How to Spend $50 Billion to Make the World a Better Place
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details the decisions at which the expert panel arrived. And the encouraging news from this unanimous panel is that
something can be done – that there are good opportunities
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for investment to be made to improve conditions for the
billions of poor in the world.
The expert panel at the Copenhagen Consensus agreed
that first and foremost the world ought to concentrate on
controlling HIV/AIDS. At a cost of $27 billion, around 28
million cases of the illness could be prevented by 2010. The benefit-cost ratio is predicted to be 40 times that figure.
The HIV/AIDS crisis provides an excellent example of how
fighting disease is a good investment.
Malnutrition and hunger are number two on the expert
panel’s list. Diseases that are a result of iron-, zinc-, iodine-, and A-vitamin deficiencies can be alleviated with subsidies.
The benefits in relation to the cost outlay would be enor-
mous. The expert panel recommends that an investment of
$12 billion be made to address this problem. Today more
than two billion people are iron-deficient. The importance of alleviating malnutrition and hunger, especially among
children, cannot be overestimated.
Trade liberalization is number three on the list. The costs of introducing trade reform would be very modest. The
benefits, however, would be enormous, up to $2,400 billion per year.
The elimination of trade barriers does not require a large monetary investment. However, political willingness is of
utmost importance. Rich and poor countries alike would
benefit from free trade, and greater prosperity means that there will be greater resources to solve more of the world’s serious problems.
Ranked fourth on the expert panel’s list was the control
and treatment of malaria. Mosquito nets treated with insect
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How to Spend $50 Billion to Make the World a Better Place repellent was proposed as an investment that would yield
high returns.
Aside from the treatment of disease, hunger, and free
trade, initiatives to ensure clean drinking water and better governance were also high on the list.
The experts have answered the question: If we had an
additional $50 billion available to improve the world, where should we invest first? A unanimous panel of top economists recommends that $27 billion be used to fight HIV/AIDS, $12
billion for malnutrition and hunger, that the reduction of trade barriers, whose costs would be modest, be initiated, and that $10 billion be used to fight malaria.
The point of departure for the Copenhagen Consensus is
that the world is plagued with a plethora of problems and we don’t have the resources to solve them all here and now. The good news from the expert panel is that appropriate solutions can be found. HIV/AIDS, malnutrition, trade barriers, and malaria are all problems that can be effectively solved.
Topping the list of priorities set by the expert panel are basic problems that affect billions of people worldwide.
New technology, economic growth, and development have
improved living conditions for many people. Nevertheless,
there remains the pressing – and basic – need for an ade-
quate and predictable food supply and the expectation of
good health.
So much for challenges that can be solved. Both experts
and those with good intentions are quick to agree that solutions should be initiated. Were we not already aware that
fighting disease and malnutrition are worthy causes? Who
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would disagree? But now, the economists tell us that it is an economically sound idea to invest in the future of humanity.
What about the rest of the list? The bad solutions? It
is not only difficult to set priorities – it is also unpleasant.
The ranking of problems doesn’t only imply that one prob-
lem stands at the top, but also that one lies at the bottom.
This way of thinking is anathema to many. Shouldn’t we
just do everything? Solve hunger, stop climate change, prevent war, etc.? Isn’t it irresponsible to rank one problem above another?
Making choices implies leaving something out. The
experts divided their lists into four categories: very good projects; good projects; fair projects; and bad projects. In the bad projects category they placed a proposal regarding migration and one for guest-worker programs for the
unskilled. Also, there were three proposals relating to climate change that stood at the bottom. These included the
Kyoto Protocol and various proposals regarding the taxa-
tion of carbon dioxide discharge.
The experts are not unaware that climate change is
important. But, for some of the world’s poorest countries, which will be adversely affected by climate change, problems like HIV/AIDS, hunger, and malaria are more pressing
and can be solved with more efficacy. Expert panel mem-
ber Professor Stokey stressed that climate change is a serious problem, but that the proposals made, including Kyoto, are not very effective. There is a need for more research
in this area.
