Accounting Prices as a Tool of Development Planning

Abstract

The postwar resurgence of interest in the problems of economic development has been marked by the proliferation of theories geared to the distinctive problems of underdeveloped economies. Among those most widely advocated is the technique of basing development plans on "accounting prices" or "shadow prices" for labor and capital rather than on the prices which actually prevail in the market. The argument of this paper is that most discussions of this technique are based on a seriously inadequate definition of the problem and prescribe policies which will be inimical to economic development.