In common with some other policy formulation tools, for instance CBA (cost-benefit analysis) or CEA (cost-effectiveness analysis) - covered in Chapter 7 - MCA provides an integrative decision making methodology, from problem and objectives definition, through evaluation of policy options, to ranking/comparing options. The underlying methodology, however, is different.

Multi-criteria analysis may be structured in several steps (see for example, Keeney 1992; Roy 1996; Dodgson et al. 2000; Munda 2004): characterization of the decision context (for example, individual or group decision making, need for participation, and so on) and the type of recommendation needed (for example, ranking, choice of best option, and so on); definition of options; elaboration of evaluation criteria; assessment of options' impact with respect to these criteria; preference modelling and aggregation of preferences; sensitivity and/or robustness analysis.

Multi-criteria analysis and cost-benefit analysis: a comparison of the different steps in the process

Source: Gamper et al. (2006, p.294).

Figure 6.1 Multi-criteria analysis and cost-benefit analysis: a comparison of the different steps in the process

Figure 6.1 shows the similarities and differences between MCA and CBA, which is also frequently applied to inform policy formulation processes.

CBA, though following similar steps in the policy formulation process, identifies positive and negative impacts of policy options quite differently, as it uses a single evaluation criterion and requires the valuation of all impacts in monetary terms. Such a simplified logic makes input elements very straightforward to compare and has therefore attracted widespread application across diverse policy venues and sectors, from public health and transport to the environment. The monetization process demands a high degree of methodological rigour to avoid biases and maintain internal validity. This has raised issues in the practical application of this approach. For instance, putting a price tag on the marginal costs of a loss of biodiversity is not only technically elaborate, but may prove unacceptable to those who believe that the intrinsic existence value of nature is unmeasurable in money terms. In practice, when rigorous monetary evaluation proves too time- and resource-intensive, CBA often leaves some values out of the equation altogether, rendering its results technically invalid (see for example Joubert et al. 1997; Brouwer and van Ek 2004). MCA offers scope for resolving some of these issues by accepting the multiplicity of impact dimensions and hence evaluation criteria for complex policy issues, such as the environment or health. This proves especially useful in the case of 'soft' or intangible factors, such as ethical, social, cultural or ecological ones, for which monetization of impacts may be exceedingly difficult and/or contentious (Gamper and Turcanu 2007).

MCA allows for consideration of several value systems and for participation to take into account the preferences of different stakeholders. Gamper et al. (2006) and Lebret et al. (2005) argue that MCA should be the preferred method if consensual solutions to resolve conflicts need to be found. For a detailed discussion of the methodological differences see Tietenberg (2001), Edwards-Jones et al. (2000), Munda et al. (2004), Gamper et al. (2006).

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