Following up on John's post from earlier on the potential value of beach renourishment projects (and the bad use of benefit cost analysis by policymakers), I sent the following message to one of our outstanding young faculty members (in my opinion of course), Dukie (we don't hold that against her), and bright mind thinking about coastal issues and the interplay between ecological and economic systems, Dr. Sathya Gopalakrishnan:
Sathya...Do you have any idea (rough guess will do) of the welfare gains per dollar spent on renourishment?
Sathya's response:
I haven't seen any estimates of return on nourishment investment.
My back of the envelope calculation based on just the hedonic valuation in NC would be $3 per dollar spent.
For an average ocean front property valued at approx $800000, the semi log hedonic coeff (accounting for endogeneity of width) of 0.11 suggests a value of $8800 per foot of beach width. With the cost of nourishment sand is approx $5 per cubic meter and fixed cost of $1000000. The cost per foot of nourishment per ocean front home would be approx 2300 (assuming costs are distributed across 50 homes along a 1km stretch of the coastline, and a limiting nourishment depth of 10m). That would be $6500 net gain, which is approx a $3 for every dollar spent.
And in good self-promotional fashion:
We used a similar calculation of net benefits in [our] JEEM paper simulations.
Well played Sathya. I'm sure you recognized the influence our blog will have on your readership.
