xt7bg7372023 https://exploreuk.uky.edu/dipstest/xt7bg7372023/data/mets.xml   Agricultural Experiment Station, Department of Agricultural Economics, University of Kentucky 1972 journals kaes_research_rprts_11 English University of Kentucky Contact the Special Collections Research Center for information regarding rights and use of this collection. Kentucky Agricultural Experiment Station Research Report 1 : April 1972 text Research Report 1 : April 1972 1972 1972 2014 true xt7bg7372023 section xt7bg7372023   PERFECTING METHODS FOR PREDICTING THE COURSE
    OF RURAL AREA DEVELOPMENT
if A PARTI
A Toward a Definition of Economic Development
and
i A Framework for Evaluating Model Efficacy
By
V Bruce R. Beattie, Thomas H. Klindt, and Garnett L. Bradford
y RESEARCH REPORT ll : April l972
V University of Kentucky : : College of Agriculture
Agricultural Experiment Station :: Department of Agricultural Economics -
~ . Lexington

 J x
x * a
’

 ~ —»·i
PREFACE
This is the first of two reports relating results of research conducted under Kentucky Hatch _
Project 89, ““Development of Procedures for Quantifying and Assessing the Economic Well-Being f
of Rural Areas in Kentucky." The research reported in this and its companion publication is
based in large part on the l’h.D. research effort of Thomas H. Klindt. This thesis research L
represented the initial phase of research contributing to Hatch 89.
The principal thrust of Hatch 89 is to perfect methods for predicting the course of rural area
economic development. Specifically, five objectives are involved—(l) definition of economic
development, (2) delineation of criteria and procedures for evaluating model efficacy, (3)
construction of alternative models for predicting important components of economic
development, (4) comparative tests of alternative models in accordance with criteria established
in objective two, and (5) use of "best" models based on results obtained in carrying out objective
four to predict the course of economic development for selected rural areas of Kentucky.
The purpose of this publication is to present an overview of the objectives, methodology,
and philosophy of the total research effort. ln addition, preliminary results related to two of the
five general objectives are reported herein That is, a definition of economic development is
tendered, and a framework for considering model efficacy is offered. The results in this regard
should not be construed as a final statement but rather as a reporting of our thinking at this early
stage of research.
Work related to objectives three, four, and five of the total research effort will be reported
in another research I`C[)Ol`l~PL’7'>/t't`Tf71g .\let/rods for Predzctz`ng the Course 0f Rural .-lrea
I)et¤eZ0pment: Park 2 rL’s1'2zg Simple Forecrzst Models to Predict Income in Selected Rural.-lreas
0fI{ezttuc}cy
The authors gratefully acknowledge the assistance and cooperation of Dr. Harold K.
Charlesworth and staff of the Office of Development Services and Business Research at the
University of Kentucky, Mr. William G Herzel and staff of the Program and Research Staff,
Kentucky Department of Revenue, and the Kentucky Department of Economic Security for
providing much of the data for this study. .—\lso, the criticisms and comments of our colleagues in
the Department of .·\gricultural Economics, especially those of Harry H Hall, are gratefully
appreciated.
iii

 CONTENTS
Page
LIST OF FIGURES ....,................................ \· pigu,
INTRODUCTION ....... . ............................. 1
Research Philosophy ........._........................ 2
Objectives and Procedures ............................... 2
Definition of Development ............................ 3
Model Efficacy .................................. 3
Model Construction ..~............................. 3
Model Testing . . . ............................... 3
Prediction ..................................... 4
TOWARD A DEFINITION OF ECONOMIC DEVELOPMENT ............... 4
Welfare and Development ................................ 4
An Examination of the Components ........................., 6
Market Effects, A1 ................................ 6
Extra-Market Effects, A2 ............................. 8
Equity Effects, E ......,.......................... $1
A Definition of Economic Development ........................ W
A Framework for Social Decision-Making .........,............. lf
‘ The Role of the Economist ............................... IY
A FRAMEWORK FOR EVALUATING MODEL EF FICACY ................ 13
Criteria for Comparing Models ..............,.......,...... 14
Logical Validity .................................. 16
Simplicity ..r...........,...,.................. 16
Fruitfulness .................................. 16
Model Testing Procedure ................................ 16
Testing for Biasedness ............................... 17
Testing for Precision ................................ 18
P The Mean-Square—Error Criterion , . . , .,.................. 18
SUMMARY AND CONCLUSIONS ....,.........i.............. 18
Definition of Economic Development ......................... 18
Model Efficacy ..................................... 20
` Implications .,..,.............................,... 20
BIBLIOGRAPHY ..,......,.........................,.. SZ?
