TheMeasurement ofEconomic Uncertainty in Public Water Resource Development

The existing benefit-cost criteria for evaluating water resource projects are deterministic and therefore incomplete, since the uncertainty inherent in project outcomes is not considered. A Monte-Carlo simulation approach is used to generate a mean and standard deviation for the benefits, costs, benefit-cost ratio, and net present value for the c~nt~ov~rsial Spe~rell Bluff Project. Subjective estimates defining probability dlS~lbutlOns ~fproJect benefits and costs were obtained from the Corps of Engineers. A project selection process that includes probability considerations in the benefit-cost criteria is recommended and several approaches for including uncertainty as a variable are suggested