1 Social Cost Benefit Analysis seeks to assess the net value of a policy or project to society as a whole. The valuation of non-market impacts is a challenging but essential element of this, and should be attempted wherever feasible. The full value of goods such as health, educational success, family and community stability, and environmental assets cannot simply be inferred from market prices, but we should not neglect such important social impacts in policy making. This Annex outlines techniques for valuing non-market impacts, and some typical applications such as time-savings, health benefits, prevented fatality, design quality, and the environment. These approaches can be complex but are equally as important as market impacts.
2 Economists attempt to attach a monetary value to non-market goods by looking at the impact that these things have on utility. Utility, in the broadest sense, refers to the satisfaction that a person gets from consumption of a good, or to the change in their welfare or well-being. Because it is difficult to observe utility directly, it has traditionally been inferred by observing the choices that people make within related or hypothetical markets. More recently, economists have attempted to measure directly the impact of non-market goods on life satisfaction.