Net Social Benefits Research Articles

Maximising the net social benefit of the construction of post‐disaster alternative housing projects

The widespread destruction that follows large-scale natural disasters, such as Hurricane Katrina in August 2005, challenges the efficacy of traditional temporary housing methods in providing adequate solutions to housing needs. Recognising these housing challenges, the Congress of the United States allocated, in 2006, USD 400 million to the Department of Homeland Security to support Alternative Housing Pilot Programs, which are intended to explore the possibilities of providing permanent and affordable housing to displaced families instead of traditional temporary housing. This paper presents a new methodology and optimisation model to identify the optimal configurations of post-shelter housing arrangements to maximise the overall net socioeconomic benefit. The model is capable of quantifying and optimising the impacts of substituting temporary housing with alternative housing on the social and economic welfare of displaced families as well as the required additional costs of doing so. An application example is presented to illustrate the use of the model and its capabilities.

Dysfunction by design: Consequences of limitations on transferability of catch shares in the Alaska pollock fishery

Abstract The Eastern Bering Sea fishery for pollock is one of the largest fisheries in the world and has often been touted as an example of sustainable fisheries management. Yet, sustainability requires more than protection of the biological productivity of the targeted fish species. It requires preservation of the flows of net social and economic benefits of the fishery, and flexible governance and management institutions that allow for adaptation to changes in fish abundance as well as changes in consumer demand and in the prices of key inputs. From an economic perspective, the Alaska pollock fishery was unsustainable before passage of the American Fisheries Act (AFA) in 1998. The AFA permanently divided the pollock Total Allowable Catch (TAC) giving a 10% allocation to the Community Development Quota (CDQ) program and partitioning the remainder among four fishing sectors. It allowed CDQ to be leased to any sector but largely prohibited leasing or sale between other sectors. These limits on intersectoral transfers have reduced the ability of sectors to respond to changes in the abundance and distribution of pollock, implementation of management measures intended to benefit other species, and changes in the prices of input factors and products. This paper explores these consequences.

Radio-over-Fibre access for sustainable Digital Cities

Pervasive broadband access will transform cities to the net social, environmental and economic benefit of the e-City dweller as did the introduction of utility and transport network infrastructures. Yet without action, the quantity of greenhouse gas emissions attributable to the increasing energy consumption of access networks will become a serious threat to the environment. This paper introduces the vision of a ‘sustainable Digital City’ and then considers strategies to overcome economic and technical hurdles faced by engineers responsible for developing the information and communications technology (ICT) network infrastructure of a Digital City. In particular, ICT energy consumption, already an issue from an operating cost perspective, is responsible for 3 % of global energy consumption and is growing unsustainably. A grand challenge is to conceive of networks, systems and devices that together can cap wireless network energy consumption whilst accommodating growth in the number of subscribers and the bandwidth of services. This paper provides some first research directions to tackle this grand challenge. A distributed antenna system with radio frequency (RF) transport over an optical fibre (or optical wireless in benign environments) distribution network is identified as best suited to wireless access in cluttered urban environments expected in a Digital City from an energy consumption perspective. This is a similar architecture to Radio-over-Fibre which, for decades, has been synonymous with RF transport over analogue intensity-modulated direct detection optical links. However, it is suggested herein that digital coherent optical transport of RF holds greater promise than the orthodox approach. The composition of the wireless and optical channels is then linear, which eases the digital signal processing tasks and permits robust wireless protocols to be used end-to-end natively which offers gains in terms of capacity and energy efficiency. The arguments are supported by simulation studies of distributed antenna systems and digital coherent Radio-over-Fibre links.

