The Social Value of Hurricane Forecasts

Paper by Renato Molina & Ivan Rudik: “What is the impact and value of hurricane forecasts? We study this question using newly-collected forecast data for major US hurricanes since 2005. We find higher wind speed forecasts increase pre-landfall protective spending, but erroneous under-forecasts increase post-landfall damage and rebuilding expenditures. Our main contribution is a new theoretically-grounded approach for estimating the marginal value of forecast improvements. We find that the average annual improvement reduced total per-hurricane costs, inclusive of unobserved protective spending, by $700,000 per county. Improvements since 2007 reduced costs by 19%, averaging $5 billion per hurricane. This exceeds the annual budget for all federal weather forecasting…(More)”.