The long-established human response to floods has not been to flee
them, but to stay put and build walls to keep river water out. The
Babylonians leveed the Euphrates. Ancient Rome did it to the Po.
In the United States, the Army Corps of Engineers has lined the
Mississippi's banks with concrete, with levees longer than the Great
Wall of China, and multiple dams and reservoirs. Parts of the Missouri
have been channeled so tightly by corps projects that environmentalists
consider it a straitjacketed travesty of nature.
The pouring of taxpayer-financed concrete has slowed in recent
years as the weaknesses of structural answers have become more evident.
Not only can dams and levees fail1,083 levees failed during
the 1993 floodbut they can make floods worse by raising water
levels and velocity, increasing pressure on downstream flood control
structures. And to the degree that their presumed protection induces
people and businesses to move onto the floodplain, structural controls
actually create the potential for higher damages when they do fail.
In addition, since a flood control structure in one location will
affect river flow elsewhere, communities often react to a neighboring
town's new dam or levee by building one of their own, in what becomes
a cascading escalation of river armament.
"We are creating more problems when we allow communities to channelize
and to avoid their flood problems by putting levees up," observed
Rep. DuWayne Johnsrud of Wisconsin's 96th District, which includes
many river communities along the Mississippi. "[Because] then [the
flood] blows out somewhere else that doesn't have a levee. ... We
all live downstream from somebody."
Finally, the costs of maintaining structural controls are substantial,
and that maintenance tends to be neglected if floods aren't an imminent
threat. "Once you build them you've got to maintain them, and that's
the problem," said Gale Selken, a South Dakota Department of Environmental
and Natural Resources dam engineer. "Nobody wants to put money into
it when it's dry. They only [complain] when the water's coming."
Despite all these problems, structural solutions are still popular
in the Ninth District:
In July, Grand Forks-East Grand Forks (N.D. - Minn.) began
a $350 million construction project to control flooding with earthen
In late April, Fargo, N.D., engineers proposed a $130 million
flood control proposal, most of it devoted to levees and flood
Downstream city dwellers on the Red River hope that upstream
rural citizens will endorse a major new dam near Lake Traverse,
The contentious debate over a solution to flooding in Watertown,
S.D., involves a choice between one large dam or hundreds of small
ones, but the proposed solutions are still structural.
Structural flood controls have been used in Rochester, Minn.,
and they're the leading contenders for solving the rising tide
of Devils Lake in North Dakota.
Critics of such solutions call dam advocates "water buffaloes"
who throw their weight around to force their projects through, and
they say the corps never met a dam it didn't like. Structure supporters
counter that environmentalists are so extreme they would just as
soon invert the slogan "Damn the torpedoes."
While this debate is inevitably heated, both sides have valid points.
Structural controls are effective, up to a point, in preventing
rivers from inundating protected lands. Most of the levees built
and maintained by the corps did not fail during the 1993 flood,
and they did protect millions of people and billions of dollars
By the same token, those same dams and levees also induced floodplain
development that otherwise would not have been at risk. And they
increased river speed and height, which placed additional force
on dams and levees protecting land and property further downstream.
According to some analyses, in fact, it was only because of unplanned
upstream levee failures during the 1993 flood that St. Louis was
Since dams can both save lives and wreak havoc, deciding whether
to build one demands careful scrutiny. People who stand in the middle
of the dam debate say that there is a definite place for structural
flood control, but only if its wisdom can be clearly demonstrated
in each given application. Dams are neither a panacea nor an unmitigated
evil. To build or not to build is not a simple choice.
The labyrinth of cost-benefit
Cost-benefit analysis is the standard approach used to determine
the advisability of a structural project. Analysts compare the costs
of a project to the benefits that could be reaped. But for economists,
the straightforward idea is far simpler in concept than execution.
Since the benefits are largely hypotheticalwhat will the
dam save if and when there is a flood?a clear market value
isn't readily available. Measuring the benefits of a proposed dam
gets complicated when economists debate whether to use property
damages avoided (PDAthe usual method), contingent valuation
(asking affected people how much the dam is worth to them) or hedonic
price (extrapolating from property prices of comparable land already
protected from floods). The PDA approach is straightforward, but
economists are not of like mind as to its superiority.
Another area of cost-benefit controversy is deciding on the right
discount rateessentially an inverted interest rateto
use in calculating the current value of future benefits and costs.
To estimate a project's value, an analyst needs to add up its costs
and benefits over a chosen time period, 50 years perhaps. Project
costs and benefits are incurred at different points in timecosts
are often up-front and benefits accrue laterbut decisions
to undertake the project must be made in the present. So analysts
need to think about the present value of each cost and benefit.
Given that a dollar spent on a project now could have been otherwise
invested, determining its value in the present requires an inverse
interest rate, a discount rate, which says, for example, that $100
worth of benefit one year down the road is worth $90.91 in the present,
using a 10 percent discount rate.
