The Social Return on Investment of Transforming Lives
Imagine the remote plains of the South American country of Venezuela. It’s the early 1900s. A French sailor adventures to this exotic place to find fortune trading “plumas de garza” (heron feathers) that eventually will become décor for the European courts; an illegal business then and now, by the way. As a “good” sailor, he’s presumed to have a family in each port. One of these ports was San Fernando de Apure, the main trading center of the region, a small town of a few hundred people, a primary school, a church, a center square, and lots of mosquitos. There, six children became typical llaneros (Venezuelan cowboys) with their own families. One of them, Temilda, grew up to be a sixth-grade-educated school teacher.
Imagine Temilda sending her two children 300 miles away to complete high school and eventually college; one becoming a lawyer and one an economist. Three generations later, there are two Ph.D.s, a lawyer, an engineer, and three college graduates in the family. One of them, writing these words more than 3,000 miles away from the edges of the Apure River and about 80 degrees colder.
Now, imagine that same family, but without all the formal education. Imagine them as llaneros, growing cows and trading goods (hopefully more legal stuff than Garza feathers). How do these two outcomes compare? How can we measure the differences between these two scenarios? Was it worth the sacrifice of sending the kids away to live in the “big city”? Was it worth the state’s investment in free public education? What did society gain from these investments? Are we all better off because of these decisions? Who is really paying for these investments?
A Tool to Measure Value for Society
These questions are not unique to the story of my family. In each society, individuals, politicians, philanthropists and businesses make decisions about how to improve their lives. Many of the answers to these questions are beyond any objective measure. Someone has said that life is unbearable and unmeasurable. But, we still need to make the most out of our limited resources. Fortunately or unfortunately, we have acquired the custom of using money to measure the value of our decisions. Social Return on Investment (SROI) is a tool to find out whether these ideas are worth the investment. In the end, SROI is just a single number that if greater than one, can be interpreted as a sign that the idea or project is a good one. It means that society is getting its investment back with some additional returns and that maybe we should keep financing projects like these.
Can we compute the SROI of my family? Can we compute it for the single mother living in supportive housing trying to graduate from college in Minnesota? Can we compute it for children receiving early childhood education? Some would say that these things are unmeasurable; but, we argue that they can be measured, and that we can do it in a rational, objective and defensible way. In fact, we have done it and we will keep showing that it is possible to show the value of these good ideas. Maybe we may not be able to show the full “true value” of a transformed life, but at least we will show that it is worth putting our money in the right place.
Jose Diaz was an economist at Wilder Research.