Chain of events
A chain of events relates to the causal links between different outcomes. For example, that improved confidence may in turn lead to increased social participation.
A financial proxy is a monetary representation of the value of an outcome
Commonly used in valuations of housing and employment markets, Hedonic Pricing uses price differences between otherwise identical goods to estimate the value of other factors. For example, two houses may be identical, but located in areas with different crime rates. The differences in value between these houses can be used to estimate how much people are willing to pay to live in an area with low crime rates. Similarly, the value of job characteristics such as job security can be estimated through analysis of corresponding wage differentials. The Hedonic Pricing method is an example of revealed preference valuation.
Indicators are measures that provide information on how much of an outcome is expected to happen or has happened. They can be based on information provided by those experiencing the outcome or from other sources.
The changes resulting from an activity. The main types of change from the perspective of stakeholders are unintended (unexpected) and intended (expected), positive and negative change.
A way of describing the activity in relation to each stakeholder’s inputs in quantitative terms.
An approximation of value where an exact measure is impossible to obtain.
Revealed Preference is a method of valuation which uses real-life choices made by stakeholders to value nonmarket goods. The two most commonly used revealed preference methods are Hedonic Pricing and Travel Cost.
Social value is the quantification of the relative importance that people place on the changes they experience in their lives. Some, but not all of this value is captured in market prices. It is important to consider and measure this social value from the perspective of those affected by an organisation’s work.
People, organisations or entities that experience change, whether positive or negative, as a result of the activity that is being analysed
Stated Preference valuations use questionnaires to ask stakeholders directly how much they would be willing to pay to have or avoid an outcome. Questions asked to stakeholders can be along the lines of “how much would you pay for this?” or, “would you pay £1000 for this?” Willingness to Pay (WTP) and Willingness to Accept (WTA) are two types of Stated Preference valuation.
Wellbeing valuations use large statistical data sets (such as the British Household Panel Survey) to assess the relationship between life circumstances (e.g. employment status, health status, levels of volunteering, safety of local area) and levels of self-reported wellbeing. This relationship allows for the monetary value of changes in wellbeing to be calculated. For example, the increase in wellbeing associated with an improvement in confidence may be equal to that of a £5000 increase in income. Therefore an improvement in confidence would have an approximate value of £5000 to an individual. This technique has the advantage of being cost effective and can be used to estimate the value of anything for which we have large sets of data.
The Travel Cost method uses visiting habit data to estimate the value that people place on a site (most commonly sites used for recreation such as parks or woodlands). The number of trips made by visitors at different travel costs can be used to estimate willingness to pay for access the site. The Travel Cost method is an example of revealed preference valuation.
Outcomes can be more or less important to the stakeholders that experience them. Valuation is a process that assesses relative importance. Financial measures are used as a proxy for value and allow for comparisons to be made between different changes. Sometimes these proxies will relate to actual amounts of money but this is not necessary.
Willingness to pay
Willingness to Pay valuations use questionnaires to determine the maximum that a stakeholder is willing to pay for something, for example, an increase in health or provision of a library service. Willingness to Pay is a form of Stated Preference valuation
Willingness to accept
Willingness to Accept valuations use questionnaires to determine the amount of money a stakeholder would need to be paid to accept a negative outcome, for example, an increase in air pollution or traffic congestion. Willingness to Accept is a form of Stated Preference valuation.
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