Democracy and Sustainable Development What Is the Alternative to Cost Benefit Analysis?

Integrated Environmental Assessment and Management Volume 2, Number 2 pp. 182 190 182 Ó 2006 SETAC Democracy and Sustainable Development What Is the Alternative to Cost Benefit Analysis? Peter Söderbaum* Mälardalen University, Box 883, 72123 Västerås, Sweden (Received 8 August 2005; Accepted 21 October 2005) EDITOR S NOTE This paper is among 6 peer-reviewed papers published as part of a special series, Ecology in a Cost Benefit Society. Portions of this paper were presented by the author at an international conference on this topic held at Roskilde University, Denmark, in 2004. Special Section ABSTRACT Cost benefit analysis (CBA) is part of neoclassical economics, a specific paradigm, or theoretical perspective. In searching for alternatives to CBA, competing theoretical frameworks in economics appear to be a natural starting point. Positional analysis (PA) as an alternative to CBA is built on institutional theory and a different set of assumptions about human beings, organizations, markets, etc. Sustainable development (SD) is a multidimensional concept that includes social and ecological dimensions in addition to monetary aspects. If the political commitment to SD in the European Union and elsewhere is taken seriously, then approaches to decision making should be chosen that 1st open the door for multidimensional analysis rather than close it. Sustainable development suggests a direction for development in a broad sense but is still open to different interpretations. Each such interpretation is political in kind, and a 2nd criterion for judging different approaches is whether they are ideologically open rather than closed. Although methods for decision making have traditionally been connected with mathematical objective functions and optimization, the purpose of PA is to illuminate a decision situation in a manysided way with respect to possibly relevant ideological orientations, alternatives, and consequences. Decisions are understood in terms of matching the ideological orientation of each decision maker with the expected effects profile of each alternative considered. Appropriateness and pattern recognition are other concepts in understanding this process. Keywords: Neoclassical economics Cost benefit analysis Institutional theory Positional analysis Political economic person INTRODUCTION Environmental problems are complex and multidimensional and involve uncertainty; negative environmental impacts are, sometimes, irreversible. Environmental problems can be local, regional, or even global. Environmental issues cannot easily be isolated from broader social, cultural, and economic aspects of progress in society. In fact, serious consideration of environmental issues such as climate change, pollution of groundwater, and health hazards connected with chemicals often means that traditional ideas about development are challenged. It is increasingly understood that the problems are not just out in the field or ecosystem but also have to do with the mental maps (i.e., worldviews) of politicians, civil servants, and other actors. Single-minded advocacy of monetary indicators, such as profits in business or gross national product at the societal level is no longer enough. Something more is needed. In recent years, corporate social responsibility has become an issue, as has sustainable development. Commitments to sustainable development now exist at the level of the United Nations, the European Union, countries such as Sweden, regions and counties, and municipalities. Agenda 21 is an attempt to involve as many actors as possible in counteracting present unsustainable trends and in supporting more sustainable ones. Universities have a role in this and, among scholars, ecologists, and economists, have tried to * To whom correspondence may be addressed: peter.soderbaum@mdh.se respond to the challenge of sustainability. Cooperation between these groups is taking many forms and is not without difficulties. In the early stages of this dialogue, ecologists with their positivistic ideas of science turned to similarly inclined neoclassical economists (Jansson 1984). Theirs was an interface idea of ecological economics. As part of this interface idea, mainstream neoclassical economics is accepted in broad terms and only modified to become compatible with findings from ecology. Rachel Carson s early book Silent Spring (1962) is 1 example. Today, identification of a large number of ecosystem services and resilience is part of this interface vocabulary. According to a competing view, neoclassical economics is challenged in the sense that the monopoly position of this paradigm at departments of economics is seen as part of the problem faced rather than any solution. Institutional economics (Söderbaum 1992) and other theoretical perspectives have been articulated, suggesting a pluralistic idea of ecological economics (Norgaard 1989). Reference to more than 1 paradigm is a way of dealing with complexity. Rather than thinking in terms of 1 paradigm at a time and paradigm shift (Kuhn 1970), the idea of paradigm coexistence has been proposed (Söderbaum 2000). At any 1 time, 1 paradigm might be dominant, but this theoretical perspective should not exclude competing perspectives. Ecological economics can be defined as economics for sustainable development. This interdisciplinary project is built on a political or ideological commitment. Getting closer to sustainability is a top priority, whereas protecting any

