THE NUMERAIRE MATTERS IN COST-BENEFIT-ANALYSIS

The choice of numeraire is shown to be important in cost-benefit analy sis. When a public good is involved, individual consumers' marginal ra tes of substitution will generally differ. Thus, the less valuable the numeraire is to a person, the higher the number required to express h is net benefit, and the more will his interest weigh in the total sum. The choice of money as numeraire is systematically favourable to thos e who value money the least, relative to alternative numeraires. (C)19 97 Elsevier Science S.A.