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ment projects even though it serves adequately for private in-
vestment decisions.
On the positive side, one should not underestimate how
sophisticated government officials and legislators can become
in economic matters. It won’t do to say they will never under-
stand a technical concept like shadow prices. They already
understand very well indeed the parallel concept of a social
rate of discount and, though I can’t vouch that they use that
very phrase, debate it very intelligently. If the concept of
shadow prices for different objectives were introduced in any
government it would, in its early years, lead a stormy exist-
ence. But pretty soon the responsible officials would learn
what 1s at stake and start to debate about what the shadow
prices should be rather than what features particular projects
should incorporate. This would be a constructive improvement
in the decision-making process.
Another proposal that comes naturally to an econometri-
cian is that projects might be designed from the very beginning
to meet certain specified target value for the various objectives
that they are intended to serve. In particular the designers
might be instructed to meet the specified targets at minimum
possible capital cost. This would require a revolutionary
change in the whole design procedure because, as inspection
of the list of objectives suggests, they are not all of the sort
that engineers feel at home with. Formally speaking, the task
to be imposed is this: An engineering design is a choice of
a vector of specifications. Given this vector, estimating the
cost of building a structure that meets them is fairly straight-
forward, though it should be mentioned that engineers do not
have a proud record as cost predictors. The prediction of
physical results is less straightforward because economic and
other nonengineering factors have to be taken into account.
If the project produces electric power, its annual output will
depend on the load-factor which, in turn, depends on the eco-
nomic composition of its market. If the project produces irri
Dorfman - pag.