Powder River Basin Coal: Powering America

Powder River Basin (PRB) coal in Wyoming and Montana is used to produce 18 percent of the electricity consumed in the United States. Coal production from the PRB more than doubled between 1994 and 2009. PRB coal companies produced greater amounts of coal at declining real prices over much of this period through investment in equipment and production systems that achieved massive economies of scale. The bulk of PRB coal is shipped to the middle part of America from Texas in the south to Michigan in the north and New York in the east. States that consume significant amounts of PRB coal have electricity rates well below the national average. The largest industrial users of electricity are in these regions. Replacing PRB coal would require almost 5.5 trillion cubic feet of natural gas per year, representing a 26 percent increase in demand. Such an increase in gas consumption would increase prices for natural gas by roughly 76 percent. In such a world, U.S. energy users would pay $107 billion more each year for electricity and natural gas. Hence, by using PRB coal, the U.S. economy avoids $107 billion per year in higher energy costs. Estimates reported in the literature indicate that the gross environmental damages from PRB coal production are $27 billion. Hence, the net social benefits of PRB coal are $80 billion per year. Given the large size and low cost of these reserves, PRB coal will likely supply societal energy needs well into the future as long as the public and their elected officials are willing to accept the environmental impacts in return for the substantial economic benefits from using PRB coal.

A GIS-based appraisal framework for new local railway stations and services

This paper describes the development of an integrated appraisal procedure for new local railway stations. The procedure is not intended to act as a ‘solid state’ set of guidelines, but instead to provide a framework containing current best practice, within which individual elements can be updated and enhanced as new evidence becomes available without affecting the rest of the methodology. The framework includes a number of different elements, which are brought together in an appraisal spreadsheet but which can be altered without affecting other sections of the procedure. First, the best locations for new stations within the study area are chosen, with potential sites selected, catchments defined, infrastructure capacity assessed and potential service patterns planned. Usage at the potential stations is predicted using trip end and flow level demand models, and the extent of abstraction from neighbouring stations is considered. The benefits and costs of constructing the stations are then estimated, including direct financial gains and losses as well as wider economic impacts and social costs and benefits. Finally, these are brought together to calculate financial and social net present values and benefit–cost ratios, with break-even demand levels for new stations also provided. The framework provides a consistent means of estimating the costs and benefits of the large number of schemes for new local railway stations in the UK, and use of a standardised methodology allows those schemes with the best case for construction to be prioritised. Since rail privatisation in the mid-1990s the costs of new stations have escalated dramatically, meaning that stations have to demonstrate much greater revenue-earning potential than was previously the case to justify construction. By providing more accurate forecasts and thus reducing uncertainty over scheme costs and benefits, this appraisal procedure can help to ensure that the best return is obtained on the limited investment funds which are available.

The social value of science shops: A cost-benefit analysis

We describe and apply a method to determine the net social benefits of science shops. University departments operating as science shops coordinate research projects for individuals or civil society organizations (CSO) lacking the financial means to turn to professional consultancy bureaus. Three cases are analyzed; the science shops atWageningen, Brussels and Eindhoven. After investigation, it appears that under the normal assumptions for the application of CBA, the science shops concerned show positive net social benefits.

Determining a sustainable and economically optimal wastewater treatment and discharge strategy

Options for treatment and discharge of wastewater in regional Western Australia (WA) are examined from the perspective of overall sustainability and social net benefit. Current practice in the state has typically involved a basic standard of treatment deemed to be protective of human health, followed by discharge to surface water bodies. Community and regulatory pressure to move to higher standards of treatment is based on the presumption that a higher standard of treatment is more protective of the environment and society, and thus is more sustainable. This analysis tests that hypothesis for Western Australian conditions. The merits of various wastewater treatment and discharge strategies are examined by quantifying financial costs (capital and operations), and by monetising the wider environmental and social costs and benefits of each option over an expanded planning horizon (30 years). Six technical treatment-disposal options were assessed at a test site, all of which met the fundamental criterion of protecting human health. From a financial perspective, the current business-as-usual option is preferred – it is the least cost solution. However, valuing externalities such as water, greenhouse gases, ecological impacts and community amenity, the status quo is revealed as sub-optimal. Advanced secondary treatment with stream disposal improves water quality and provides overall net benefit to society. All of the other options were net present value (NPV) negative. Sensitivity analysis shows that the favoured option outperforms all of the others under a wide range of financial and externality values and assumptions. Expanding the findings across the state reveals that moving from the identified socially optimal level of treatment to higher (tertiary) levels of treatment would result in a net loss to society equivalent to several hundred million dollars. In other words, everyone benefits from improving treatment to the optimum point. But society, the environment, and the Corporation are all worse off when treatment levels are pushed beyond what is economic and sustainable.

