Multi-criteria evaluation of investments in quality of life

Fundacja Dobre Państwo • December 15, 2025 • 🇵🇱 Polski

Introduction

Evaluating public investments, such as parks or sports facilities, is exceptionally complex. Traditional financial analyses fail to account for their key objective: improving quality of life. This article explains why multicriteria methods, specifically MCDA (Multiple Criteria Decision Analysis), offer a superior tool. They enable the integration of social, environmental, and financial factors, supporting more rational and transparent decision-making in the public sector.

Traditional Methods: Overlooking Quality of Life

Classical economic methods, such as cost-benefit analysis, are insufficient for public investments. They focus exclusively on measurable financial flows, ignoring non-financial values. They cannot quantify the strengthening of social ties, improved public health, or increased urban attractiveness. The public sector, unlike the private sector, must create public value, not maximize profit.

The answer to these limitations is Multiple Criteria Decision Analysis (MCDA). This analytical tool allows for the simultaneous evaluation of a project based on multiple, often conflicting, criteria. MCDA makes it possible to compare investments by considering their full impact on community life.

MCDA: Steps in Public Investment Evaluation

The evaluation process using MCDA is structured and consists of several stages. Initially, the problem and potential investment alternatives are defined. Next, key evaluation criteria are identified, typically encompassing three dimensions: financial (construction and maintenance costs), social (accessibility, needs fulfillment), and environmental (impact on nature, resource consumption).

A crucial step is establishing weights for individual criteria. At this stage, decision-makers determine priorities – whether a low price is more important, or perhaps a minimal environmental impact. Finally, using a chosen aggregation method, evaluations and weights are combined into a synthetic indicator, which allows for the ranking of analyzed projects.

Choosing an MCDA Method: Key to the Final Decision

The choice of a specific MCDA technique is not neutral and is fundamental to the outcome. Methods like SMART are compensatory – a weak result in one criterion (e.g., high costs) can be offset by an excellent outcome in another (e.g., significant social benefits). Conversely, methods such as PROMETHEE or ELECTRE are non-compensatory. They require a balanced performance across all areas, which promotes more harmonious projects.

The result of the analysis is synthetic indicators. Their role extends beyond analysis – they become a communication tool. They allow for the simple presentation of decision logic to citizens, building trust and legitimizing government actions. In this way, MCDA supports a new, interdisciplinary public rationality, based on transparency and dialogue.

Conclusion

The main barrier to implementing MCDA is not technology, but political practice. Decisions are often made as a result of partisan compromises and pressures, rather than cool analysis. The challenge, therefore, is to integrate these methods into the permanent decision-making culture of public institutions. In a world dominated by lobbying, do multicriteria methods stand a chance of becoming a real tool for rational policy, leading us towards a more sustainable future?

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Summary

This article discusses multi-criteria assessment of public investments in quality of life, emphasizing their complex nature, which goes beyond simple economic calculations. It presents the MCDA (Multi-Criteria Decision Analysis) methodology as a key tool for transparent and effective management of social development. It describes in detail the stages of the assessment process, from defining criteria (financial, social, environmental) to aggregation methods such as SMART, PROMETHEE II, and ELECTRE III. It emphasizes that the choice of method has political and philosophical dimensions, influencing the approach to sustainable development. The text presents MCDA as an interdisciplinary tool that increases the legitimacy of public decisions and builds social trust by combining economic, sociological, and environmental perspectives.

Frequently Asked Questions

Why is the evaluation of public investments in quality of life more complex than commercial projects?

Public investments, such as building parks or modernizing schools, aim to improve quality of life and create public value, not maximize profit. Their effects extend beyond financial considerations to encompass social, cultural, and environmental spheres, requiring a broader perspective than simple economic calculations.

What is MCDA (Multiple Criteria Decision Analysis) and why is it crucial for public authorities?

MCDA is a multi-criteria technique that allows for project evaluation across multiple, often conflicting, dimensions. It is crucial for public authorities because it enables the translation of non-financial values (e.g., neighborhood ties, air quality) into analytical terms, supporting rational and transparent decisions.

What are the main stages of the multi-criteria investment evaluation process?

The process involves defining the problem and alternatives, identifying evaluation criteria (financial, social, environmental), measuring the performance of alternatives, establishing weights for the criteria, and using an aggregation method to generate a project ranking.

What are the basic differences between MCDA methods such as SMART, PROMETHEE II, and ELECTRE III?

They differ in their degree of compensability: SMART is highly compensatory, allowing for offsetting poor performance. PROMETHEE II is less compensatory, favoring sustainable projects. ELECTRE III is the most rigorous, relying on acceptability thresholds and minimizing risk.

Why is transparency so important in the process of assessing public investments using MCDA?

The transparency of the decision-making process, supported by the MCDA, allows authorities to clearly demonstrate which factors and priorities have been taken into account. This builds citizens' trust in public institutions and legitimizes the decisions made, making them more socially acceptable.

What criteria, apart from financial ones, are key in assessing investments that improve the quality of life?

Beyond financial criteria, social criteria (meeting residents' needs, accessibility, integration), environmental criteria (impact on nature, emissions), and often cultural criteria (building a community identity) are crucial. All these dimensions must be analyzed simultaneously.