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The wildfires on the Hawaiian island of Maui have killed at least 99 people. This loss of life is undoubtedly the fire’s most tragic outcome, but with thousands of buildings in the town of Lahaina damaged or destroyed, the rebuilding effort—estimated to cost more than $5 billion—looms large.
According to RAND's Isaac Opper, the full economic cost of rebuilding will likely be far higher. That's because, in addition to decimating buildings and other infrastructure, disasters also destroy human capital, the collective knowledge and skills that drive individual economic earnings, as well as regional economic growth.
The primary way that disasters affect human capital is by disrupting education. Recent research led by Opper shows that school closures and stress and trauma among students lead to prolonged negative impacts: Test scores and college attendance rates drop in the year after a disaster strikes, and there is no evidence they ever rebound. Thus, natural disasters can end up being economic shocks—akin to automation or international trade competition.
“There’s no easy remedy for recovering significant amounts of lost education,” Opper says. “But as our analysis points out, failing to address these more hidden damages is incredibly costly.”
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