Economizing Human Responses to Subsidence and Rising Sea Level

Abstract

Potential economic impact and required human adjustments due to land subsidence and rising sea level in low-lying coastal areas are explained in order to help guide public response, and to anticipate the ways in which people will affect and be affected by these problems. A form of benefit-cost analysis to estimate the expected cost of an event in the absence of mitigation is an economic impact assessment. For example, rough estimates of the scale of potential impact of land subsidence and sea-level rise in Bangladesh and Egypt are reported on the basis of inundation scenarios up to the year 2050. Using strong assumptions about economic growth rates, land rent as a segment of the national product, intertemporal discount rate, and rate of inundation, a method is formulated for extending this characterization to an even cruder estimate of potential economic loss. This is a certainty-equivalent value confined to land inundation. Aside from obvious sources of imprecision, it underestimates several important phenomena: lost capital structures, increased exposure to storm damage and interior flooding, and such secondary effects as saline intrusion, crowding and factor reallocation costs. Even so, it is probably an overestimate because it is not based on probability, assumes a linear rate of land loss, and, most importantly, ignores cost reductions arising from human responses. Five economic topics involved in such responses receive special attention. These are: (1) the advantages of incremental responses to gradual change; (2) principles for managing uncertainty; (3) the ‘retrofit’ problem and capital durability; (4) economic discounting of future values; and (5) the nature and implications of common property, spillover, transboundary and informational effects.