ABSTRACT
The specific techniques of benefit-cost analysis are used in various rationales for public investment. Some of the reasons for public sector investment include characteristics of products that may make them perform differently under private provision; high exclusion cost, jointimpact goods where marginal cost to another user is zero, transaction costs, and various other reasons, lumped together in the literature as externalities and market imperfections. The existence of high exclusion cost goods may be a rationale for public investment, but it is not sufficient without further conflict-resolving value judgments. The cost function of some goods enables another consumer to be served with no additional cost. These goods are called joint-impact goods. Government can use a measure of consumer surplus to guide investment decisions and thus not worry about how the costs are actually going to be collected. The existence of a monopoly may cause prices of inputs or outputs to differ from what would exist in a competitive market.
