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OOG33E 24 "If one does not accept revealed market valuations of resource services--mutually. determined as they are by technical transformation conditions and money demands--as the appropriate measure of cost, then one must employ some other measure of cost for any or even all resource inputs, if one is obligated to under- take a cost-benefit calculus. The 'some other measure' must necessarily be the result of a valuation process. The results of such valuation process have also corne to be termed 'shadow pricing', but it is a valuation process nevertheless. At this point, the question of 'whose' shadow price and what are the principles by which it is set arise. "There is nothing inherently wrong with developing shadow prices (indeed, my method of calculating the private opportunity return implicitly employs such a technique to take account of the 'tax wedge I upon the yields from private investment). However, use of a shadow pricing approach, unless one is careful, is susceptible to obfuscating the distinction between cost and demand, or more precisely in the context of cost-benefit analysis, between cost and benefits. . . ." * * * * * "But, overall, I find the social discount rate concept a rather disingenuous way of addressing the subject of evaluating government programs. It is a way of providing a cost rationale for something when the issue should be explicitly hammered out in terms of demands, or preferences. If the same approach is applied to other inputs. . . it makes a shambles of any attempt to conduct cost-benefit or cost-effectiveness analysis of government programs. The real operational content of all this, it seems to me, amounts to the assertion that political decisiorunakers, when employing the coercive power of the state, can override any set of preferences that its citizens would otherwise register in the market place. But this has always been true. However, I see no reason to confuse the concepts of cost and benefits (which are admittedly fragile) in the process. It would be better, it would seem, to dispense with cost-benefit endeavor entirely. i. "Thus far I have only discussed the 'principle' pertaining to costing capital inputs employed for goverrunent resource-using activities. The problem of determining empirically the 'opportu_ nity cost of capital,' is a separate issue, and entails some com- plexities which I have addressed elsewhere. I estimate that rate, before taxes, to be around ten percent, after an allowance for inflation. . . ."