PART III. INFLUENCE OF CHOICE OF GOALS ON RIVER-BASIN 

 COSTS, BENEFITS, AND RESOURCE ALLOCATION 



The identification of goals to be achieved is of prime importance in river- 

 basin resource allocation, as well as identification of costs and benefits. Often 

 these goals are not clear and involve multiple considerations. Nine goals were 

 identified for analysis in this study. These nine goals were then expressed as 

 objective functions to be optimized. The goals were: (1) maximize consumer 

 benefits from water-related recreation use (code name, PRIBEN), (2) maximize 

 water-related production benefits in terms of value added (PRODUCT), (3) 

 maximize gross consumption and production benefits (PRITOT, which equals 

 PRIBEN + PRODUCT), (4) minimize private variable costs of providing potable 

 water and waste-water disposal (PRICOST), (5) minimize public variable costs of 

 providing potable water and waste-water disposal (PUBCOST), (6) minimize 

 combined public and private costs of providing potable water and waste-water 

 disposal (SOCCOST, which equals PRICOST + PUBCOST), (7) maximize net 

 benefits of water-related activities (REVOWAT, which equals PRITOT less 

 SOCCOST), (8) maximize net private benefits (PRINET, which equals PRITOT 

 less PRICOST), (9) maximize environmental quality by minimizing coliform 

 bacteria count and biochemical oxygen demand. 



The first six objectives are summarized in the seventh by maximizing net 

 benefits. 



The objectives being optimized have an effect upon the costs of providing 

 adequate water supplies and waste-water disposal both in terms of levels and 

 incidence of costs. Further, the objective being optimized has a substantial 

 effect on level of economic activity as measured in terms of direct and indirect 

 income effects to the area, upon level of labor employment, and to all other 

 resource employment in the area. Quantification of these influences is presented 

 in Appendix B, Table 3. 



The importance of the choice of goals -ohiectiwe functions in this case-is the 

 critical topic in this discussion. The effect of goal selection on the level of 

 economic activity, incidence of costs, and allocation of resources is described in 

 that order. 



3.1 Effect of Objective Function on Level of Economic Activity 



The influence of each objective function optimized on the area as measured 

 in terms of direct and indirect annual benefits (VALADT) and on monthly 

 (August) net benefits (REVOWAT) is described in Figure 3.1. Maximizing «er 

 benefits (REVOWAT) provides a standard for comparison. It not only resulted 

 in the highest net benefits for August but also provided annual benefits that 

 were as high or higher than any objective function optimized. 



Maximizing total benefits (PRITOT), net private benefits (PRINET), and 

 production benefits (PRODUCT) resulted in as much annual benefits as max- 

 imizing net benefits but brought about inefficient resource use. Maximizing 

 consumption benefits (PRIBEN) but ignoring industry resulted in substantially 

 lower net benefits to the basin. 



Minimizing public costs (PUBCOST) or private cost (PRICOST) separately 

 or combined (SOCCOST) resulted in lower levels of economic activity. The 



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