On the use of Cost-Benefit Analysis and Multi-Criteria Evaluation in ex-ante Impact Assessment
When a public administration wishes to implement policies, there is a need of comparing different options and valuating and evaluating them to assess their social attractiveness. Traditionally, welfare economics has used cost-benefit analysis based on the Kaldor-Hicks compensation principle, which was invented to achieve two clear objectives:
1) To compare individuals’ preferences according to the efficiency oriented utilitarian calculus, explicitly avoiding the principle one individual, one vote.
2) To implement an objective evaluation criterion, that could be accepted in the framework of the positivistic philosophical paradigm.
A relevant question now is: are these objectives still relevant in the 21st Century? This article aims at presenting a structured comparison of the main distinguishing features of monetary and non-monetary methods useful in the assessment of public policy options. In particular, cost-benefit analysis (CBA) and multi-criteria evaluation (MCE) are discussed according to the following ten comparison criteria: efficiency, fairness, democratic basis, effectiveness, problem structuring, alternatives taken into account, policy consequences, comprehensiveness, transparency and mathematical aggregation rule.
A conclusion is that regarding public policy problems, CBA and MCE can be considered as competitive methods only if all consequences of a policy decision can be correctly transformed into monetary values and efficiency is the only relevant policy objective. In all other cases, CBA can be used as a criterion in a MCE framework; thus in general terms, CBA and MCE are complementary in nature. MCE seems to be an appropriate public policy framework to integrate different scientific languages, when concerns about civil society and future generations have to be considered along with policy objectives and market conditions.
MUNDA Giuseppe;
2017-10-03
Publications Office of the European Union
JRC107900
978-92-79-73213-3,
1831-9424,
EUR 28768 EN,
OP KJ-NA-28768-EN-N,
https://publications.jrc.ec.europa.eu/repository/handle/JRC107900,
10.2760/311199,
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