Recovery from Earthquake Disasters: Turning devastation into creative destruction

Introduction

On the first day of 2024, a powerful, 7.6 magnitude earthquake took place with its epicenter close to the Noto Peninsula in north-central Japan, claiming many lives. Relocated people are still living in shelter facilities with the bare minimum protection against the winter cold, while emergency rescue and relief efforts are ongoing. To help pave the way for recovery from the Noto Peninsula Earthquake, I would like to once again look back at the situation following the Great East Japan Earthquake, which occurred 13 years ago, review how the areas devastated by that earthquake have recovered from the perspective of economics and spatial information science, and discuss the challenges that remain unresolved and the outlook on the future of the devastated areas. While the loss of lives caused by the disaster cannot be undone and the grief of bereaved relatives is unimaginable, I would like to step back and consider measures to achieve recovery in the true sense of the word.

How Economics Understands Post-Disaster Economic Dynamics

A consensus has been reached among economists that the benefits of national and regional economic growth trickle down throughout society, contributing to the improvement of overall living standards (e.g., Dollar and Kraay, 2002; Dollar, Kleineberg and Kraay, 2016; Ravallion, 1995). First,let us consider what economic path disaster-ridden areas should take on the assumption that economic growth is essential to the improvement of living standards. A country's (or region's) economic size can be expressed as the equivalent of the sum of human capital, physical capital, and total factor productivity, which indicates its level of technological advancement. Under that equation, even if the economy is hurt by a natural disaster like the Great East Japan Earthquake or war —- that is, if damage is caused to physical and human capital —- the economy will later return to normal as a result of capital re-accumulation as long as the level of technological advancement remains unchanged. That has been the common view among the proponents of neoclassical economic growth theory (e.g., Barro and Sala-i-Martin, 1992). However, due to the dissemination of broad sets of verifiable statistics and the rise of empirical analysis that utilizes the approach of identifying causal effects, the view has emerged that it is important to verify the validity of the results predicted by that growth theory through empirical research. Among the sceptics of neoclassical economic growth theory, one school argues that a post-disaster economy becomes more stagnant compared with the situation before the disaster because of the "poverty trap" (Azariadis and Drazen, 1990; Sachs, 2005; World Bank, 2003), which refers to a lack of economic growth due to continuous low investment in physical and human capital. Another school asserts that post-disaster economies should achieve recovery beyond their pre-disaster levels as a result of increased levels of technological advancement due to greater introduction and more widespread use of innovative investments and knowhow spurred by such destruction (Aghion and Howitt, 1992). In recent years, an increasing number of empirical studies have supported the latter school's theory -- that is, the creative destruction theory -- based on sets of nighttime satellite images of artificial urban lighting (each representing an area of approximately 1 km2), which serve as an indicator of national economic activity because of the strong correlation between the brightness levels of nighttime light and economic activity, in addition to data collected at the macro and microeconomic levels (e.g.,Yamada, 2023; Yamada and Yamada, 2021).

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