  y iv
1
  `
1
’. * ,...,..

 1 Q
LIS'I` OF FIGURES
’agc Page
\’ Figure 1.-Components of model efficacy .......................... 15
1
2
  1
3
3
3
3
4
4
4
6
6
8
$1
10
12
12
13
14
16
16
16
16
17
18
18
18 V
18
20
20 I
22
`7

 PERFECTING METHODS FOR PREDICTING THE COURSE OF mo,-(
RUIUXL AREA DEVELOPMENT mul
relei
Part I judg
abse
TOWARD A DEFINITION OF ECONOMIC DEVELOPMENT that
AND
A FRAMEWORK FOR EVALLIATING MODEL EFFICACY prot
mak
b}` undi
enal
Bruce R. Beattie, Thomas H. Klindt, and Garnett ls. Bradford* Ul
pftit
INTRODUCTION
Area development programs are not new, used to quantify and assess the effectiveness
but in the past few years there has been a of rural area development programs. The need Cm,
renewed surge of interest in rural area for such research can be supported from tivo [hm
development. In the Report of the President`s levels: (l) in terms of the ultimate need of the dll.
National Advisory Commission on Rural decision maker for useful, reliable economie SUIT
Poverty [22] it was recommended that information and (2) in terms of the Crm
multicounty development districts be immediate needs of economists for a relevant APF
established throughout the country. Fifteen framework from which to view rural area per
such districts have been delineated in development. The first, a need for applied rese
Kentucky. The purpose of these districts research, gives rise to the second, a need for ded
presumably is to provide a mechanism for more fundamental research focusing on the est;
promoting area development. In addition to identification of relevant economic issues and issu
these districts, area and regional development the development of operational techniques in (
associations are being formed by various for their quantification. Sue
interest groups. If these groups are to be There is, we believe, considerable (thi
effective in accomplishing their "development confusion concerning the nature of rural exa
objectives,” then decision makers at various economic development.l This "confusion" orl
levels will need reliable information seems due in part to the fact that the
t concerning economic consequences of articulation of this concept is based largely on 1`€S<
V alternative courses of action. the intuitive feelings of many individuals. var
Thus, there is need to structure an representing diverse interests and disciplines. est
effective analytical framework which can be about what "ought to be" important in a per
developmental context. There is need for .t the
l be
i cot
*ASSiSI8¤t PrOf€S$Oi‘ of Agricultural Economics, University Of ’—”’_‘;"""‘"""' be
j Kentucky; Assistant Professor ot Agricultural Economics, rcs
Louisiana State University; and Associate Professor of
Agricultural Economics, University of Kentucky, lWe shall attempt to justify this assertion in a later sectioli pu
respectively by briefly reviewing literature on this subject. dc]
L prt
  ‘ me
l
l .
l .
»_ ~ gg `

  `ti
2
more solid conceptual foundation for rural complex than one might suspect at first
area development, thereby providing a glance. Notice that the statement reads,
relevant set of criteria and/or framework for ". . .demonstrate that the model has y
judging what "will be" given the inception or accurately predicted in the past", not that it
absence of certain programs. lt is to this end accurately predicts past events. There is a not
that the research reported herein is directed. so subtle difference between the two  
Before looking at objectives and statements. lt is one thing to construct, using
procedures, let us take a brief diversion to all information available today, a model that L
make explicit the research philosophy does an adequate job of explaining past
underlying this study. llopefully, this will events. There is no prediction involved. It is
enable the reader to gain greater appreciation quite another to demonstrate that a model
of why the particular objectives and based on experience and information of the
procedures were selected. distant past is capable of predicting less
distant past events. This is the real essence of
Research Philosophy establishing the predictive capabilities of a
model. Such is the thrust of objectives three
ness The philosophy underlying this research and four of this research (see next section).
