Monday, February 28, 2011

A regulation story

While the Fraser Institute and its clones plot to restore laissez-faire capitalism devoid of government regulation, let us consider the experiences of Christchurch and decide if deregulation is what we need.

From the New Zealand Herald:
"Prime Minister John Key said today Treasury's early estimate of the damage caused by last week's 6.3-magnitude quake was between $10 to $15 billion - two to three times the $5b estimated cost of September's 7.1-magnitude quake and 7 to 8 per cent of the GDP, compared to Hurricane Katrina's one per cent impact on the US economy."
One of the most widespread forms of government regulation is building code enforcement, a subject of particular importance to areas with major earthquake risks. Although Christchurch was perceived to have had only medium exposure, its requirements for earthquake designs had been regularly updated, with the most recent change in 2008. Overall standards were high.

Until fairly recently, scientists believed that earthquakes would not produce ground accelerations greater than about 0.5G. However, while the Christchurch quake rated as magnitude 6.3, ground accelerations were as strong as 2.0G. For comparison, the devastation in unregulated Haiti was caused by a quake that peaked about 0.5G and a quarter million people died.

Had real estate magnates convinced New Zealand officials that building code regulations were unnecessary, the death toll in Christchurch would have been far above the 240 lives thought to be lost in 2011. Additionally, instead of combined earthquake damages of $20 billion, the economic loss since September might have been incalculable.

When politicians or think tanks claim that no regulations are needed to supervise conduct of business - that market forces and self-regulation provide adequate protection - think about building codes and this report from California:
"There are other buildings in California whose vulnerabilities in quakes are well-known, such as multi-unit condos and apartment buildings with tuck-under parking. They are vulnerable because their first floor lacks a wall that would help keep the building from toppling in a quake, [Susan] Hough [seismologist with the U.S. Geological Survey] said.

"Los Angeles has enacted an ordinance that has required bracing of unreinforced masonry buildings, Hough said. But other municipalities haven’t enacted such requirements. . ."
Risk of injury depends on where one resides in the Los Angeles area and that risk is determined by the quality of regulation.
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