The Little-Mirrlees Manual-An Evaluation of Its Relevance for the Developing Countries

An Evaluation of Its Relevance for the Developing Countries Bimal Jalan Introduction THE current upsurge of interest in the methods of project evaluation would semi to he the result of two empirical findings with respect to the results of past industrialisation policies in developing countries: (a) that, in these countries, there exist pervasive divergences between market prices and social values, and (b) that the pursuit of import substitution strategy by many of these countries has led to the encouragement of import substitution projects regardless of social costs. The finding that social values may diverge from market prices is, of course, not new in economics; what has given it a new relevance for development policy is the conviction that widespread government intervention in the economies of developing countries may have served to further accentuate rather than attenuate these divergences. 1 Once it could also be shown that government policies have made possible the domestic production of many manufactured products in developing countries at exceptionally high social cost, the conclusion was inevitable that what the developing countries needed was a good method of project evaluation, which would bridge the gap between private and social values.