1. T HE LIMITS OF THE ECONOMIC VALUE IN MEASURING THE PERFORMANCE OF SOCIAL ENTREPRISES Michel Marée & Sybille Mertens HEC-ULg, Centre d’Economie Sociale Liège, 3-4 March 2011

2. Introduction Question : How can we compare performance of various types of providers ? Paper : Synthetic analysis of the various methods used to measure global performance, including non-market dimensions of performance Focus : limits of the economic value

3. One example Dimensions of performance of a work integration social enterprise active in the area of waste collection and recycling Market dimensionsNon-market dimensions OutputSales of recycled productsIntegration Recycling activity Direct impactsUtility of buyers (buying the products) Increase in the employability Waste collection Indirect impactsProtection of the environment Social cohesion

4. Dimensions of performance

5. The measures of nonmarket production

8. Cost-effectiveness analysis Physical indicators (+ qualitative analysis) Limits : Partial character of the indicators Weigthing problems Specific character of the indicators Requirement for interdisciplinary work Existence of intangible impacts

9. The measures of nonmarket production

10. Cost-benefit analysis Comparing the costs and the benefits NAV =  (B i –C i )/(1+r) i with i = 0,…,n Two techniques : Indirect monetary value Economic value (Willingness to pay- WTP) Revealed preferences Expressed preferences ( Contingent valuation Method-CVM )

11. Cost-benefit analysis Advantages : Rigorous, WTP explained by the consumer theory Objective (based on individual’s preferences) Global (covering all dimensions) Consistent with the evaluation of market goods Limits : Technical Methodological : embedding effect, scope effect, sequence effect and warm-glow effect Conceptual

12. Conceptual limits EV =  SV i for i = 1,…,N, where N is the number of persons concerned and SV i = V(  U i ) = WTP i, Hypothesis : Max of the utility function Monetary measures of the variation in utility Assimilation of utility to value (welfare approach) Economic value = sum of individual subjective values

13. Conceptual limits

14. Conclusion CBA with CVM : Too ambitious Limits of economics CEA Social construction Interdisciplinary work Evolutive work

15. Contacts Centre d’Economie Sociale – HEC-ULg www.ces.ulg.ac.be + 32 4 366 27 51