274 MULTIPLE PURPOSE RIVER DEVELOPMENT 



The estimated opportunity cost for public capital derived in this 

 study, it must be recognized, relates to a particular set of economic 

 conditions — to relatively full employment and to the particular 

 kinds of tax changes which we believe are most likely to be made 

 by the two major parties. Our estimate of opportunity costs is not 

 relevant as an investment criterion when there is generalized unem- 

 ployment and idle industrial capacity, as was characteristic of the 

 depression of the thirties. Moreover, it should not be looked upon 

 as a guide to the level of returns which should attach to investments 

 undertaken under different economic conditions than those assumed 

 in connection with this study. The social cost of investment is the 

 opportunity foregone from committing productive resources at a 

 given time to one use as against another. Once the resources have 

 been irrevocably committed, different criteria for the efficient man- 

 agement of existing plant become appropriate in lieu of the 

 investment criteria we have employed. 



Our estimate of the opportunity cost, however, indicates that 

 projects which were formulated, but not undertaken, at a time 

 when economic expectations appeared consistent with generally 

 lower returns to investment appear to be designed with excessive 

 capital under present economic conditions — if efficiency criteria 

 alone are to guide public policy. The plan of the U. S. Corps of 

 Engineers for the Coosa River, for example, appears overly inten- 

 sive; this is partly because the development was planned with too 

 low an imputed social cost for public capital. Similarly, a set of 

 two dams of lower capital intensity might be more efficient econom- 

 ically than the more capital intensive High Dam for the Hells 

 Canyon Reach of the Snake River, in view of the rise in the level 

 of opportunity costs over that which was anticipated at the time 

 the High Dam project was formulated. The significance of this 

 should not be misinterpreted. It does not follow that a smaller 

 number of structures would be justified for the development of the 

 Columbia or Coosa than originally planned. But it does suggest 

 that the degree of development which is justified, as measured by 

 its capital inputs, is less intensive and conceivably would be reduced 

 at the margin, compared with a plan which could be justified at 

 a rate equivalent to 2.5 per cent on investment. 



While the analysis of efficiency consequences of alternative ways 

 of undertaking multiple purpose projects has been a major concern 

 of our study, we have considered a related issue. Whenever public 



