Quantifying Social Costs and Benefits to Guide Public Investments
This post is the second part of our dive into Social Cost-Benefit Analysis. Part 1 looked at how quantifying the social impacts of a decision can guide individual action. Here we look at the power of quantifying and visualizing the social impacts of public investments.
Cost-Benefit Analysis (CBA) is typically the first tool in the policy-maker’s arsenal that public policy students learn about. It makes sense — estimating and weighing the strengths and weaknesses of alternatives is naturally how we go about making decisions, even on a personal level. And what is governing if not constant, high-stakes decision-making? Cost-benefit analysis simply makes the process more systematic.
However, when it comes to looking at the holistic impact of an investment on the things we care about- quality of life, equity, the environment- traditional CBAs are woefully inadequate. First, this is because we shy away from including impacts that are hard to measure, so the analysis becomes biased towards financial return. Second, CBA assumes a discount rate which essentially says that future impacts (usually benefits) are worth less than present impacts (usually costs). While this makes sense for financial impacts due to interest, it does not fit when you are looking at human well-being. We should care about future generations as much as we care about ourselves and each other today.
To better align the principles of cost-benefit analysis with the values government and society cares about, we are adopting a different approach.
Social Return on Investment
Social Return on Investment (SROI) is an approach we can use instead to illuminate and communicate tradeoffs and opportunities in public space investments. Working with Miami-Dade County Department of Public Works, we created a visual prototype to analyze the long-term and meaningful but largely intangible benefits of their SMART plan.
You can explore a recent iteration of the user interface here. It is best viewed on a desktop. This example compares three investment opportunities for a mobility hub, or centralized area of transportation options: (1) designating a rideshare pick-up and drop-off zone using signage, lights, and some adjustment in traffic flow; (2) building charging stations for electric vehicles; and (3) adding bikeshare and scooter docks. The primary metric to compare these three options is the social return on investment, or ROI, displayed as a multiple of the estimated up-front cost.
The color legend labeled “Primary Value Category” shows the six broad types of social impacts we looked at. When you hover over any color block in the visualization, you can see more information about particular anticipated impacts of the investment, why we chose its primary category, what secondary categories it may touch, how we calculated the ROI, and references.
Here is another example where we looked at two potential ROI scenarios, to help the department understand ways in which they could influence the social return by amplifying the benefits and/or reducing the project cost over the course of implementation.
Next Steps
Since this first application of the tool with Miami-Dade County, we’ve created another version looking at US food policy, particularly corn subsidies, in a blog post. In the coming years, we are looking to further the use of Social Return on Investment in Miami, gain and incorporate feedback more generally, and find new questions to apply it to. We welcome your thoughts and ideas.
