Criteria for the Selection of Water-Resource Projects

Published Online:https://doi.org/10.1287/opre.4.1.52

Estimates of the cost and gain attributable to water-resourcp projects (e.g., irrigation or flood-control measures) are often used to help winnow out the ones that should be undertaken. This sort of comparison, which is usually called “cost-benefit analysis,” is closely related to systems analysis and operations research, all of these activities pose problems of formulating analyses and devising tests of preferredness. In this connection, three points are discussed and illustrated. (a) With a given water-resource budget, maximization of the present value of net benefits is a better test than the maximization of the conventional benefit-cost ratio. (b) The alternatives that are compared should be water-resource “systems”—each consisting of a proposed project added onto existing watershed features and projects. As new projects are approved and constructed, the other proposals added onto the original watershed features may no longer be the relevant alternatives. (c) The alternatives that are compared should include project-increments, not just huge “lumps.”

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