Coastal Erosion as a Natural Resource Management Problem: An Economic Perspective

Abstract

Natural forces render the coastal environment an evolving landscape, with the majority of coastline in the U.S. exhibiting net erosion in recent decades. This article provides an interdisciplinary introduction to economic dynamic optimization models for analyzing beach replenishment and explores differences between these theoretically based welfare economic models and typical applications of benefit-cost analysis employed by public agencies and consultants. Welfare economic models conceptualize benefits of beach area as service flows accruing to nearby residential property owners, recreational beach users, and local businesses, while the costs include pecuniary engineering expenditures, opportunity costs, as well as negative impacts on the coastal environment. Combining information on net benefits with an equation representing beach dynamics, this framework is capable of identifying the conditions under which beach replenishment is welfare-enhancing, and an optimal replenishment schedule can be derived. By congressional mandate, applications of benefit-cost analysis employed by public agencies focus attention on storm damage reduction, with limitations placed on assessment of recreational benefits. We provide an overview of empirical results and compare and contrast the two approaches.