The Case For, or Against, New Orleans
Sometimes one’s choices may involve catastrophic decisions and bear great risk and yet there can be no clear answer. For example, if a person gets a divorce, shutters a plant, sells a losing investment, or closes their business, will he or she be better off? The following case incorporates nearly all of the material you have covered this far and presents an example of one such choice where nearly all of the alternatives have a significant downside risk.
Review the following information from the article “A Cost-Benefit Analysis of the New Orleans Flood Protection System” by Stéphane Hallegatte (2005):
• Hallegatte, an environmentalist, assigns a probability (p) of a Katrina-like hurricane of 1/130 in his cost-benefit analysis for flood protection. However, the levees that protect New Orleans also put other regions at greater risk. You may assume the frequency of other floods is greater than Katrina-like events (Vastag & Rein, 2011).
• The new levees that were built in response to Katrina cost approximately fourteen billion dollars (in 2010). This is in addition to the direct costs of Katrina (eighty-one billion dollars in 2005).
• 50 percent of New Orleans is at or below sea level.
• A 100-year event means that there is a 63 percent chance that such an event will occur within a 100-year period.
• The following are the interested (anchored and/or biased) constituencies:
o Residents of New Orleans—both those that can move and those who cannot move
o Residents of the surrounding floodplains at risk from New Orleans levees
o The Mayor of New Orleans
o The federal government—specifically taxpayers and the Federal Emergency Management Agency (FEMA)
Assume that the availability heuristics makes people more risk averse (populations drop, at least in the short term). Consider how this would affect the local economy.
You are an analyst at FEMA and are in charge of developing a recommendation for both the state and the local governments on whether or not to redevelop New Orleans.
Write a report with your recommendation. Address the following in your report:
• Analyze the economics of New Orleans in light of the above parameters and develop your own Cost-Benefit Analysis (CBA) for rebuilding.
(1. Analysis of New Orleans’ economics is insightful and thorough. It includes a soundly estimated cash flow/CBA with a variety of likely outcomes and several possible scenarios.
(2. All constituencies and their interdependencies are represented.
(3. CBA for rebuilding is thoughtful in regards to scope, resources, and objectives. CBA provides specific, astute details and resources needed to achieve objectives. Research and evidence from the case study are used to support ideas.
• Evaluate the value of the CBA for each constituency and integrate these estimates into a scenario model and/or decision tree. Analyze the results.
(1. Evaluation presents specific, acute benefits of the CBA for each constituency, and each constituency is completely described and insightfully apt to the situation.
(2. Scenario model and/or decision tree completely, concisely, and insightfully integrates the estimates.
(3. Integrates of constituencies is acutely addressed and specific examples of how the decisions are conditional upon each other are thoughtfully presented.
(4. Analysis of the results is specific and provides a scenario model and explains interrelation of constituencies’ decision in detail.
• Clearly each of these constituencies may both overlap and be prey to a variety of group dynamics internally. For one of these options, discuss the decision pitfalls to which they may be susceptible and make a recommendation on how to alleviate these pressures.
(1. Decision problems to which the constituencies may be susceptible are astutely identified and appropriate to situation.
(2. Recommendations are thoughtful and grounded in theory or research.
• Starting with your CBA, estimate the relevant expected utility for the interested constituencies.
(1. Estimation of the relevant expected utility for these parties is thoughtful, proportional to one another, and grounded in insightful evidence.
(2. Estimation clearly reflects and relates to the CBA proposed.
Note: You need not have absolute amounts but your relevant utilities should be proportional to one another.
Hint: If you assume that your total CBA for New Orleans is fixed for each constituency (do not forget the overlaps), then each constituency will have a piece of the utility pie.
• Make a case for or against rebuilding the city of New Orleans. This should be an executive summary; be concise and brief. Include exhibits.
(1. Executive summary insightfully takes a stance on whether to rebuild New Orleans or not.
(2. Specific, astute evidence and research are provided to support ideas.
(3. Stance is reasonable and unbiased.
• Whether you are for or against, discuss how social heuristics could be used to your advantage, both ethically and unethically, in making your case. You may choose to fill the role of one of the constituents, if you prefer.
(1. Discussion of how social heuristics can be used to gain advantage is thoughtful, complete, and provides specific examples to support its ideas.
(2. Ethical and unethical advantages are precisely identified and insightfully discussed.
• Estimate what percentage of the class was for versus against, rebuilding and provide a confidence interval for the estimate.
(1. Estimation is insightful and grounded in evidence from the case study.
(2. Confidence interval is precise, detailed clear, and accurate.
Write an 8–10-page report in Word format. Apply APA standards to citation of sources.
Hallegatte, S. (2006). A cost-benefit analysis of the New Orleans flood protection system. Center for Environmental Sciences and Policy. Stanford University. Retrieved from
Vastag, B., & Rein, L. (2011, May 11). In Louisiana, a choice between two floods. The Washington Post. Retrieved from