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Social Cost Benefit Analysis (SCBA) : By: Sheereen (027) Ankita

Social cost-benefit analysis (SCBA) evaluates the total costs and benefits to society of a project or policy, including both market and non-market impacts. It is used by governments to determine if a project should be approved based on whether its total benefits exceed total costs. SCBA examples provided analyze the costs and benefits to society of building a bridge, including how many people will use it, any reduction in traffic, and if people are willing to pay tolls that cover the project costs. SCBA is important for both public and private investments and can help governments address issues like market failures, employment effects, income distribution, and externalities.

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41 views12 pages

Social Cost Benefit Analysis (SCBA) : By: Sheereen (027) Ankita

Social cost-benefit analysis (SCBA) evaluates the total costs and benefits to society of a project or policy, including both market and non-market impacts. It is used by governments to determine if a project should be approved based on whether its total benefits exceed total costs. SCBA examples provided analyze the costs and benefits to society of building a bridge, including how many people will use it, any reduction in traffic, and if people are willing to pay tolls that cover the project costs. SCBA is important for both public and private investments and can help governments address issues like market failures, employment effects, income distribution, and externalities.

Uploaded by

abhibabu2010
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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SOCIAL COST BENEFIT ANALYSIS

(SCBA)

By:
Sheereen (027)
Ankita (005)
WhAT IS SCBA?

Social cost-benefit analysis of


anything is associated with its
social impact.

Social cost benefit analysis is


a part of calculating the merits
of a project or a government
policy.

Only after calculating the


opportunity cost of a project, it
is approved.
EXAMPLE

If a bridge is to be constructed then how much


will
. it benefit the people who live in that
particular area, is to be analyzed.

Therefore, how many people are willing to use


the bridge, how much traffic will be reduced
and what is the increase in cost of travelling,
will have to be assessed as a whole to come to
a conclusion.

Suppose, if people are not willing to use the


bridge if the cost of travelling from the bridge is
$5 and if $7 has to be charged per vehicle to
make this project feasible, then the government
may consider dropping the project out.
EXAMPLE

On the other hand, if people are willing


to travel using the bridge, being
indifferent to the toll price-difference of
$2, and the traffic is reduced by a good
amount, then the government will
sanction the project.

Therefore, it is beneficial to take up a


project if its total benefits (B) are more
than its total costs.

Thus, it can be said that if, B/C > 1 or


even when B=C, then a project can be
under taken.
EXAMPLE

Before sanctioning a project,


cost and benefit of alternative
projects are assessed too.

For example, the opportunity


cost of setting up a hospital
instead of a school.
ScoPE of SociAL coSt
BEnEfit AnALySiS
SCBA can be applied to both
public and private
investments

Public Investment: SCBA is


important specially for the
developing countries where
govt. plays a significant role
in the Economic development

Private investment: Here,


SCBA is also important as
the private investments are to
be approved by various
governmental and Quasi-
governmental agencies.
Importance of SocIal coSt
BenefIt analySIS
Market

Market failure when a big project is not affecting


everyone but only a few.

A private firm would only look at profitability and


related market prices to take up a deal but the
government has to look at other factors.

To determine the social cost in case of market


failure and when market prices are unable to define
them.

These social costs are known as shadow prices.


Importance of SocIal coSt
BenefIt analySIS
Savings & Investment

Impact of the project on general savings and


investment level.

A project that induces more savings are


investment in an economy and not the other way
round.

Distribution & Redistribution of


Income

The project should not lead to accumulating


income in the hands of a few but, it should
equally distribute the income.
Importance of SocIal coSt
BenefIt analySIS
Employment and Standard of Living

How a project affects employment and


standard of living will be taken into account as
well.

The deal should lead to increase in


employment and standard of living.

Externalities

Externalities are impacts of a project which can


be both harmful and beneficial.

Therefore, both the effects are to be assessed


before sanctioning a deal.
Importance of SocIal coSt
BenefIt analySIS
Positive-externalities could be in
the form improvement in technology
and negative-externalities could be
in the form of increase in pollution
and destruction of ecology.

Taxes and Subsidies

In a general cost benefit


calculation, taxes and subsidies are
considered as expenses and income
respectively.

Though in case of social-cost benefit


analysis, taxes and subsidies are
considered as transfer payments.
conclUSIon

Social cost benefit analysis enables the


government to take up new
developments which will benefit everyone
and not just a few.

Also, it helps in bringing about an


overall development in an economy and
can help make decisions that will
increase employment, investments,
saving and consumption, thus, improving
the economic activities in an economy.

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