Choosing how to pay: The influence of foreign backgrounds

Is having a foreign background a relevant factor in choosing between payment instruments in consumer point-of-sale transactions after migration? We analyze this question using a unique diary survey in which both participants with a Dutch and a foreign background documented their daily purchases. We present several pieces of evidence suggesting that foreign backgrounds still influence the choice between payment instruments after migration to the Netherlands. For instance, we find that first-generation migrants from a number of countries that can be seen as cash-oriented are more likely to use cash in the Netherlands. At the same time, second-generation migrants have similar payment habits as individuals with a Dutch background. This finding suggests that payment behavior is not passed on between generations, but affected by host country payment habits. Finally, we suggest that, in this context, special information campaigns to increase debit card usage will not have clear net social benefits.

Lifetime Benefits and Costs of Diverting Substance-Abusing Offenders From State Prison

Prisons hold a disproportionate number of society’s drug abusers. Approximately 50% of state prisoners meet the criteria for a diagnosis of drug abuse or dependence; however, only 10% of prisoners receive drug treatment. Diverting offenders to community-based treatment has been shown to generate positive net social benefits. We build on a lifetime simulation model of a nationally representative state prison cohort to examine diversion from reincarceration to community-based substance abuse treatment. We find that diversion provides positive net societal benefits to the United States and cost savings to the national criminal justice system. Our study demonstrates the societal gains from improving access to the community drug treatment system as an alternative to prison.

Reviving manufacturing with a federal cogeneration policy

Improving the energy economics of manufacturing is essential to revitalizing the industrial base of advanced economies. This paper evaluates ex-ante a federal policy option aimed at promoting industrial cogeneration—the production of heat and electricity in a single energy-efficient process. Detailed analysis using the National Energy Modeling System (NEMS) and spreadsheet calculations suggest that industrial cogeneration could meet 18% of U.S. electricity requirements by 2035, compared with its current 8.9% market share. Substituting less efficient utility-scale power plants with cogeneration systems would produce numerous economic and environmental benefits, but would also create an assortment of losers and winners. Multiple perspectives to benefit/cost analysis are therefore valuable. Our results indicate that the federal cogeneration policy would be highly favorable to manufacturers and the public sector, cutting energy bills, generating billions of dollars in electricity sales, making producers more competitive, and reducing pollution. Most traditional utilities, on the other hand, would lose revenues unless their rate recovery procedures are adjusted to prevent the loss of profits due to customer owned generation and the erosion of utility sales. From a public policy perspective, deadweight losses would be introduced by market-distorting federal incentives (ranging annually from $30 to $150 million), but these losses are much smaller than the estimated net social benefits of the federal cogeneration policy.

Faustmann and the climate

Abstract The paper presents an adjusted Faustmann Rule for optimal harvest of a forest when there is a social cost of carbon emissions. The theoretical framework takes account of the dynamics and interactions of forests’ multiple carbon pools and assumes an infinite time horizon. Our paper provides a theoretical foundation for numerical model studies that have found that a social cost of carbon implies longer optimal rotation periods and that if the social cost of carbon exceeds a certain threshold value the forest should not be harvested. At the same time we show that it could be a net social benefit from harvesting even if the commercial profit from harvest is negative. If that is the case, the optimal harvest age is decreasing in the social cost of carbon.