Alternatives to CBA Integr Environ Assess Manag 2, 2006 183 particular paradigm has to be regarded as secondary. For ecologists and other natural scientists, this reference to a political standpoint might appear strange or at least unusual, but whether one likes it or not, economics is at the same time science and ideology. In the case of neoclassical economics, a specific idea of human beings, organizations, markets, progress in society, approaches to decision making, and institutional change is offered at the expense of all competing ideas of these phenomena or processes. Limiting attention to human beings as consumers who maximize utility is specific both in terms of roles and ideas about ethics. Cost-benefit analysis (CBA), with its emphasis on the monetary dimension and its ideas about correct prices for purposes of resource allocation cannot be said to be value free. Any idea of value-free valuation of policies and projects is clearly an illusion. Because values are always with us (Myrdal 1978) in social science research, our ideas about good science have to be reconsidered in some respects. If values and ideology is part of the research process, then attempts to be conscious about such influences and openly discuss them becomes a virtue. Other, more traditional ideas about good science, such as working consciously and systematically, relying on established method for purposes of measurement, and so on will remain intact. TECHNOCRACY VERSUS DEMOCRACY Expertise has a role in the decision and participation process, but experts should at the same time be aware of some limits to their role. The label technocracy is sometimes used to denote the more extreme versions of expertise in which the person (or organization) uses her or his political power to dictate decisions with few opportunities for other actors and stakeholders to participate and influence the process. If, on the other hand, the fact that values and ideologies differ between actors in society, such as politicians, political parties, and civil society organizations, is taken seriously (e.g., Perlas 2000) and participation in the decision process contributes to a constructive learning process, then we are closer to democracy as the ideal of governance and management. In this case, all actors and stakeholders have a right to participate and potentially influence the decision process. At issue is how the specific approaches to decision making to be discussed relate to the technocracy and democracy aspects. Does an approach such as CBA open the door for a debate about different ideas of progress in society or does it rather close the door? Does the approach tend to invite stakeholders and citizens more generally to the table or does it rather tend to exclude participation or suggest that it is unnecessary? Democracy can be defined in many ways. At a fundamental level, there is the respect for human rights and ideas about how power can be divided rather than concentrated. Concentration of power in the form of dictatorship then becomes the opposite of democracy. Democracy furthermore implies that actors and citizens more generally have to be respected for their different value or ideological orientations, as long as these opinions do not contradict democracy itself. Representative democracy is a way of attributing specific roles to some individuals as politicians. They are the elected representatives of specific segments of citizens and are expected to be responsive to their electorate and members of society more generally. Citizens, in turn, should ideally actively participate in public debate. To improve their capability of participating, transparency or public availability of information about plans, projects, and decision processes become key considerations. Also, different kinds of media have a role in this. For actors belonging to the different categories mentioned, issues of responsibility and accountability become essential. Decisions should be well prepared and the follow-up aspect is as important: What happened in terms of different kinds of effects and did specific actors behave in a reasonable way? Can the decision and participation process be improved for the future? With CBA as a starting point, the purpose is to rank alternatives of choice, such as projects for roads and dams (or government regulation, e.g., alternative ways of regulating chemicals) with reference to specific methods of resource allocation. The method also claims to assess whether a net contribution to social welfare occurs through present value calculation. Costs and benefits are normally of many different kinds, but an attempt is made to reduce them to their monetary equivalent. Where actual markets do not exist, markets are assumed or inferred from actual behavior. A typical CBA advocate will argue that We need a common denominator, a measuring rod. Money is the natural choice. People know about it and are used to thinking in terms of money, but if you want to measure in terms of pieces of chocolate or some other measuring rod, it is up to you. At issue, however, is whether the many simplifications connected with 1-dimensional analysis are reasonable. When faced with complex decision situations, we should perhaps not start by assuming that they are simple. We live in a world that is becoming increasingly complex. Unfortunately our styles of thinking rarely match this complexity. We often end up persuading ourselves that everything is more simple than it actually is, dealing with complexity by presuming that it does not really exist (Morgan 1986:16). Present value calculation as part of CBA represents monetary reductionism in 4 respects: Effects that are multidimensional are reduced to 1- dimensional monetary effects, Effects that are uncertain and sometimes irreversible are reduced to 1-dimensional numbers, Effects that refer to different individuals or interested parties are reduced to 1 aggregated sum of effects, and Effects that refer to different periods of time are reduced to effects at a point in time (in the form of a present value). At a deeper level, the use of CBA means that Individuals are regarded as consumers expressing their willingness to pay in actual or imagined markets, and other roles such as citizen and professional are disregarded (only that which can be expressed in money terms counts); All phenomena that consumers value can be reduced to commodities traded in markets, the so-called commodification of the environment; and Consensus in society about a specific market ideology is assumed (i.e., the ideas of correct prices and valuation of CBA), which means that this particular ideology is preferred to all other possible valuational rules (e.g., other market ideologies, other ideologies in which the market plays a more secondary role, other ethical standpoints, etc.).