reed effort is relatively straiglrtfonvard. We believe The underlying philosophy of the
two that the applied researcher can be most empirical portions of this effort, then. is that
`the effective if he orders his thinking atrd effort if one can demonstrate that a particular
rnric something like the following. lle tnust first model has predicted well "in the past," then
the conceptualize the problem in terms of an the model is preferred for predicting future
vant appropriate theoretical framework. 'lihis events to one for which this has
area permits a set of releviurt variables, unsuccessfully been established. This notion
Jlied researchable issues, atrd/or hypotheses to be seems so obvious as to be elementary;
l f0l` d€CltlCCCl and isoloated and, most importa1rtly_ however, we believe that economists
the establishes a framework so that individual (including agricultural varieties) have been (
; atrd issues or variables may be related to and kept derelict in this regard.
ques in proper perspective in terms ofthe problem. Let us ttrrn now to the objectives and
Such a framework is needed so that the forest procedures of this research effort.
rable (the problem) is trot lost sight of while
rttral examining individual trees (issues, variables, Objectives and Procedures
gion" 0I` hypotheses),
the lf the researcher is then to effectively Hatch 89 has five objectives:
ly on research issues, predict levels of the relevant
luals. variables, atrd/or test lrypotlreses, he must (1) to define economic development, g
lines. establish criteria for evaluating model (2) to delineate operational criteria and .
in a perfortnatrce or efficacy. Presumably, one of procedures for evaluating model
for tr the criteria will be that the models developed efficacy,
be amenable for predicting futtrre evetrts. Of (3) to constrttct alternative tnodels for
course, where is no ex ante way that this catr predicting important components of
be dotre with certainty. llowever, the econotnic development, I
researcher catr lend some credence to the (4) to cotnparatively test alternative
section PN-Tdictive capability of his rnodel(s) if he can tnodels in accordance with criteria
demonstrate that the tnodel has accurately established in objective two, and ~ (
Predicted in the past. A rigorous test of a (5) to use "best" tnodels based on results
model’s capability in this regard is more obtained in carrying out objective four
 

 3
` to predict the course of economic or planners when contemplating programs to ll*
‘ development for selected rural areas develop an area. Once relevant variables have Ul
i   of Kentucky. been identified, the researcher can then Vu
develop analytical models to predict future of
. I Some amplification of these objectives is in levels of each, given alternative development uc
° order; we consider each in turn and include a strategies. uc
cursory look at the procedures utilized (or bl
Z i proposed)2 to accomplish each. Model Efficacy Su
» se
i Definition of Development lf predictive models are to be useful in a mi
  decision-making context, then criteria are
( 1 Research and planning pertaining to necessary for determining the "best" model Pr
  areas or districts (rural or urban) commonly under given circumstances (objective 2).
V i` have the goal of enhancing the development Certainly, the determination of a "best"
  of those areas or districts. ln these cases, model depends upon what is required of it. m'
i { development is normally defined in terms ofa \\`e propose to elaborate and give operational
I   single criterion such as increasing employment content to economic and statistical criteria in
I ~ or increasing total or per capita income.3 The terms of logical validity and l·`riedman`s
T first objective of this effort was to articulate a concepts of simplicity and fntitfulness ll l ] .
  more comprehensive definition of _
i ‘ ( development—that is, establish a ModelConstruction lm
i comprehensive theoretical framework. The “`l`
j general procedure used to meet this objective The third objective involves the im
  _ Was to derive 21 set of criteria, each construction of alternative models (in ml
component of which might affect aggregate accordance with criteria established in ““
- social welfare. This was achieved by beginning accomplishing objective two) with a view Su
with a welfare economics framework and toward predicting future levels ol variables Gil
'T deducing, by identifying the assumptions that (identified in accomplishing objective one) dc
" permit optimization, a set of critical given alternative development strategies.
