THE ECONOMIST

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THE ECONOMISTS ROLE

• Ken Claseman
• Senior Policy Advisor for Economics
• Office of Water Project Review
• HQUSACE
• kenneth.g.claseman_at_usace.army.mil

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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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THE ECONOMISTS WORLD

• Demand/Supply
• Willingness-to-Pay
• Scarcity
• Opportunity Costs
• Decisions at the Margin

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PRINCIPLES GUIDELINES (1983)

• Intended to ensure proper and consistent planning
  by Federal Agencies
• The Federal Objective is to contribute to
  National Economic Development consistent with
  protecting the environment
• Alternatives are to be systematically formulated
• Planning Criteria Efficiency, Effectiveness,
  Completeness, and Acceptability
• Plan that maximizes net NED benefits is selected
• (unless an exception is granted)
• Discounting is used to make benefits and costs
  comparable
• Separable costs will be assigned to their
  respective purposes

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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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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?
NO!
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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

• TODAYS 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 Plans
• Step 4 - Evaluate Effects of Alternative Plans
• Step 5 - Compare Alternative Plans
• Step 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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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
• PG 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 ?

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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???