Public Sector Social Value Metrics

One line of Geoff Mulgan’s article, “Measuring Social Value” in the SSIR from 2010 stuck out to me in particular.  “In the nonprofit sector, good managers are very rigorous about tracking costs and income…Meanwhile, in the public sector, political judgment counts more than cost-benefit assessments.”  While I understand the crux of this sentiment, I think it is slightly missing the point.  In the public sector, political cost-benefit is more important than economic cost-benefit or social cost-benefit.  This revision may appear minute, yet it is critical.  In the public sector, political capital reigns supreme over social impact or economic considerations.

There is a brilliant book by the author Bruce Buena de Mesquita titled, “The Dictactor’s Handbook” in which Mesquita argues that the fundamental objective of all politicians, whether authoritarians or democrats, is to remain in power.  This is true of much of the political class as well.  In advanced democracies such as the United States, politicians must appeal to an approximate majority of the people in order to get reelected.  Political capital is the influence a politician wields over the public or other political figures.  There are times when political capital is congruent with good social policy and good economic policy, and there are times when it is not. 

Mulgan argues that often public policy makers and professionals ignore social value metrics and considerations when crafting their policy.  This is true, not because the public sector does not value social value, but the social benefit a venture creates must always overcome the political cost of that venture.  The best example of such an equation is the public investment in solar and renewable energy.  Clearly the long-term social benefits of clean and renewable energy far outweigh the costs.  However, because of the United State’s wealth of natural resources, an entrenched a well-funded oil and natural gas lobby, and the political aversion to large public sector investment in green energy, we have seen a flatlining of public funding and concern for such projects.  The political capital is simply not there.

 The greatest obstacle to introducing effective metrics for public sector innovation is not the availability of know-how, or data, or resources, rather it is aligning political will with social benefit.