Ill Market Mechanics, 



River Basin Development, 

 and Efficiency 



Under perfectly competitive conditions, the total output of an 

 enterprise, valued at market prices, would reflect accurately the 

 total returns from employing productive resources in a line of 

 activity. In equilibrium, the opportunity cost of the factors 

 employed at the margin of any line of activity would equal the 

 returns, thus delimiting the possibilities for productive investment 

 in that application. If similar conditions prevailed in every other 

 productive application, there would be no further possibility — by 

 allocating a little more of society's resources for producing more 

 of one good and a little less for another — that any individual's 

 gains would be more than sufficient to compensate the loss incurred 

 by others. 



In qualifying comments, we have indicated that these results 

 would obtain only if market organization were sufficiently com- 

 prehensive to satisfy every variety of economic want. Furthermore, 

 it also would be necessary that goods or services produced by the 

 expenditure of scarce resomces be available only through the inter- 

 mediary of the market in return for a price. In the actual economy, 

 there is evidence of conditions to the contrary; furthermore, these 

 conditions are especially common in regard to water-derived com- 

 modities and services.^ To become fully aware of the divergence 



'The term \vater-derived commodity, or for the sake of brevity, water deriva- 

 tive, will be used to represent the group of heterogeneous commodities, services, 

 or "benefits" from water resources development such as hydroelcctricity, flood 

 protection, services rendered by an inland waterway, etc. 



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