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

the finished output in terms of which he defines a particular project. 
Should these inputs be described in terms of intermediate or only 
primary factors? What source of information can be tapped to de- 
termine prices considered as given in the proposed computations? 
In other words, how should the cut off point or points be determined 
beyond which he does not intend to push the application of maximiz- 
ing procedures involving explicit consideration of several well-defined 
I want to underline only one point. It is in fact very difficult 
to choose the right indicative prices without very close connection 
with the market, without the pressure of the market. And I can 
give two very striking examples. The first one concerns the cal- 
culations of the French National Electricity Board. A few years 
ago the engineers were calculating projects using a very low rate 
of interest. When these calculations had been made they had the 
choice between different projects. The rate of interest chosen for 
the calculations was something about 3 per cent, I don’t remember 
exactly. Later in order to make a final choice, they used a new 
rate of interest of 8 per cent, as a result of general instructions issued 
by the Commissariat au Plan. Correspondingly, the result that each 
project effectively retained represented an over-investment. The 
final outcome of this error of principle in the calculations was a 
waste of resources for the French economy. This waste would have 
been avoided if the decisions of the Electricity Board had followed 
the rules of the market economy. 
The second example is the indicative price for coal which the 
Three Wise Men designated by the European Coal and Steel Com- 
munity in 1957 advised should be used for the energy policy of the 
Europe of the Six. This shadow price was 22 dollars per ton of 
American coal c.i.f. European port. But four years later the price 
was only 12 dollars. If there had been a real and reliable market, 
3] Dorfman - pag. 36

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