4 SOCIAL SCIENTIST Dobb has formulated the problem of investment planning as involving three distinct elements:1 the overall rate of investment has to be determined; then comes the allocation of the quantum of investment between different economic sectors; finally, within each sector, there is the problem of choosing the technique. Much of the debate ensuing from Dobb's work has centred primarily on the last problem. The question of choice of technique has been p >sed in terms of investment criteria resulting in some confusion as to whether in fact these were identical or distinct issues. Further literature now deals with a gamut of problems in terms of criteria for project evaluation which is clearly not identical with the choice of technique for producing a given commodity. Two major works on project evaluation have appeared: Project Appraisal and Planning for Developing Countries by I M D Little and J A Mirlees (hereinafter referred to as L M) and Guidelines for Project Evaluation by AK Sen, P Dasgupta and SA Marglin (referred to as SDM).2 Both attempt to formulate detailed and comprehensive guidelines for the so called less developed countries (LDCs) and as such merit consideration. Before taking them up a few points common to these two works and to others advocating project evaluation procedures for LDCs may be noted. Invisible Hand The theoretical starting points are neoclassical general equilibrium theory and individualist welfare economics that has developed in close association with that theory.8 The equivalence theorem of neoclassical general equilibrium theory states that, under certain convexity assumptions regarding technology and consumer preferences, the equilibrium position of a perfectly competitive economy is pareto-optimal, and conversely every pareto-optimal outcome can be generated as the equilibrium of a perfectly competitive economy. This proposition, which is of extremely limited significance, and has a purely definitional validity as we shall attempt to show later, is often more loosely interpreted to mean the coincidence of "private costs (benefits)" and "social costs (benefits)9' in a perfectly competitive economy, that is a modern rendering of Adam Smith's eulogy of the "invisible hand". Starting from this position it is argued that in less developed countries, there exist market imperfections, government-induced distortions, and other disturbances. It is then deduced on this basis that market prices of resources and goods in these countries do not correctly reflect social costs and benefits. Hence it is argued that there is need for "social cost benefit analysis'^ also called project evaluation. Any project consists of inputs used up and outputs produced. Further production is not instantaneous. Thus we are dealing with inter-temporal flows of inputs and outputs. Project evaluation, it is argued, consists of valuing these inputs and outputs, taking the time dimension into account, in a manner that accurately reflects their social value* Since market imperfections and other factors mentioned above render market