incidence of cost may be allocated more optimally by minimizing public and 

 private cost combined than by minimizing each separately. 



Optimizing environmental quality, as measured in terms of minimizing coli- 

 form or biochemical oxygen demand (BOD) in the river on a basin-wide basis, 

 also had a retarding effect upon annual benefits and net benefits for the month 

 of August. 



3.2 Effect of Objective Function on Cost 



The influence of the nine goals optimized on public cost (PUBCOST), private 

 cost (PRICOST), and combined costs (SOCCOST) is portrayed in Figure 3.2. 

 Three major observations are illustrated. First, the figure shows the trade-offs 

 that would be expected between the pubUc and private sectors, depending on 

 objectives optimized. Second, private costs (PRICOST) showed a greater magni- 

 tude of variation than public costs (PUBCOST). Third, maximizing environmental 

 quality (BOD MIN andCOLIFORM MIN) carried a high cost, which was allocated 

 to the private sector. 



Often there develops a controversy between who should bear the cost of 

 providing clean water, the private sector or the public sector. The obvious com- 

 parison is minimized public costs (PUBCOST) versus minimized private costs, 

 (PRICOST) of providing adequate water supplies and waste disposal. The 

 expected result is borne out; minimizing public costs would mean shifting the 

 cost burden of providing adequate water supplies and waste-water disposal to 

 the private sector. In the same way, minimizing private costs results in shifting 

 costs from the private sector to the pubhc sector. The imphcation of these 

 findings is that acceptance of changes in goal selection-such as improved environ- 

 mental quality-is very difficult to secure because the changes are apt to bring 

 about large variations in individual costs. 



3.3 Effect of Objective Function on Resource Allocation 



The influence of the objective function optimized on annual water use 

 (ANNH20), recreafional user days (RDAYUSE), and total seasonal and year- 

 round labor employment (LABTOT) is shown in Figure 3.3. Two major items 

 are illustrated. First, annual water use (ANNH20) and number of jobs (LABTOT) 

 reflect level of economic activity as measured in terms of annual direct and 

 indirect benefits (VALADT) shown in Figure 3.1. The second major item high- 

 lights internal dilemmas found in two of the nine goals. Recreation use 

 (RDAYUSE) is at its minimum when private costs (PRICOST) are minimized. 

 The dilemma facing individuals is the trade-off between amenity value of rec- 

 reafion and the goal of minimum cost. In the same way, maximizing environ- 

 mental quality (BOD MIN and COLIFORM MIN) is accomplished by hmiting 

 recreation activity. The dilemma facing individuals is how to optimize environ- 

 mental quality while enjoying some form of recreation. It was found that 

 examination of these goals in terms of optimizing an objective identifies con- 

 flicts found within the goal itself. 



3.4 Effect of Objective Function and RiverFlow on Resource Allocation by Sectors 



The above analysis has been based on aggregated variables. The goal chosen 

 also has an impact on sectors taken individually. The objectives most useful for 



15 



