A Conversation with Headwaters Economics

In the recent report, Using Economics to Support Climate Adaptation, Headwaters Economics discusses how to make a case for climate adaptation planning through economic methods. As an independent, nonprofit research group Headwaters Economics provides research to help people and organizations develop solutions to some of the most urgent and important issues that communities face. This week, we caught up with ASAP Member Megan Lawson to discuss the report and applications to adaptation professionals’ work. 

ASAP: We often talk about adaptation work being multidisciplinary. Do you think using an economic analysis framework for this work will bring new collaborators or disciplines into a community’s adaptation work?

Megan: Yes, economists can and should be playing a bigger role in supporting community adaptation efforts. And by engaging economists in this work, we can appeal to broader set of local stakeholders. Making the economic case for adaptation can open doors for local collaboration with influential groups like elected officials, department heads, and business leaders. For example, this report highlights the successful application of economic arguments in some relatively conservative communities, such as the small community of Warren, Minnesota, where economics was used to demonstrate cost savings from adaptation efforts. 

ASAP: How “off the shelf” are the tools recommended in the report? Do you expect that communities will be able to jump right into these recommendations or need to build up new internal capacities?

Megan: Some of the recommended strategies can be pursued immediately with the help of city engineers, GIS staff, or university and nonprofit partners who can provide data or required expertise.

Two of the strategies we discuss need little additional training: departmental budget and strategic analysis, and understanding economic context. The first requires working with departmental leadership to understand budgeting and strategic planning processes, then thinking creatively to see how adaptation projects can help department leadership meet their goals on their timeline. The second strategy—providing economic context—involves understanding a community’s economic strengths including trends in population, employment, education, and types of industries that support the economy. These data are publicly available from several sites, including the Economic Profile System on our website.  

Another accessible strategy —equity analysis—evaluates how programs will affect underserved individuals and neighborhoods. Headwaters Economics, PolicyLink, and other nonprofits and federal agencies have found creative new ways to share data on potentially vulnerable populations. Neighborhoods at Risk is a free tool created by Headwaters Economics that will be available to every community in the country this summer.

ASAP: Cost benefit analysis that includes calculating avoided losses have, historically, been difficult to develop. What have you seen change in recent years to make this approach more possible? 

Megan: It is true that a cost-benefit analysis can be complex, time-consuming, and expensive. However, an original, in-depth cost-benefit analysis for your community’s project may not be necessary. Examples of similar projects in similar communities can be almost as compelling as an original analysis, and as more analyses have been developed for a range of communities and projects, it is easier to find relevant examples. Our report highlights interesting examples of cost benefit studies from Buffalo, New York; Miami-Dade County, Florida; and San Antonio, Texas.

ASAP: What one or two lessons that you learned from this work really stand out for you on how communities can accelerate their adaptation work through using economic analysis? 

Megan: The number one lesson is the importance of strategic communication. In our interviews, the people who were incorporating economics effectively were doing so with a keen awareness of their audience—those who needed to support or advance a program—and developed information that would be useful for that audience. Clearly communicated and relevant information were more important than complicated analyses that were difficult to explain. 

ASAP: What was most surprising to you as you conducted this research?

Megan: The biggest surprise was how consistently communication and recognizing people’s immediate needs and interests came up during interviews. For example, Dayton, Ohio, needed to reinforce levees to prevent contamination of drinking water sources—an expensive project that might not provide tangible benefits until far in the future. The city needed to persuade ratepayers. City staff wisely focused on two kinds of economic benefits: avoided costs of water treatment that result from building protective infrastructure, and avoided health costs that result from keeping contaminated flood water out of wells. While infrastructure alone may not generate interest and support, health and clean water certainly do. Time and again, we see that strategic use of economics has the power to persuade.

The recommendations from Headwaters Economics are especially timely as a potential antidote to ICMA’s recently released Disaster Resilience & Recovery Survey. The survey results found that of 901 responding municipalities only 31% current have resilience or sustainability plan. This is despite the fact that nearly 55% of respondents “experienced experienced a disaster in the last five years that resulted in a federally declared disaster”? Maybe if we can begin to deployment the kind of economic assessments that Headwaters Economics suggest we can increase the resilience plans and decrease the disasters.