of Reclamation and the U.S. Corps of Engineers. The general objective
in this application was to provide a useful picture of the costs and gains
associated with investments in water-development projects. The intellec-
tual "father" of benefit-cost analysis was the nineteenth-century French-
man, Jules Dupuit, who in 1844 wrote an often-cited study, "On the
Measure of the Utility of Public Works." In this remarkable article, he
recognized the concept of consumers' surplus (which is detailed in chapter
2) and saw that as a result the benefits of public works usually are not
the same thing as the direct revenues that the public works projects will
generate.

In the United States, the first contributions to the development of
benefit-cost analysis did not come from the academic or research
communities, but rather from government agencies. Almost from the
nation's beginning, officials and agencies concerned with water resources
development have been aware of the need for economic evaluation of
public works projects. In 1808 Albert Gallatin, President Jefferson's
secretary of the treasury, produced a report on transportation programs
for the new nation in which he stressed the need for comparing the
benefits with the costs of proposed water improvements. Early in this
century the Federal Reclamation Act of 1902, which created the Bureau
of Reclamation and was aimed at opening western lands to irrigation,
required economic analysis of projects. The Flood Control Act of 1936
proposed a feasibility test for flood-control projects which requires that
the benefits "to whomsoever they accrue" must exceed costs.

In 1946 the Federal Interagency River Basin Committee appointed a
Subcommittee on Benefits and Costs to coordinate the practices of federal
agencies in making benefit-cost analysis. In 1950 the subcommittee
issued a landmark report entitled Proposed Practices for Economic Analysis
of River Basin Projects. This document was fondly known by a generation
of water-project analysts as the "Green Book." While never fully accepted
either by its parent committee or the pertinent federal agencies, this
report was remarkably sophisticated in its use of economic analysis and
laid an intellectual foundation for research and debate in the water
resources area, which made it unique among other major reports in the
realm of public expenditures. It also provided general guidance for the
routine development of benefit-cost analysis of water projects which
persists until now, even though a successor report exists that is more
adapted to the conditions of the present day.

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