ABSTRACT
"Accounting prices" are prices used in economic calculations, as distinct from the prices used in actual transactions. It is difficult to justify the use of accounting prices in planning decisions while different market prices govern actual transactions. Differences between prevailing market prices of factors of production and their marginal productivity are widespread in rapidly changing economies. Calculating accounting prices presents serious methodological problems. The only theoretically efficient solution is a general equilibrium solution using factor supply schedules, alternative production functions, and final demand schedules to derive simultaneously all factor and product prices and quantities, as well as desirable production functions. Market prices for products are often as inappropriate for efficient decisions as market prices for factors. Experience with the calculation and use of accounting prices in Pakistan shows that even where statistical and other data are extremely inadequate, a beginning can usefully be made in deriving accounting prices and using them operationally.
