Economic appraisal for Wicked Problems

In February 2020 Aither’s Sarah Leck attended the Australasian Agricultural and Resource Economics Society (AARES) conference in Perth at the University of Western Australia. The outgoing President of the society, Professor John Rolfe, gave the keynote speech on applying economics to Wicked Problems in the context of the Great Barrier Reef. It was a fantastic session with some great insights into how we can best apply economic thinking to solve highly complex and uncertain problems.

The term ‘Wicked Problems’ refers to an environmental or social issue for which it is difficult or impossible to develop a solution. These difficulties may be related to lack of robust knowledge, a large range of stakeholders with often contradictory views, high economic costs, and complexity and interconnectedness to other issues.

Environmental problems often have the following characteristics:

• they are difficult to clearly define
• they have multiple causes and interdependencies
• they are usually not stable.

We regularly help clients to solve these types of problems when undertaking cost-benefit analyses of environmental problems or policies. We’ve found that some of these issues can be minimised or overcome using the following approach.

Clearly define the outcomes you are trying to achieve

Whilst there may be difficulties fully defining the environmental issues, it is still important to consider what any given policy is really aiming to achieve. Focusing on one or two specific outcomes can help design practical and achievable options for delivering environmental improvements.

Identify any co-benefits or losses associated with possible solutions

As wicked problems are highly integrated in natural and social systems there are likely to be either other benefits (co-benefits) or losses which may not be immediately apparent. Identifying options that can maximise co-benefits and minimise losses helps to reduce risks and improve the likelihood of achieving positive economic and social outcomes.

Identify risks and uncertainty

Solving environmental problems often faces significant risks or uncertainties and change over time due to multiple influences. For example, coral reef restoration can be at risk from bleaching events or severe storms. Understanding and identifying sources of risk and uncertainty can not only help in developing appropriate options but is important for understanding why possible interventions may or may not have achieved their outcomes when evaluating them in future.

Talk to community and stakeholders

Engaging with the community and key stakeholders can help with the first three actions. It can help to understand what outcomes are important to the community, what benefits or losses they value most, and understand their appetite for risk and uncertainty. Good community engagement and awareness-raising can also be vital for the long-term success of environmental management activities or policies.

Monitor and evaluate outcomes and implement learnings

Often good solutions to environmental problems are let down by a lack of data and robust evidence. Monitoring and evaluating any program or policies put in place can help to both understand whether the expected outcomes and benefits have been achieved, and to provide insights and lessons for future policy development.