Carbon Emissions, Renewable Electricity, and Profits: Comparing Policies to Promote Anaerobic Digesters on Dairies

Anaerobic digesters can provide renewable energy and reduce greenhouse gas emissions from manure management. Government policies that encourage digester adoption by livestock operations include construction cost-share grants, renewable electricity subsidies, and carbon pricing (offset) programs. However, the effectiveness and efficiency of these policies is not well understood. For the U.S. dairy sector, we compare predicted digester adoption rates, carbon emission reductions, renewable electricity generation and sales, and net returns and social benefits of several policies. We find that a carbon pricing policy provides the greatest net social benefit for a range of assumptions about the benefits of carbon reductions and renewable energy.

Car notches: Strategic automaker responses to fuel economy policy

Notches – where marginal changes in behavior lead to discrete changes in a tax or subsidy – figure prominently in many policies. In this paper, we analyze notches in fuel economy policies, which aim to reduce negative externalities associated with fuel consumption. We provide evidence that automakers respond to notches in the Gas Guzzler Tax and mandatory fuel economy labels by precisely manipulating fuel economy ratings so as to just qualify for more favorable treatment. We then describe the welfare consequences of this behavior and derive a welfare summary statistic applicable to many contexts. In brief, notches are an inefficient substitute for smooth policies because they create marginal incentives that vary among decision makers and induce some individual actions that have negative net social benefits.

Home visiting programmes for the prevention of child maltreatment: cost-effectiveness of 33 programmes

ObjectiveThere is a body of published research on the effectiveness of home visiting for the prevention of child maltreatment, but little in the peer reviewed literature on cost-effectiveness or value...

Innovation and Sustainability in the Supply Chain of a Cosmetics Company: a Case Study

The article analyses the induction process of technological innovations that consider economic, social and environmental concerns throughout the supply chain, in accordance with the proposals of sustainable development. Specifically, it examines the role of focal companies as innovation inductors for their supply chains. The article presents a debate with regards to innovation, sustainability and supply chain management and analyses the concept of sustainable innovation, as well as management models that bridge the gap between these themes. A case study conducted with a cosmetics company of Brazilian origin and presence in Latin America, is presented. This case study demonstrates that sustainable innovation driven by the focal company requires the engagement of its suppliers in order to reduce the negative social and environmental impacts throughout the product’s life cycle. Moreover, it illustrates that is possible to implement innovations that generate net social and environmental benefits for all members of the supply chain.

Towards a simplified performance-linked value for money model as a reference point for bus contract payments

The burgeoning commitment to contracting the delivery of bus services through competitive tendering or negotiated performance-based contracts has been accompanied by as many contract payments schemes as there are contracts. We are now well placed to design a simplified performance-linked payment (SPLP) model that can be used as a reference point to ensure value for money, given the accumulation of experiences throughout the world which have revealed substantive common elements in contracts. Whether the payment to the operator is framed as a payment per passenger or as a payment per service kilometre, the SPLP identifies efficient subsidy outcomes that are linked to a proxy indicator of net social benefit per dollar of subsidy. We illustrate how the SPLP model can be applied to obtain the gross (subsidy) cost per passenger (or per passenger km) from measures of gross cost efficiency and network effectiveness. This model can then be used as part of a benchmarking activity to identify reference value of money prospects in respect of passengers per $ subsidy outlay by adjusting for influences not under the control of the service provider. A single framework to identify contract payments to operators, and to assess (i.e., benchmark) operator performance on critical KPIs, is provided by internalising critical key performance indicators (KPIs) in the design of the SPLP. The proposed SPLP model is sufficiently general to be independent of the procurement method (competitive tendered or negotiated, for example) and of the treatment of revenue allocation (net or gross based contracts), with the additional advantage of being able to assess value for money for government.

