Full text: Study week on the econometric approach to development planning

payments and are likely to contribute more to general economic 
8. Traditionally, of course, governments have always in- 
vested largely in the facilities required by their own minimal 
functions of national defense, maintenance of law and order 
administration of justice, revenue collection, and the like. 
o. Finally, and again this is a recent development, govern- 
ments invest in enterprises intended to enhance the prestige 
of the nation. Atomic power plants and steel mills are typical 
This is a list of motives, undoubtedly not complete, that 
induce governments to undertake investments. It is also a list 
of the considerations that must be applied to any government 
investment, because it is a rare project indeed that contributes 
to only one of these objectives. 
Thus the appraiser of a government project, as contrasted 
with the appraiser of a private one, must be concerned with 
many kinds of consequence, not all measurable in monetary 
units and not all comparable among themselves in any na- 
tural unit. Even in dealing with the consequences that are 
measurable in monetary units, in principle, he is not likely 
to find that market prices are an ‘adequate guide, partly be- 
cause of the prevalence of unpriced external effects and partly 
because consumers’ surplus (a treacherous concept that cannot 
be avoided here), though not reflected in the markets, is im 
portant to governments. - 
There are similar complexities in the consideration of costs. 
though not as severe. To be sure, a government must recog: 
nize, while a private.firm can ignore, such external disecono- 
mies as congestion and smoke contamination, but these are 
usually not of the essence. The government is more likely to 
be concerned with discrepancies between the market prices 
and social values of certain factors of production: labor, when 
there is substantial unemployment, is a famous instance. It is 
Dorfman - pag. 

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