184 Integr Environ Assess Manag 2, 2006 P Söderbaum Ezra Mishan, himself an author of a CBA textbook (Mishan 1971), argued that CBA is a useful method only if society agrees about the CBA way of valuing effects in relation to each other. If no such consensus exists or can be expected, then CBA should no longer be used (Mishan 1981). Mishan pointed especially to environmental problems in making the judgment that no such consensus existed at the time of his writing. Today, it is even more difficult to imagine that this kind of consensus exists. The way out of this is obviously to allow for more than 1 valuational or ideological viewpoint and, more generally, to carry out a multifaceted analysis in which effects are treated separately in multidimensional terms and the existence of multiple stakeholders and actors with differing ideological orientations is respected. Positional analysis (PA) is proposed as a method that differs in many ways from CBA and that instead aims at illuminating an issue in a many-sided way by involving and cooperating with stakeholders (interested parties) and other actors with respect to Perception of problems, Alternatives to be considered, Common interests and conflicts of interest, Possibly relevant ethical/ideological orientations, and Conditional and tentative conclusions that follow from possibly relevant ideological orientations. This is done through 2 parallel and interacting processes: a mainly social process of participation, dialogue, and learning and a mainly technical process of expert analysis (i.e., preparing a document to illuminate the issue before decision making takes place). Although CBA is an attempt to optimize by maximizing present value in monetary terms, the idea of PA is rather to illuminate an issue through dialogue and analysis. The social and technical processes should be compatible with normal imperatives of democracy (e.g., avoiding manipulation of various kinds). The process includes both social and technical aspects of monitoring and follow-up arrangements. Although PA has only been outlined in very broad terms so far, it is now possible to discuss relevant alternatives to CBA (Table 1). It is clear that the ideals of CBA fall into category a, being highly aggregated and ethically closed, whereas PA belongs rather to category d (highly disaggregated/ideologically open). Although Table 1 mainly focuses on the kind of expert analysis that can be helpful to decision makers, our next distinction suggests that technical studies have to support and be supported by participatory activities. According to this line of reasoning, 3 strategies are possible: 1-sided emphasis on technical studies (in the sense of expert analysis made available in a specific report) with little or no concern for participation; technical studies and participatory activities that are both taken seriously and mutually support each Table 1. Approaches to decision making and follow-up studies can be categorized with respect to degree of aggregation and ideological/ethical closeness Ideologically closed Ideologically open Highly aggregated a b Highly disaggregated c d other; and 1-sided emphasis on dialogue and participation with little or no technical support and studies. Where complex issues are concerned, the intermediate strategy is the 1 recommended here. CBA belongs to the 1st category, with emphasis on technical studies (analysis by experts), whereas PA has more openings for participation. Participation can be facilitated in various ways through meetings and opportunities for public debate in various media. Appropriate ways of organizing this process is a matter of kind of issue, traditions, and more generally, the local context. Exclusive or almost exclusive reliance on the deliberations of a citizen jury (see, e.g., Coote and Lenaghan 1997) exemplifies the 3rd category (1-sided emphasis on dialogue). Such a citizen panel can also be part of a strategy in the intermediate category. In summary, the search for alternatives to CBA should focus on highly disaggregated and ethically, or ideologically open, approaches and on the avoidance of extreme forms of technocracy. Approaches should be evaluated with respect to their contribution to a well-functioning democratic society. And in a democracy, debate about visions concerning a desired future and ways of getting there is extremely important (i.e., ideological debate in a broad sense). THE IMPORTANCE OF IDEOLOGICAL ORIENTATION: INTERPRETATIONS OF SUSTAINABLE DEVELOPMENT The terms ideology and ideological orientation have already been used. Ideology here refers to ideas about means and ends in a broad sense, or means ends philosophy. Not only established political ideologies, such as liberalism and socialism, are included, but also issue-related ideologies concerning transportation, environment, health care, or other policy domains. In the case of health care, for example, centralization versus decentralization of hospitals is often an ideological divide. Ideological options, in the sense of a choice between means ends relationships, are also relevant at the micro level of the activities of organizations or individuals. One individual (or organization) can focus almost exclusively on monetary effects, and the priority of another can point primarily in the direction of health and environment. Ideology is sometimes connected with a kind of fundamentalism, in which the believer has very precise ideas about how to attain a better society. As used here, ideology is a necessary condition of life. An individual in, all roles and activities, is guided by an ideological orientation, and this ideological orientation can be fragmentary rather than complete and uncertain rather than certain. It might involve tensions between motives and behavioral options rather than offer clear-cut guidance. Experience and dialogue, on the other hand, might sharpen a person s ideological orientation generally or in specific policy or activity domains. Judging from the current situation in Sweden, it appears relevant to speak about an economic growth ideology in terms of GDP that is shared and actively advocated by many public interest groups. Progress in society is reduced to a matter of economic growth, and it is believed that all sectors and interests will benefit more, the higher the growth rate in monetary terms. More money will be available for all kinds of purposes, it is argued. However, the economic growth ideology is not undisputed. Since the 1970s at least, a number of competing ideas about progress in society have been suggested. Qualitative growth was among the 1st proposals,

