In analyzing PPL policy, I am using a socio-economic impact analysis approach, as I consider it to be the best framework for appraising the case for implementing a longer PPL scheme. I consider it to be a better framework for analyzing the program than other alternatives, such as cost-benefit analysis.
Under the cost-benefit analysis model, the total expected costs are weighed against the total expected benefits, to provide the most profitable option. However, as benefits and costs are expressed in purely monetary terms, there are limitations on understanding a social policy such as PPL, which has both economic and social impacts. It is important to consider the social effects associated with PPL. As the cost-benefit analysis model is based purely on the monetary valuation of the impact of a proposed policy initiative (and as such, all benefits and costs must be translated into a common measure, usually dollars, at a common point in time, usually through net present value calculations), it is most useful for analyzing economic policies. It is not always useful for public sector decision analysis in areas such as social policy, as dissimilar benefits and costs (such as human life or human safety) must be converted to a common denominator. Some benefits and costs cannot be quantified. Also, analyzing the social effects of a policy allows us to view social returns, and this helps people to understand that any economic cost can be understood as an investment, as opposed to a subsidy. As such, the focus shifts to the creation of value, and away from the risk mentality and opportunity cost. Additionally, the nature of benefits and costs can be hidden in numbers – hiding the benefits and costs from stakeholders. As such, cost-benefit analysis is an inadequate tool to use.
Conversely, socio-economic impact analysis approach is the most suitable for generating fresh insights into the problems at hand as it enumerates, and also illustrates, benefits and costs, and can therefore measure the social and financial value created. As such, where benefits and costs are quantified in similar measures, they can be directly compared; and where they are in dissimilar measures, it is ultimately up to the interpreter to determine if the trade-off is worthwhile. This analysis builds upon the logic of cost-benefit analysis, but differs in that it is explicitly designed to inform practical decision-making focused on optimizing social and economic effects – not just ensuring that a policy is economically efficient. As such, it allows decision-makers to appraise more effectively whether the policy is aligned with their policy objectives.