2.2 Accounting for uncompensated losers
A programme of expansion of social services will be selected if its shadow-priced
net benefits are higher than any alternative competing project. Net benefits are
measured as the difference between the benefits received by the private sector and
the costs incurred by the public sector, subject to the minimal approval condition
that B(Q) − C(Q) > 0. As in Orr ([31]) and Brent ([6]), the social utility function
of taxpayers as a group can be assumed to positively depend not only on own