Flooding and Cost-Benefit Analysis in Manville, New Jersey

Thursday March 31, 2016

There’s a story from Manville, New Jersey, about flooding and cost-benefit analysis, and that’s my bag, baby. Here’s the story:

Long story short, The Army Corps of Engineers said no to flood protections for this small town because they don’t pass a cost-benefit test. Cost-benefit analysis was spearheaded in Federal decisionmaking with the 1936 Flood Control Act, which required the Corps to use cost-benefit on potential flood mitigations. So if anyone knows how to do cost-benefit on flood control, it’s the Corps.

Needless to say, the community is up in arms, and there’s a litany of complaints that sound familiar. But here’s a new one.

Criticism of the Corps’ conclusion centered on how the cost-benefit analysis was calculated, the scope of the feasibility study and why other measures were not considered.

Assemblyman Jack Ciattarelli (R-District 16), who represents Manville, said the Corps should have conducted a “sensitivity analysis” to determine the costs of floods that are not included in insurance claims or how lives are impacted.

That’s not what sensitivity analysis does. Sensitivity analysis is used to test how the results would change if the valuations used were incorrect. Of course, valuations used are point estimates, but like most statistical values, have some sort of built-in range. Sensitivity analysis allows us to test those ranges. But it is not a way to include costs that are otherwise not justified for inclusion in the analysis.

Image of the 1948 Manville Flood by USGS Surface Water Photo Gallery / Wikimedia Commons.