Policy Analysis in Canada: The State of the Art



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Conclusion


Table 12 summarizes the specific methods that fall within the four choice method classes. It provides a detailed elucidation of Table 1.

***Insert Table 12 about Here***

The four method classes can be summarized as follows:


  • Cost-Benefit Analysis – efficiency is the only goal and all dimensions of efficiency are monetized. It is equivalent to a multi-goal analysis with a single row in which all cell entries are monetized.

  • Efficiency Analysis – efficiency is the only goal, but not all dimensions of efficiency are monetized. Other dimensions of efficiency may be quantified and some may be expressed in qualitative terms.

  • Embedded Cost-Benefit Analysis – all efficiency impacts are monetized. Thus, there is an embedded NPV component. Other goals, such as equity or impact on government revenue are also included.

  • Multi-Goal Analysis – there are multiple goals, including efficiency. Not all dimensions of efficiency are monetized. Other goals are expressed quantitatively or qualitatively.

A clearer understanding of metachoice issues is a useful step in improving Canadian public sector policy analysis. Both the empirical evidence and experience working with analysts from several levels of Canadian governments suggest that there is confusion about the differences between the various analytical methods and when they are appropriate in specific circumstances. Some of this stems from the lack of a metachoice framework. The increasing requirement for the formal consideration of costs and benefits certainly represents progress in reducing confusion, in spite of the lack of preciseness as to their meanings. But, metachoice clarity is by no means a panacea. Offsetting this progress is the continued prominence of EIA—it is like Dracula movies, no matter how many times a wooden stake is driven through the Count’s heart you know he will be back for the sequel. Furthermore, even with a transparent metachoice framework, policy actors can and will engage in strategic behavior (De Alessi 1996; Flyvbjerg, Holm, and Buhl 2002; Sanders 2002), ignore analysis (Radin 2002) or deliberately use idiosyncratic definitions of benefits and costs (Boardman, Vining, and Waters 1993).


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Table 1

Metachoice Framework and Choice Classes





Single Goal of Efficiency

Multiple Goals Including Efficiency




Comprehensive Monetization of Efficiency Impacts

Cost-Benefit Analysis


Embedded Cost-Benefit Analysis




Less-than-Comprehensive Monetization of Efficiency Impacts



Efficiency Analysis



Multi-Goal Analysis




Table 2

Benefit-Cost Analysis of the North East Coal Project







Benefits

Costs

Net

Benefits

Mining Sector

3316

3260

56













Transport Sector










Trucking

33

33

0

Canadian National Railway

504

358

146

B.C. Railway

216

202

14

Port Terminal

135

150

-15

Analysis & Survey

11

11

0













British Columbia










Royalties & Taxes

231




231

Infrastructure

0

88

-88

Tumbler Ridge Branchline

91

267

-176













Canada










Corporate Taxes

134

0

134

Highways, port navigation

0

26

-26













Totals

4671

4395

276

Source: (Bowden and Malkinson 1982, 108). All figures are present values in 1980 dollars, using a 10% discount rate and assuming no terminal value in 2003, the end of the discounting period.



Table 3:

Typology of Efficiency Analysis Methodologies










Benefits’ Inclusion and Monetization







No ‘Benefits’ Included

Agency Revenue Only

Some Non-Agency Benefits also Included

All Social Benefits Included, but Not All Monetized

All Social Benefits Included and Monetized

Costs’ Inclusion and Monetiz-ation



No ‘Costs’ Included

No

Efficiency Analysis



Revenue Analysis

Effectiveness Analysis; Economic Impact Analysis

Effectiveness Analysis

Effectiveness Analysis

Agency Costs Only

Cost Analysis

Revenue-Expenditure Analysis

Cost-Effectiveness Analysis, MNBA, IQCBA

IQCBA, MNBA

IQCBA, MNBA

Some Non-Agency Costs also Included

Incomplete Social Costing

IQCBA,

MNBA


Cost-Effectiveness Analysis, MNBA, IQCBA

IQCBA,

MNBA


IQCBA,

MNBA


All Social Costs Included, but Not All Monetized

Incomplete Social Costing

IQCBA,

MNBA


Cost-Effectiveness Analysis, MNBA, IQCBA

Qualitative CBA,

MNBA+


Qualitative CBA,

MNBA+


All Social Costs Included and Monetized

Complete Social Costing

IQCBA,

MNBA


Cost-Effectiveness Analysis, MNBA, IQCBA

Qualitative CBA/ MNBA+

CBA

Table 4

A Hypothetical Example of MNBA+ Analysis







Policy Alternatives

Goals/Impacts

Alternative A

Alternative B

Alternative C

NPV of monetized efficiency impacts

$105 M

$78 M

$96 M

Environmental Protection

Low

Medium

High

Table 5


A Hypothetical Example of MNBA+ Analysis: Alternative Highway Projects





Policy Alternatives

Impacts (Criteria)

Alternative A

Alternative B

Alternative C

NPV of monetized efficiency impacts

$30M

$43M

$60M

Lives Saved

6

3

2

Equitable Access to Wilderness

Medium

Low

High


Table 6

Monetized Net Benefit Analysis of Proposed Ignition Propensity Standard







Analyst’s Estimates

Industry’s Estimates




Scenario 1

Scenario 2

Scenario 1

Scenario 2

Benefits:













Reduced Fatalities

6960

3480

6960

3480

Reduced Injuries

7

3

7

3

Reduced Property Damage

637

320

637

320
















Costs:













Compliance

867

867

1766

1766

Net Benefits

6737

2936

5837

2036

Source: Derived from Health Canada 2004. All figures are present values in 2002 $CA millions, assuming impacts occur in perpetuity and a 3 percent discount rate.



Table 7

An Example of Embedded NPV Analysis







Policy Alternatives


Goals


Alternative A


Alternative B


Alternative C

Efficiency (NPV of all efficiency impacts)

$55 M

$28 M

$46 M

Equity

Medium

Low

High


Table 8

Total Net Financial Benefits to British Columbia of Treaty Settlements





Scenario 1

Scenario 2

($5 Millions, 1995 Constant Dollars)

($5 Millions, 1995

Constant Dollars)



First Nations







  • Cash, resource revenues & cash equivalents

$5,300

$6,000


  • Tenures from third parties

380

160

  • Interest-free loans and grants

90

90

  • Funding of First Nations’ core institutions

250

380

Total Financial Benefits to First Nations

$6,020

$6,630

Costs to other British Columbians










  1. Provincial Government Costs










  • Provincial share of cash, cash equivalent and resource revenues to First Nations

$ 640

$1,330


  • Pre-treaty costs

780

750

  • Implementation costs

1,040

980

  • Costs to third parties for purchase of tenures

190


80


  • Reduction in provincial program costs

(740)

(1,710)




$1,910

$ 1,430

  1. Other British Columbians Costs







  • Provincial taxpayers’ share of net Federal costs

200

(60)


Total Financial Costs to other British Columbians


$2,110


$ 1,370

Total Net Financial Benefits to British Columbia


$3,910


$5,260


Table 9

An Example of a Multi-Goal Analysis: B.C Salmon Fishery











Alternative Policies



Goals



Criteria


Current Policy: Continued Implementation of the Mifflin Plan


Harvesting Royalties and License Auction (Pearse Plan)


River-Specific Exclusive Ownership Rights


Individual Transferable Quotas to Current License Holders



Efficient Resource Use



Impact on Rent Dissipation

Poor — large negative net present value


Good — considerable improvement over status quo


Very good — major improvement over status quo, lowest cost technology


Good — considerable improvement over status quo




Protection


Impact on the Number of Viable Runs

Poor — high risk


Poor — continued risk for vulnerable runs


Good — very good except possibly for Fraser River


Reasonable (provided ‘share’ quotas used)



