If we take the house example again, how much it is worth depends who we are
referring to. If you are selling a house, you will have a sense of what you are prepared
to accept for it – how much value it has for you. If I am thinking of buying your house,
I have my own view of what I am prepared to pay – how much value it has for me.
What the market does – in fact, what it is effectively for – is to bring together people
whose valuations happen to coincide. This ‘coincidence’ is called ‘price discovery’ – but
it is not uncovering any ‘true’ or ‘fundamental’ value, rather it is matching people who
(broadly) agree on what something is worth.
Arriving at an estimate of social value is the same as this in almost every way. The
difference is that goods are not traded in the market and so there is no process of ‘price
discovery’. This does not mean, however, that these social ‘goods’ do not have a value
to people. If I want to buy a house but there are no sellers, this does not mean that it
does not have a value to me or that I don’t have an idea of what this is. Similarly, if a
local authority creates a park for residents, where I can go, this too has a value to me.
The fact that I have not had to pay for this does not negate this fact.
In SROI we use financial proxies to estimate the social value of non-traded goods to
Stag
different stakeholders. Just as two people may disagree on the value of a traded good
Stag
(and so decide not to trade), different stakeholders will have different perceptions of
e the value they get from different things. By estimating this value through the use of e

financial proxies, and combining these valuations, we arrive at an estimate of the total

social value created by an intervention.
This is no different in principle to valuations on a stock market, which are simply a
reflection of the cumulative subjective valuations of buyers and sellers. With SROI,
however, the total valuation arrived at is likely to be more complete. Why? Because
share prices only reflect the valuations of a very limited group of stakeholders
(institutional and retail investors), while an SROI analysis, if done properly, captures
the different types of value relating to an activity, intervention or organisation, as seen
from the perspective of those that are affected – ie the stakeholders.
The process of valuation has a long tradition in environmental and health economics;
SROI is building on the methodology and extending it to other fields. While it may
seem initially daunting, it is relatively straightforward and gets easier with practice. As
SROI becomes more widespread, monetisation will improve and there will be scope for
pooling good financial proxies. Now we will take you through some guidance drawn
from different disciplines for identifying proxies for each of these.
Proxies that are easy to source
Sometimes monetisation is a fairly straightforward process – where it relates to a
cost saving, for example. This might be the case where you are interested in the value
of improved health from the state’s perspective; you may decide to use the cost of
attending a GP clinic.
Sometimes this will not result in an actual cost saving because the scale of the
intervention is too small to affect the cost in a significant way (see section on marginal
costs, below) but it still has a value.
 A guide to Social Return on Investment
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