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also involves certain external diseconomies because of its impact 
on air and water pollution. But these are all so conjectural and so 
minor in comparison with the directly measurable consequences of 
an investment in a steel plant that it is best to ignore them and to 
analyze a steel plant by a straightforward benefit-cost analysis or, 
much the same thing, a capital budgeting analysis. In this way we 
could ascertain whether the prospective output was valued highly 
enough to justify the required expenditures. 
The question about time horizons and time periods seems to be 
very closely related to Professor KooPMANS’ question. The answer 
lies in the choice of an appropriate rate of time preference which 
will allow us to evaluate consequences that accrue at different times 
whether they be expenditures, which normally occur early in the 
life of a project, or beneficial outputs which normally accrue over 
a very long period of time. The shadow price idea is simply a 
device for placing comparative values on consequences which occur 
on different dates. They express the importance of targets as well 
as the time periods over which they are realized and are not separ- 
able in concept from social targets to be attained by public in- 
vestment undertakings. 
MAHALANOBIS 
[ agree entirely with what Professor DORFMAN had said; certair. 
value judgments have to be made in some way or other by policy 
makers. In using econometric models sub-optimization is also ne- 
cessary. The advantage of a complete aggregate model is that we 
may be able to reach some of the special decisions when these are 
not conflicting. But in making calculations for optimization even 
in the case of a particular project, it seems to me that there will 
be much gain in objectivity in choosing the shadow price if we 
set up certain targets which belong to the whole of the national 
economv over a given period of time 
Dorfman - pag. 
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