Introduction

  • Ajit K. Dasgupta
  • D. W. Pearce
Chapter

Abstract

The idea of measuring the net advantages of a capital investment project in terms of society’s net utility gains originated with Dupuit’s famous paper ‘On the Measurement of the Utility of Public Works’, published in 1844 [1].1 In this work, Dupuit pointed out that ‘political economy has not yet defined in any precise manner the conditions which these [public] works must fulfil in order to be really useful’ ([1] p. 83), and proceeded to develop his definition of what we now call consumers’ surplus, the excess of consumers’ willingness to pay for a good or service over and above its market price, as a measure of the net welfare gain from a project. Despite refinements to the concept and theory of consumers’ surplus by Marshall, Hotelling and Hicks, the practical application of the theory to public investments which had been recognised by Dupuit was not resurrected until the 1950s, with the formal advent of cost-benefit analysis.

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Copyright information

© Ajit K. Dasgupta and D. W. Pearce 1972

Authors and Affiliations

  • Ajit K. Dasgupta
    • 1
  • D. W. Pearce
    • 2
  1. 1.Sir George Williams UniversityMontrealCanada
  2. 2.University of SouthamptonUK

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