Managing new technology investment for underwater security of ports

This study focuses on the economic implications of positive externalities in new technology investment for underwater security of ports and waterways. The evidence on the magnitude of positive externalities in this area is reviewed. Positive externalities exist when a product or service provides benefits to the society in excess of the private benefits of the decision-makers. Port security investments involve direct benefits as well as positive externalities. Direct benefits of security investment are the result of preventing port closure and are observed by port decision-makers. Direct positive externalities include the benefit of preventing the stoppage in shipping and are reflected in avoidance of production and sales decreases. Indirect positive externalities result from prevention of supply-chain stoppages at suppliers and customers of affected firms. Finally, indirect positive externalities include the avoidance of induced costs that result from loss of income to communities whose members work in the affected industries. Ports are part of critical infrastructure. Underwater security threats pose specific new challenges and require new technology investment. Accurate economic evaluation of such security investment promotes efficiency and security of resources. This study advocates applying the concept of social net present value to enhance evaluation of port security investment.