76 MULTIPLE PURPOSE RIVER DEVELOPMENT 



marketable, project capital is not obtained by competitive bidding 

 in the market. In this study, we accept the fact that public revenues 

 for project construction (and operation in part) typically are raised 

 by taxation. Estimating the opportunity cost of tax-raised federal 

 funds is a complicated task, however, which has not been system- 

 atically investigated in previous studies. Accordingly, we defer for 

 the moment the treatment of opportunity cost of developmental 

 funds needed to round out our benefit-cost criterion. This problem 

 will be taken up for systematic, detailed treatment in the following 

 chapter. 



To complete the rationale underlying benefit-cost analysis used 

 in this study, we argue as follows: Economic efficiency, as we define 

 it, will require that a scarce resource be committed to a develop- 

 mental opportunity (and to specific purposes within a multiple 

 purpose project) up to the point at which the added benefits just 

 compensate for the added costs. In deciding the scale of the project, 

 if there are discontinuities in the project's expansion path, the 

 more efficient scale will be the one that exhibits the larger total 

 net gains — that is the excess of benefits over costs will be at a 

 maximum, which is the point at which incremental benefits just 

 equal incremental costs. If the benefits accrue to the same indi- 

 viduals that incur the costs, we can claim that the net gains 

 represent an increase in social welfare. This is a possibility attend- 

 ing collective action when the public revenues in question are 

 raised by means of special-purpose assessments, but will not 

 ordinarily apply to the situations taken up in this study. However, 

 if those who gain could and do compensate those who lose by the 

 economic change stemming from a multiple purpose development, 

 and if they will have a net gain remaining, our efficiency criteria 

 will provide guides to achieving an increase in social welfare. ^^ 



If those who gain would be able out of their gains to compensate 

 the losers, but do not do so because the administrative machinery 

 for implementing multilateral compensation is not feasible, we do 

 not argue that social welfare has been increased as a result of the 

 development. We have no scientific bases for comparing one man's 

 gain with another man's loss. A dollar's gain to one can be equated 

 to a dollar's loss to another only if the marginal utility of money 



^ This abstracts from the cases in which the interrelation of consumer satis- 

 factions could be significant. 



