Estimating the Social Impacts of Change: Exploring a Psychological Approach to Capturing Social Impact Data for Cost-Benefit Analysis

Events over the last decade surrounding the management of the Murray-Darling River system have highlighted that cost-benefit analysis (CBA) is a preferred tool for evaluating possible decision options in the public domain, yet there is little integration of social outcomes in these analyses. The focus of this thesis, therefore, was to explore an approach to including a robust estimation of social impacts in cost-benefit analyses. In addition to being well-recognised as a tool to assist decision-making in the public sector, CBA is claimed to be the only normative framework in which a comprehensive and explicit assessment of all costs and benefits can be carried out (Vining & Weimer, 2010). However, the review of CBA literature found that, in practice, most CBAs rely on narrow definitions of social welfare, grounded in neo-classical economic theory, where the welfare of people is believed to be directly related to their economic activity. There is a need, therefore, to increase the capacity for those carrying out CBAs to include a greater range of social outcomes in analyses. Three key issues were identified in current CBA theory and practice which would need to be addressed by any new approach to including social outcomes: firstly, an appropriate framework is needed to capture social impacts in a way which is compatible with CBA; secondly, a technique for identifying relevant social costs and benefits would need to be specified; and thirdly, once costs and benefits were identified, a method of eliciting quantified measures from members of the public would be required. With regard to the latter, it is argued that existing approaches for determining values of non-market goods and services are not appropriate for social impacts, given what is known in the discipline of Psychology about how humans think about, and hold, values and preferences for different aspects of life. That is, most people do not have cognitive strategies or concepts for valuing aspects of themselves, or their social world on a monetary scale. Thus, it is argued that a cognitively appropriate, theoretically based, measurement system is required to gather quantitative measurements of social costs and benefits, which could then be converted to a monetary scale using an exchange system to be developed at a later date. This thesis draws on two other areas of literature. Firstly, the field of Social Impact Assessment (SIA) yielded several important contributions, including a definition of social impacts which addressed the first challenge of identifying areas of social impacts which are broadly applicable, and which can be quantified for the purpose of CBA. Other findings supported the idea of finding a way to measure impacts which was cognitively appropriate, and highlighted the importance of understanding the relationship between social impact and wellbeing. Secondly, from the discipline of Psychology, the theory of agency and communion (Bakan, 1966) was identified as being a suitable conceptual framework for addressing the issues mentioned above. In the foundational literature, Bakan presented agency and communion as the position that humans function as both self-aware individuals, and as interactive beings in a variety of social systems, and, moreover, that people need to maintain ‘healthy’ functioning on both of these dimensions. Becoming unbalanced in these aspects poses risks to physical and mental health and social relationships – that is, risks to wellbeing. The research presented in this thesis, therefore, is an exploration of agency and communion as a conceptual basis for identifying social outcomes of change in small regional and rural communities in NSW, Australia. This conceptual framework is used as a basis for gathering quantitative data on the experience of these social outcomes in response to a major change affecting the communities examined. The social outcomes were identified using semi-structured interviews with 33 participants from three small communities: Hillston, Bulahdelah and Warren. Thematic analysis of the interview data yielded six components of agency and six components of communion which were important to participants’ wellbeing, and had been subject to impacts in each town (drought, changes to major industries of employment, or to available health services in the area). The six agency components were: main occupation; perception of financial security; time; being able to ‘take time out from it all’; opportunity for desired level of contact and community features. The six components of communion were: intimacy and reciprocity in relationships; commitment to community maintenance or improvement; co-operating with others; problem sharing; community emotional climate and community leadership. A list of 20 ‘agency and communion social impact’ (ACSI) items was developed based on these identified components. Items were developed so that people could be asked to rate their satisfaction with each item on a seven-point scale. This item list was incorporated into a questionnaire which was distributed in Hillston, Warren and Nyngan. Data were gathered from 202 participants, including satisfaction ratings for the 20 items at the time of surveying, two years previously (just prior to the end of a 10-year drought in Western NSW), and in response to a hypothetical future drought scenario. Additionally, personal wellbeing data were gathered. Partial Least Squares Structural Equation Modelling (PLS-SEM) analysis conducted on these data indicated a good predictive relationship between the latent constructs, satisfaction with agency and satisfaction with communion, each of which was formed by their respective items, and personal wellbeing. The results also provided importance weightings of different items on their latent construct, and on the agency and communion construct on personal wellbeing. This provides insights into the drivers of agency and communion, and of personal wellbeing in the communities studied. Six key findings resulted from this research. Firstly, agency and communion was established as a suitable framework for quantifying social impacts for use within or alongside CBA. Secondly, the agency-communion framework was used to identify social impacts of a change in small communities. Thirdly, specific components of social impacts relevant to the case study communities were identified. Fourthly, a technique for measuring social impacts was explored, which yielded the fifth key finding: the demonstration of a statistical relationship between agency, communion and personal wellbeing. The final key finding was the use of the importance weights, together with information on changes in satisfaction with each of the indicators due to the impact examined, to calculate a quantitative figure indicating an estimation of social impacts. By using the importance weights derived from the PLS-SEM together with the changes in the aspects of agency and communion due to the social impact, it has been demonstrated that it is possible to quantitatively estimate social impacts. In summary, the research presented in this thesis has demonstrated that it is conceptually, and practically possible to capture quantitative social impact data based on primary information. This represents significant steps towards being able to generate social cost and benefit data for inclusion in CBA.