On Measuring the Social Opportunity Cost of Labour in thePresence of Tariffs and an Informal Sector (The DistinguishedlLecture)

Harberger introduced his influential 1971 essay with thefollowing words. This paper is intended not as a scientific study, noras a review of the literature, but rather as a tract – an open letter tothe profession, as it were – pleading that three basic postulates beaccepted as providing a conventional framework for applied welfareeconomics. The postulates are: (a) The competitive demand price for agiven unit measures the value of that unit to the demander; (b) Thecompetitive supply price for a given unit measures the value of thatunit to the supplier; and (c) When evaluating the net benefits or costsof a given action (project, programme, or policy), the costs andbenefits accruing to each member of the relevant group (e.g., a nation)should normally be added without regard to the individual(s) to whomthey accrue.