ABSTRACT
If decision rules, as a useful method for dealing with future uncertainty, is something of a forlorn hope, the certainty equivalence perhaps too crude, and the more sophisticated conditional probability approach rather cumbersome, there yet remain a number of proposals that may be employed. Assuming that the risk run by each type of private investment can be arranged as a probability distribution, some average of the range of expected or actuarial rates of return on private investments may be adopted as the opportunity yield in evaluating each of the anticipated annual returns of a public project at some common point of time, either present or future. It has been argued that where the funds for investing in a public project are raised wholly from tax revenues. The riskier the type of private investment, the higher the expected rate of return – a consequence both of risk-aversion and the tax disadvantages of investing in projects that yield highly variable returns.
