Abstract:
This case describes the Corps of Engineers' plan to build a dam and reservoir on the Delaware River for flood control, water supply, recreation, and power generation. Students may be asked to set up a cost--benefit analysis of the project, identify issues that must be resolved, and indicate what additional data are required to complete the analysis. Important issues include: specifying the boundaries of the project, valuing unpriced costs and benefits, identifying alternate projects, and selecting an appropriate discount rate. Special attention may be given to identifying and evaluating the project's uncertain environmental effects. The supplement proposes a pumped storage power generating facility, in combination with the Tocks Island Dam, which introduces a further complication. The preface presents a brief description of the proposed Tocks Island Dam project. It may be used to stimulate a discussion of the general approach an analyst should take in estimating the costs and benefits. Use of the preface is not necessary in teaching the case to students who are knowledgeable about cost--benefit analysis.
Learning Objective:
The case provides opportunities for students to learn to deal with complex scientific and environmental uncertainties in performing cost--benefit analyses, and to explore the uses of different kinds of information.
