OCR Text |
Show be tangible effects, beneficial or adverse, from the standpoint of society as a whole that would escape evaluation in a summation of individual effects based on market values, as, for example, the value of resource conservation to future generations. Also, there may be other values not readily evalu- ated in terras comparable to exchange values as, for example, effects on health and welfare and on national security. In applying the public viewpoint to economic analysis of projects, it is essential that consideration be given to all effects of a project and that such effects be evaluated as completely as possible and on the same basis. Intangibles, that is to say, effects which it is considered impossible or undesirable to express in monetary terms, such as scenic values, should be considered and described in such a way that their importance and influence on project formulation and selection can be clearly indicated. This the Commission considers a very impor- tant consideration for, after reviewing the entire effort to secure economic evaluation of projects from a broad public viewpoint, it is convinced that the effort to translate a wide range of public benefits into monetary terms may lead to over- evaluation of benefits in order to secure a benefit- cost ratio above unity. Effect of Project on Economy The report further considers the fact that the effects of a project cover a wide range, extending to the entire economy. It illustrates by citing an example in which the primary benefits from a water resources project may be the value of wheat produced by a farmer, whereas the sec- ondary benefits may include the value of the bread produced from the wheat, over and above the value of its wheat content. To determine the benefits actually attributable to the project, how- ever, it contends that the farmer's costs, other than irrigation water, and the costs entering into the production of bread, other than the wheat, must be deducted. It says: Ascertaining and measuring net secondary bene- fits properly creditable to a project is a most dif- ficult and complex problem and great care must be exercised in their use for project justification. Because of such difficulties primary reliance in proj- ect analysis will need to be placed upon the more direct types of project effects. The problem, how- ever, merits continuing study. The Commission agrees as to the difficulties and complexities involved in the measuring of secondary benefits, as defined in the report, in dollar terms. But many projects will have their major effect on the broad development of our social economy. It will, therefore, be contrary to the public interest to place principal reliance in project analysis on primary benefits, which may often be private in character. Furthermore, the Commission believes that these more general effects on regional and national economies can be weighed in relatively precise terms, although not along the lines of analysis discussed in the report of the sub- committee. The subcommittee recommends the ratio of benefits to costs as the basis for comparison of projects. It holds that this ratio, properly de- termined, constitutes the proper measure of the effectiveness of use of the Nation's resources insofar as the use of such resources for project purposes is concerned. It finds the monetary unit to be the most convenient and widely recog- nized basis for measurement of costs and benefits. Finally, the subcommittee report does not make the important distinction between a project and a program. Had this distinction been made, the importance of the secondary or general effects of development might have been more clearly evident. Public or Intangible Values No aspect of multiple-purpose water resources development has been more productive of con- fusion and controversy than the treatment of social, or intangible, values. This is a relatively recent issue; it was not present in earlier single- purpose projects constructed, whether by private enterprise or by Government, solely for the real- ization of primary, tangible benefits, most of which could be assigned directly to individual beneficiaries. 56 |