ABSTRACT
In the circumstances it is, indeed, quite surprising that discussion about the problem of ‘calculating the economic effectiveness of investment’ should have occupied Soviet economists as early as it did and should have had the outcome that it has. A limit has to be placed at some point on the additional investment-cost that it is worthwhile to incur in order to achieve a given result. The Soviet ratio of effectiveness is one way of imposing such a limit. As soon as the use of such ratios is regarded in the setting of the most efficient use of economic resources in the economy as a whole, it becomes obvious that the whole question of price-policy is inevitably raised. Any comparison of investment cost with subsequent economies in operating cost is a comparison in price terms; and the result is likely to be different according to the relative prices of the various commodities entering into the comparison.
