ABSTRACT
The first problem to be considered is the relationship between the financial measure and the cost-benefit measure of the value of a project or policy: can rates of return or net present values calculated financially be compared directly with the results of a cost-benefit analysis? If they differ, is this because of their different coverage of the implications of projects, or because they measure different things or because they perform the same task but with varying degrees of reliability? All this might not be very important, were it not for the fact that the
enterprises concerned are in competition, directly or indirectly, for funds and also for traffic. In the first part of this chapter, the problem of budgetary choice will be considered: how should a central authority faced with demands for money for projects appraised in the cost-benefit sector and projects appraised financially decide how to allocate its funds. The problem as stated is stylised and does not quite represent the position of any individual organisation, but it is sufficiently close to reality to be relevant. Note that the starting point of the analysis is that the pricing regimes are not susceptible to change by the authority concerned. Following this, a rather different set of problems are considered, which arise when an enterprise operating under a financial regime nevertheless is required in some more or less precise sense to have regard to social returns.
