The Little—Mirrlees Method and Project Appraisal

  • Frances Stewart

Abstract

It IS not uncommon in the history of positive and normative economic doctrine for a new law or a new rule to be announced which is interesting and appears to reveal something important. Under the impact of criticisms (including self-criticisms), the law or the rule is qualified, refined, redefined and reformulated until it becomes a tautology. The original, non-tautological proposition is now seen to be false, though illuminating; the reformulated, redefined, qualified proposition to be true, though tautological. Yet, the proposition and others derived from it survive because they draw strength from swinging in an indeterminate manner between falsehood and tautology. In the area of positive economics, the assumption of profit maximisation, the equation of marginal revenue to marginal cost, and the theories of the firm derived from these premises, may serve as illustrations. In optimising theory the L-M (Little—Mirrlees) method of project appraisal in some respects resembles this procedure. When it has ‘body’ and substance, when it is applicable and practical, it is open to certain objections, most of them seen by the authors themselves. When it is provisos, ‘footnotes’ and qualifications, it tends to retreat into tautology.1

Keywords

Petroleum Rubber Income Marketing Gravel 

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References

  1. L-M, ‘Further Reflections on the OECD Manual of Project Analysis in Developing Countries’ (mimeo, May 1970) p. 5.1.Google Scholar
  2. See P. Kilby, Industrialisation in an Open Economy Nigeria, 1945–1966 (CUP, 1969), and African Enterprise: the Nigerian Bread Industry (Hoover Institution Studies, 1965 ).Google Scholar
  3. Examples shown in D. S. Pearson, Industrial Development in East Africa (OUP, 1969 ).Google Scholar
  4. See, e.g., John H. Dunning, Studies in International Investment (George Allen & Unwin, 1970) pp. 65 and 125. The theory was put forward by the US National Industrial Conference Board, US production abroad and the US balance of payments (New York, 1966). The same point was made in Paul Streeten. Dunning, Studies in International Investment (George Allen & Unwin, 1970) pp. 65 and 125. The theory was put forward by the US National Industrial Conference Board, US production abroad and the US balance of payments (New York, 1966). The same point was made in Paul Streeten, ‘The Taxation of Overseas Profits’, The Manchester School (Jan 1957) p. 99.Google Scholar
  5. I.M. D. Little and D. G. Tipping, A Social Cost Benefit Analysis of the Kulai Oil Palm Estate West Malaysia Development Centre of the OECD, Paris, 1972.Google Scholar
  6. See Paul Streeten, Economic Integration 2nd ed. (Sythoff, 1964) Appendix 1.Google Scholar
  7. N. H. Stern, An Appraisal of Tea Production in Kenya. An Experiment with the Little—Mirrlees method, Development Centre of the OECD ( Paris, 1972 ). We are indebted to Judith Heyer of the University of Kenya, Nairobi, for comments.Google Scholar
  8. E.g., A. K. Sen, Choice of Techniques, 3rd ed. (Blackwells, 1968).Google Scholar
  9. S. Marglin, Public Investment Criteria (Allen & Unwin, 1967 ).Google Scholar

Copyright information

© Paul Streeten 1972

Authors and Affiliations

  • Frances Stewart

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