The Economics of Wildfire in the United States

Abstract

Wildfire is a natural phenomenon with substantial economic consequences, and its management is complex, dynamic, and rife with incentive problems. This article reviews the contribution of economics to our understanding of wildfire and highlights remaining knowledge gaps. We first summarize economic impacts to illustrate scale and trends. We then focus on wildfire management in three phases: mitigation before fires occur, response during fires, and response after fires. The literature highlights economic interdependencies and spillover effects across fire-prone landscapes as the source of economic inefficiencies and motivation for public institutional response. The literature illustrates the complexity of this problem with its myriad threads, including the trade-offs of living in fire-prone environments, the prospects for using controlled fire and mechanical fuel removal for reducing wildfire severity, the decision-making environment that firefighters face, and the economic consequences of wildfire smoke on health. Economics provides valuable insights, but fundamental questions remain unanswered.