Alternatives to CBA Integr Environ Assess Manag 2, 2006 185 implying that a change in the composition of gross national product (GNP) has to be systematically considered to judge whether things are improving or not. In principle, each commodity or product being part of the GNP can be evaluated with respect to acceptance in relation to nonmonetary criteria, as in the case of environmental labeling, for instance. Ecodevelopment, in the sense of ecological development (Sachs 1976, 1984), ecologization of the economy (Marinov 1984), and ecological imperatives for public policy (Söderbaum 1980, 1982) were some of the labels used to indicate that simplistic measurements of GNP was not enough. Sachs (1976, 1984) pointed to the advantages of a strengthened role for local economies and self-sufficiency, whereas the mentioned ecological imperatives focused on nondegradation of the natural resource base in nonmonetary positional terms. Now, with the Brundtland Commission, reference is made to sustainable development. However, changing the mental maps and ideological preferences of influential actors, and citizens more generally, is not easily done. As an example, sustainable development can be interpreted as 1) business as usual (i.e., sustain what already exists), such as simplistic ideas about economic growth at the societal level and monetary profits in business; 2) modernization (i.e., adaptation within the scope of present political economic system), such as environmental labeling, environmental management systems, and other certification schemes; or 3) readiness to radically reconsider present political economic systems for purposes of reversing unsustainable trends and considerably improving environmental and social performance. Radical change according to the 3rd option is probably not possible without structural change in the mental maps of influential actors. Söderbaum (2004) discussed 4 related aspects of such reorientation. Theory of science, by allowing for pluralism and theoretical perspectives other than positivism (e.g., hermeneutics); Paradigms in economics, by encouraging competition and pluralism rather than the present neoclassical monopoly at university Departments of Economics; Ideology, by making environment, health, and human rights top priorities while downplaying markets and trade to some extent; and Institutions, by reorganizing national and international regulations to respond to change in the priorities mentioned. Although markets often are useful and beneficial, they have to be seen as secondary in relation to environmental, health, and cultural considerations and interests. Cost benefit analysis does not raise the issue of ideology at all but simply dictates how policies, programs, and projects should be evaluated. Essentially this is an economic growth or net value-added ideology (see, e.g., interpretation number 1 of sustainable development listed above) as pointed out by Norwegian economist Johansen (1977), among others. This way of dealing with ideological or value issues is not compatible with normal ideas about democracy. As scholars, we have no right to dictate the kind of ideology to be applied at the level of society. Claiming value neutrality while dictating methods of valuation is not a reasonable position. As discussed in the next section, the alternative is to make the issue of ideological orientation an integrated part of approaches to decision making and evaluation. BASICS OF INSTITUTIONAL THEORY While CBA is part of neoclassical economics, PA as an alternative is part of institutional economics, and the conceptual framework and basic assumptions of institutional theory differ significantly from neoclassical economics as indicated in Table 2. Economic main assumptions are part of neoclassical theory; a human being is a wage earner and consumer and, in the latter role, chooses between bundles of commodities to maximize utility. Preferences are given rather than problematized. On the institutional side (Table 2), reference is made to a political economic person (PEP) with many roles and relationships and guided by his/her ideological orientation (Söderbaum 2000). The individual refers to his/ her resource position that is not exclusively monetary in kind and interacts within a context that is cultural, social, physical, man-made, and ecological over time. Table 2. A comparison between the neoclassical and an institutional conceptual framework View Neoclassical economics Institutional economics Individual Economic man Political economic person as actor Organization Economics Profit-maximizing firm Ideologically closed idea of efficient resource allocation Political economic organization as actor Ideologically open ideas about efficient resource allocation Decision making Optimization Matching, appropriateness, pattern recognition Approach to decision making Cost benefit analysis (CBA) Positional analysis (PA) Relationship Markets Nonmarket and market Market Progress in society Supply and demand of commodities Gross national product growth Social (and power) relationship between market actors, multifunctionality Ideologically open sustainability included among options