( _ economic variables relevant in identifying and Alternative econometric models were Sul
quantifying the economic dimensions of area constructed with the aim of predicting the CO
development. Although no objective method future state of affairs given alternative hai
for combining or comparing (trading—off) each development programs including the "no tig!
. of the dimensions (variables) is available, each program" alternative. l)uring the first phase ldc
  ( may affect aggregate welfare and should, of study, emphasis has been placed on dh
  ’£h€1”€f0Ye, be considered by decision makers constructing single-equation multiple mf
  _ regression models. ln later phases Bu
consideration will be given to "more ccf
‘"""__`_" sophisticated" models. lm
nn]
. 2Our progress in accomplishing objectives one and- tvvo is j~jOdCj Testing tht
reported tn subsequent secttons of this report Preliminary CX;
· results related to objectives three, four, and five are
» reported in l?art·2 (forthcoming), A brief discussion of the A(`(Cr nlodcjs um dcvclopt-d_ it jg lilll
last thrae objectives ts included here so that the reader may . . .
. View Objecmes one and (wom properperspgcme necessary to devise testing procedures to fm
3T _ _) _ _ _ determine which are superior in terms of Cu
he overstmpltfted nature of such criteria has been potnted . . .   , , ·
. out by Levin [16, p. 24] and Smith,Brannon,and Anschel Cmtcrm lot m()dcl CHICHCY 10 lcs) lh" LUN
[24]. predictive accuracy of models, each must be Soi

 4
used to predict the dependent variable into a predicting future states. Thus far, our main
time period in which actual values of that concern has been to predict future levels of
variable are known. This allows measurement total and per capita regional incomes with the
of deviations of the predicted values from the most accurate models. The procedures
actual values. Based on this information, involved are the same as those utilized in
accuracy of the predictions can be determined making text predictions except that data used
by tests of unbiasedness and precision. From are more current.
such tests the "most accurate" models can be Having completed this discussion of the
selected for predicting future levels of overall research effort and philosophy
important area development variables. underlying Hatch 89, we now turn to the
[ main theme of this publication—a reporting of
] Predicting our research results regarding the definition of
area economic development and the
L Objective five is self-explanatory. It specification of a framework for evaluating
merely involves using the "best°' model(s) for model efficacy.
l
n
5 TOWARD A DEFINITION OF ECONOMIC DEVELOPMENT
I Let us consider the planned to increase per capita income." Viner [27], in
implementation of a project or program an article concerning developed versus
which would somehow affect the economy of underdeveloped countries, suggests that per
. all area and HSSUITIC that the qu€Sti0l1 was capita living levels and population density are
I raised concerning whether the project would both important dimensions of development
, enhance economic development of that area. with per capita living levels being the most
_. Such a question cannot be answered until important. Clearly these objectives
5 criteria are established for judging economic (definitions) are not equivalent or, for that
y development. matter, necessarily compatible.
For all that has been written about the
1 subject, no comprehensive definition of area Welfare and Development
_ economic development (and hence, criteria)
1 has come to the fore. There is widespread Most economists agree that the
3 agreement that more research is needed for tlieoretieal basis underlying all policy related
_ identifying and measuring the impact of issues in economics, including those of area
Q alternative rural development programs on development, is welfare economics. As Mishan
U those economic variables deemed important. has noted;
S But, it seems clear from the literature on
U economic development that economists do The practical importance of an
not have a firm grip on what is deemed understanding of welfare economics can
important, i.e., what is meant or implied by be questioned today only by those
the term area economic development. For unfamiliar with its subject
example, Berry [3] and CSRS [7] indicate matter .... whether to invest in a road
S that the creation and maintenance of an or a railway, or whether to conserve
J employment base is the major objective of natural beauty and how much, are all
]· economic development. Spiegelman, Baum, political questions which, in so far as
C and Talbert [25] suggest that "the essential they are influenced by economic
C goal of planning for economic development is considerations, must ultimately be

 5
referred to the propositions of welfare that there is scarcity, the distribution of those are
economics [21, p. vii]. goods and services among the individual recre.
