobs well—but it ultimately rests on oversight by the public and a responsive political system. Private owners, however, need information (about the hazards, the materials’ characteristics, and so on), not necessarily compulsion, which may be harmful when the rules are difficult to enforce. A government entity already has and collects information about hazards that could be made easily accessible. Insufficient funds to print, or security concerns, are excuses that rarely withstand scrutiny. Third, “limited human and institutional capabilities” and corruption in poor countries

can be weak excuses: better construction is possible both for government structures and for vernacular dwellings that many build without the benefit of engineers or architects. But more funds may be needed to improve the quality of education and research in local universities. Such research could be usefully extended to testing the strength of nonengineered materials widely used in vernacular buildings. Better structures follow, even in areas with low literacy and daunting logistics, when both information and incentives work in tandem. What people do individually is entwined with what is done collectively—the subject

of the next chapter. How well individuals do for themselves, given their environment, is not the same as how satisfactory the environment is—often a result of many individual actions put together. Jakarta illustrates this interconnectedness and the greater importance and

challenge in collective decisions (Financial Times 2009). After doubling its population between 1980 and 2005, the already flood-prone Greater Jakarta still attracts a quarter of a million new residents every year. Residents of the Kamal Muara district have to raise their houses because the ground is sinking. The ground level is falling with the water table because industrial estates and other commercial enterprises without reliable piped water supply extract fresh groundwater from borewells hundreds of meters deep. Northern parts of Jakarta are predicted to be four to five meters below sea level within 20 years, and simulations show that floods would affect up to 5 million people. Essential for prevention is collective government action, the subject of the next chapter.

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Spotlight 3 on Haiti Preventing Haiti’s horrors

The earthquake that struck Haiti in January 2010 was devastating: a third of its 9 million people were directly affected, a million lost their homes, and more than 200,000 lost their lives. Government officials struggle to respond in the aftermath of destroyed buildings, hospitals, schools—even the President’s palace. The world has shown commendable concern: donations flooded into charities, the United States military, along with Canada and France, organized logistics for relief and recovery, and other governments are acting bilaterally and through multilateral agencies. Haiti and its development partners are determined to look ahead, not back. But the

lessons of the past are useful for the future, and this spotlight mainly examines the 2008 hurricanes because distance provides a better perspective. The death and destruction in the recent earthquake was far greater than in 2008, yet many of the underlying issues are the same.

Haiti’s 2008 hurricanes

Not since 1944 did so many hurricanes affect Haiti in such quick succession: while each of the four 2008 storms and hurricanes (Fay, Gustav, Hanna, and Ike from August 16 to September 8) may have caused some damage, their cumulative effect was devastating. Although Hanna did not make landfall, its unexpected turn to the south brought more rain to already saturated ground (spotlight map 1). Mud slid down hills, rivers swelled with water and sediment, and the Category 4 Ike that followed delivered the coup de grâce.

Spotlight map 1 Storm paths through Haiti in 2008

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Source: NOAA.

Disparate destruction

The human toll was high: 793 dead, 548 injured, 310 missing.1 More people were affected, though fewer died than after Hurricane Jeanne in 2004, when mud flows at night caught many sleeping. People were better prepared and more alert in 2008. But as with the comparison with California’s earthquakes, fatalities are far greater in Haiti than in neighboring Dominican Republic or Cuba, exposed to many of the same hurricanes (spotlight table 1).

Spotlight table 1 More killed by hurricanes in Haiti than in neighboring Cuba and Dominican Republic

Haiti Dominican Republic Cuba

2002 65 3 6 2003 88 18 2004 5,422 773 4 2005 88 12 20 2006 16 2 2007 163 175 1 2008 698 13 7

Source: EM-DAT.

Artibonite, with 13.4 percent of Haiti’s population, is one of the more vulnerable regions, a low lying fertile delta where four watercourses empty into the sea.2 Artibonite grows 80 percent of Haiti’s rice, and three-quarters of the cultivated areas are on hillsides with terraced fields. (80 percent of the area has steep slopes.) Haiti’s hills have been denuded of trees, and heavy rains wash mud from the deforested hills and terraced slopes, carrying rock and debris into Artibonite’s port and capital, Gonaïves (spotlight figure 1).

