A Determination of the Opportunity Costs of Government Projects: A Neo-classical versus a Keynesian Approach

This article deals with the determination of the opportunity costs of government projects. In the past, authors such as S. A. Marglin and M. S. Feldstein developed fromulae for opportunity costs, starting (implicitly) from a particular variant of a neoclassical model. In the article, it is argued that the formula for determining opportunity costs should be derived in two steps. First, a mathematical model of the existing economic regime should be constructed. Then the opportunity-cost equation can be deduced from the model. In this article, opportunity cost formulae were deduced for a simple neoclassical and a Keynesian model.