“Shadow Prices for Pakistan: An Assessment of Alternative Estimates” – A Reply

Ms. Tsakok (I) has done a useful job in summarising and commenting on the various estimates of shadow prices which appeared in the symposium on shadow pricing in Pakistan, published in the Summer 1979 issue of this Review. However, her discussion of my paper in the symposium (3) 1 is misleading regarding a number of points of detail, and, more seriously, obscures the general thrust of the argument. Considering the detailed points first, Ms. Tsakok is concerned with a comparison of the values of the key shadow prices given in the different studies as well as with the explanations for the variations between the different estimates. However, JW discusses not the estimation of a set of shadow prices for Pakistan, but the broader question of the implications of the use of an income-weighting system, described conventionally as ‘social’ analysis, in project appraisal. The shadow prices attributed to my work in Table I of Ms. Tsakok’s paper (II are not in fact contained in JW. but are taken from an earlier mimeographed paper written in 1977. These shadow prices are preliminary estimates, which are not used in my more detailed study on cost benefit analysis in Pakistan [2]. Furthermore, It is strange to find these estimates cited, since they conflict with the analysis of JW, which is the paper under review.