THE ECONOMISTS ROLE Ken Claseman Senior Policy Advisor

THE ECONOMIST’S ROLE Ken Claseman Senior Policy Advisor for Economics Office of Water Project Review HQUSACE kenneth. g. claseman@usace. army. mil Building Strong! 1

OBJECTIVES THE STUDENT WILL KNOW: • WHAT ECONOMISTS DO • WHAT THEY NEED TO PERFORM THEIR FUNCTIONS • HOW THEY SHOULD PERFORM THEIR FUNCTIONS Building Strong! 2

WHAT ECONOMISTS DO • INFORM DECISIONMAKING • COMMUNICATE VALUE • PARTICIPATE ON TEAMS • REPRESENT THE AGENCY Building Strong! 3

THE ECONOMIST’S WORLD • • • Demand/Supply Willingness-to-Pay Scarcity Opportunity Costs Decisions at the Margin Building Strong! 4

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 Building Strong! 6

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 Building Strong! 7

SO THE ECONOMIST MUST BE AN. . . • • • Appraiser Survey Specialist Data Processor Statistician Financial Analyst Communicator Building Strong! 8

BUT CAN ECONOMISTS DO IT ALONE? Building Strong! 9

ECONOMISTS REQUIRE INPUTS AND INTERACTION • • LAND USE PLANS PROBABILITIES DISCHARGE STAGES TRAFFIC FORECASTS CHANNEL DIMENSIONS COSTS RESTORATION OUTPUT Building Strong! 10

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 Building Strong! 11

THE STUDY TEAM – TODAY’S COMPLEXITIES REQUIRE TEAM SOLUTIONS. – ALL OF US ARE SMARTER THAN ANY ONE OF US. Building Strong! 12

HOW SHOULD WE DO IT? • Follow the Guidance • Time and Budget Constraints • Objectivity / Avoiding Bias • Documentation Building Strong! 13

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 Building Strong! 14

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. Building Strong! 15

STEP 2: INVENTORY AND 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 Building Strong! 16

STEP 3: ALTERNATIVE PLANS • Management Measures • Alternatives • Programs Economists must participate in formulation process, understand performance of measures to estimate economic impacts. Building Strong! 17

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 Building Strong! 18

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. Building Strong! 19

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 ? Building Strong! 20

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 Building Strong! 21

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? ? ? Building Strong! 22