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Show II. THEORETICAL CONSIDERATIONS In this section, the technical aspects of the model used to generate the results of this water study are considered. In particular, we describe in theoretical terms our welfare function and input- output model. It is presumed that the reader has some acquaintance with optimization techniques and input- output analysis. 6 We, therefore, try to keep the technical explanations to a minimum. The position we take is that the resources of an economy should be so allocated among their alternative uses that the " welfare" of the community is maximized. This objective motivates the theoretical criteria developed in this section. It is assumed that this objective more or less corresponds to what the community, given its pricing system, legal system, and other institutional systems, is, in fact, attempting to achieve. In other words, the community as a whole is assumed to behave rationally in the sense that it tries to be efficient, i. e., it tries to maximize welfare by the appropriate allocation of resources. In formal terms, our welfare function is specified as; ( 1) U* U( Y, D%, D2, . * *, Dn| a, . . .), where U is welfare, Y is household income with a as a parameter describing its distribution, and where D^, D2, . . ** Dn represent the final demand vector of the community. Other conditional parameters such as social and political ^ The bibliography on optimization techniques and input- output analysis is extensive, but at a minimum one should consult [ 4], [ 5], [ 10], and [ 13]. |