Quantifying Social Value

The dilemma of how to measure social impact is one I am familiar with. I used to intern for a non-profit organization that specialized in research and social impact studies. Clients came to them with problems and questions that were hard to define; they wanted to know the potential social impact, benefit, or cost of certain changes or policies. I scoured through studies, called business professionals, spoke with legislators, and created spreadsheets, all in the hope that something would shine through as a beacon for measuring success. Ultimately, the most valuable pieces of information were the client’s goals and values. What were they trying to achieve with this policy or project? What did they value as a company or individual? Our models and metrics were useless if they did not work within the client’s values and goals. Our definitions of success and social impact were often different. Social impact is, in large part, subjective.

We like to make decisions—or investments, if you are an investor—in concrete facts and evidence. As Mulgan describes, there are several issues in social innovation that make this difficult to do, including a lack of fundamental laws, a lack of agreement on values, unreliable or arbitrary metrics, and time.[1] People have different stakes and interests that are difficult to measure by one thing. However, formulating a framework for defining value is essential for social ventures to gain support and grow.

Back in 2011, the EPA declared that a human life was worth $9.1 million and the FDA declared it was worth $7.9 million.[2] You may ask how an organization can possibly place a monetary sum on a person’s life. While seemingly arbitrary, there is a methodology behind these conclusions. Organizations and economists attempt to quantify value of a life based on a number of factors, such as what someone could contribute to society in his or her lifetime. Whether you agree with this valuation method or not, this is a prime example of an organization trying to quantify social value.

Creating a valuation system for social ventures may seem cold and arbitrary, but it forces us to remember that we live in a world of supply and demand. If someone thinks he or she has a fantastic idea but no one is willing to invest in it, then that idea will never come to fruition. To have a social impact, there needs to be dynamic cooperation between innovators, investors, and legislators.[3] Creating a valuation framework and defining metrics for success can help connect these actors and generate support. But is it really possible to measure and capture all elements of value in a single framework or metric? Can we really define something so multi-faceted?

---

[1] Mulgan, Geoff. (2010). Measuring Social Value. Stanford Social Innovation Review. http://ssir.org/articles/entry/measuring_social_value

[2] Appelbaum, Binyamin. (February 16, 2011). As U.S. Agencies Put More Value on a Life, Businesses Fret. The New York Times.   http://www.nytimes.com/2011/02/17/business/economy/17regulation.html

[3] Chertok, Michael, Hamaoui, Jeff, & Jamison, Eliot. (2008). The Funding Gap. Stanford Social Innovation Review. http://www.worldofgoodinc.com/press/articles/SSIR-spring08.pdf