Land Rents and Ecological Crisis: The case of the Oder River Valley

In the summer of 1997, the Oder Valley experienced an almost unprecedented flood. By calling in the army, the German government prevented the dykes from bursting, yet massive floods occurred in neighboring Poland, as the River Oder is now the border between Germany and Poland. Similar floods occurred in the Czech Republic and Romania. In October of 1997, a seemingly unrelated event occurred: The Nobel Prize in economics was awarded to Myron S. Scholes and Robert C. Merton for their pioneering contributions to the theory of how options are priced in financial markets. Ironically, the options contract model provides a solution to the Oder Valley crisis. This article ties the two events together and also draws on insights from the radical reformer, Henry George.