Free «Social Cost Benefit Analysis» Essay Sample

Social cost benefit analysis is a systematic method that is used to identify and measure advantages of the cost-cutting measure as well as the expenses of a project. These benefits are values of increased outputs of services and goods of a project. They may include services of the environment which are made probable by the project, and costs are values of increased real resources of the project Hufschmidt (1983).

Assessing a Rain Forest for its Environmental, Economic and Social Components of Total Economic Value

Total economic value is the combination of indirect, direct, optional and existence values of natural resources. Rain forests provide goods and services whose value is wished to be estimated what their worth. These benefits can be valued in one or three ways depending on the availability of the good on a market that is competitive. Environmental goods offered on a market are characterized by competition that is perfect (Fasould et al., 1996).

Price that is formed is considered equal to the goods' economic value. Natural assets can be available on the market but not fully subject to competition rules. In cases like this the price on the market is a piece of financial information and is not equal to good value economically. The market price is adjusted to get the value that is correct for the environmental good. The environmental good is derived from a market price that is adjusted. The market price of most natural resources is not specific as stated by Hufschmidt (1983).

In this case one or more methods of valuation are used. This is done by using estimations that exist, which are mostly macroeconomic terms. The valuations do not have reflection on the preferences of agents that are economic and do not provide the natural assets economic value.

Total Economic Value for the economic, environmental and social components can be assessed by use values and non use values. These are benefits obtained by direct use of natural resources. They are related to forms of expenses and activity. They are associated with recreation outdoors. They arise from use of resources of the environment physically such as recreational fishing (Perman et al., 1995). Also benefits from activities that are productive such as agriculture, fishing activities and forestry are also use values.  Direct use values, result from current use of the resources, which include consumptive uses for example, hunting and hiking while non consumptive is camping, hiking, nature photography and boating.

The economic value of wood based forest products for example timber and fuel from wood and non wood products from forests for example cork, mushrooms, resin, medicine plants and decorative plants and other services like grazing and hunting (Merlo & Briales, 2000), biodiversity and security of the economy are accepted under direct use values (Perman et al., 1995). Indirect use values are benefits that are obtained indirectly by use of resources from the environment.  For example, reading books related to natural resources or watching television on wildlife (Fasould et al., 1996). Soil conservation, balancing the microclimate, biodiversity, water purification and quality, preventing floods and, local ecosystem conservation of resources of the forest are in this category.

Non use values are estimated for resources that are natural although they are in fact not in use, they will never be used or visited and also the willingness to pay at this time to have resources preserved for future generations.


Finally, we can conclude that the total economic value of rain forests is determined by how and where activities that affect the environment economically and socially take place. Their value can be estimated by using all the three components by their positive total economic value and eliminating the negative total economic value.


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