Document Type
Article
Publication Title
Water Resources Research
Publication Date
10-1972
ISSN
0043-1397
Page Number
1338
Keywords
benefit-cost guidelines, budgetary constraints, maximum economic advantage
Disciplines
Law | Water Law
Abstract
Conventional benefit-cost guidelines are erroneous, owing to their failure to recognize the realities of policy making. From appropriate consideration of budgetary constraints, the interdependence of projects, and the influence of project selection on future budgets the conclusion is that project selection should not follow crude rules of thumb, such as the order of project benefit-cost ratios. By means of a dynamic Lagrangian multiplier model the maximum economic advantage principle for the political context is derived. This principle implies that an optimal project schedule does not require that all marginal benefit-cost ratios be equal. For example, if a project increases the economic desirability of other projects, its own economic value increases. Moreover, a project increasing future budgetary allocations takes on increased economic desirability, since one of the project benefits equals the sum of the increased budgetary allotments, as weighted by the appropriate budgetary shadow premiums.
Recommended Citation
W. Kip Viscusi,
“Budgetary Constraints and Benefit-Cost Criteria, 8 Water Resources Research. 1338
(1972)
Available at: https://scholarship.law.vanderbilt.edu/faculty-publications/1588