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November 24, 2008

Externalities: Wildfires Aren't My Problem

The world is full of examples of important externalities -– non-market economic dependencies –- these days, so it's hard to know where to look. But an unusual one showed up in the San Diego paper over the weekend.

According to analysis of voting results here, a recent ballot initiative went down to defeat in an interesting way. The gist: Intended to bring a more coherent approach to fire protection in San Diego County, the initiative required more than 60% support to pass, and while it got that along the coast, it didn't get that inland. The twist, of course, is that people inland are in fire-prone areas, and people on the coast aren't likely to ever see a wildfire –- and yet there are more of us here and so we pay most of the bill.

Check the following graphic (and click for a larger version) which shows the boundaries of recent wildfires here, as well as the voting splits inside and outside burned zones. Think of it is a catastrophe insurance breakdown, if you will, to bring it back to capital markets issues.

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