Equitable Distribution

Fairness to Current License Holders

Good

Good

Depends upon compensation for licenses

Very good




Fairness to Native Fishers

Neutral, good for incumbents

Neutral, good for incumbents

Good

Neutral, very good for incumbents




Fairness to Taxpayers

Poor, large net costs

Excellent after phase-in

Excellent

Poor, but depends on fees


Source: (Schwindt, Vining and Weimer 2003)

Table 10

Multi-Goal Analysis of Alternative Routes Between Vancouver and Squamish



COST and IMPACT FACTORS

1 = least preferable to 5 = most preferable



ROUTE OPTIONS

Highway

99 North

upgrade

Capilano

River

Seymour

River

Indian Arm

/Indian River

Hybrid Seymour-Indian River

FINANCIAL ACCOUNT

  • Capital cost
















- route cost

5

3

1

1

2

- link to Provincial network

5

3

3

1

3

- network upgrade cost

4

4

4

2

4

  • Added operating/maintenance cost

5

4

3

1

4

  • Traffic disruption cost

1

4

5

4

5

CUSTOMER SERVICE ACCOUNT

  • User travel time reduction

3

5

5

2

5


  • System integration

3

3

3

5

3

  • Mode shift potential

5

3

3

1

3

  • Timing of benefits

5

1

1

1

1

  • Vehicle operating cost reduction

5

4

3

3

3

  • Accident cost reduction

5

5

5

5

5

ECONOMIC DEVELOPMENT ACCOUNT

  • developable land accessed

5


3


1


1


1


  • interior interaction

2

2

2

2

2

  • generated travel

3

3

3

5

3

SOCIAL ACCOUNT

  • urban land use impact

3

3

3

2

3


  • park/recreation impact

4

4

3

1

3

4

4

3

1

3

  • consistency with regional growth plans

5

3

3

1

3

  • emergency route

1

2

3

5

4

ENVIRONMENTAL ACCOUNT

  • watershed impact

5

1

1

3

3


  • geotechnical concern

3

5

1

1

1

  • physical env. impact

3

2

2

1

2

  • avalanche concern

5

4

2

1

1

  • archaeology

5

3

2

1

2

TOTAL

94

78

65

51

69

Source: (Ministry of Transportation 2001,12).


Table 11

An Example of A Multi-Goal Valuation Matrix








POLICY ALTERNATIVES

Alternative A

Alternative B

Alternative C




Efficiency
(MNBA)


$30M

3


$43M

5


$60M

8





Revenue-Expenditure
Impact


-$100M

8


-$100M

8


-$200M

3


GOALS



Equity

Medium

5


Low

2


High

7





Pollution Reduced

3.0%

7


2.6%

4


2.4%

3





Impact on
Employees



No Change

8


10% Layoff

3


Increased Workloads,
No Layoffs

5





Sum of Equally-weighted Scores

31

22

26


Table 12

Sample Goals/Criteria For Metachoice Alternatives






Single Goal of
Efficiency

Multiple Goals
(including Efficiency)




NW

NE

Comprehensive


Monetization of Efficiency




CBA
Analysis







Embedded CBA
Analysis







NPV

Benefit-Cost Ratio

IRR

Payback Period










NPV + Other Goals (Equity, Human Dignity, Net Revenues)

Distributionally-Weighted CBA

Budget-Constrained CBA








SW

SE

Less-than- Comprehensive
Monetization of Efficiency






Efficiency
Analysis







Multi-Goal
Analysis







Cost Analysis

Social Costing

Revenue Analysis

Effectiveness Analysis

Revenue-Expenditure Analysis

Economic Impact Analysis

CEA

Qualitative CBA



MNBA

MNBA+ (MBA plus intangible impacts)









Additive Utility Rule

Highest Product of Utility

Qualitative Assessment

Satisfycing

Lexicographic ordering






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