| Sumario: | The article presents views of the author at the social valuation of input price changes. The author considered the consumer surplus valuation of changes in the private and social cost of an intermediate good used by a competitive industry that produced a consumer good under constant returns to scale. The author concluded that since the input market can at best reflect the consumer's surplus generated in the final product market, the appropriate measure should be used. The following two sections consider the social valuation of a change in the social cost of the first input, accompanied by a change in the private cost. The basic reason for this bias is simple. Under perfect competition, the net surplus is maximized for given input prices by marginal cost pricing of the final product, so that the partial derivative with respect to output is zero. Under imperfect competition, however, this partial derivative is positive since the community as a whole would benefit from increased output. But the welfare effect of ceteris paribus output changes is not reflected in input demand functions, and it thus cannot be detected by analysis of input markets
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