A review of these objectives is outside the scope of this paper. One discount rate that could be used in Government investment evaluations is the market rate of interest. Under limiting assumptions, the use of the market rate of interest would lead to an efficient allocation of financial resources between competing public and private sector investment proposals. It has been claimed that people systematically undervalue future incomes and overvalue the present. That is, individuals' consumption decisions are biased in favour of current consumption due to heavy discounting of the benefits of savings and investment for the future.
Individuals underestimate the importance of saving and overestimate that of current consumption.
Overall it is argued that the private rate is too high since consumer's time discount is too high, hence Governments should intervene to correct the error by applying a lower rate. The concept of opportunity cost, most relevant to private sector investment decisions, must also be considered in public sector investment decisions. It must be recognised that there may be an opportunity cost involved in diverting funds from the private sector to allow for public investment. This opportunity cost must be recognised in public investment decisions to ensure that resources are allocated efficiently with the aim of maximising the economy's wealth. This ignores any potential gains in value from operating efficiency improvements post privatisation.