Little Mirrless Approach

M.D.Little and Mirrlees have developed an approach to social cost benefit analysis.
Its underlying assumptions and lays down step-wise procedure for undertaking benefit-cost
studies of public projects.
Little Mirrless approach approach ing shadow prices of non-tradables. Use of detailed input-
output tables is suggested with a view to tracing down the chain of all non-traded and traded
inputs that go into their production.
Non-availability of detailed input/output tables, a conversion factor based on the ratio of domestic
costs of representative items to world prices of these items could be used for approximation of
shadow prices of non-traded resources.
Little and Mirrlees believe that in all less developed countries, one of the major criteria for the
choice of a project should be its ability to generate savings .
Little and Mirrleesprocedure is relatively more practical.
L M approach has many similarities and few differences with the UNIDO approach..
Similarities:
Both the approaches uses shadow pricing for foreign exchange saving and unskilled labour.
Both use discounted cash flow technique to evaluate the return.

Difference
L.M approach uses international prices instead of domestic prices.
L.M approach uses uncommitted social income basis whereas UNIDO uses consumption basis.
L.M. approach applies intergrated impact of various factors such as efficiency and redistribution
whereas UNIDO applies them stage by stage.