THE PRINCIPLES OF MULTICRITERIAL REASONING

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THE PRINCIPLES OF MULTICRITERIAL REASONING OF
THE DEVELOPMENT PRIORITIES Buracas
Zvirblis antanas_at_buracas.com
PROF. HAB. DR. ALGIS ŽVIRBLIS
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MAIN STAGES OF THE ECONOMIC STRATEGIES FORMATION

• they are determination of main tasks
• SWOT analysis
• differentiation identification
• taxonomy and subordination of development
  priorities
• multivariate formation of the programmed
  indicator groups.
• On these stages, the parallel analysis,
• multiobjective and multicriterial evaluation as
  well as
• optimizing of alternatives according to
  essential integrated criteria,
• reasoning of strategic solutions,
• analysis of expected consequences of the
  implementation of strategic procedures and, at
  last,
• their necessary feedback correction comparing
  with policy measures determined on the earlier
  stage - is suggested to be applied.

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EFFICIENCY OF STRATEGIC PROGRAMMING IS EXPECTED
TO BE SYSTEMIC EVALUATED

• The theoretic backgrounds of national economic
  (finance system) development strategies are
  generated in the process of
• multicriterial evaluation,
• ranking and
• optimizing of priorities, alternatives and
  formation groups of background economic
  (financial) indicators for this development
• in the connection with national economic
  resources and competitive abilities,
  multifunctional regional and sectored development
  directions.

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EVALUATION METHODS FOR THE PROGRAMMED PRIORITIES
OF THE ECONOMIC DEVELOPMENT

• The Analytical Hierarchy Process (AHP),
• Simple Additive Weighting (SAW),
• Complex Proportional Assessment (COPRAS),
• Multi-Objective Optimisation on basis of Ratio
  Analysis (MOORA),
• Generalized (Multiattribute) Utility Function and
• Technique for Order Preference by Similarity to
  Ideal Solution (TOPSIS)
• - such methods are mostly used for the
  determining of the alternative programmed
  financial indicators and / or criterial
  significance, the evaluation of their priorities.

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COPRAS SAW

• COPRAS method permits to determine the value of
  the complex criterion for the finance system
  environment. Such a criterion is integrating some
  partial criteria (international payment balances,
  legal surrounding of the decision taking a/o)
  their values are determined, p. ex., by SAW
  method.
• The essence of the priority synthesis consists in
  the determination of the highest priority from
  local priorities and the last ones compared with
  it. The inconsistent realization of the
  procedures may become serious obstacle to correct
  application of the method itself under review .

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TOPSIS MOORA

• The optimization principles for strategic
  programmed solutions applying Multi-Objective
  Optimization on basis of Ratio Analysis (MOORA)
  method can be realized using minimax or TOPSIS
  methods and comparative calculations of
  efficiency parameters.
• Technique for Order Preference by Similarity to
  Ideal Solution (TOPSIS) is determined for the
  evaluation of alternative (or variant) economic
  and / or finance priorities. The priority is
  given to the alternative which is nearest to
  ideal variant under review.

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THREE-STAGE SYSTEM OF QUANTITATIVE ASSESSMENT

• An essence is provided in the following
  consequence
• the identification and assessment of essential
  socioeconomic indicators (based on expertises)
  determining the objective groups of indicators
• the assessment of groups of indicators according
  to their determination using a compound index for
  each of them
• the assessment of generalized macroeconomic
  criteria (as a composition of indicator groups)
  applying the level index as a complex measure.

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General matrix expressions
When applying SAW method for the evaluation of
finance system environment indicators
where b11,bnn are the significance parameters of
the essential indicators E1, ...,En influence on
the compound variable E.
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THE MODEL FOR ASSESSMENT OF FINANCE MACROSYSTEM
where ke1, kln , are the significance
parameters of direct and interaction impact of
respective indicator groups E, S, A, L on the
general level of finance macrosystem M.
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Selected basic groups of the essential
macrosystemic efficiency and innovation
indicators (comparative with WEF expert
evaluations)

• GDP growth and its structure
• Inflation level (DIT)
• Amount of direct foreign investments
• Level of economics regulation
• Market size and efficiency
• Favourability of taxation (redistributive
  function)
• Number of bancrupting enterprises (changes)
• Financial market sophistication
• Amounts of public procurement
• Indicators of innovations, markets efficiency a/o
  (with account of business situation).

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APPLYING COMPLEX PROPORTIONAL ASSESSMENT (COPRAS)
METHOD

• The value of macroeconomic level index M(I) is
  determined by COPRAS with account of the
  significances of partial criteria

where ke, ks, ka -coefficients of impact of
partial criteria economic growth E(I), finance
sector efficiency S(I), innovation and market
efficiency level A(I) on the value of
macroeconomic level index M(I) determined by
expert way.
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THE QUALITATIVE AND QUANTITATIVE ASSESSMENT OF
IDENTIFIED ECONOMIC INDICATORS AND DETERMINATION
OF WEIGHTS IN INFLUENCE SCENARIOS I AND II
Economic indicator groups and determining essential indicators Qualitative evaluation Assessment in points Assessment in points Assessment in points Weights
Economic indicator groups and determining essential indicators Qualitative evaluation I II II Weights
Group of economic indicators (E) 0,4
Direct foreign investments E1 () 5,5 5,5 6,0  0.2
Change of GDP E2 (- ) 4,5 4,5 5,5 0,15
Busines sophistication E3 (- ) 4,5 4,5 5,0  0.2
Economic regulation level E4 (- ) 4,0 4,0 5,5  0.2
Taxation favourability E5 (--) 3,0 3,0 4,0 0,25
Level index E (I) 4,3 4,3 5,0
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SUMMARY

• The multicriterial evaluation and optimization
  principles based on it permit to formulate the
  more effective strategic development programs, to
  determine their priorities and essential
  indicators when modeling programmed alternatives.
  
• There is possibilities to implement the
  multicriterial reasoning under review into
  management and administration systems when
  forming the algorithms of this process.
• The principles under review may form the basis
  for the computer-based strategic planning and
  development programs.