Social Cost-Benefit Analysis

Social cost-benefit analysis (SCBA) appraises public investment projects from the standpoint of society as a whole rather than a private investor. It values inputs and outputs at shadow prices that reflect their true opportunity cost to the economy — correcting market prices for taxes, subsidies, trade distortions, and unemployment — applies distributional weights to gains accruing to different income groups, and discounts the resulting stream of social net benefits at a social discount rate to obtain a net present social value. The modern framework was systematized by Little and Mirrlees and, in parallel, in the UNIDO guidelines of Dasgupta, Sen, and Marglin.