Intangible value

Not everything that is important can be assigned a dollar value; just as the benefits of mitigating risk do not always add up to monetary values. Intangibles are important to land managers and community members alike, but how are these values, such as protecting biodiversity, taken into account when making land management decisions?

With the 2015 Productivity Commission’s report on natural disaster funding arrangements in Australia finding that there is an over-investment in post-disaster reconstruction and an under-investment in mitigation, the Economics of natural hazards project led by Associate Prof Atakelty Hailu and Dr Veronique Florec at the University of Western Australia has helped natural hazards managers justify the use and allocation of resources for mitigation efforts.

The study has developed two tools that can inform economic analysis relating to natural hazards. 

The Value Tool for Natural Hazards can be used when generating estimates of non-financial benefits and undertaking integrated economic analysis of management options. It allows land managers to assess intangible benefits such as lives saved, health and environmental benefits, and social values. A small prescribed burn might cost a lot of money, and take time and resources, but what the burn protects cannot be measured just by money.

This has enabled South Australia’s Department of Environment and Water to not only take into account the costs of undertaking prescribed burning on private land, but to also effectively measure the benefits to ecosystems, lives and the way of life of people who live in the area.

Previously, these non-market values were not taken into account, underselling the benefits provided by prescribed burning in some areas.

The second tool is the Quick Economic Analysis Tool, which allows you to determine the economic benefits of natural hazard risk mitigation projects, and to compare the relative benefits of different projects.

This tool uses values from sources including the Intangible Values Tool. It can be used to understand the value for money that managers can expect from investing in a single mitigation option, or to compare the relative benefits of a range of mitigation options, including the impacts on tangible (market) and intangible (non-market) values that can be affected by natural hazards. 

This work has benefited other CRC research, with the tool used by a Geoscience Australia team to inform the cost benefit analysis of flood mitigation work in Launceston.