Spotlight figure 1 An aerial view of floods caused by Tropical Storm Hanna in Gonaïves

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Source: Reuters http://www.alertnet.org/thenews/photoalbum/1220614932.htm.

Deluge, drainage, or deforestation?

Soil fertility in the uplands is rapidly declining, reportedly at 0.5 to 1.2 percent a year. About 3 centimeters of fertile top soil have been washed away over the last four decades, and settling silt enriches the low lying delta attracting people to cultivate rice —and exposing them to mud flows during heavy rains. So a heavy deluge, poor drainage, and deforested hills all contribute to the disaster. Soil erosion and deforestation have continued unchecked for decades. The island

Hispaniola was almost entirely forested when Columbus arrived, but timber began to be stripped from Haiti’s third of the island starting in the mid-19th century. Forests covered 60 percent of Haiti as recently as 1920, but only 1 percent is left (Diamond 2005). The remaining two-thirds of the island—the Dominican Republic—is visibly greener with 28 percent still covered in forests: more rainfall and lower population density help (spotlight figure 2). Wangari Maathai, before winning the Nobel Peace Prize in 2004, wrote after flying over the island (Maathai 2007, pp. 228–29):

“As I looked down, I realized that I had never seen a country so devastated. People were cultivating crops on the tops of hills, and nearly every tree had been cut down. It looked like someone had taken a razor blade to the land and shaved it bare. When the rains came, the soil just washed away.”

Spotlight figure 2 The visible border between Haiti and the Dominican Republic

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http://www.alertnet.org/thenews/photoalbum/1220614932.htm

Source: National Geographic.

Deforestation: Symptom or cause?

International assistance has sought to improve peoples’ plight through government spending, but Haiti’s government struggles to balance its budget and to deliver many public services such as schooling. Tax revenues were under 11 percent of GDP, while government spending exceeded 18 percent.3 Building more schools versus planting more trees is a false tradeoff that begs the question of why hills are denuded. Is deforestation the cause or a symptom of a deeper problem? Maathai (2007, pp. 228–29) describes her unsuccessful attempt to help Haiti’s nascent environmental movement:

“In 2000, two Haitian women supported by GROOTS International came to Kenya to learn about the Green Belt Movement. When they returned to Haiti, however, they were unsuccessful in establishing an initiative. When, in September 2004, I heard the news that Hurricane Ivan and Jeanne had together caused the deaths of more than three thousand people in Haiti through landslides and floods, I thought immediately of what I had seen a decade earlier.”

Charcoal, a popular fuel, is made from wood, and the damage to trees is exacerbated by livestock grazing and trampling on vegetation and saplings. Economists are quick to diagnose “the problem of the commons,” where each has the incentive to over-exploit commonly owned resources. Haiti’s land titles may have shortcomings (not being able to borrow with land as collateral), but the law allows the landowner to seize livestock found grazing on his property. If the law is not flawed, enforcement is often thought to be so, though neither may be at fault.

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Only thriving communities can ensure that trees are not thoughtlessly felled and that saplings planted will grow. Even if the interest of uplanders who cut the trees may diverge from lowlanders who get the mud flows, communities bridge these differences and manage the fair use of the commons. Elinor Ostrom, whom the 2009 Nobel Prize Committee honored for her insights into how communities share common pool resources, describes how such arrangements develop, be they to share the use of pastures, fisheries, forests or irrigation systems (Ostrom 1990). Such studies in Haiti find that communities suffered from decades of misrule; and replacing local leaders killed or silenced is not easy even with the help of international environmental activists.4

Having freed itself of colonial rule and abolished slavery in the early 19th century, Haiti withered under the Duvalier family from 1957 to 1986. Both François “Papa Doc” Duvalier and his son and successor Jean-Claude or “Baby Doc” were presidents for life who ruled with the help of the Tonton Macoute, a brutal band unpaid except for what they got through extortion and looting.5 By 1961 the Tontons were more powerful than the army and feared by the people: they arrested, tortured, and murdered those they considered troublesome and specifically targeted social and community activists—precisely those who also constitute the backbone of civic institutions. Rebuilding these institutions is difficult, especially when armed predatory gangs still roam the countryside forming uneasy alliances with different political factions and criminal gangs, many with a Macoute past. More recently, Aristide’s election was a beacon of democratic hope after the Duvalier regime—until he was forced out of power.

The way ahead: Rebuild, reforest, or resettle?

