The Housing Association’s Charitable Trust (HACT) and SImetrica have recently made a really useful contribution to assessing social impact. Measuring the Social Impact of Community Investment: A Guide to using the Wellbeing Valuation Approach provides estimates of the value of certain social outcomes to individuals.
The values are estimated from the trade-off between additional income and particular social outcomes or activities in terms of impacts on an individual’s subjective well-being measured as satisfaction with their life. For example, the satisfaction with life gained from “Go[ing] to a youth club” is the same as £2,300 of extra income to an average young person per year. Similarly the value of “Feel[ing] in control of life” is worth £12,470 of extra income each year for an average adult.
Such values allow us to compare things that are very different to each other using a common metric—money. They can also allow us to compare the costs of an investment or a project with its respective benefits in the same (monetary) terms using tools like cost-benefit analysis and SROI. So, in theory, though there are limits to whether this is sensible, if policy-makers need to choose between funding youth clubs or mental health services, for example, they can compare the value of the expected outcomes of each and pick the one with the highest net value (the benefits minus the costs).
Economists have developed methods to include important things in life that don’t have a market price, such as “feeling in control of life” in such decision-making. But most of these methods involve asking people directly about what they value or are willing to pay. These often result in poor estimates because the answers are prone to a number of distortions. HACT—and in particular, Daniel Fujiwara from SImetrica and the London School of Economics—have instead used large amounts of survey data about people’s life satisfaction, income, opinions, and circumstances to get more reliable estimates of the value of non-market or social outcomes.
While some may balk at putting a monetary value on life satisfaction and social outcomes, the approach is sound. It is included in guidance on the well-being methodology for the UK Government and features in the OECD guidelines on measuring and using well-being statistics.
So, these values are useful benchmarks and will help us get better at making decisions to increase well-being. So far, so good. But things get a bit trickier when an organization wants to use the values for a different purpose, namely to make claims about their impact. There are several reasons why individual organisations need to be very cautious about how they use these values. I will talk about why in a follow up blog next week.