SEMAINE D'ÉTUDE SUR LE ROLE DE L’ANALYSE ECONGOMETRIQUE ETC. 
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115. 
KOOPMANS 
We have covered a great deal of ground in the last ten minutes. 
But my comments really go back to our earlier discussions on the use 
of techniques and planning. I have the impression that Professor 
MAHALANOBIS is using the term « sophisticated » with disapproval, 
and « mathematical » with approval. I would like to express my 
own belief that if you look at planning from the time at which it 
starts off, the greatest return on economic analysis is at the early 
« arithmetical » stage when small comparisons and computations of 
the kind that have been illustrated are made; and that the time for 
sophisticated analysis comes later whereas the payoff to it is probably 
substantially smaller; I think I understand the sense in which the 
terms « sophisticated » and « mathematical » are used in this way 
and take that sense over for these comments. But I do not see this 
as a reason to refrain from working on sophisticated methods — be- 
sides having a certain direct payoff the sophisticated methods also 
have the advantage of introducing rationality and objectivity in the 
decision process, an advantage distinct from the direct payoff itself. 
I also have a more detailed comment about the fertilizer calcula: 
tion, which may illustrate this general comment. There is a compa- 
rison here between different ways of supplying fertilizers. These 
ways differ in three respects. One is timing of availability of the 
fertilizer, another is rupee cost, and the third is dollar cost, or foreign 
exchange cost, and the timing of these. Now I would submit that to 
make the comparison one needs not only the dollar figures that are 
stated here, one also needs a shadow price on foreign exchange, and 
a (shadow) social rate of discount, in order to make the comparison 
between these three alternatives. The shadow price of foreign 
:xchange would itself have to be determined in a wider calculation, 
which includes not only fertilizers but many other instances of deci- 
sions where foreign sources and domestic sources are considered as 
alternatives. In CHENERY’s work on Southern Italy (1) the shadow 
nterest rate came out at something like 35°, per vear. This is to 
CHENERY and KRETSCHMER, « Econometrica », 1950 
05-99 
-5 Mahalanobis 11 - pag. 3,