PROJECT APPRAISAL: A TRADITIONAL APPROACH

Publisher Summary This chapter discusses project appraisal. One phase in the construction of a development plan consists of the selection of a program of projects out of a larger collection of projects. The aim of this selection process is to find a set of projects that together will use the quantities available of scarce production factors and that will maximize the contribution to the aims of development policy. The prices, often indicated as “shadow prices,” must reflect the relative scarcities of the factors and they depend on the selection of the projects made. The modern trend is to develop less general, numerical methods of a trial-and-error method, and to aim at the exact answer. In the tradition of successive approximations, the chapter discusses the problem in its simplest form. In an attempt to generalize the results to more complicated frequency distributions, it is an established tradition to develop the frequency density function into a power series.