Pakistan Institute of Development Economics



Methods of Project Analysis: A Review. By Deepak Lai. Baltimore and Lon¬don: The Johns Hopkins University Press. 1974. (World Bank Staff Occa¬sional Papers, Number 16.) 53 pp.Price $3.00.

Author: A.R. Kemal

Project analysis is one of the most important and useful forms of applied welfare economics. In a perfectly competitive economy, with no externalities, it boils down to calculation of net present value or internal rate of return to rank the projects. However, when there are distortions in the market, social rankings will differ from the market rankings, because in both the goods and factors markets, prices are no longer the true indicator of the scarcity values. Thus, in order to rank the projects socially, one will have to take account of the distortions present in the economy. Different methods, notably L.M. and U.N.I.D.O., have been suggested to account for these distortions. Besides L.M. and U.N.I.D.O., methods recommended by Bruno and Kruger are worth mentioning. The book under review compares the different methods and concludes that all the methods are basically the same in the sense that if equivalent assumptions are made, they require the same information and social ranking is the same.

A.R. Kemal

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