Multi-criteria evaluation in environmental policy analysis

In the framework of policy analysis, the traditional evaluation tool is cost-benefit analysis (CBA), which is generally considered to focus on efficiency criteria. However, any policy decision affects the welfare of individuals, regions or groups in different ways. As a consequence, public support for any policy decision depends upon the distributional effects it entails. CBA is based on the Kaldor-Hicks compensation principle, which is grounded in preferences expressed in the market place (or which would be expressed if there were a market), and not on preferences expressed by a political vote. The main underlying idea of using preferences expressed in the market is that individuals can be compared by virtue of being consumers. There is a single unit of measurement (i.e., money values) expressed via an individual’s willingness to pay (or accept payment) for a good or service. The validity of money values is connected to the objective of economic efficiency and the institution of the market. This approach fails to incorporate other objectives and values, such as equity or sustainability.
This means that a policy option may appear preferable just because some dimensions (e.g., the environment) or some social groups (e.g., the poor) are not taken into account. There is no obvious reason why this issue of the existence of a plurality of values should be considered a problem that can only be ‘solved’ by considering consumers’ preferences as the only relevant social value (Lo and Spash, 2013). Our point here is not to argue against giving economic value to natural resources, human health (or even lives) or cultural heritage, but rather that
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social decisions involve multiple and incommensurable values. Therefore, since different values are related to different objectives and institutions, plural values cannot be reduced to a single metric (Martinez-Alier et al, 1998; Munda, 2016).
For example, urban well-being is not evaluated as good or bad as such, but rather, as good, bad, beautiful or ugly in relation to different descriptions or indicators. It can be at one and the same time a "good average income" and a "bad social inclusion", a "beautiful skyline" and an "ugly cultural heritage". This basic idea of multi-criteria evaluation (MCE) is to achieve the comparability of incommensurable values (Figueira et al., 2016). From an operational point of view, the major strength of MCE is its ability to deal with policy issues characterised by various conflicting evaluations, thus allowing for an integrated assessment of the problem at hand.
In the next section, we will present the basic ideas of MCE considering the technical, empirical and epistemological aspects. That is followed by a section dealing with the main mathematical aggregation procedures that are employed in MCE. We then present some future research directions before concluding.