186 Integr Environ Assess Manag 2, 2006 P Söderbaum The only organization referred to in the textbook version of neoclassical theory is the firm that is supposed to maximize monetary profits. The institutionalist, on the other hand, uses the term political economic organization (PEO) to refer to organizations that can differ in kind, business companies being an admittedly important subcategory. The core values or mission statement vary between organizations and even among business companies, and this is regarded as an issue to be investigated rather than assumed away. A PEO is a polycentric organization in the sense that each individual as member is assumed to have her specific ideological orientation that can be more or less compatible with the mission statement of the organization. Individuals as PEPs and organizations as PEOs are regarded as politically responsible and accountable actors in society. These actors have their agendas (ideological orientation and mission statement, respectively) and appear in different arenas, the market being just one among possibilities. Neoclassical economics offers an ideologically closed idea of economics and efficiency. It is assumed that business companies maximize monetary profits and that present value (or benefit cost ratio) is maximized at the societal level. For the institutionalist, objectives and ideas about progress is a matter of debate between actors. A business company can more or less seriously consider nonmonetary objectives relating to the environment or specific groups of individuals. At the level of society, more than 1 ideological orientation is normally considered, suggesting that ideas about efficiency and rationality will also differ. The choice of an alternative in a decision situation is regarded as rational if it matches well or is compatible with ideological orientation. This implies that what is a rational choice for actor A (in a situation of common concern) might be seen as irrational by actor B. Those who emphasize environmental values have reasons to criticize the alleged rationality of many decisions in present society. The neoclassical idea of decision making is connected with optimization. Consumer utility, business profits and present value as part of CBA are all maximized in mathematical terms often subject to specific limiting conditions or constraints. For the institutionalist, optimization in mathematical terms can be seen as a special case, whereas the main idea of decision making is one of appropriateness, pattern recognition, or matching. The ideological orientation or value profile of the decision maker is matched against the expected effects profile of each alternative considered. If the fit is good or if the alternative is judged to be appropriate, then it is probably chosen, but finding an even better alternative is always possible through further search activities. In a complex decision situation at the societal level, the analyst systematically illuminates the options and compares alternatives in relation to possibly relevant ideological orientations, as previously discussed. Neoclassical CBA has already been presented, and PA as the institutional alternative will be outlined in the next section. Also, neoclassical and institutional ideas about progress in society (the last item in Table 2) have been discussed. Only the way of interpreting relationships and ideas about markets remains for further discussion. In neoclassical economics, relationships of a nonmarket character are nonexistent or assumed away. However, in the case of institutional theory, in which all actors are understood in a political and democratic context, nonmarket relationships are of importance in addition to market relationships. Individuals interact outside and within organizations. Their dialogue about ideological orientations and appropriate alternatives (practical solutions) is extremely important and not assumed away through rigid assumptions about optimal behavior. Neoclassical economists understand markets essentially in terms of the mechanistic forces of supply and demand for homogeneous commodities. This particular interpretation of markets is certainly useful for some purposes. The institutional economist argues that mechanistic thinking is limited and tends to point to a political, social, and at times even personal aspect of relationships between market actors. Market relationships can be fair or unfair in relation to some specific idea about fairness or ideological orientation. Market relationships can be built on trust or on suspiciousness; they can be cooperative or antagonistic. One market actor could exploit another market actor according to some idea about fairness and justice. Multifunctionality and multiple (related) transactions are other considerations on the institutionalist side (Söderbaum 2002). A market actor A in a monopoly situation could exploit his power position completely or act in accordance with some considerations of fairness. Each way of acting can be regarded as rational, but in relation to different ideological orientations. Considering aspects such as these, it is an open issue and a matter of ideological orientation whether a specific market transaction is good for society or not. PA AS AN ALTERNATIVE TO CBA Positional analysis is part of the institutional economics already outlined. Essential elements are The PEP and PEO assumptions; Dialogue between analyst, stakeholders, and concerned actors about problem perceptions and ideas of dealing with the problems faced in a process of interactive learning; Identification and articulation of potentially relevant ideological orientations; A many-sided search for alternatives that match the diversity of ideological orientations; An equal treatment of (preferably 2 4) alternatives considered and motives as to why some alternatives have been considered and not others; Systems thinking as a way of identifying the various effects and relating the decision situation to broader decision situations or policy issues; A systematic focus on how nonmonetary and monetary effects differ between alternatives; Positional thinking as a way of considering inertia (e.g., path dependence and irreversibility) and, more generally, effects on future options of choosing 1 alternative rather than another; Analysis of commonalities and conflicts of interest in relation to the various affected activities; Attempts to systematically deal with uncertainty in terms of scenarios and in other ways; Conditional conclusions from the analysis in relation to possibly relevant ideological orientations to be presented to decision makers, stakeholders, and other actors; and Feedback from all actors, ideally at all stages; monitoring of the effects of implemented alternatives; and improvement of the information base for future decisions.

