Environmental Engineering Reference
In-Depth Information
perspective of policy implementation has hardly been an issue in economic analysis.
Further, while political science and sociology sometimes address institutional
aspects in ex-ante impact assessments they do not focus on the effects institutions
have on the (economic) decisions of individuals (e.g., North
1991)
.
In cases where it is possible to quantify costs and benefits in monetary terms,
a major tool for ex-ante impact assessment is the Cost-Benefit Analysis (CBA).
In contrast to COPI, CBA has a narrower and more concrete focus and tends to work
with more specific data. Despite its widespread use, it has many practical and con-
ceptual difficulties associated with monetising costs and, in particular, benefits of a
proposed policy. This is particularly true in developing and transition countries where
methods of quantification are generally underdeveloped. Further, those countries are
rather unfamiliar with systematic assessments of the benefits and costs of new regula-
tions (Kirkpatrick et al.
2003)
. Due to the methodological difficulties to monetise costs
and benefits, CBA is hardly objective and is slanted in various ideological directions.
Thus, the role of CBA within a political context is often that of political argument, not
scientific evidence (Bickers and Williams
2001
; Kirkpatrick et al.
2003
: 15).
There are other supporting valuation methods that try to capture likely policy
impacts in general and the problem of monetising environmental benefits and costs
in particular. These are: (a) the Contingent Valuation Method, i.e., a stated preference
method where respondents value changes in environmental services and goods on
hypothetical markets (Wagner
2000)
, (b) the Choice Modelling, i.e., a method that is
derived from Contingent Valuation, but where respondents' choices of their preferred
alternatives demonstrate their willingness to trade-off one attribute against another
(Morrison and Bennet
2004)
, (c) the Travel Cost Method, i.e., the valuation of ben-
efits of an environmental asset (usually a recreational area) by using the costs of
consumption of the ecosystem services, including travel costs, entry fees, on-site
expenditures, and outlay on capital equipment necessary (Hanley and Splash
1993)
,
and (d) the Hedonic Pricing, i.e., deriving values of environmental services, such as
clean air and water, biodiversity or landscape, from observed differences in prices of
affiliated market goods, such as houses or labour (Freeman
1993)
. These methods can
be - and actually are often - embedded into CBA in particular as they provide a basis
to monetise public goods that do not have a market value.
An alternative to CBA is the multi-criteria analysis (Figueira et al.
2005)
, in
particular social multi-criteria evaluation (Munda
2004)
. This method tries to intro-
duce more realistic assumptions in their models. Parts of institutional constraints of
policy implementation, which are related to hidden interests, influence of lobbying
groups, power relations, social participation, ecological awareness, cultural con-
straints that can be expressed in terms of different actors` values and preferences,
can be incorporated into these models. The difficulty with multi-criteria analysis is
to assess information about preferences, yet it represents an appropriate promising
framework which at least offers the possibility to incorporate institutional aspects
by the way the problem is structured.
Still, from an institutional perspective, costs and frictions of policy design and
implementation are not addressed by these different methods; not the least because
they are difficult to estimate and quantify ex-ante.
