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Building Strong!

THE ECONOMIST’S ROLE

Ken ClasemanSenior Policy Advisor for Economics

Office of Water Project ReviewHQUSACE

kenneth.g.claseman@usace.army.mil

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Building Strong!

OBJECTIVESTHE STUDENT WILL KNOW:

• WHAT ECONOMISTS DO

• WHAT THEY NEED TO PERFORM THEIR FUNCTIONS

• HOW THEY SHOULD PERFORM THEIR FUNCTIONS

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WHAT ECONOMISTS DO

• INFORM DECISIONMAKING

• COMMUNICATE VALUE

• PARTICIPATE ON TEAMS

• REPRESENT THE AGENCY

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• Demand/Supply

• Willingness-to-Pay

• Scarcity

• Opportunity Costs

• Decisions at the Margin

THE ECONOMIST’S WORLD

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Building Strong!

ECONOMICS IN THE USACE• Determines project justification• Helps identify the best Federal Investment• Consistent with economic theory• Integrated with the planning process• Guidance is highly developed

– Principles and Guidelines– ER 1105-2-100– Economic Guidance Memorandums

• Administration Policies affect the scope of Economic Analyses and Formulation

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Building Strong!

SPECIFIC ACTIVITIES• Inventories using sampling / surveys• Identify and Quantify Economic Variables• Forecasts Of Future Conditions• Economic Analysis of Alternatives

– NED Benefits– Develop Economic Costs– Estimate B/C Ratios & Net Benefits– Cost Effectiveness/Incremental Cost Analyses– Trade-off Analysis– RED and OSE

• Empirical Evidence is Essential

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SO THE ECONOMIST MUST BE AN...

• Appraiser

• Survey Specialist

• Data Processor

• Statistician

• Financial Analyst

• Communicator

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BUT CAN ECONOMISTS DO IT ALONE?

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ECONOMISTS REQUIRE INPUTS AND INTERACTION

• LAND USE PLANS

• PROBABILITIES

• DISCHARGE

• STAGES

• TRAFFIC FORECASTS

• CHANNEL DIMENSIONS

• COSTS

• RESTORATION OUTPUT

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WHERE DO WE GET THE INFO?

• Other Team Members• Other Governmental

Agencies• MSCs - HQUSACE – IWR• Communities of Practice• Centers of Expertise• Outside Experts• Surveys and Databases

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THE STUDY TEAM

– TODAY’S COMPLEXITIES REQUIRE TEAM SOLUTIONS.

– ALL OF US ARE SMARTER THAN ANY ONE OF US.

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HOW SHOULD WE DO IT?

• Follow the Guidance

• Time and Budget Constraints

• Objectivity / Avoiding Bias

• Documentation

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6 STEP PLANNING PROCESS

Step 1 - Specify Problems and Opportunities

Step 2 - Inventory and Forecast Conditions

Step 3 - Formulate Alternative PlansStep 4 - Evaluate Effects of

Alternative PlansStep 5 - Compare Alternative PlansStep 6 - Select Recommended Plan

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STEP 1: CONCEPTS

• Problems, Opportunities and Constraints– Economists actively

participate in defining problems, opportunities and constraints.

• Goals and Objectives– Economists use goals and

objectives for evaluation.

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STEP 2: INVENTORYAND FORECAST

• Data collection– Related to problems,

opportunities and objectives

• Define historic and existing conditions

• Forecast– Existing Condition– Future Without Project Condition– Future With Project Conditions

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Building Strong!

STEP 3: ALTERNATIVE PLANS

• Management Measures• Alternatives• Programs

Economists must participate in formulation process, understand performance of measures to estimate economic impacts.

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STEP 4: EVALUATION• Quantify and Describe Effects & Impacts

– National Economic– Environmental, including ecological and cultural – Regional Economic– Social

• Four Evaluation Criteria: Efficiency, Effectiveness, Completeness, Acceptability

• Other Criteria – RED/OSE• Future With Project Conditions

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STEP 5: COMPARISON

• Compare all viable plans• Describe differences

– Contributions to objectives– P&G Evaluation Criteria– Other criteria of importance

• Describe trade-offs– Systematic trade-off analysis

might be required.

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STEP 6: SELECTION

• No Action• NED Plan• NER Plan• Locally Preferred Plan• Combined NED/NER Plan

Economists provide primary input for decision making

IS IT WORTH IT ?IS IT WORTH IT ?

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Building Strong!

OTHER THINGS ECONOMISTS DO• Input to PMPs• Financial Analysis• Life Cycle Cost Studies• Economic Updates• Economic Analysis for:

– DMMPs– Dam Safety– Military Projects

• Budgetary Support

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KEY TAKE AWAYS• Economists communicate value.• Economists help identify best Federal

investment.• Empirical evidence is essential.• Economists are important members of Project

Delivery Teams.• Economists play a significant role throughout

the planning process.

IS IT WORTH IT???