ABSTRACT
Fishlow, Nerlove, David and Hawke calculate social rates of return and their estimates were subjected to a rigorous critique by McClelland and others. For McClelland and other critics of the new economic history of railways the key defect is a reliance on social savings as a proxy for the benefit to consumers that came from the fall in the price of transport which resulted from introduction of the railway. Furthermore, the empirical and logical objections to estimates used to measure the gains from investment in railroads are valid as objections to estimates of social savings expressed as a share of national income. Cost benefit analysis attempts to conceptualise and measure these gains by relating them to gross investment in a given innovation or project. Problems related to the identification and measurement of externalities and the conflation of private returns and social benefits are commonplace in recent controversies over the applicability of cost benefit analysis to resource allocation in underdeveloped countries.
