Social policies and programs - an "investment" view
How Value for Investment can strengthen social investment
New Zealand's current government favours what they call a Social Investment Approach to allocating public funds, which promises to focus on data-driven decision-making to meet people's needs effectively and ensure that services are tailored to achieve measurable outcomes.
One component of the social investment approach is cost-benefit analysis (CBA). The government’s approach is also underpinned by a set of beliefs about how the system can and should change, and where decision-making and budget-holding rights should sit.
This article in Newsroom by Rob Campbell argues that politicians love using slogans to simplify complex issues, often at the expense of nuanced understanding and effective economic policy, which leads to oversimplified and misleading approaches (like “social investment”) that fail to account for broader systemic issues. It’s a fair point and I share a little of his scepticism, but I also see potential in the social investment approach.
I’m OK with the notion of treating public spending as investment, provided we don’t carry the analogy too far. Anything we allocate funds to, whether commercial or public, should have a clear value proposition - and conceptually that is what we invest in: the proposition that a course of action will create worthwhile value. The value, of course, is very different in a social investment than a financial one.
Viewing social policies and programs as investments is a choice, but it’s a choice that often makes sense because spending can create long-term value when we set out to build capital assets (such as a knowledge economy, a well-functioning health care system, a resilient transport network) that endure over time and provide an ongoing return on investment (such as quality and quantity of life, economic productivity, inclusive prosperity). Even ‘social safety net’ dollars can be viewed in this way; more than taking from the rich to give to the poor, they can be appraised for their contribution to social capital, e.g., a fairer, more cohesive society long term.
Social CBA can provide decision-makers with useful and valid information about some of the potential value of proposed social investments, measuring value in monetary terms. Any method can be used well or poorly and we shouldn’t accept decisions based on CBAs that are spuriously precise, less than transparent or that merely bolster ideas that conveniently fit decision-makers’ ideologies. Good policymaking deserves rigorous, high quality CBAs.
However, even CBA ‘done right’ provides only one perspective. There’s no need to rely on CBA alone and plenty of reasons to take a broader approach, incorporating the wisdom of CBA within a bigger picture that balances economic metrics with other important considerations.
There’s an alternative approach that was designed to address this need. It combines good practice from evaluation and economics, providing a way of transparently judging whether a policy or program is a worthwhile use of resources. The approach is called Value for Investment.
Value for Investment isn’t a rival to the social investment approach - it can support social investment to meet its full potential by combining different kinds of evidence (qualitative, quantitative and economic) and value (tangible and intangible) in a robust and practical framework that involves power sharing and collaboration with stakeholders to surface values and make sense of evidence.
Meanwhile, in the UK, Labour’s election promises include establishing an Office for Value for Money aimed at justifying every penny of government expenditure. This blog post by Daniel Wate argues that a reliance on traditional economic appraisals and CBA continues to dominate public spending decisions and could benefit from a more comprehensive Value for Investment approach that integrates interdisciplinary perspectives and mixed methods:
Irrespective of opinions on the quality of the economic analysis, the overall VfM judgement is largely dependent on a single method and a single metric. And that can be limiting because it may ignore aspects of value that are difficult to quantify, such as equity (for example, supporting the levelling up strategy), coherence and alignment with other policies, sustainability, and other criteria.
We need to avoid the folly of trying to measure our way to a decision. Technocratic methods can make important contributions but it is human judgement that carries a decision across the finish line. The maths isn’t the judgement. Nor are the focus group findings or other kinds of evidence. Making a judgement requires more than being an expert in statistics, data science, or a social science. The judgement-making is a discipline of its own. It’s called evaluation.
New Zealand’s Social Investment Agency, and the UK Labour Party’s proposed Office for Value for Money, can significantly lift the resource allocation game if they combine state-of-the art analysis with the fundamentals of good evaluation.
For more on the value for investment approach see:
King, J., Wate, D., Namukasa, E., Hurrell, A., Hansford, F., Ward, P., Faramarzifar, S. (2023). Assessing Value for Money: the Oxford Policy Management Approach. Second Edition. Oxford Policy Management Ltd.
King, J., Crocket, A., Field, A. (2023). Value for Investment: Application and Insights. Youth Primary Mental Health and Addictions Evaluation. Exemplar report for Te Whatu Ora – Health New Zealand. Dovetail Consulting Ltd.
King, J. (2019). Evaluation and Value for Money: Development of an approach using explicit evaluative reasoning. (Doctoral dissertation). Melbourne, Australia: University of Melbourne.
King, J. (2017). Using Economic Methods Evaluatively. American Journal of Evaluation, 38(1), 101–113.
Acknowledgement
Many thanks to Emily Mason for reviewing a draft of this article. Any errors or omissions are my responsibility.
Thanks for reading!
I’ve heard that clicking the ❤️ button increases the visibility of this post on Substack…
Thanks for the great article! If I understand correctly, the 'Value for Investment' framework uses traditional econometrics and CBA, but only as one perspective. Other perspectives (equity, sustainability, alignment) etc. are also included in the analysis to inform decision making. I wonder how far we can take this, could this all-encompassing framework reduce the power of our policy makers so that they're job is literally to fill out questionnaires for an AI (utilising all the Value for Investment) to spit out answers. Do we not elect our leaders so that their professional judgements overwrite what different evaluations and CBAs tell them? Leaders have the tough job of saying "Yes on paper these two policy options achieve similar benefits to society at similar costs, however we must pick Option A because I know that the business community feels more warmly about it, its benefits are more likely to be spread equitably etc. Keen to hear your thoughts!