[BLANK_AUDIO] In this video we're going to go through the exercise that you have just done on health versus non-health benefits. This exercise has two parts. In the first part you considered the challenge of estimating the health and non-health benefits of a 24/7 piped water supply in a peri-urban slum of a large city, from the household's perspective. In the second part, you considered health and non-health benefits to both connected and unconnected households, from a community perspective. First, let's look at the household's perspective. We assume a household is considering connecting to a new piped water supply with 24/7 service in a peri-urban slum. The household is thinking about the health and non-health benefits it will receive if it connects to the new system. But before the fact, or ex-ante, the household may not perceive all the health and non-health benefits it will recieve ex-post. Ex-ante there are benefits that the household perceives. Then ex-post the household actually receives both the perceived benefits and the non-perceived benefits. We assume there are four types of benefits to the household. These are shown in this table. One, health benefits that the household perceives ex-ante that its members will receive if it connects to the pipe distribution system. Two, health benefits that the household does not perceive ex-ante that its members will receive, but, in fact, the household will receive ex-post if it connects to the piped distribution system. Three, non-health benefits that the household perceives ex-ante that its member will receive if it connects to the piped distribution system. And four, non-health benefits that the household does not perceive ex-ante, but, in fact, will receive ex-post if it connects to the piped distribution system. We assume that these four types of benefits to the households sum to 100% of the household's benefits. This table shows an example in which each of the four types of benefits is equal in size. That is, each represents 25% of the total benefits. Your first task was to replace the 25% values in these four cells with values that you think would be more accurate. This table shows Dale's guesses, but he emphasizes that they are just a guess. Dale thinks that health and non-health benefits are typically roughly equal in size. He's put them here as both totaling 50%. Of course, the relative size will depend on local conditions. If households are using vendors, then cost savings from having a piped supply will be significant. If households are walking to collect water from outside the home, time savings are likely to be significant. Both cost savings and time savings are non-health benefits. Dale thinks that most, but not all, of the benefits to households will be perceived ex-ante. He estimates that 75% of the benefits will be perceived ex-ante and 25% will not be perceived. Of those benefits that are not perceived by the household, Dale suspects most of these are health benefits. The second part of the exercise was to consider the investment in a 24/7 piped water system from the perspective of the community. The water planner estimates that 50% of the households in the community will connect to the new pipe system and 50% will not connect. The connected households throw off externalities, both positive and negative, on other households. Both those who connect and those that do not connect. At the community level benefits accrue to both connected and unconnected households. Again, we look at health and non-health benefits. Your task was to fill in the cells in this table. As for the the previous table for the household's perspective, the four cells in the northwest portion of the table total 100%. This table shows Dale's estimates, but he again emphasizes that these are just guesses. Again, Dale estimates a 50/50 split between health and non-health benefits. Dale thinks that most, about 80%, of the benefits will accrue to connected households. Most of the positive externalities would arise from sanitation investments, not from the water supply. He guesses that the benefits to unconnected households would be split equally between health and non-health benefits. We want to emphasize that no one knows the answer to the first or the second part of this exercise, either for a particular community or in general. This is a puzzling situation for wash professionals to find themselves in. Without being able to answer such seemingly straightforward questions it is easy to see why understanding household's behavior is difficult, and why conducting an economic analysis of such water infrastructure investments is challenging. This exercise poses the question, how to proceed in the face of such uncertainty about the magnitude and distribution of the benefits from such investments? Should we proceed based on intuition? Or do we need a strategy for planning in the face of uncertainty? If so, what should this strategy be? Thanks for watching this video. [BLANK_AUDIO]
