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The Measurement of Economic Uncertainty in Public Water Resource Development

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  • Bernard W. Taylor
  • Ronald M. North

Abstract

The existing benefit-cost criteria for evaluating water resource projects are deterministic and therefore incomplete, since the uncertainty inherent in project outcomes is not considered. A Monte-Carlo simulation approach is used to generate a mean and standard deviation for the benefits, costs, benefit-cost ratio, and net present value for the controversial Spewrell Bluff Project. Subjective estimates defining probability distributions of project benefits and costs were obtained from the Corps of Engineers. A project selection process that includes probability considerations in the benefit-cost criteria is recommended and several approaches for including uncertainty as a variable are suggested.

Suggested Citation

  • Bernard W. Taylor & Ronald M. North, 1976. "The Measurement of Economic Uncertainty in Public Water Resource Development," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 58(4_Part_1), pages 636-643.
    • Handle: RePEc:oup:ajagec:v:58:y:1976:i:4_part_1:p:636-643.
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    File URL: http://hdl.handle.net/10.2307/1238806
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    Cited by:

    1. Meyer, Joan K., 1984. "Incentive vs. Conventional Regulation of New Utility Construction," Journal of the Northeastern Agricultural Economics Council, Northeastern Agricultural and Resource Economics Association, vol. 13(1), pages 1-9, April.
    2. Tsur, Yacov, 1988. "The Buffer Role Of Groundwater When Surface Water Supplies Are Uncertain: The Implications For Groundwater Development," Staff Papers 13924, University of Minnesota, Department of Applied Economics.

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