PART V. RESOURCE ALLOCATION, IMPLIED PRICES, AND 

 COST FOR RIVER-CONNECTED ACTIVITIES 



Most sectors are directly connected hydrologically and physically by the 

 quality and quantity of river flows. The connection is one way and flows with 

 the river. Linkage with lakes usually is restricted to surplus surface runoff above 

 that required to maintain lake depths by dams. In an economic sense, the 

 interrelations can be reflected in a reciprocal manner throughout the hydro- 

 logical systems through planning and coordinating activities. Trade-offs among 

 the seven sectors under consideration, low river-flow augmentation, and water 

 supply source can be included. 



5.1 Comparison of Present with Potential Resource Allocation 



There are two situations of particular interest with respect to resource, cost, 

 and benefit allocation. The first of these is the entire basin for median river-flow 

 levels, class-C quality when public and private costs (SOCCOST) are minimized. 

 This situation is of particular interest because it closely approximates 1967-70 

 conditions in the basin. These conditions were developed from Census of Man- 

 ufacturers, Population Census, a survey of industrial water use conducted by the 

 New Hampshire State Planning Office (then of the Department of Resources and 

 Economic Development) and updated U. S. Geological Survey and highway 

 maps. The programmed solution depicts the minimum cost of providing water 

 supply and waste-water treatment under current (1967-70) conditions. The 

 optimal solution for the above minimum cost objective indicated that the fol- 

 lowing categories of resource use were prescribed at levels similar to current 

 conditions: number of shore and non-shore vacation cottages (with and without 

 boats), public beach facihties, launching facilities, number of farms, the amount 

 of forest harvest, intensive residential and urban water use, the amount of man- 

 ufacturing activity in the southern Ashuelot area. Mixed production technologies 

 entered the solution, which is more descriptive of the present industry situation 

 than all new or all old technology. 



A second part of this particular situation is the same optimization for low- 

 flow conditions, all other characteristics remaining the same. Of particular 

 interest was the shift from mixed technologies in paper production to newer 

 technologies which were less polluting. The results were an increase in gross 

 benefit to the area. The change in technology and resulting increase in gross 

 benefit was not by design of the model but because the newer technology 

 was less polluting. The shadow price on biochemical oxygen demand (BOD) is 

 an indication of marginal cost to the basin of meeting current river quality 

 under approximate current levels- of economic activity. For median river-flow 

 level, the marginal cost was $0,109 per pound of BOD removed; for low-river 

 flow, it was $0.56 per pound; and for median-flow, but B-class, $0.12 per 

 pound. 



When public and private costs are minimized, benefits move in a variety 

 of directions without the guidance of income incentives. This leads to a second 

 situation of particular interest, maximizing net benefits (REVO WAT). 



Maximizing net benefits (REVOWAT) resulted in resource allocation and 

 production under profit incentive. Resources were free to move and were con- 

 strained by model assumptions and institutional arrangements such as zoning. 



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