The Case For, or Against, New Orleans

Hallegatte, an environmentalist, assigns a probability (p) of a Katrina-like hurricane of 1/130 in his cost-benefit analysis for flood protection. However, the levees that protect New Orleans also put other regions at greater risk. You may assume the frequency of other floods is greater than Katrina-like events (Vastag & Rein, 2011).
The new levees that were built in response to Katrina cost approximately fourteen billion dollars (in 2010). This is in addition to the direct costs of Katrina (eighty-one billion dollars in 2005).
50 percent of New Orleans is at or below sea level.
A 100-year event means that there is a 63 percent chance that such an event will occur within a 100-year period.
The following are the interested (anchored and/or biased) constituencies:
Residents of New Orleans?both those that can move and those who cannot move
Residents of the surrounding floodplains at risk from New Orleans levees
The Mayor of New Orleans
The federal government?specifically taxpayers and the Federal Emergency Management Agency (FEMA)
Assume that the availability heuristics makes people more risk averse (populations drop, at least in the short term). Consider how this would affect the local economy.

You are an analyst at FEMA and are in charge of developing a recommendation for both the state and the local governments on whether or not to redevelop New Orleans.

Analyze the economics of New Orleans in light of the above parameters and develop your own Cost-Benefit Analysis (CBA) for rebuilding.

Evaluate the value of the CBA for each constituency and integrate these estimates into a scenario model and/or decision tree. Analyze the results.

 
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