I wanted to add a few quick additional comments to Ilan Noy’s reflections on the possible economic implications of the tragedy in Japan.
In assessing the economic consequences, it’s useful to draw a distinction between narrow-swath and wide-swath disasters. In a narrow-swath event like 9/11, the destruction was horrific but was narrowly focused, leaving intact the response infrastructure and allowing immediate access to the impacted areas. In a wide-swath event like Katrina, the nature of the disruption made it very difficult logistically for any emergency or relief operations to function, and returning to some sort of normalcy was a very difficult process.
In the current situation, Japan’s damaged infrastructure includes electricity generation and transportation. Fear of radiation could hamper not just immediate relief efforts, but could profoundly influence all kinds of spending patterns, which I could easily see exerting big effects on demand in addition to the obvious considerations on the supply side. To paraphrase Franklin Roosevelt, the fear itself could cause more economic damage than the physical events themselves, and the physical damage was of course itself quite awesome and frightening.
And here are some quick links to thoughts of others:
Michael Schuman notes the importance of Japan for supplies of electrical components, but does not expect a dramatic economic effect on the rest of the world.
Arnold Kling notes that his theories of the importance of specialization have quite different implications for the macroeconomic effects of a disaster like this one than do more standard aggregate supply-demand models.
Phil Izzo, as usual, has a very useful collection of comments from other observers.
Paul Krugman is skeptical of direct consequences for financial markets.
Tim Duy sees limited overall economic impact, wondering if economists have a “tendency to initially overestimate the potential impact of such events as they believe the economic impacts must somehow reflect the human impact.”
On that last point, I’ve been talking here about the economic impact, that being the primary focus of Econbrowser. But let me emphasize, as I’m sure Tim would as well, that even if the economic implications of these events for the rest of the world turn out to be relatively minor, no one can doubt that we have been watching a the unfolding of a human tragedy of staggering dimensions.