Chapter

Policy Reforms

Partha Dasgupta

in Human Well-Being and the Natural Environment

Published in print November 2001 | ISBN: 9780199247882
Published online November 2003 | e-ISBN: 9780191596100 | DOI: http://dx.doi.org/10.1093/0199247889.003.0013
 Policy Reforms

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It is shown that the correct way to evaluate a public project is to compare reductions in consumption arising from the investment outlay with the increase in wealth that the investment helps to create. Putting it in other words, projects should be accepted if they add to wealth, but not otherwise. It is also shown that for public projects this amounts to estimating the present discounted value (PDV) of the flow of the project's social profits. A project whose PDV is positive should be accepted; one whose PDV is negative should be rejected. The correct measure of social well‐being, even for purposes of project evaluation, is wealth. The finding unifies valuation and evaluation.

Keywords: consumption; investment; present discounted value; project evaluation; public projects; social well‐being; valuation; wealth

Chapter.  5890 words. 

Subjects: Economic Development and Growth

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