Question

“Social Cost-Benefit Analysis (SCBA) is an assessment method used to determine the economic prudence of a project, programme, or policy to all relevant members of society”. Critically examine this statement.

Answer 1

Social Cost-Benefit Analysis compares costs and benefits associated with a project, program, or policy. SCBA is used to find differences in different alternatives. This helps in taking the best possible decisions given all the conditions.

There are three factors related to SCBA:

1. DIRECT EFFECTS: It refers to the direct costs or direct benefits related to all the relevant members of society.

2. INDIRECT EFFECTS: These are costs or benefits that are transferred outside the market in which the project is involved.

3. EXTERNAL EFFECTS: These are costs or benefits related to environmental issues such as biodiversity, noise, etc

To make the analysis, the method of monetizing is adopted. In this method, positive or negative values are given to the effects. With these values, the final net benefit value is calculated to compare different alternatives available.

Thus, in this way, social cost and benefits are taken into account before deciding which project to choose.