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The Benefit-Cost Ratio in Resource Development Planning

Published online by Cambridge University Press:  28 April 2015

George A. Pavelis
George A. Pavelis*
Affiliation:
Water Resources Branch, Natural Resource Economics Division, Economic Research Service, USDA
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Extract

The stimulus for this article was an observation that resource development in the United States is of a lumpy or whole project-by-project character. We seem to have looked at resource development proposals in isolation from other worthwhile activities and to have been preoccupied with the magnitude of “benefit-cost ratios” in evaluating and comparing individual resource development activities, projects, or programs. Unless properly interpreted, however, such ratios can mislead planners and legislators to invest capital and other inputs in a way that leads to a less than fully efficient pattern of resource development, even where the objective is only to maximize quantifiable monetary benefits. Accordingly, this analysis examines the “benefit-cost ratio” in the context of an income-producing efficiency objective and elementary production theory. Such other currently emphasized objectives as environmental quality improvement are treated implicitly, though not within a multiobjective framework. For a more complete treatment of these see Miller and Holloway [9] who have illustrated an application of multiobjective resource planning principles recently issued by the Water Resources Council [15]. Other particular papers and reports dealing with multiobjective resource development planning are [3, 4, 5, 7, 9, 13 and 14].

Type
Research Article
Information
Journal of Agricultural and Applied Economics , Volume 3 , Issue 1 , December 1971 , pp. 161 - 166
Copyright
Copyright © Southern Agricultural Economics Association 1971

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References

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