As an aid to planning, decision-making, evaluation and control, the social cost benefit analysis provides a scientific and quantitative base for the appraisal of projects and concerns with a view to determine whether the total benefits of a project and concern justify the total social costs. To make scientific and systematic social cost benefit analysis of a project or concern it is necessary to weigh each project’s or concern’s advantages (benefits) and disadvantages (costs) to the society or nation as whole. Economists consider externalities as spillover effects, third-party effects etc. to be more precise, external economies and diseconomies are social benefits and social costs respectively. An externality arises whenever a firm’s activities have a negative or positive impact on the environmental for which the firm is not held accountable. If the impact is positive, it is called an external economy or social benefit if the impact is negative, it is external diseconomy or social costs.

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Keywords: Social Cost Benefit Analysis, Decision-Making, Social Costs, Spillover Effects.