John W. Morris
individual projects in the minds of the people of the country and, of course, the
Congress.
Before I start this, I would like to make it clear that I am not against benefit-cost
ratios, and I am certainly not advocating their abandonment.
recent years I have gradually but surely reached the conclusion that as valuable
as the benefit-cost ratio may be, it has become an over-used and misused tool.
Its value in establishing investment priorities has been weakened because few
people really understand the details of deriving the benefit-cost ratio. It is a target for
attack by those who oppose the project...a target not only because of the arithmetic on
which it is based, but also as the symbol of indifference to environmental and other
non-computable costs and benefits.
Further, history has proven time and again that economic analyses are so
ultraconservative that the costs are invariably on the high side and the benefits; without
exception, on the low side.
Last year's flood damage prevention record of .4 billion, compared to total
historical federal expenditures for our flood control program of .2 billion, supports
the view that we've been conservative overall in estimating the benefits which will be
achieved by our projects. Incidentally, that .2 billion expenditure figure includes
all design, construction, and operation and maintenance costs incurred through fiscal
year 1979.
The authorizing document for the St. Louis, MO, local flood protection project
was 1.07 to 1. The project, essentially complete in 1975, cost .3 million. Through
1978 the project had prevented 2.5 million, in damages over three times the cost
of the project.
Additionally, the benefit-cost ratio has led us to make some very serious mistakes.
Perhaps I am too hard on the benefit-cost ratio and should be speaking more about its
philosophy. Today, every functional element of a project has to be individually
supported economically and the last added increment must return greater benefits than
its cost. This latter view has frequently caused the head of navigation to be immediately
downstream from major man-made or natural obstacles, thereby assuring that any
extension of the waterway must first overcome a major cost.
In another case, our economic analyses have forced us to define projects too
In the Missouri River, the Pick Sloan Plan is really six separate projects
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