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 .