Friday, June 4, 2010

Breaking news

Here's another local story, just posted at the Star News Online.

Sewage spills into Smith Creek

How does this relate to class topics like cost-benefit analysis and valuation?

How does this story relate to the other local stories in the previous post in terms of the economics?


Wanda Lewis said...

This article shows cost benefit analysis because they were allowing the costs of a sewage spill outweigh th benefits of replacing the line. The old sewage line has already broken three times in two years but they kept putting it off, thinking the benefits of not replacing the line were greater than the costs of replacing it. Now they finally realize that the opporunity cost of not replacing it is too great, and are forced to spend 7 million in repairs.

Jennifer said...

A cost-benefit analysis of sewage system repair and its significance in the preservation of the local ecosystem would require a valuation of the surrounding natural resources in the local environment.

The negative externality of the effects on the Smith Creek and its wildlife inhabitants may cost society more than it would to repair the faulty sewage system.

It would seem the natural resource valuation of the creek, its inhabitants and their part of the local ecosystem would justify repairs after the repeated environmental infractions caused by the insufficiencies of the troubled Ogden interceptor. What do we value?

Thomas Cruz said...

Benefit-cost analysis will determine the value of replacing the pipe, which already has a long history of problems versus continuing to use pumps and temporary lines to bypass parts of the interceptor that are clogged.
Considerations for valuing would be the effects on the local neighborhoods served by this sewer line, property value due to this ongoing problem, the cost associated with clean up each time the line has broken and the environmental effects of this problem that appear to be elevating levels of fecal coliform bacteria in Smith Creek.
Opportunity costs: Is there a better solution to this problem that will bring greater net benefits to the area?
Long term: Is the new pipe going to support growth levels in the area? What might be the environmental impact of this project down the road should this current project not consider growing population rates?

Jacob Stanley said...

All I can say is, Wow. This seems to be the same problem a local river near my home has been facing for the past couple of years. The city decides to save some money by only replacing the parts that need replacing, only when they absolutely need to. They then let other parts of the lines rot and corrode, thinking they still have time to let the other parts work before they need to be replaced. However, should these utility companies be fined or taxed for the accidental pollution, they may end up finding that keeping the working parts in good order is cheaper than running into the accident in the first place.

Joel Garner said...

As wanda and Jennifer hit on the true problem i believe is the cost benefit of replacing the pipe. The true methodology in business is what makes us the most money and can we get by without it. Yes the pipe should have been replaced but truely thier should have been someone outside of the company (local or Government agency) checking this and it could have been prevented. They should have been made to replace the pipe or face shutdown until it is completed. Further if this meant losing jobs for individuals while the repairs were taking place they should have had to pay them too. We must look more at the future and what potential problems we could face.