The wildfires on Maui killed at least 96 people and damaged or destroyed thousands of buildings in the town of Lahaina. While the loss of life is clearly the most tragic, officials estimate that the cost to rebuild will exceed $5 billion. But the full economic cost will likely be far higher, because it will reach deep into the intangible factors that make communities thrive.

After a natural disaster—be it a wildfire like on Maui, or a flood, snowstorm, heat wave, hurricane, or tornado—the physical wreckage is obvious. In contrast, the damage to a region's human capital is invisible, but it is real and persistent, creating a drag on the community's economic growth and development.

Other effects of natural disasters on communities—including on economic growth generally—have been deeply researched for years. But comparatively little is known about how disasters affect human capital, the collective knowledge and skills that drive individual economic mobility and earnings as well as regional economic growth.

New research I led aims to shed light on this topic, by studying the impact of natural disasters on student achievement, high school graduation, and college attendance. We found that the loss in the value of human capital is on par with the cost of damages to buildings and other infrastructure.

My coauthors and I came to this conclusion by collecting data on all Presidential Disaster Declarations from 2008 to 2018. That period included the major floods through the Midwest in 2011, superstorm Sandy in 2012, and the wildfires in California in 2018, as well as hundreds of other floods, tornadoes, ice storms, earthquakes, and more. In fact, over one-third of the counties in the United States were affected by a natural disaster that caused at least $100 per person in property damage during that period.

The declarations for those events include detailed assessments quantifying local property damage. We then looked at how standardized school test scores and other measures of educational attainment (such as graduation rates and college enrollment) changed in regions after the disaster hit. In doing so, we found that large disasters reduced student test scores by about 0.02 standard deviations—or nearly 10 percent of the average annual reading gain for middle school students—and reduced postsecondary enrollment by 2.5 percent.

Read the full article about damage from Maui wildfires by Isaac M. Opper at RAND Corporation.