70 MULTIPLE PURPOSE RIVER DEVELOPMENT 



gram converts a migrating resource into forms which can satisfy 

 a number of complementary and competing wants. At any stage 

 in a river's seaward movement, its conversion into water derivatives 

 may entail gains (external economies) for complementary uses, or 

 inflict losses (external diseconomies) for competitive uses, outside 

 the intermediary of the market. Moreover, the gains or losses for 

 complementary or competitive uses downstream are not independ- 

 ent of the product mix at upstream plants during low-flow seasons 

 or adverse hydrologic periods, when common storage must be used 

 outside the range of complementary production. Accordingly, 

 rather extreme, direct interdependence prevails among the com- 

 plementary facilities representing a multiple purpose river basin 

 development. This is true not only of the various production 

 functions within the integrated system, but also to a considerable 

 extent of the relationship between the system's production func- 

 tions and those of fiscally independent enterprises employing the 

 services of water derivatives as factor inputs. Direct interdepend- 

 ence, of course, eliminates the intermediary of the market so that, 

 unless all of the interdependent economic activities are integrated 

 into a single fiscal unit, not all of the costs and gains relevant to a 

 socially efficient investment decision will be taken into account. 



Integrating all directly interdependent activities is an extreme 

 solution, however. Such integration would include under one 

 umbrella hydroelectric power generation and the anadromous fish- 

 ing industry; the water development agency which regulates stream 

 flows for navigation and processing firms along the stream that 

 profit from pollution abatement; and so on. This country has 

 been loath to permit such a concentration of economic power, 

 whether in a private or public body, as reflected in the national 

 attitudes toward private monopoly and antipathy to so great a 

 concentration of economic power in a public organization. More- 

 over, even this degree of integration would not meet the problem 

 in cases where a significant proportion of the economic gains are 

 nonmarketable. Thus, within the range in which there is a com- 

 petitive relation between marketable and nonmarketable deriva- 

 tives among the system's production possibilities, market mechanics 

 cannot assure the economically most efficient product mix from 

 multiple purpose projects. This poses not only a problem that 

 market mechanics cannot solve efficiently, but also some difficult 

 problems for specifying economic efficiency criteria. 