Alternatives to CBA Integr Environ Assess Manag 2, 2006 187 Individuals and organizations are regarded as PEPs and PEOs, that is, as politically responsible actors. The analyst should listen to them and learn from the diversity of voices. Analysis should be carried out in a way that respects the spirit and normal rules of democracy. The results of this dialogue with actors and stakeholders should ideally be documented as part of analysis. Finding the solution to an issue is not only a matter of maximizing an objective function given from outside. Debate about possible ideological orientations and articulation of relevant competing ideological orientations is a better starting point. This debate about values and ideologies will in addition facilitate the search for relevant alternatives (i.e., alternatives that are compatible with at least 1 ideological orientation considered). When choosing alternatives to be considered for further study, an attempt should therefore be made to match the different ideological orientations identified. Positional analysis is similar to CBA in that alternatives considered are treated equally. This implies a difference from the case of an Environmental Impact Assessment (EIA), in which 1 alternative is normally advocated for implementation by a company or public agency and competing alternatives play a secondary role. In complex decision situations, the number of alternatives considered is normally limited to 3 or 4 to make the analysis easier to grasp for those affected, decision makers, and others. Modified versions of 1 of the alternatives can later be considered as a 2nd step. The reasons why specific alternatives proposed by stakeholders or other actors have been dropped should be presented. When a specific set of alternatives has been chosen for further study, then systems thinking as part of PA refers to a way of identifying the kind of systems that will be affected differently, depending on the alternative chosen. In the case of planning a new road, land use for agriculture or forestry in specific areas will be affected; water systems might be affected, as well as people living in houses close to the road corridors being considered, commercial systems at specific places, and so on. This kind of systems thinking can be seen as a step toward identifying the effects of each alternative and how they differ between options. Systems thinking can also be a way of discussing how a specific decision situation relates to other decision situations at a different systems level. Building a motorway between 2 places can hardly be isolated from national transportation policy or regional and environmental policy, for example. One road alternative might be compatible with 1 kind of transportation policy, regional policy, and environmental policy, whereas another road alternative might be compatible with some other national policy. In this way, a specific road planning issue cannot be isolated from higher level policy options. It could be that illuminating the higher order policy issue is a necessary 1st step toward illuminating or solving some lower level issue. Effects of the alternatives considered can be compared in monetary and nonmonetary terms and can be expressed in terms of periods of time or points in time (Table 3). The GDP of a nation is a monetary flow (category a, Table 3), whereas the assets and liabilities of an organization or a person at a point in time exemplify monetary positions (category b). On the nonmonetary side, CO 2 pollution from a transportation network is a nonmonetary flow (category c), whereas the state of the atmosphere with respect to carbon at a point in time is a nonmonetary position (category d). When compared with Table 3. A classification of effects in economic analysis Flow (periods of time) Position (points in time) Monetary a b Nonmonetary c d other approaches, the focus on nonmonetary, in addition to monetary, effects and on nonmonetary positions in addition to nonmonetary flows characterizes PA. At the same time, positional thinking is only 1 among many features of PA. Not all nonmonetary effects are expressed in quantitative form. They can be visualized as pictures, as in, for instance, the state of the environment after completion of a road or dam construction project. Our focus on democracy also points to the important role of the arguments and narratives of different stakeholders and concerned actors. The analyst can listen to stakeholders and other actors before making a judgment on effects, and each stakeholder is encouraged to independently express expectations and opinions in public debate at different arenas about each alternative considered. Positional analysis is based on a holistic or nonreductionist idea of economics and decision making. The idea is to keep effects separate and allow for different ideological orientations. Expected social effects will be described as social effects, environmental impacts of specific kinds in their own terms, and so on. Issues of inertia, path dependence, and irreversibility in various nonmonetary terms become relevant. For this purpose, decision trees in positional terms can be used to illuminate how decisions today will influence the options available at future points in time. Nobody denies the importance of monetary and financial effects. They will always be considered and are part of PA, but the concept of sustainable development implies a new emphasis that should be reflected even in economics on nonmonetary effects. The 1st PA study I carried out was about evaluating competing research and development (R&D) projects in the steel and pharmaceutical industries (Söderbaum 1973). The monetary dimension certainly plays an important role also in relation to R&D, but at some stage in my dialogue with actors from these industries, the rather trivial observation was made that research projects are not only about money but about knowledge. A successful research project will qualitatively change the stock of knowledge available as a basis for further strategic moves. And this new stock of knowledge, or knowledge position, will to a large extent determine new options and the monetary costs of further adding to the stock of knowledge. Second-step options depend on the alternative chosen as the 1st step. Because knowledge is nonmonetary, issues of inertia and irreversibility enter the scene. The multiple-stage process discussed can be compared with the stepwise positional changes of 1 player on a chessboard. Inertia exists in the sense that you are not allowed to return to the previous position if you regret your choice. Decision trees can be used to illustrate the initial options and possible future options with the expected position at each ramification. Focus is on nonmonetary positions, and no attempt is made to summarize end results in 1-dimensional monetary terms for each path through the tree. At some stage, experiences from the study of R&D projects were generalized in a PhD thesis (Söderbaum 1973) to other nonmonetary dimensions. Inertia

