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Cost Benefit Analysis and Investment in the Public Sector

Document Cited in Related
Vincent
DOIhttp://doi.org/10.1111/j.1467-9299.1965.tb01613.x
Published date01 June 1965
Date01 June 1965
AuthorP.W. GLASSBOROW,MARTIN S. FELDSTEIN
Correspondence
Cost Benefit Analysis and Investment
in
the
Public
Sector
Dear
Sir,
Mr.Feldstein in his otherwise admirable article states that changes in the
absolute level of prices can
in
all cases be ignored and that only relative
changes in price need to
be
taken into account,
This
statement is only true
if the time profile of the various projects under consideration is identical
or equivalent. It is very rarely that this condition is satisfied.
P
.
W
.G
LA
S S
11
0
K
C)
M'
The author replies
:
Mr.Glassborow has misinterpreted my original statement. Even il'
projects differ in time profile there is no reason to take into account
expected
changes in
absolute
prices. All calculations should be performed with
constant absolute prices (i.e. as if the current level of prices remained
unchanged). Of course, as noted
in
the original statement, changes in
relative prices must be explicitly recognized.
MAR?'
I
N
S
.F
E
L
DSTE
I
N

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