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Chapter 6 Social Cost Benefit Analysis (Scba

Social cost benefit analysis (SCBA) evaluates investment projects from society's perspective. SCBA helps evaluate individual projects within broader national economic plans. It identifies projects that maximize social welfare and ranks projects to best allocate limited resources. SCBA considers social costs and benefits, which can be difficult to measure and convert to monetary terms. Market imperfections like rationing and minimum wages cause prices to differ from true social values, so SCBA accounts for these differences.

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397 views6 pages

Chapter 6 Social Cost Benefit Analysis (Scba

Social cost benefit analysis (SCBA) evaluates investment projects from society's perspective. SCBA helps evaluate individual projects within broader national economic plans. It identifies projects that maximize social welfare and ranks projects to best allocate limited resources. SCBA considers social costs and benefits, which can be difficult to measure and convert to monetary terms. Market imperfections like rationing and minimum wages cause prices to differ from true social values, so SCBA accounts for these differences.

Uploaded by

Aregash Mandie
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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
DEFINITION
• SOCIAL COST BENEFIT ANALYSIS (SCBA
called Economic analysis, is a methodology developed
for evaluating investment projects from the point of
view of the society as a whole.
• SCBA aids in evaluating individual projects within the
planning framework which spells out national
economic objectives and broad allocation of resources
to various sector.
• In other words , SCBA is concerned with Tactical
Decision making within the framework of macro level.
Advantages
• The ability to identify the projects that maximize the
welfare of the country.
• The ability to objectively assess and quantify the
purpose projects in relation to community needs.
• Exposure of the basis for decision-making for
projects and opportunity for public criticism.
• Ability to rank and prioritize limited resources so that
the maximum benefit is realized.
Disadvantages
• Difficulty in measuring social costs and benefits and
converting them in to monitory term.
• Over statement of the value of social benefits
• Complexity
• Conflict between social welfare and financial
justification.
6.1. Rationale for SCBA

• In SCBA the focus is on the special costs and


Benefits of the project. The principle sources of
discrepancy are:
– Market imperfections
– Externalities
– Taxes and subsidies
– Concern for savings
– Concern for redistribution
– Merit wants.
Market imperfections:
• When imperfection exits, market price do not reflect social
values. The common imperfections found in developing
Countries are :
• Rationing:
Rationing of a commodity means control over its price and
distribution .The price paid by a consumer under rationing is
often significantly less Than the price that prevail in the
competitive market.
• Prescription of minimum wage rates : When minimum
wages would be in a competitive labour market free from
such wage legislations .

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