Before the January 2010 earthquake, international donors were helping Haiti’s government integrate vulnerability reduction measures into national strategy documents and to ensure the implementing of these measures. A multisectoral committee for land use planning was established in the Prime Minister’s Office to provide strategic guidance for future preventive investments. A vulnerability reduction cell was established in the Ministry of Planning and External Cooperation to ensure the integration of these preventive investments. And plans were under way to strengthen line ministries and the local authorities as well. Among international actors, there was growing consensus to rethink and integrate vulnerability reduction measures in their programs. This consensus is now driving Haiti’s subsequent recovery and reconstruction strategy. The earthquake has shattered any illusions of quick progress, and the immense

challenges are now being used to marshal international support. The prospects of massive aid create expectations that may be difficult to meet. Donors, coming

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forward with considerable goodwill, are looking past relief for a development strategy. Such a strategy should come from the government and reflect the wishes of the people; but newspapers report frustrated Haitians asking the United States or the United Nations to explicitly take over the government’s responsibilities. None is keen to grasp this nettle, though many are generous with aid, advice, and offers to rebuild. Rebuilding bridges and buildings to ameliorate effects of future disasters—promise high rates of return, enabling foreign donors to fund reconstruction. But Paul Collier (2009, p. 9) warns about “unrealistic donor behavior”:

“At the heart of the maintenance problem is the past behaviour of donors. Donors have structured their activities so as to deliver ‘projects,’ a procedure for which the construction of infrastructure is well suited: a road can be built by a donor and handed to the government. If over the decade the road falls apart due to lack of maintenance, then eventually the same donor, or another one, rebuilds it. Not only does this approach delink the capital budget from the recurrent budget, but inadvertently it destroys the incentive for the government to provide maintenance. It is a donor responsibility to ensure that any construction of infrastructure is supported by a credible process for its maintenance. Currently such a system is in its infancy as a result of a rudimentary Road Fund (Fonds d’Entretien Routier). However, at present this is a further example of unrealistic donor behaviour. First, there is no effective system to ensure that the Fund actually receives revenue, (e.g. the supposedly automatic earmarking of revenue is not operative). Second, there is no link from construction to revenue so that as more roads get constructed whatever is provided for maintenance will simply be spread more thinly.”

Collier proposes promoting reforestation by establishing clear land rights for new mango-planting, regulating the commercial use of charcoal, and introducing a subsidy for gas bombs, though they may be less effective than they appear: regulations on charcoal use may be no easier to enforce than other widely flouted laws. Worse, the black market that will likely emerge could be detrimental to both honest government and the environment. Also, environmental experts warn that trees may not take root where the topsoil has already been washed away. So despite good intentions, such centralized attempts at development may be no more likely to succeed than previous ones. As Ostrom observes:

“International donors and nongovernmental organizations, as well as national governments and charities have often acted, under the banner of environmental conservation, in a way that has unwittingly destroyed the very social capital—shared relationships, norms, knowledge and understanding—that has been used by resource users to sustain the productivity of natural capital over the ages. The effort to preserve biodiversity should not lead to the destruction of institutional diversity. We have yet to recognize how wide the diversity of rules groups has devised through the ages to work to protect the resources on which they rely. These institutions are most in jeopardy when central government officials assume they do not exist (or are not effective) simply because the government has not put them in place.”6

Ostrom’s work underscores the importance of good institutions and ways in which communities could improve their functioning. People in particularly vulnerable areas of

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a large country often move elsewhere: many residents of New Orleans resettled in other areas of the United States after Hurricane Katrina. But those in Haiti have nowhere to go except abroad, and crossing international boundaries is extremely difficult.7 Even so, Haitians abroad have alleviated their suffering by sending remittances that averaged 20 percent of GDP (roughly 4 times grants from donors) between 2006 and 2008. Donors are responding to victims’ obvious plight, and while they are doing much, it

is equally important to recognize where their attempts may fall short. Haiti’s prosperity ultimately depends on rebuilding the trust and social capital that was lost even before the earthquakes and hurricanes struck. It would be unfortunate if shortcuts to hasten reconstruction were allowed to trump the slower restoration of trust in government and society. This report’s chapters emphasize that measures to preventing death and destruction are possible, but effective government spending requires Haiti’s people to participate and oversee all aspects of such measures.

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