But the choice of a discount rate is somewhat arbitrary: Is the
proper discount rate high, low or does it vary over time? "We write
books on the subject of the proper discount rate," observed University
of Minnesota economist Steven Taff. "The state [of Minnesota] uses
8 percent. The Feds have generally used a much lower number, 3 percent,
4 percent." The choice makes a huge difference to the outcome of
an analysis, with low rates tending to boost the estimated value
of long-run benefits, and critics have accused the corps of using
rates that exaggerate project benefits.
A more contentious issue in cost-benefit analysis is "scoping"that
is, who and what is included in the analysis? "Who counts? Where
do they count? How long should we consider? What costs and benefits
do we consider?" said Taff. "Drawing a circle around what's going
to be inside and outside the decision framework is the necessary
first step." And as Taff points out, these issues are not strictly
economic. "These are intensely political decisions ... but we can
deal with that in the cost-benefit framework. We can say, 'if you
think that this should count, here's what the costs are'... or,
'these are the people who bear this cost.'"
The task of an economist, therefore, is to clearly spell out the
costs and benefits of different alternatives and clarify the tradeoffs
implicit in any decision on flood control measures.
"When you're building these flood control structures, you're basically
trading off protection [from] low-level floods against much higher
damage when higher level floods come along," said Lester Lave, professor
of economics and finance at Carnegie Mellon University in Pittsburgh.
The structures allow residents to derive value from the protected
land during years of low-level flooding, but when a large flood
occurs "it's going to overtop everything." Since people have built
in the floodplain in the meantime, "the amount of damage is greater
than if you had not built the flood control structure."
From an economist's standpoint, this could be the most efficient
use of resources, said Lave. "In present discounted value," he said,
it could well be "more valuable to get the high-value use out of
the land and then have the [homes and buildings] destroyed than
to keep the land in very low-level use."
The same argument applies to rural vs. urban flooding. "If we're
narrow-minded economists and put on our efficiency hat," said Lave,
"we say, 'Great, that's the efficient solution: Flood all this cropland
and lose pennies rather than flooding the urban area and lose dollars.'"
But of course, there are other considerations. "From an efficiency
standpoint, I think that's right," Lave said. "But when you look
at it from an equity standpoint, the farms and these other areas
say, 'What the hell are you guys doing? We're not benefiting from
that city center. Why are you causing all these problems for us?'"
It is usually in examining such tradeoffs that the seemingly technical
cost-benefit analysis breaks down. An economically rational choice
will be deemed socially unwise or unpalatable to some decision-makers.
What is economically efficient might not be seen as politically
Indeed, some benefit-cost analyses have been skewed to arrive
at the desired outcome, be it support or defeat of any given project.
Lave chaired a 2001 National Academy of Sciences review of a corps
cost-benefit analysis of its proposed Upper Mississippi lock-and-dam
expansion project. Both the NAS assessment and an internal Army
review found the corps analysis was highly flawed. The U.S. Office
of Special Counsel determined that it had been "manipulated ...
in order to justify the expensive extension."
Congressional critics of the corps have called for independent
review of all major corps cost-benefit analyses in the future and
the exclusion of private benefits from these analyses. They're also
pushing for the use of a 1.5 ratio of benefits to costs as the standard
for proceeding with a project (rather than 1.0), arguing that taxpayers
should expect to receive better than break-even benefits from their
The corps says it is already subject to sufficient scrutiny and
not inherently biased toward massive concrete flood control. And
local corps staff point to their Red River Basin project, which
would combine wetlands water storage with structural control, as
an example of their push toward nonstructural solutions.
"Historically, corpswide, there may be some justification" for
criticism of the corps for overemphasis on structure, said David
Loss, an engineer in the corps' St. Paul office. "But I think the
direction the corps is taking right now in fact is very much emphasizing
looking at nonstructural alternatives."
Whatever the pros and cons of dams and levees, and regardless
of corps biases, its clout has been only slightly blunted by recent
attacks on its reputation. When the Bush administration tried to
cut the corps budget by 14 percent this year, its congressional
supporters promptly replaced the missing funds.
While the distribution of funds to structural flood control will
remain a largely political decision, economists point out that shifting
the costs and responsibilities for dam-building to local entities
would tend to prevent misallocation.
"You have to be very careful with whether the benefit-cost analyses
[of structural flood controls] are being done honestly," noted Lave.
"And I think that one way of certainly doing that is to have more
That is, if local communities are required to pay a greater portion
of flood control costs, they'll consider more carefully what truly
is needed, what will actually protect local assets over the long
term and whether other alternatives might prove to be a better investment.
Academic studies have indeed found that the size of flood control
projects chosen by legislators varies inversely with the local cost
share. But whether policymakers will be willing to curb federal
subsidization of structural flood control remains an open question.