1. A structure (bridge, building, etc.) should be as robust and durable as possible,
while having the lowest possible cost. The adopted procedure has been to
establish construction codes of practice which prescribe the minimum acceptable
strengths or conditions acceptable, with regards to materials, workmanship,
structural behaviour, etc. The cheapest structure satisfying the code specifications
is then constructed.
2. When a town proposes to construct public housing units, land for building and
money for construction are the two scarce resources. Unfortunately, for political
and spatial motives, these resources are not easily exchangeable. As two goods
need to be produced, (1) a maximum quantity of housing units and (2) a maximum comfort within each unit. The favoured procedure will probably minimise
the construction cost per housing unit, given the constraints restraining the
choices of the other variables. Land area will be minimized through a minimal
amenity standard within each housing unit. Similarly, the project drivers can use
their social judgement to enhance a building code ensuring a minimum structural
amenity standard. This is also likely to result in the cheapest acceptable housing
units built in a crowded space, subject to available money for construction.
3. Police manpower resources need to be allotted between traffic management and
the other usual police activities. As managing traffic, usually at school crossings
and at busy intersections is properly understood, it is not difficult to establish
satisfactory standards for this activity. It is more difficult to lay down standards
for the other police activities, mostly crime fighting. Thus, an arbitrary, but
understandable and satisfactory, standard will be established for the manpower
resources assigned to traffic. The remainder of the policemen will be allocated to
the other activities.
4. A municipality owns a plot of land which it wishes to develop into an industrial
park. The prevalent council members of the majority propose to apportion the
land, among potential industries which can maximise estimated employment,
given quantified constraints on water and electricity requirements, transport
facilities, and environmental impacts. Members of the opposition, argue instead
that waning, low-wage industry will be encouraged by this approach. The
opposition, therefore, recommends the alternative of maximizing monetary output of the new industries, considering the same constraints specified above.
These examples demonstrate that although an arbitrary constraint approach is
indeed practical, a better methodology should be adopted for an effective allocation
when resources and goods cannot be compared with the same yardstick.
This has led economists to devise an optimal resource allocation mechanism,
where “consumption indifference curves” try to group, in a quantifiable way, the
benefits obtained from combinations of incommensurable goods.
The approach is very easily understood by limiting oneself to two resources,
A and B, which can be processed to obtain two chosen goods, X and Y. Thus, the
resources might be land and money, and the goods might be public golf courses and
ball fields.
7.3 The Allocation of Incommensurable Resources for Incommensurable Goods
189
while having the lowest possible cost. The adopted procedure has been to
establish construction codes of practice which prescribe the minimum acceptable
strengths or conditions acceptable, with regards to materials, workmanship,
structural behaviour, etc. The cheapest structure satisfying the code specifications
is then constructed.
2. When a town proposes to construct public housing units, land for building and
money for construction are the two scarce resources. Unfortunately, for political
and spatial motives, these resources are not easily exchangeable. As two goods
need to be produced, (1) a maximum quantity of housing units and (2) a maximum comfort within each unit. The favoured procedure will probably minimise
the construction cost per housing unit, given the constraints restraining the
choices of the other variables. Land area will be minimized through a minimal
amenity standard within each housing unit. Similarly, the project drivers can use
their social judgement to enhance a building code ensuring a minimum structural
amenity standard. This is also likely to result in the cheapest acceptable housing
units built in a crowded space, subject to available money for construction.
3. Police manpower resources need to be allotted between traffic management and
the other usual police activities. As managing traffic, usually at school crossings
and at busy intersections is properly understood, it is not difficult to establish
satisfactory standards for this activity. It is more difficult to lay down standards
for the other police activities, mostly crime fighting. Thus, an arbitrary, but
understandable and satisfactory, standard will be established for the manpower
resources assigned to traffic. The remainder of the policemen will be allocated to
the other activities.
4. A municipality owns a plot of land which it wishes to develop into an industrial
park. The prevalent council members of the majority propose to apportion the
land, among potential industries which can maximise estimated employment,
given quantified constraints on water and electricity requirements, transport
facilities, and environmental impacts. Members of the opposition, argue instead
that waning, low-wage industry will be encouraged by this approach. The
opposition, therefore, recommends the alternative of maximizing monetary output of the new industries, considering the same constraints specified above.
These examples demonstrate that although an arbitrary constraint approach is
indeed practical, a better methodology should be adopted for an effective allocation
when resources and goods cannot be compared with the same yardstick.
This has led economists to devise an optimal resource allocation mechanism,
where “consumption indifference curves” try to group, in a quantifiable way, the
benefits obtained from combinations of incommensurable goods.
The approach is very easily understood by limiting oneself to two resources,
A and B, which can be processed to obtain two chosen goods, X and Y. Thus, the
resources might be land and money, and the goods might be public golf courses and
ball fields.
7.3 The Allocation of Incommensurable Resources for Incommensurable Goods
189