Social Cost Benefit Analysis

Social Costs – The term ‘social costs’ refers to all those harmful consequences and damages which the society on the whole sustains as a result of productive processes and for which entrepreneurs are not held responsible. The concept is wide enough to include even certain ‘opportunity costs’, avoidable wastes and social inefficiencies of various kinds. Social costs are, thus, the sacrifices of the society for which the business concerns are responsible e.g.. Air pollution, Water pollution, Depletion and destruction of animal resource, Soil erosion, Deforestation, Impairment of human factor of production, Monopoly and social losses, Production of dangerous products and explosives etc.

Social Benefits – Unlike social cost which is a detriment to the society or sacrifice of the society, social benefit is a compensation made to the society in the form of increase in per capita income, employment opportunities, improved products, latest technology etc.

Social Cost Benefit Analysis

Social cost-benefit analysis (SCBA) or cost-benefit analysis (CBA) is a proceșs of evaluating a project from the point of view of the total impact which the project will have on the economy of the nation. In SCBA, the project is not looked upon merely as capital investment proposition, but as a resource investment proposition, where not merely the entrepreneur but the whole nation gets involved. Primarily it was used for evaluating public sector investments though it can be applied to both private and public investments. It aids in making decisions with respect to various aspects of a project and the design programmes of closely interrelated projects.

Objectives of SCBA

1. To identify and quantify as many tangible costs and benefits as possible.
2. To find out a strategy which achieves the maximum benefit for the minimum cost. A project should be undertaken only if the benefits exceed costs.
3. To discount the costs and benefits which accrue over a period of time to determine the feasibility of the project.
4. In a specialised sense, SCBA should also describe techniques for making investment decisions in non-profit making organisations.