ABSTRACT
Previously we have been concerned with general considerations basic to evaluating the economic efficiency of alternative courses of action in actual cases involving water resource development. In Chapter II, we outlined a theory of efficient resource allocation in a perfectly competitive market ennomy, specifying the conditions among all the decision-making units in the economy that would have to be met in order to achieve efficient production and distribution of the resulting output. We recognized, however, that the attainment of efficiency goals theoretically obtainable within the framework of a purely market economy is inhibited by certain conditions in the actual economy. These departures from the competitive model were elaborated in Chapter III, with special regard to the provision of water-derived commodities and services. This suggested that a perfectly competitive market economy would be unable to satisfy group wants, or to make allowances for the divergence between private and social marginal productivity of resources where direct interdependence among production processes short-circuited the market. Furthermore, the unadjusted competitive model did not adequately cover the case where public budgeting, by collective choice, entered into the determination of the actual allocation of resources.
