Statement of the Problem 13 



national product (consistent with efficienq' considerations), but 

 also may be undertaken for strategic, social, and perhaps other 

 objectives, which may not be compatible with maximum efficiency 

 in terms of the relatively narrow definition of efficiency employed 

 in this study. Where projects are undertaken for the latter type of 

 goals, there will be a smaller net economic gain than otherwise 

 would be possible — national income will be smaller than if condi- 

 tions of maximum efficiency were to prevail. This is not meant to 

 imply that such objectives are unworthy, and that our efficiency 

 considerations provide the preferable course of action. Social, 

 strategic, and other objectives may be preferred, and may be under- 

 taken with the sanction of collective choice expressed through the 

 political process in a representative government. Even so, it does 

 not follow that our efficiency criteria will be of no practical value 

 for determining a course of action when higher criteria prevail. 

 Efficiency criteria, even here, have a relevance in their ability to 

 demonstrate the economic costs which society will incur — some- 

 thing which we feel is not always made explicit — when it decides 

 upon a course of action based on such higher criteria. 



Plan of the Study 



A major portion of our effort is devoted to defining the condi- 

 tions for achieving economic efficiency, isolating the circumstances 

 which make water resources a "special case" among sectors of the 

 free market economy, and determining, on the basis of this analysis, 

 what general alternatives are open for achieving efficiency within 

 our institutional environment. This task is undertaken principally 

 in Chapter II, where we present the analytical framework used to 

 define the conditions required for economic efficiency, and Chapter 

 III, where we take another look at the river basin development 

 problem, with the added perspective obtained from the efficiency 

 concepts developed in the process. At this point, we conclude that 

 to achieve efficiency through exclusive reliance on the market 

 mechanism would require an unacceptable degree of concentration 

 of economic power, whether public or private. This is a value 

 judgment, of course; but it represents a distillation of a national 

 consensus as indicated by public policy with respect to private 

 monopoly and a tradition of antipathy to the concentration of such 



