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Cooperative Institute for Research to Operations in Hydrology

Why and How to Use Economics to Evaluate Forecasts and Value Their Impacts

Why and How to Use Economics to Evaluate Forecasts and Value Their Impacts

Day 2 Session 1 (10:45PM)

Presenters:

George Van Houtven (RTI)
Daniel Lapidus (RTI)

Forecast systems are designed to improve societal decision-making and outcomes, but measuring and demonstrating the societal benefits of investments in these systems can be challenging. This workshop introduces economic analysis methods and tools that can be used to evaluate and communicate the value of hydrologic forecast systems.

The session focuses on how cost–benefit analysis (CBA)—commonly used to evaluate physical infrastructure investments such as dams and levees—can be extended to assess investments in information-based systems, including hydrologic forecasts. Through examples and guided exercises drawn from flood, drought, and reservoir management applications, participants will learn how forecast-informed decisions can be modeled, quantified, and valued in economic terms.

The workshop highlights how both anticipated and unanticipated benefits of forecast systems can be uncovered and how economic information can be tailored to support decision-making across different audiences.

Workshop Slides

Learning Outcomes:

  • Understand how economic methods are used to evaluate water resource management programs and investments
  • Assess the value of avoided flood- and drought-related impacts and losses
  • Apply value-of-information methods and cost–loss models to evaluate hydrologic forecasts
  • Analyze forecast-based decisions as trade-offs between avoided losses and the costs of protective actions (e.g., evacuations, road closures)
  • Recognize limitations, challenges, and uncertainties associated with economic valuation methods

Prerequisites:

  • Knowledge:
    • No specific technical prerequisites required
    • Intended audience includes water resource researchers and managers interested in understanding how economic methods can be applied to evaluate hydrologic forecast systems
  • Software & Data:
    • None required
    • All materials will be provided as PDFs or printed handouts

Additional Notes:

This workshop aligns with CIROH Research Theme 4, which focuses on applying social science, economics, and impact modeling to strengthen decision support and build community resilience.