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

to increase the income of some impoverished group by $.75. 
In that case, income to the group to be favored would receive a 
shadow price of $1.33. 
This proposal may seem visionary, but it contains the es- 
sence of all the proposals I am about to make, and, in fact, 
expresses a kind of comparison that is ineluctable and is made 
every day. For this reason it may not be as impracticable as 
it seems at first blush. Since these decisions are made fre- 
quently, a study of administrative or legislative records should 
disclose bounds, at least, on these shadow prices by showing 
the rates of trade-off between different objectives on projects. 
that are accepted and rejected. Such a study would have to 
assume that the shadow prices remain stable for reasonable 
periods. Perhaps they do, but perhaps also they change with 
changes in the political and economic climate. There is another 
difficulty, too, for this line of empirical research. Though in 
every project plan, choices of the sort at issue have to be made 
somewhere along the line, the form of benefit-cost analysis 
rather obscures them. As I mentioned,’two or three variants. 
of a project at best are submitted for decision by responsible 
authorities. These tend to differ in many dimensions, and the 
amount of trade-off between different objectives is not likely 
to be brought out very clearly. If variant A of a flood-control 
project provides more protection to property than variant B, 
it may also cost more, provide less protection to life, and 
provide better by-products in the form of recreational facilities 
but less hydro-electric power. Knowing that the legislature 
has preferred variant A tells little about the shadow prices; 
though more may be disclosed by inspecting the record of the 
debate. I emphasize this difficulty because it suggests that the 
entire process of generating a benefit-cost analysis which TI 
sketched above — the sharp distinction between the spheres 
of the engineer and the economist, the small number of variants 
produced — may be unsuitable for analyses of public invest- 
'31 Dorfman - pag. 

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