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Alternatives to CBA

234.Sometimes it may be appropriate or sufficient to carry out a partial CBA. The following briefly describes such partial methods:

Multi-criteria analysis

  • Multi-criteria analysis (MCA) should be used to show decision-makers how a project fits in with their objectives.
  • A CBA should be used to show decision-makers what the economic impacts are on the nation.

235.Multi-criteria analysis (MCA), sometimes referred to as multi-criteria decision analysis (MCDA), is sometimes advocated as an alternative to CBA, particularly where some costs or benefits are difficult or impossible to quantify.

236.MCA is used to appraise and rank alternative policy options against a given set of objectives or criteria. There is no standard methodology, but it usually involves setting a list of success criteria (possibly reflecting public policy goals) and assigning weights to each criterion. The various project options can be assessed and scored (typically by a representative panel of stakeholders) against the criteria, with the assigned scores multiplied by the weightings, yielding a ranking of alternative options.

237.MCAs are configured either:

  • as crude CBAs, particularly where it is difficult to quantify some of the costs or benefits and a qualitative assessment is required. This kind of MCA can be recognised by the fact that the criteria measure impacts on the population at large, or at least those people who are affected by the proposal or project,

or

  • as evaluations of the extent to which proposals or projects meet the objectives of decision-makers. They can be recognised by the fact that the evaluation criteria, or at least some of them, relate to the policy interests of decision-makers rather than the specific impacts on members of the public, or indeed the economic effects on society at large.

238.Both kinds of analysis have their place but there may be value in reserving the term “MCA” for the latter. An MCA of the latter kind is suitable for measuring “effectiveness”, ie, the effectiveness of a proposal or project in meeting stated objectives.

239.The first is really a rough kind of CBA and is employed because of limitations in data or time. Its short-comings usually include some of the following:

  • Criteria are ill-defined and reflect decision-makers' objectives rather than the impact on welfare.
  • Criteria overlap, resulting in double counting.
  • Different denominators are implicitly used for different criteria, which can result in ‘adding apples and pears'.
  • Criteria are evaluated by decision-makers or their staff on an intuitive basis rather than empirically.
  • The process for evaluating criteria and their weights often entails consensus building, which encourages ‘group think'.
  • Cost is not given a 50% weighting. This can produce a bias towards more expensive options.
  • “Do nothing” option is ignored. This can produce a bias towards action.
  • No attempt is made to take the value of time into account.

240.Attempts should always be made to remedy these short-comings. The more this is done, the more the MCA will look like a conventional CBA. Thinking of the analysis as a CBA rather than an MCA will help minimise those shortcomings.

241.Decision-makers should always receive information on how different options contribute to welfare (ie, a CBA), but sometimes they also want information on how effective they are in meeting the decision-makers’ objectives (ie, an MCA). One possible way of displaying both types of information simultaneously is in two-dimensional space as follows:

Figure 3
Figure   .
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