ABSTRACT
The important question for the economist interested in allocation is not so much the price of the good, nor what a person actually pays for a good, but what its value is. More precisely it is the social value of that good, even though it is bought, possessed and used by only one person, that is important. If a person's use or possession of that good has no effect whatever on the welfare of other members of the community then the value to him, reckoned, say, as the most he is willing to pay for it, is also the social value. If, on the other hand, his possession or use of the good does affect the welfare of others, then the value of these effects on others also has to be calculated and (algebraically) added to his personal value in order to determine its social value.
