Abstract
Abstract The discounting of future values and their summation into a single Present Value is a standard procedure used by engineers and economist to help them identify the best technology, and the best designs, for capital investments. The author questions the validity of this methodology for invesments that will generate recurrent cost whose provision cannot be assured by user charges and must therefore be covered from government budgets. It is wrong to use a methodology that (a) puts such future costs at a discount and (b) which converts capital and recurrent costs into an abstract, undifferentiated concept of ‘total resource costs’ expressed in a single number, the Present Value (PV). This challenge to the indiscriminate use of PV methodology is illustrated by reference to rural water supply projects; however, the author believes his viewpoint has much wider application.
Published Version
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