188 Integr Environ Assess Manag 2, 2006 P Söderbaum and irreversibility what is nowadays often referred to as path dependence represent a group of phenomena also relevant in relation to health and environmental issues, for example. Pollution of groundwater or surface water is not easily eliminated, land use changes for purposes of road construction are processes that are not easily reversed, and so on. Against this background I found the idea of attempting to meaningfully aggregate the multiplicity of effects of different kinds in 1-dimensional monetary terms as unrealistic. It is not feasible at the level of individuals and organizations, and even less at the societal level. I am only suggesting what has been obvious to many noneconomists for a long time that welfare should largely be measured in nonmonetary, especially nonmonetary positional, terms. Comparing the state of the environment at a particular place over time is the strategy of many monitoring systems. Something similar holds for human health. As part of PA, the different effects of specific alternatives are described in terms of profiles of a multidimensional kind (rather than in 1-dimensional terms) and decision making is understood in terms of a matching process. The analyst systematically compares alternatives in relation to the dimensions judged to be relevant, and each decision maker or other actor will match specific ideological orientation with expectations of the effects profile of each alternative considered. Positional analysis also involves a technique of illuminating conflicts between various affected interests. In a way similar to systems thinking (as described above) the analyst identifies those activities of individuals and organizations that will be affected differently depending on the alternative chosen. Each activity can then be connected with an assumed objective. In the case of a new road being considered, for instance, it can be assumed that people living in houses close to a road will prefer a level of traffic, with the connected noise and pollution, that is as low as possible. In this way, the alternatives considered can be ranked in relation to this particular activity. The rankings connected with different activities will then exhibit a pattern in which conflicts of interests become visible. In the normal case, an alternative that is ranked number 1 in relation to some affected activities will not score so well in relation to all other activities. Technical analysis of this kind is useful but also has its limitations. As previously indicated, a technical analysis can be complemented by type-recorded interviews with a limited number of important stakeholders or actors, experts included, to listen to their views about the effects of different alternatives in relation to different societal and private interests. The results of such dialogue with actors should be made public so that each actor becomes responsible for her or his arguments. The analyst can finally assist by suggesting conditional conclusions. Normally uncertainty is involved and the effects of 1 alternative might depend on decisions and actions outside the control of our decision makers. This means that conditionality in relation to ideological orientation could be related both to different scenarios about future states of affairs (for instance world market prices of oil) and value priorities. A specific decision maker will look for that alternative that best matches his orientation, including attitudes to uncertainty. Other decision makers will act in a similar way. As in the real world, decision makers can engage in a dialogue and get closer to each other or get further away from each other. THE INSTITUTIONALIZATION AND ROLES OF DIFFERENT METHODS Historically, CBA has been the main approach to decision making at the societal level. This is still the approach taught at most Departments of Economics, and many professional economists, therefore, do not consider any other approach. In Sweden, for example, those who work at the Ministry of Finance and the Ministry of Commerce normally refer to a neoclassical conceptual framework and see it as the natural starting point for their deliberations. Much like neoclassical economics as a whole, CBA has been institutionalized over the years, and cognitive, emotional, and other kinds of inertia (or path dependence) will see to it that CBA will be part of the mental maps of many actors for some time to come. More recently, however, signs have appeared that CBA is part of a deinstitutionalization process, in the sense that its role is weakening. It is increasingly understood, as argued by Mishan (1981), that the application of CBA has to be based on a consensus in society about the rules of valuation that characterize CBA (or based on the CBA ideology in the present vocabulary). CBA is not neutral in terms of values; on the contrary, it is very specific about what counts and how 1 effect should be related to another. Another reason for the weakened position of CBA is the emergence of a new generation of approaches. In the United States, Environmental Impact Statements and EIA became an issue in the early 1970s. Politicians and other actors felt that in connection with dam construction and similar projects, financial and other monetary aspects were usually carefully considered and that the same was true of technological or engineering issues. Environmental aspects, on the other hand, tended to be downplayed or regarded as secondary. The purpose of the National Environmental Policy Act was to upgrade environmental considerations as part of project appraisal. Knowing what was being done in environmental terms was seen as a reasonable ambition. The EIA emphasizes environmental impacts and does not claim to cover all kinds of effects. In that sense, it did not at 1st represent a big threat to the dominant position of CBA. The EIA was sometimes interpreted as part of the initial and preparatory stages of CBA. In any case, EIA has become institutionalized not only in the United States, but also in the European Union and a number of countries. The EIA represents a step toward sustainable development, but much more is needed, and at issue is whether the EIA methodology can be improved in various ways. Reference to multicriteria approaches (MCAs) has become more common in recent years. In my understanding, there are at least 2 roots to this new development. One is the challenge of multidimensionality. If problems are complex and multidimensional, why should they be treated as simple? Would it not be possible to live with this kind of complexity? Second, in public decision situations (and often in private situations as well), there are many decision makers rather than 1, and they can differ with respect to values. This means that one has to consider more than 1 objective function. The role of the analyst was then to identify the objective function of each decision maker and individually calculate the best option for him or her. Nowadays, with a large number of multicriteria approaches, the focus on mathematical objective functions, and calculation is not so dominant. However, multidimen-