members of society. Frequently, these two (Rec;
Since €COnOmic d€v€lOpm€11t is C011C€f11€d considerations are labeled by economists as comr
with the health, happiness and prosperity of efficiency and eqttity effects. 'l`hat is, the mark
people, it would seem only appropriate that impact of a developmental project or program [,,0],
development be defined in terms of people on economic welfare may be considered in
[20]. Social welfare depends on the terms of fl) the production of the largest prese
satisfaction levels of all consumers, or of all possible "social pie" (in terms tif the output the
members of a particular society, however, of goods and services) from availahle t-cor
delimited [13]. Obviously, ". . . the concept resources~·economic efficiency and (Qi intel
of social welfare transcends the tnore equitable division of the "social pie" among inte
restricted notion of economic welfare" [13, individuals of society economic equity. lit funci
p. 20] . The concept that we wish to pursue is functional form, the relationship may he funci
that of economic development. Hence, the stated as judgi
goal of concern is economic welfare.`f ecoi
If increases in economic welfare of \\' = w[(_»\,l·l) ill infor
people is the goal, then it is reasonable that wisd·
economic development be equated with that where overt
increase. Thus, an increase in aggregate quo
economic welfare becomes the definition of \\'—denotes aggregate social welfare well`:
economic development. That is, if as a .»\»denotes efficiency effects GXPC
consequence of a developmental program li—denotes equity (distributive) effects. deve
aggregate economic welfare is increased, then welf;
economic development has occurred. lf efficiency effects are divided into Cléiill
Obviously, this definition shifts the burden market effects and extra-market effects, the llddl
from defining economic development to relationship may be rewritten as
defining increases in aggregate economic func
welfare. However, this seems justified in order W = w2(A1_ A2, 1;) (Qi cone
to make clear (as should be obvious upon basis
completing this section) that to equate area where oper
economic development with increases in real desir
personal income, for example, is at worst A]—denotes market effects imd.
fallacious and at best misleading. A2»denotes extra- market effects. f01`il
V ` One may begin the process of defining Whei
. social welfare by postulating that it depends In general, market effects represent that
. upon the quantity of all 5goods and services collection of goods and services for which the Si
available for consumption and to the extent market is relied upon as the principal M
A allocative mechansim. On the other hand. gf
, .. - extra-market effects represent that collection bl
l of goods and services for which market priee> C‘
2 _ 4Henceforth in this report, the term "welfare" refers to the for fcusomublc pfoxlcs ll‘“"°"fl mic mu
· · concept of economic welfare. generated zttld used as lUClfSlll`CS of t‘tit>tti>tnlt`
, 5ThE phrase ,,90OdS and Sgmceg, is used in 3 Very general value.6 Some examples ol extra-market good>
‘ context It refers to both market and extra—market goods —————————~—— _ _
9 [ and includes discommodities as well as commodities. A Ot C
, g commodity is a good of which consumers prefer more to Or
 ·· T   ‘ less, whereas discommodities are those for which they 6See discussion of "intangibles" by Ciriacy·Wantrup [5, DP f
 `   D|'€f9I' l€SS to I'T10l’€.  
l ;
it “ f ___,... .

 '· 'i
6
osc are national defense, publicly provided region. Thus, one need not be concerned
ual recreational facilities, and polluted air. directly with every component of economic
wo (Recall, that discommodities as well as welfare (i.e., every aspect of A1, A2, and E.),
a as commodities are included in the categories of but instead, only with those aspects which
the market and extra-market effects as per would be changed by a developmental  
‘am footnote 5.) project. What is needed then is a system for
I in The problem in defining total welfare as determining the effects of a proposed project 4
;¤‘sl presented in equation (2) is that in this form on component parts of the total welfare i
ptll the concept is not operational. Most relationship (equation 2). ln effect, a separate
tble economists agree that problems of `“with" and "without" comparison is required
(2) interpersonal utility comparisons and for each ol the component parts of the
ong interdependency of individual utility welfare function. Let us take a closer look at
. ln functions preclude tlie use of a social welfare each of the components to identify how each
be function as an operational criterion for might be affected by a proposed
judging tlte social desirability of alternative developmental program.