Uncertainty in ecosystem services valuation and implications for assessing land use tradeoffs: An agricultural case study in the Minnesota River Basin

Ecosystem services analysis can help recognize the full costs and benefits of land management decisions. Quantification and valuation of services can enhance policies and regulations and, if linked with payments or incentives, properly reward private decisions that yield public benefits. However, the field of ecosystem services research is relatively new and quantification and valuation remains highly uncertain. While there is significant uncertainty about the biophysical production of ecosystem services, there is additional uncertainty about the value of services. This paper explores how uncertainty associated with valuation of ecosystem services in agriculture affects the ranking of land use alternatives in terms of social net benefits. We compare the values of four land use scenarios in the Minnesota River Basin, USA, by combining a range of value estimates for these services with varying estimates for returns from agricultural production. Although variations in ecosystem service values are significant, fluctuations in agricultural returns more significantly determine how scenarios rank with regard to delivery of total value. This analysis suggests that addressing uncertainty in ecosystem service valuation is critical to accurately assessing tradeoffs in land use.

Factors influencing farmers’ adoption of modern rice technologies and good management practices in the Philippines

We employ binary logit and Poisson estimators to model socioeconomic, institutional and environmental factors influencing the adoption of certified seeds, in particular, and integrated crop management practices, in general, in rice production in the Philippines. Estimates of factors influencing adoption are reasonably consistent between the two models but some differences are noted, particularly with respect to soil deficiencies and risk aversion. Results were found to be consistent between models in terms of the positive impacts on the adoption of certified seed technology and integrated crop management practices of farmers’ education, machinery ownership, irrigation water supply, capacity-enhancement activities and profit-oriented behavior. Conversely, soil and nutrient deficiencies are impediments to their adoption. Extension-related variables have the biggest impact on technology adoption.Results of this study provide information that is important in domestic policy making. Avenues for policy implementation to be analyzed for their contribution to net social benefits include the delivery of more capacity-enhancement activities, mechanization options and affordable credit to farmers as well as the provision of irrigation facilities and improved water technologies. Moreover, the government should consider short-term strategies that offset environmental adversities such as drought and submergence. Lastly, government interventions to improve the educational status of farming households, overcome the effects of small farm size and encourage more profit-oriented behavior by farmers are necessary to enhance technology adoption in rice production in the long run.

The Effects of Extended Unemployment Insurance Over the Business Cycle: Evidence from Regression Discontinuity Estimates Over 20 Years

One goal of extending the duration of unemployment insurance (UI) in recessions is to increase UI coverage in the face of longer unemployment spells. Although it is a common concern that such extensions may themselves raise nonemployment durations, it is not known how recessions would affect the magnitude of this moral hazard. To obtain causal estimates of the differential effects of UI in booms and recessions, this article exploits the fact that in Germany, potential UI benefit duration is a function of exact age which is itself invariant over the business cycle. We implement a regression discontinuity design separately for 20 years and correlate our estimates with measures of the business cycle. We find that the nonemployment effects of a month of additional UI benefits are, at best, somewhat declining in recessions. Yet the UI exhaustion rate, and therefore the additional coverage provided by UI extensions, rises substantially during a downturn. The ratio of these two effects represents the nonemployment response of workers weighted by the probability of being affected by UI extensions. Hence, our results imply that the effective moral hazard effect of UI extensions is significantly lower in recessions than in booms. Using a model of job search with liquidity constraints, we also find that in the absence of market-wide effects, the net social benefits from UI extensions can be expressed either directly in terms of the exhaustion rate and the nonemployment effect of UI durations, or as a declining function of our measure of effective moral hazard. Copyright 2012, Oxford University Press.

Optimal design of cross-compliance under asymmetric information

Abstract The benefits of cross-compliance can be maximized only by taking into account the trade-off between economic costs due to cross-compliance prescriptions and environmental benefits produced. Both can, however, be strongly differentiated between different areas/farms. In addition, the effects of cross-compliance are conditioned by the ability to design appropriate incentives to compliance for farmers. The objective of this article is to develop a framework for the analysis of cross-compliance under asymmetric information when the differentiation of the compliance cost function is explicitly taken into account. This is accomplished by the development from the public regulator of a mathematical model of optimal cross-compliance design under asymmetric information about compliance. The methodology is applied to a case study represented by the municipality of Argenta in Emilia-Romagna Region (Italy). Empirical insights show the potential loss of net social benefits from cross-compliance when undifferen...