A Cost-Benefit Analysis of the New Orleans Flood Protection System

Stephane Hallegatte

Post-Print from HAL

Abstract: In the early stages of rebuilding New Orleans, a decision has to be made on the level of flood protection the city should implement. Such decisions are usually based on cost-benefit analyses. But in such an analysis, the results are contingent on a number of underlying assumptions and varying these assumptions can lead to different recommendations. Indeed, though a standard first-order analysis rules out category 5 hurricane protection, taking into account climate change and other human-related disruptions of environment, second-order impacts of large-scale disasters, possible changes in the discount rate, risk aversion and damage heterogeneity may make such a hurricane protection a rational investment, even if countervailing risks and moral hazard issues are included in the analysis. These results stress the high sensitivity of the CBA recommendation to several uncertain assumptions, highlight the importance of second-order costs and damage heterogeneity in welfare losses, and show how climate change creates an additional layer of uncertainty in infrastructure design that increases the probability of either under-adaptation (and increased risk) or over-adaptation (and sunk costs).

Keywords: Cost-Benefit analysis; Hurricane risk; New Orleans; Climate change (search for similar items in EconPapers)
Date: 2006-03-01
Note: View the original document on HAL open archive server: https://hal.science/hal-00164628v1
References: Add references at CitEc
Citations: View citations in EconPapers (9)

Published in AEI-Brookings Joint Center. Regulatory Analysis, 2006, pp.06-02

Downloads: (external link)
https://hal.science/hal-00164628v1/document (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-00164628

Access Statistics for this paper

More papers in Post-Print from HAL
Bibliographic data for series maintained by CCSD ().