ABSTRACT
The unavoidable uncertainty of future benefits, disbenefits and outlays, may be dealt with in various ways. Yet, they are all somewhat arbitrary inasmuch as none can be anchored in the subjective preferences of those affected by the project being evaluated. What is invariably being suppressed in the popular treatment of such investment criteria as discounted present value, or internal rate of return, is the basic economic rationale involved: what economic meaning can be attached to the magnitude arising from the application of any of these investment criteria? And in a cost-benefit analysis based on the Pareto criterion, the economist necessarily has to compare alternative investment streams by reducing each to a single figure at a common point of time. In sum, the search for an investment criterion involves us in a search to discover an answer to the question: what single figure best summarizes the net social benefits of each of the investment streams under consideration?.
