It is true that social welfare considerations exert the significant influence on the investment decisions of the public sector. All the same, the authorities have also to choose between different projects calling for public investment. All the desirable projects cannot be undertaking; therefore, it is necessary to come to a decision on the basis of which projects are sound most worthwhile. For this purpose, the use is being made of cost-benefit analysis by the public authorities. Cost-benefit techniques attempt to assess the social profitability and the social cost of proposed investments. Social profitability and the social benefits refers to those satisfactions enjoyed by the community which are not fully revealed in the revenues earned by an enterprise.

In short, in the public sector, investment decisions are motivated by profitability in terms of surplus of social benefits over social costs.

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