economic states. llowever, if such
( lt information were available, i.e., if we had the Market Effects, A1
wisdom, techniques, and data needed to
overcome these two problems, then the status Market effects represent that element or
quo could be compared with the aggregate argument of economic welfare with which
welfare value which would result from the economists have historically concerned
expected economic changes of a planned themselves. The value of market goods may
ects. developmental program or project. lf the be measured in dollars because of the ability
welfare change were positive, then it could be of consumers to express themselves in the
into claimed that welfare and, ltence, development marketplace through the medium of a general
the had been enhanced. good, viz., money. Recall, the market effects
Since the concept of a social welfare component was said to represent that
function is not operational even on a collection of goods and services for which
(Qt Conceptual basis, much less on an empirical market prices (or reasonable proxies the_reof)
basis, then alternatives must be introduced if are used as a measure of economic value.’
operational criteria for judging the social f\l;n·l;ct effects lnclndg bgth dn-ect and (
d€$ll`**bllllY of ¤l[<*l`\llili\`€ €€<>il0mi€ states indirect net, present, real market value of the
and, hence, economic development are to be relevant collection of goods and services. Net,
forthcoming. Mcliean addressed tltis point present, real market value of the relevant
when he “'i`<>i€i collection of goods and services is a deceptive
ilizli notion. A number of important concepts are l
lt the Sims it is impossible to measure involved. First, indirect as well as direct ‘
`Cfpftl Mlhieveinents in these terms (ultimate (immediate) effects are important and must
]Ll[l(l_ gO@11$), it is UCCUSSLIYY U) liClO}Jl illClll`L`Cl be ;lCCt)L1lllL`Cl fO1` ill LlS$CSSlllg ll`1€ HCY IHZl1`li€[
Cnnn bill tvorkable criteria that appear to be t-nlnc of incremental output attributable to L1
Hm., Consistent with ultimate aitns ll8,p. 29]. I
not vY-_t.,.
.omit` An Examination of the Components
gfitlfls 7Considerable discussion in economies literature has been
` Rcciill, lllilt tlle original probleln was one devoted to the questionof the usefulness of observed prices —` ‘
of determining wiretitcr tt pta-ttcttlttr program      
I5, pp OY PY0lCCl would enhance development of a given by l\/IcKean {19, DD- 33·65l
i

 7
developmental project 0r program. To Pl`OdLlCCl`-pl`OdllCL`l` cxu·i·1i;ilitics (if any) u wr
_ complicate matters, not Ollly indirect bcncfits must bc uccoumcd for in dctcrnminiiig nhq d i S
but also indirect c0sts must bc tukcu imo total murkct oliver u>mpi>i1cii1. Aucniiiin in cons
account. Indirect benefits (costs) arc benefits dmwu specifically m this type i>i` m;u·kr·i
(costs) resulting from the economic activity effect bccuusc these externalities do ;il`l`cc1 ihv has
generated (curtailed) in thc process of quantity und value of goods and si·rx·iu·s hui megh
realizing direct benefits. Indirect benefits rum- frequently overlooked in cviilimtiiip 1hi· (din
(costs) are realized (borne) by those impact 0i`p1‘opuscddc\1·li>p111c11t;1lpiwjccisiii in
individuals who service direct beneficiaries us programs. '1`hc externalities iii interest uri- imm
well as by individuals in other interdependent technological gis opposed ui pccuni;ny.l I im;
sectors 0f thc cc0n0my.8 Pmduccrpmnhiccr Lceliimliigiciil uxu·1·1i;ili1ii·~ con
Another important concept i1w0l\‘€d in occur when the production of one firm mc;1
