Social Cost Benefit Analysis

Topics: Cost-benefit analysis, Tourism, Welfare economics Pages: 7 (1849 words) Published: January 17, 2011

What is Social Cost Benefit Analysis?

Cost-benefit analysis is a process for evaluating the merits of a particular project or course of action in a systematic and rigorous way. Social cost-benefit analysis refers to cases where the project has a broad impact across society {and, as such, is usually carried out by the government. While the cost and benefits may relate to goods and services that have a simple and transparent measure in a convenient unit (e.g. their price in money), this is frequently not so, especially in the social case. It should therefore be emphasized that the costs and benefits considered by (social) `cost-benefit' analysis are not limited to easily quantifiable changes in material goods, but should be construed in their widest sense, measuring changes in individual `utility' and total `social welfare' (though economists frequently ex- -press those measures in money-metric terms). In its essence cost-benefit analysis is extremely, indeed trivially, simple: evaluate costs and benefits for the project under consideration and proceed with it if, and only if, benefits match or exceed the costs.

There are a variety of factors:
• Benefits and costs may accrue to different sets of people. If this is so we need someway to aggregate and compare different benefits and costs across people. • Benefits and costs may occur at different points in time. In this case we need to compare the value of outcomes at different points in time. • Benefits and costs may relate to different types of goods and it may be difficult to compare their relative values. This usually occurs when one of the goods does not have an obvious and agreed upon price. For example, we may be spending standard capital goods today in order to obtain environmental benefits tomorrow. • Benefits and costs may be uncertain.

• Benefits and costs may be difficult to calculate and, as a result, there may be widely differing views about their sizes. One might think this could be subsumed under uncertainty, however the two points are rather different: two people agreeing that an outcome follows some probability distribution is different from them arguing about its mean and variance.

Usually, in real-world cases the dominant issue is usually the last one: the basic job of calculating estimates for the project's costs and benefits. This especially true in the `social' case where the projects under consideration may involve costs and benefits that very difficult to quantify { what is the benefit of the national security derived from military spending, how large are the benefits from education, etc. Necessarily this quantification only makes sense on a case-by-case basis. Here we are concerned with general principles and we therefore focus only on the preceding four items and look at how they can be incorporated into the analysis in a general way.



“Tourism” is the totality of the relationship and phenomenon arising from travel and stay strangers. The stay does not imply the establishment of a residence and connected with remunerated activity.


In creating better appreciation of other people’s ways of the life and institution, tourism may create goodwill for a country. Each year many tourist travel to participate in particular events ranging from congress to corona tings; their visits also afford opportunities to improve co-operation as well as project the correct image of a country to the out side world.

Politics, society, education, and culture thus often provide motivations for tourist to travel away from home, they influence tourism and tourism in turn has an influence on them. These factors also help explain participation in tourism generally as we have seen. An evaluation of the significance of tourism may be extending to such aspects...
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