Alternatives to CBA Integr Environ Assess Manag 2, 2006 189 sionality and the recognition of the existence of multiple value perspectives are still the main building stones. The MCA has so far largely played an academic role, but the work by the World Commission on Dams can be seen as an important initial step in a possible institutionalization of MCA. In fact, in its report (WCD 2000), the commissioners argue explicitly that CBA cannot in itself be used to justify the building of dams. Cost benefit analysis should largely be replaced by the kind of MCA presented in the report. Among the commissioners, some represented indigenous people (i.e., a group that in many cases have been resettled when dams have been constructed and large areas inundated). Resettlement of indigenous and more general populations raises ethical issues, and it was somehow felt that ethics should be dealt with in other ways than through CBA calculations. Positional analysis, which has been described at some length in this paper, broadly belongs to the MCA category. Positional analysis has been applied in studies mainly by university students in the Nordic countries (cf. Brorsson 1995, p 111 141). In public administration and in the worlds of politicians, method has been connected, largely through the frequent use of CBA, with approaches that are able to deliver clear-cut answers even to complex questions. The idea of conditional conclusions is not so easily grasped. Some scholars at universities have preferences in a technocratic direction and do not like to hear about the ideological particularities of specific approaches. However, politicians also might prefer more technocratic approaches. Rather than being exposed to a number of conflicts between interests and openly taking responsibility for her or his choice, the politician might prefer to hide behind the numbers produced by CBA analysts. As an example, to build a road would be against the interest of many farmers and other landowners. By pointing to the result of CBA calculations and referring to the authority of experts, it is probably much easier to weaken the resistance of property holders. The diversity of approaches that has here been indicated could play a positive role in another sense. Each method can be regarded as composed of a set of (methodological) elements. Students of public or business management could get a feeling for relevant methodological issues and then choose 1 of the methods in a pure sense or combine elements from different methods in relation to the particular planning issue, as well as the social and political context faced. One method can be more compatible with democracy than another, but the possibility of manipulation of one kind or another can never be excluded. One way of dealing with this is for 2 or more studies of a particular issue be made from different vantage points. A study at the university level might add to the information and knowledge presented in governmental studies. Manipulation becomes more difficult with the possibility that someone else also will enter into the dialogue. PROSPECTS FOR SUSTAINABLE DEVELOPMENT The theme of the conference Ecology in a Cost Benefit Society is relevant in many ways. It is true that we are living in a society in which thinking in terms of money, business, and markets plays an important, if not predominant, role, but the importance and strength of social movements and individuals that criticize simplistic thinking in money or market terms should not be underestimated. Neoliberalism as ideology is challenged in the World Social Forum, the European Social Forum, and in many other circles. Cost benefit analysis has largely been used in connection with the construction of dams, roads, airports, energy systems, and so on, but the approach is considered and used in other sectors as well; for example, government regulation of chemicals in relation to health and ecosystems. Some encourage this practice and even defend the role as technocrat (Sunstein 2002); others express skepticism (Ackerman and Heinzerling 2004). It need not be explained that I tend to agree with Ackerman. My judgment is based not only on ideas about good science but also on ideas of a functioning democracy and the hope of getting closer to a sustainable society. For ecologists and toxicologists (and for economists like myself) the choice is between adapting to the present cost benefit society or, in cooperation with like-minded persons, trying to counteract it. The 1st strategy of adaptation might be rewarding in the short run, but I think that the best days of CBA in its traditional sense are now behind us and that a broader approach, in which costs and benefits are understood in multidimensional and profile terms, will increase its market share in the future. Technocracy will lose ground, and the elements of democracy in the decision-making processes will be strengthened. Such judgments about the future are not based on science alone, and as scholars, we are back to the concept that values are always with us. Accepting CBA in its neoclassical sense would mean that one accepts the politics of CBA as 1 of the conference speakers argued as opposed to some other politics or policy. Politics is mainly the purview of politicians, but as repeatedly argued, nobody can play innocent. University scholars can open the door for recent developments in the theory of sciences, such as perspectivism (Fay 1996) and various versions of subjectivism and contextualism (Toulmin 1990). We can take an interest in social science paradigms, other than neoclassical economics, such as institutional theory; we can openly discuss how health and ecosystem protection is part of, or absent from, development concepts and the priorities that they suggest; and we can finally enter into a dialogue about how all this is reflected or not reflected in institutional frameworks. Should unsustainable trends be taken seriously, or should we accept the present dominance of monetary reductionism in its different forms and regard it as unrealistic to try to reverse the trends? Should the precautionary principle be taken seriously, or should one accept new additions to the long list of failures to consider this principle documented by Harremoës et al. (2002)? Although the challenge appears considerable, my hope is connected with scholars and universities who take their responsibility seriously and enter into a public debate in an effort to strengthen democracy. If actors, decisions, and their consequences are systematically made visible, the prospects for sustainable development will improve. Acknowledgment This article was written as part of the research project Actors, strategies, institutions Cooperation for sustainable development, financed by the Swedish Research Council for Environment, Agricultural Sciences, and Spatial Planning.