A major development in Social Cost‐Benefit Analysis has been the substitution of world market prices for domestic prices. It is argued that this procedure is superior to the use of average relationships, such as a shadow exchange rate or a standard conversion factor. This paper discusses some of the problems involved in applying world prices in the evaluation of projects, and draws upon the experience of a research study which applied SCBA techniques to industrial projects in Pakistan. In this study, for a number of reasons discussed in the paper, extensive use had to be made of an average ratio, the standard conversion factor.