Economics

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Programme Title: Economics - Creating an Economically Resilient New Zealand (CERNZ)

Programme Leader: Dr Garry McDonald (Market Economics)

Programme Overview

This toolbox programme aims to provide economic decision-support tools that enable New Zealand to more effectively and quickly transition to a nation resilient to natural hazards.  These toolsets, which will be operate at multiple scales and for multiple stakeholders will:

  • offer capabilities to simulate economy-wide consequences of infrastructure (horizontal and vertical) failure with and without alternative mitigations/adaptations;
  • extend widely-practiced approaches/conventions to economic decision/policy analysis (benefit-cost analysis) to allow for better appraisal of alternative resilient-building strategies; and
  • identify a set of best-practice risk-sharing and financial interventions to motivate resilience.

Programme Outcomes

Contribution to Challenge Mission: Provides state-of-the-art economic tools to drive resilience by enabling decision-makers to build better business and value cases for, and to assess the potential of, alternative resilience-building initiatives and pathways.

Vision Mātauranga (“VM”) outcome: Co-production of the resilience-based BCA framework will occur under the Rural priority research area in collaboration with the Valuing Resilience Initiatives work-stream and Mātauranga toolbox.  Specifically, Māori businesses will assess alternative resilience-based BCA frameworks to assess farming, forestry and potentially treaty settlement investment options.

10-year outcome: By 2025 New Zealand’s ‘GDP at risk’ as reduced further through resilience-building initiatives. Aggregate measures from multi-capital frameworks, which provide a holistic assessment of resilience, are more widely adopted and utilised.  Resilience measures are now mainstreamed in public and private infrastructure Benefit Cost Analyses.

5-year outcome: By 2020 New Zealand’s ‘GDP at risk’ is reduced through resilience-building initiatives.  The ‘GDP at risk’ measure will be assessed for various events, adaptations, mitigations and so on relative to a carefully constructed counterfactual.

Specific Projects within Programme

1.   Enabling Pathways to Resilience.  This project aims to create the first ever interface between the Multi-hazard toolbox developed in the Resilience challenge and existing tools: Riskscape and MERIT (Measuring the Economics of Resilient Infrastructure Tool) to enable the rapid assessment of economic consequences of resilience-building strategies to be assessed through time and across space.

2.   Valuing Resilience Initiatives.  This project will design and test a modified benefit-cost analysis (BCA) framework to enable better business case development in the context of resilience to natural hazard in a range of New Zealand organisational contexts.

3.   Motivating Resilience. This project aims to propose a toolkit of best practice risk-sharing and alternative financial interventions.  It will expand the empirical evidence base for risk-transfer/financial mechanisms towards resilience, and draw on the emerging field of behavioural economics, which seeks to understand the systematic biases, heuristics and market failures underpinning inefficient behaviour.