The primary objective of the book is to illustrate the use of welfare economics for examining costs and benefits of resource conflicts arising from the use of water to produce hydropower. The book begins with an introductory chapter that organizes lessons to be learned from the subsequent chapters. What follows are eight standalone papers written by environmental/resource economists from Europe and the United States. The chapters include discussions of a number of very focused, specific methodological issues, as well as, several more broadly based analyses. The papers were originally presented at a workshop in 2009. This is the likely explanation for the combination of both a great deal of overlap among certain chapters, as well as gaps in the coverage of other aspects of the problem being studied.
Chapter 2 by Nick Hanley provides a useful overview of the workings of the European Union's Water Framework Directive and the types of information required to assess improvements in water quality. The discussions in sections 3 and 4 (measuring benefits and problems that arise when undertaking cost-benefit analyses of water quality improvements) will be helpful to future researchers wanting to undertake original survey work to obtain the willingness to pay for improving water quality. A discussion of and/or linkage to potential conflicts pertaining to water quality and hydro-power development would have better linked the key lessons from benefit estimation issues to the stated focus of the book.
In Chapter 3, John Loomis looks at what is arguably the most important negative consequence of the siting of hydro-power operations: the downstream impacts of dams upon the flow of rivers and the implications for aquatic life. In particular, he presents a very interesting case study using micro meta-analysis to examine the (largely) recreational fishing benefits association with the removal of dams. This chapter contains much useful information both for practitioners of non-market valuation studies and for policy analysts wanting to understand better the limitations of these methods. Like Hanley, Loomis discusses the important use of benefit transfer methodologies. Given the potential important role of benefit transfer, this topic might have merited its own standalone chapter.
Chapter 4, written by Per-Olov Johansson and Bengt Kristrm, is a departure from the specific and partial equilibrium analysis approach of the previous two chapters. The authors develop a general equilibrium model to examine a very specific case study. It is a reduction in the amount of power generation provided by foreign owned companies that generates a positive externality for the small economy in which the generation takes place. This model is then used to assess a real-world situation in Sweden. Like the previous two chapters, this paper describes a particular non-market preference elicitation survey tool that has been used to obtain benefit estimates. In addition, the general equilibrium rule derived for undertaking welfare valuations is potentially adaptable for different situations. The discussion of appropriate choice of discount rate is particularly useful to all researchers wishing to do cost-benefit analysis.
A student who was interested in undertaking some type of benefit estimation would find much useful information from a comparison of the first three chapters. The insights from different surveys could be supplemented with the material presented in Chapter 5, authored by Bo Ranneby and Jun Yu. They present details of alternative forms of interval estimation. While the technical work is well described and will be of use to researchers, the chapter does not make a connection to the key focus of the book (benefits-costs from hydropower conflicts). A useful addition to this chapter would have been a categorization of specific types of problems that might be associated with calculating benefits associated with either water quality changes or water quantity changes as related to hydro-power projects.
The first chapter written by Finn Frsund (Chapter 6) looks at issues around price formation and electricity production within a two-country trading model. This approach broadens out the discussion to include models of (optimal) social planning behaviour and allows for a comparison of isolationist and trade situations. The discussion is limited to an analysis of existing capacity and does not look at investment in production expansion, which presumably would bring hydro-power into new conflicts with other uses of resources. In addition, some of the more interesting features that make hydro-power unique are not included in the model.
In Chapter 7, Finn Frsund and Lennart Hjalmarsson also adopt a social planning perspective to look at the role of electricity reserves as a means of balancing power production with the goal being the optimal pricing of hydro-power reserves. They look specifically at the Nordic electricity market to illustrate their model's predictions and provide a discussion of the potential impact of wind power on electricity price levels and variation. These two chapters (6 and 7) contrast with the earlier chapters and help to illustrate the breadth of topics contained under the umbrella of cost-benefit analysis.
John Duffield's paper (Chapter 8) provides a very different perspective on the subject of the cost-benefit analysis of hydro-power conflicts. Specifically, his work is a review of the historical trade-offs between hydro production and the free-flow of rivers in the Western United States. He brings up a very important point. When undertaking cost-benefit analyses of any type of public project, the context specifically the legal and institutional context surrounding the project is important to capture in the analysis. He completes the paper with a series of case studies to illustrate different circumstances and situations. This is an extremely useful literature review of four decades of US experience.
The final chapter (9), written by V. Kerry Smith and Eric Moore, takes a big step away from the other papers by posing the following philosophical problem: does behavioral economics have a role to play in cost-benefit analysis. Behavioral economics a competitor to the standard neoclassical economics approach-incorporates psychological insights to assist a better understanding of the rationality (or irrationality) of consumer choices. It has gained currency in the last few years. Ultimately, they argue that behavioral economics havenothing to offer for practical cost-benefit analyses (p. 187) since the frameworks do not incorporate the necessary trade-off approaches implicit in cost-benefit analysis. While the paper is indeed though-provoking, it makes no explicit reference to some of the specific issues or problems that might be faced by researchers looking into hydro-power. Since this is the last chapter, the reader hoping for insights into the analysis of hydro-power conflicts with the tool of cost-benefit analysis may feel somewhat dissatisfied at the absence of the subject matter. A final chapter focusing explicitly on the stated objective of the paper would have left the reader with a sense of completion and purpose.
While each of the papers are well written and contain material by well-known and respected experts in the field, I find the book as a whole to be somewhat eclectic in its choice of papers. I don't have a sense of overall cohesiveness. I also wonder about the intended audience for the book. While several chapters will serve as very useful teaching tools in upper level courses and/or for students embarking upon theses that deal with hydro-power conflicts, others do not address the issues inherent in these problems.