440 



The General Dam Acts of 1006 and 1910 had envisioned Federal con- 

 tributions to private water power dams, to provide for the direct costs 

 of locks or other navigation facilities. The idea of joint assumption of 

 joint costs, and separate assumption of the costs of specific parts of 

 multipurpose structures was advanced in connection with the Muscle 

 Shoals development on the Tennessee River, on the eve of World War 



J 29 



However, the first project in which cost/]')enefiit calculations befcan to 

 approach their ultimate order of complexity was the TVA. On this 

 project, the purpose of the cost /benefit calculation was mainly to pro- 

 vide a basis for the establishment of electric power rates. The act had 

 provided that TVA should make a findino; as to the portion of the total 

 capital investment that was attributable to power g-eneration, and that 

 this portion of the outlay should be amortized liy the sale of power. The 

 solution, as described by TVA Cliairman Gordon Clapp, was to use the 

 '"alternative justifiable expenditure method"' for the allocation of TVA 

 power charges : 



That method * * * is this : That portion of the common cost of a niultiple- 

 puriw-'^e project which any one of the purposes served should bear is of the same 

 i-atio to the total as the maximum amount which that purpose could justify, 

 assuming a project were being built to serve that purpose alone, is to the sum of 

 the amounts which each of the several purposes could so justify.^" 



Although this method was apparently adequate for the limited purpose 

 required, it was less suitable as a tool in the analysis of program 

 priorities, or to guide decisions as to whether or not any individual 

 facility should be built. According to one student : 



Insofar as rational economic administration of water resources is pos-ible (and 

 desirable), the objective should be maximization of the complex of benefits rela- 

 tive to costs rather than maximization of any particular benefit. We have found 

 no need for allocations of joint costs in the planning of multiple purpose enter- 

 prise. Indeed, the danger is not inconsiderable that allocations would accomplish 

 more harm than good by becoming confused in the issues of project or purpose 

 feasibility. The feasibility of a project is contingent simply upon the relation of 

 total project cost to total benefits; the feasibility of a purpose at a project is 

 contingent upon direct cost for the purpose relative to purpose ))enents * * *. We 

 must conclude that apportionment of [joint cost] is at best a meaningless ritual. 

 [Moreover] the diflficulties of achieving * * * accurate appraisals are so great 

 that we question whether it is possible to formulate a program of water resource 

 development according to strict cost/benefit relations. We believe the effort is 

 doomed to fail. In the end social considerations and public policy rather than 

 hypothetical benefit valuations will be found to provide the more honest and 

 satisfactory guides for public water planning." 



After World War II, the conceptual approach became firmly es- 

 tablished that Federal programs of vrater development should en- 

 compass entire river basins, with each planned facility to contribute 

 in balanced fashion all available benefits. The need for an orderly 

 and systematic method of characterizing an.d comparing costs and 

 benefits for each facility and each basin quickly became^ apparent. 

 Accordingly, in April 1946, the Federal Interagency River Basin 



^■' Toseph Sirera Ransmeier. The Tennessee V.ille.v Authority. A Cost Study in the Eco- 

 nomics of Multiple Purpose Strer.m Planning. (Nashville, the Vanderbilt University Press, 

 194'' 1 pp 19''— 19.5 



:»"u S Congress "House. Committee on Public Works. The Allocation of Costs of Federal 

 Water Resource Development Projects. Renort to the * * *. From the Snhcommittee To 

 Studv Civil Works. Dec. 5, 19.52. S2d Cong., 2d sess. House Committetj Piint No. 2.S 

 (Washington, U.S. Government Printing Office, 1952), p. 12. 



31 Ramsmeier, op. cit., pp. 420-421. 



