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PONTIFICIAE ACADEMIAE SCIENTIARVM SCRIPTA VARIA - 2% 
DORFMAN 
I think that you have raised some very pertinent points which 
are not adequately dealt with in the paper. What I contemplate 
's that private investments that are displaced by public investments, 
as in the case of electric power generation in the United States where 
both public and private owners are of substantial importance, should 
be valued in precisely the same way as public investments even 
to the extent that one ought not to value private investments in the 
same way that the prospective investors will. For example, one 
should value private investments, using the rate of discount that 
you would use in valuing the public investments, normally a lower 
rate of discount than private investors employ. 
I would answer your question about taxes in the same spirit. 
Taxes are purely a transfer payment and should be taken account 
of in dealing with competitive private investments just as they are 
in dealing with public investments that do not generate taxes. 
JOHNSON 
Another point relates to the paper, but was not referred to spe- 
cifically in your presentation this afternoon One of your reasons 
for government investments was to improve the distribution of 
income by providing goods at low prices (below marginal cost) to 
various low income groups. « Such subsidies in kind are often 
more feasible administratively than direct transfer payments, and 
are likely to contribute more to general economic advance ». I don’t 
know of many cases in which a government in mixed economy can 
produce goods which it can make available generally only to certain 
lower income groups; housing is perhaps one example, but this is 
about the only one. Governments can make direct transfer pay- 
ments to low income groups on a very broad scale and for all pur- 
poses thal you want to have such payments. Do we want to rely 
upon the judgements of the recipients on the ways of expending the 
income given to them or do we want them to rely on the decisions 
3] Dorfman - pag. 26