ECON371/UBCO2024WT1/NewsWiki/group1week3
Source
Problem
Jasper is facing an increase in social challenges, including homelessness, substance abuse, and domestic violence, due to the impacts of the summer wildfire. The local Community Outreach Services team is overwhelmed by the sudden increase in community members seeking help. The municipality is facing a potential budget shortfall.
Summary
In response to the social and economic problems coming from the wildfire, the Jasper Municipal Council has approved four additional recovery positions, including two recovery outreach workers on two-year terms, a second project recovery manager for one year, and a small business recovery coordinator. The new outreach workers are needed to address the massive increase in residents seeking assistance for social issues. The Alberta government will cover 90% of the $650,000 cost for these positions, while Jasper must cover the remaining 10%. Despite the need for these roles, there is concern among residents about the potential tax burden, as the town also lost $2.2 million due to the destruction of property during the wildfire.
Economic concepts
- Willingness to Pay (WTP): Willingness to pay is the maximum price at or below which a consumer will definitely buy one unit of a product. This corresponds to the standard economic view of a consumer reservation price.
- Opportunity cost: The cost of what spending time and/or money on something is giving up by not being spent on something else. For example, if I were to walk into a bakery with $4.00 and buy a maple bar, I have the opportunity cost of not using those $4.00 to buy an apple fritter. This concept can also apply to time. For example, as a manufacturing company that makes sports balls, by choosing to spend time producing more soccer balls than basketballs, you are giving up the time cost of producing more basketballs, since you can only produce a limited amount of products at a given time.
Application of concepts
- In this case, the negative impact of the wildfire forced the Jasper Municipal Council to approve additional recovery positions in order to address the increase in assistance requests made by residents. These requests could lead to more serious and potentially life-threatening situations, which shows the importance of the outreach programs. This is a major reason why the Council approved these new positions, deeming them necessary for the communities well-being. Luckily for the Council, the Alberta government will cover 90% of the cost, leaving Jasper to pay only $155,000 for the Disaster Recovery Program. This still shows that the Council believes the price of hiring more workers in order to meet the demand of the requests is worth paying a large sum of money.
- By choosing to administer more members to the outreach team to aid with recovery from the summer wildfires, and extending the time they are working, the Community Outreach Services (COS) is committing a significant amount of labor, money, and time to this project. These decisions were made based upon the situation. More time was allocated due to research done on similar disasters revealing more time would be needed, more people were assigned to the outreach due to the vast number of people struggling with stability and housing, and the money spent comes from the salaries needed for the four new positions. While the government in Alberta was covering most of the cost, some of it was still paid for by the COS. The cost of the damage done by wildfires and the amount of people who need housing and stability does, however, mandate this response from the COS.
Prof: A more clear link between your choice of concepts and the content of the story would improve this analysis. Your WTP description speaks about a consumer, while the description speaks about Jasper Municipal Council. If JMC is an accurate reflection of the WTP of the people of Jasper, then it could be argued that the vote in favour reflect the WTP of the people of Jasper for this program. An assumption like this should be clearly stated.
For the opportunity cost, what is the value of the next best alternative use of these funds? You have not specified the alternative.
Conclusion
The wildfires in Jasper ended up causing significant damage to the city, which forced the COS to be in an unfavorable situation. In this case, the COS chose to spend more money to hire more outreach workers to provide relief for those affected by the wildfire this summer. While this does cause them to go significantly over budget, it was a choice they made based on the information they had and the position they were in.