Abstract
This paper introduces two ways of evaluating a large project. One approach 'collapses' the economy-wide effects into a single market (but a term reflecting any market distortions must be added). The other approach allocates gains and losses to various stakeholders. They provide the same overall result, but trying to capture the effects in a single market comes at a previously ignored cost in empirical evaluations. The paper demonstrates that the closed economy result generalises to an open economy under flexible exchange rates. As a by-product, the paper shows how to calculate the deadweight loss of taxation for a large project.