Social Cost Benefi Analysis- Our 3rd semester assignment on Project Management

1. SOCIAL COST BENEFIT ANALYSIS
(SCBA)
By:
Sheereen (027)
Ankita
(005)

2. 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.

3. 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.

4. 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.

5. 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.

6. 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 Quasigovernmental agencies.

7. 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.

8. 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.

9. 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.

10. 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.

11. 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.