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Monthly Archives: September 2014

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Social Return on Investment and Benefit-Cost Analysis: What is the Difference?

“It is better to be vaguely right than precisely wrong”, so said the famous economist, John Maynard Keynes. Is this the right attitude to take when measuring the non-marketed social benefits from social services programs? Or should all possible effort be expended to precisely quantify the benefits and costs of a social services program? I would argue that it isn’t possible to precisely quantify social benefits because of the difficulty of collecting data. However, that doesn’t mean that we should accept that a social benefit is material without some transparency. And this is where the Social Returns on Investment (SROI) methodology can help improve the rigour of investment decision-making in social programs. (more…)

Climate Change Scepticism: It’s the Economy, Stupid

I’m sceptical that climate change scepticism is simply a matter of scientific ignorance. While it may be true for some climate change sceptic individuals, I don’t think it is representative. The scientific community doesn’t agree with me. Scientists think the answer to this knowledge ‘deficit’ is to provide even more scientific information. This ‘deficit model’ of scientific communication assumes that climate change sceptics are ignorant and will change their views if they are simply plied with more information. However, it does not take into account that all people interpret scientific information in subjective ways, usually in ways that reinforce their prevailing views on the matter. Essentially, scientific information does not deal with people’s concerns on how climate change policy measures would impact their economic well-being. (more…)

Are You Ready to Manage Energy Price Risk?

Check out this post I wrote for Carbontel:

Now that the Federal government has ‘axed the tax’, energy prices should plummet now, right? Actually, reports from Federal Government agencies don’t see it that way. In fact, there are key economic drivers to expect energy prices to rise in the future. In this article, I will explain why energy prices will rise and what you could do to manage or ‘hedge’ energy price risk. (more)

Ebola and Market Failure

You have probably heard about the deadly progress of the Ebola virus in West Africa. It is spreading at an alarming rate and does not appear to have any cure. To make matters worse, Ebola has a high fatality rate of 70% according to the most rigorous statistical studies. So far, it has claimed over 2000 lives and has now spread into Africa’s most populous nation of Nigeria. There may be unconfirmed reports that Ebola has found its way into Australia. According to the Oxford University professor, Adrian Hill, a vaccine is “doable” but ‘Big Pharma’ has not developed a vaccine because there was no business case. This situation sounds like a classic case of market failure. (more…)

Social Impact Bonds: Aligning Incentives and Social Impact

You have probably been approached on the street to donate to a social or environmental cause by an enthusiastic spruiker. If you are like me, you are torn between two impulses: one to protect yourself from being ripped off, but the other to help. Because I can’t verify if my donation will actually make a difference, I usually don’t donate. This is an example of what economists call ‘asymmetric information’; the potential donor has little or no information on how their donation may help, whereas the charity organisation holds this information. Because of asymmetric information, people who may want to help do not help because they cannot verify (without incurring high costs) whether or not their donation had an impact. Social Impact Bonds (SIBs) are a way of overcoming this asymmetric information problem. (more…)