assessing thc uct, present, real market vzdue 0i` affects the production process of ;u1<>1hi·r Cost
incremental output attributable to u firm. An cxiunplc of this pliciimiiciiiiii is 1hr- cffc
developmental prOgI`a.m is that ill idC11tif§°il1g cuss in which un llp$[l`L'Q\l1l l)l`U(1llL`l'l` ~·» imp
i thc relevant set Of goods zmd SCl`\`iC€S, polluws thc \\'LllL`I` that ;1 diiwiistiuim HSSC
n0n-pccuinajy (technological) externalities producer must expend 1`usi¤111‘u·s In eliuui thu
must be c0nsidercd.9 We will elaborate 0n thc wgucr beikirc usc. 'lhcsc externalities, bint; incr
notion 0f externalities by using external cuiniimius und cliscciiiiiiiiiivs. in (po:
p1`0duc€r·pr0duc€r and COHSUITl€l`·})1`OdLlC€l` only important (that is, they must by dui;
technological intcrdcpcndcncic·s as examples. accounted for in determining total n1;ii‘k¤: new
We use producer-consumcr und effect) when they nrc iii- uu nxiiciiixipciismon imp
c0nsum€1‘-consumcr types as €x:1mpI€siu thc v;u·icLy, For example, if ;i diiwnsiixxmx (cxi
next section (cxtra-market effects) DOL producer wcrc compensated for [hc cxiirrixeei 1s;1
because we believe that these varieties arc discconomy imposed by the upsiuumy pur
uniquely associated with the category Of producer, then nhs cikci would show up .;~ 15 ri
cxtra-market effects, but rather b€Cz1us€ gm increase in gusts iii production for Liu [hw
producer t0 consumer and consumer {0 upstream firm uml would bc accounted hir iii p1‘;1_
Consumer iHt€Id€ €r1d€DCi€S HIC ITIOYC terms of net value ul` thc iI1(jl`Cl1lL`lllLll mul Hui. lh;
I
frequently associated with Cxtra-mark€l (jonsumcr-p1‘0dL1Cc1‘ externalities Arr b0\
€ff€cts.1O comparable to p l`(1dll(`k`i` pi‘i>duc<‘i hm
cxtcrmxlitics. Again, univ the LlllC<>l1ll)L'l\$.lll`k€ cm}
technological varieties need Lii he yiiiisiilciui. ICN
. 8 _ _ _ A consumcr-pruduccr wclxixiiliigiuii Pm
- The concepts of direct and indirect benefits and costs are I _ . V _. ‘ _ . . _ _ . i 1 giy(
well developed in the literature. A detailed treatment of cxtcumlll} Lmbh lt Um*um})u(m Ut A wmt UI H
These ¤¤¤€€¤f$ is f0¤¤d in B9¤¤i€. Ei H', [2]· The ¤¤¤¤€Di service (011 the part ol, ciiimsuiucrs) affects liiv U
of net, present, real market value of incremental output is . » · . mu
developed in McKean [18] production process ol gm l)l`U(lLlLX`l`($). Ii, in thi u
exam lc nvcn above, the mllutcr s had bvcia P I
9 . . .
For a discussion of external effects, see Castle [4, pp_ __’_______v_*vr_A A uni
. 542-556] . Y" K"'
, H0
1OWe d0 not wish, given the scope and purpose of this 11The reason for exclusion Ot mcnnigr cxierrialiiirs ’ [IIC
_ r v
2 report, to engage in the debate concerning whether or not considering the marker effects wmpnrmnr is mimi mu
_ certain extra-market effects, including those due to reshuffiing of resources and resultant losses (gains) diivif ,
- technological interdependencies, can be included in the changes in product and factor prices are merely liv dls
market effects category, There have been numerous distributive effects of an economy striving ro m0¤=’ uS(
attempts to derive market price proxies in order to ascribe adequately meet the sovcrign consumui's diemuiid _
: economic value to extra-market goods. Our choice is Pecuniary externalities are, of course, an imppiwii? ui
, · primarily one of convenience and should in no way be consideration when describing disxribuziviz or ieqiiiis
 _ E interpreted as a point of view that we strongly adhere to, implications of developmental programs For a m0i·`
 ‘·   V even through we remain skepticaicf procedures commonly detailed examination of this reasoning, see I\/lct