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The Measurement of Economic Uncertainty in Public Water Resource Development
Author(s) -
Taylor Bernard W.,
North Ronald M.
Publication year - 1976
Publication title -
american journal of agricultural economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.949
H-Index - 111
eISSN - 1467-8276
pISSN - 0002-9092
DOI - 10.2307/1238806
Subject(s) - resource (disambiguation) , process (computing) , cost–benefit analysis , monte carlo method , net present value , computer science , selection (genetic algorithm) , standard deviation , operations research , environmental economics , risk analysis (engineering) , economics , statistics , production (economics) , engineering , business , mathematics , microeconomics , computer network , ecology , artificial intelligence , biology , operating system
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.