Wednesday, May 4, 2011

Opportunity Costs & Trade-Offs

The Corps of Engineers’ demolition of a levee to relieve pressure and save the town of Cairo, Illinois but at the expense of farmers in Mississippi County, Missouri offers some great possibilities to review some of the most basic concepts.  You can find The Wall Street Journal's version here with a slide-show, video and interactive graphics. But you can also find the story just about anywhere on most news sites.

According to the stories, there was a choice to be made. If nothing was done, the water could break through the levee at Cairo and put much of the town under 20+ feet of water. Or the Corps could blow a hole in the levee on the Missouri side of the River. This would save the town but flood farmland, farmland that was already planted. 

One can examine the potential for economic losses (damage and lost business in the city vs. damage and lost crop revenue), but there are additional questions. What about the impact on commodity prices?  These prices are already climbing.  One story I heard hinted that the planted crops are a total loss and after the flood waters recede and the fields dry out it may be too late to plant a second crop?  And there are now stories about the farmers being eligible for disaster relief.  How does the relief to the farmers compare to the relief payments that would be made to the residents of Cairo?  Would any of these qualify as “unintended consequences”? My inclination would be to say “yes” regarding the impact on commodity prices, but “no” to the disaster relief question.

What about political questions?  How many voters would be affected on the Illinois side vs. the number of voters affected on the Missouri side?  I don’t want to believe that was part of the calculation, but it does spring to mind.

Anyway, leaving the political issue out of the question, how do you see this story being used in the classroom, if at all?

No comments: