ABSTRACT
Provided that classification of private investment according to actuarial rates of return is feasible, it might be thought that the highest actuarial rate of return (corresponding to the riskiest private investment) is the appropriate opportunity rate of return for public projects – on the argument that the outlay. The reader is reminded, however, that, where the necessary funds for the public project are to be raised entirely by borrowing from the public, the relevant opportunity rate of return, which is to be used as the discount rate, has to be calculated, in general, not by reference simply to the rate paid by the government on the nominal value of the bonds issued. In order to estimate a community’s rate of time preference, however, it is not enough to take account of all the different loan markets, and within each such market the different categories of borrowers, for, as a result of rationing the amount of money lent to each borrower.
