Decision Making and Economic Analysis

The ultimate aim of decision-making in flood management should be to minimize loss of life from flooding while maximizing the net benefits derived from flood plains. This can only be realized if decisions are able to create a balance between development demands, environmental conservation and human security. Decision-making in flood management, therefore, is not an isolated exercise. Various aspects and constraints have to be factored. Broadly, they can be categorized into: physical, financial, social, political, legal and environmental aspects.

In order to ensure that limited public resources are allocated efficiently it is essential to make well informed and calculated choices. One prerequisite for making calculated choices is economic analysis. The contribution of economic analysis to decision-making lies in providing a set of tools for the evaluation of the benefits and costs of specific flood management projects in monetary terms so as to enable their comparison and judge the economic viability of the proposed projects. Economic analysis helps to approach not only the optimum level of adjustment to floods on the basis of risk-safety trade-off decisions but also an optimum combination of measures for the purpose.

It is important to underline that economic efficiency is not the only objective of society. After all decision-making in flood management is a political process in which economic analysis has to be contrasted to other aspects including non-quantifiable factors. Nonetheless economic efficiency issues can never be ignored if society is to progress.

The most widely used method of economic analysis is the cost-benefit analysis which examines whether the total benefits of a project, evaluated in terms of money, exceed the costs of utilizing resources.

 


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