Some critics believe that the methods used by the Copen-
hagen Consensus were, all in all, much too myopic in
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xviii How to Spend $50 Billion to Make the World a Better Place focusing on economic costs and benefits. Yet two other prioritizations made by non-economists seem to support the
economists’ choices. First, it is interesting to note that the ranking of issues by the top economists closely resembled
the results of 80 young students who were given the same
task as the experts. Christian Friis Bach stresses that though the participants of the Youth Forum chose other solutions
for the problems cited, the list of priorities they set quite closely resembled the one drafted by the experts. In addition, he describes the way in which the Youth Forum participants often suggested far-sighted solutions, and that these were perhaps better. It is true that the choice lies between clinics and condoms, but the difficult question still remains: Should we save 1,000,000 lives with condoms or 100,000
with a comparable cost outlay for clinics? Second, the Danish newspaper, Politiken, also asked a small expert panel in Uganda to prioritize the formidable challenges facing
humanity and the result was amazingly similar to the rank-
ing of the economists. Thus, quite a bit of evidence exists that indicates that there is widespread support for the priorities set by the economists.
This fact – that the cold, rational overview of the
economists, the enthusiastic discussions of the Copenhagen Youth Forum, and an Ugandan panel – essentially came
to the same set of conclusions confirms that disease and
hunger are urgent problems.
The
Copenhagen Consensus has also been criticized for
comparing apples and oranges. How can one set priorities
among problems such as hunger and climate change when
they are so vastly different in kind? Sure, it’s difficult. But
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it is precisely these kinds of decisions that politicians make each day. Priorities are set when the choice is made to build a traffic circle to ensure traffic safety over funding home help for seniors, or between new schools and better hospitals. And the setting of priorities doesn’t disappear if they are not discussed – the decision-making process behind them
simply becomes less visible. For this reason the discussion regarding the setting of priorities is relevant.
The Copenhagen Consensus has also been criticized for
assuming from the outset that there is not enough money
for everything. Will the conclusions reached at the Copen-
hagen Consensus be leveraged to rationalize budget cuts? It is my belief that we will see the opposite effect. The Copenhagen Consensus will create an increased awareness of the
problems we face and thus generate more investment in
developing nations. Simply put: We show that money can
improve the world.
Some have questioned the whole idea behind the Copen-
hagen Consensus – the very necessity of creating priorities.
Just think – what if doctors did not perform triage?
If doctors working in an emergency room didn’t priori-
tize the treatment of patients based on the seriousness
of their illnesses? What if doctors simply treated those
who by chance stood first in line or complained the
loudest? A broken arm could be treated before a heart
attack. This approach would cost lives and result in a misguided use of resources. As such, it would never be con-
sidered. Should we thus consider using this method when
considering how to alleviate the problems of the world’s
poorest people?
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How to Spend $50 Billion to Make the World a Better Place Those who will not acknowledge that resources are limited live in a dream world. At the risk of being offensive, I believe that the world has more need for realists than for dreamers. It’s very easy to want to support all good causes, but in the real world this is just not possible.
Do dreamers – with all their good intentions – have
a monopoly on being good? Are the priorities of realists
misguided?
Measured by the effect on those who suffer most in the
world I am inclined to re-think the relationship between
dreamers and the realists. It is unethical not to take into account knowledge that indicates where we can do the most
good. The Copenhagen Consensus constitutes the cold,
rational approach. Instead of intending to do good, isn’t it better to actually do good?
The Copenhagen Consensus has shown that an informed
ranking of priorities is possible, and that economic cost-
benefit analyses do not lead to short-sighted solutions or a fixation on money. On the contrary, they lead to a focus on the problems of people living in impoverished conditions.
I’m proud that we have realized the first goal of the
Copenhagen Consensus, namely a list of priorities regarding the world’s most challenging problems. Experts have used
their knowledge and insight to commit themselves to create a set of concrete solutions. The Copenhagen Consensus has
already initiated an important debate on the prioritization of the world’s resources.
The Copenhagen Consensus is conceived as a concrete
resource for politicians. But will they use it? My hope has always been that when the list first became available, it
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would be impossible to ignore – because it’s based on knowledge, and because it’s so concrete.
But the Copenhagen Consensus shouldn’t only concern
politicians. It’s important that the rest of us also become involved in the discussion of priorities, that we consider the facts, and that we face the difficult but inevitable task of having to choose among a long list of important issues.
This book offers readers the opportunity to exploit the best research in order to improve the debate, to come up with
their own informed lists. The next goal for the Copenhagen Consensus is to involve both academics and politicians in
the debate. I hope very much that each of you will partic-
ipate in this absolutely necessary discussion about global priorities – namely, what we should do first.
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WILLIAM R. CLINE1
1
Meeting the Challenge of Global
Warming
Introduction
This chapter compares the costs and benefits of three
alternative policy strategies to reduce mankind’s emis-
sions of greenhouse gases and limit damage due to global
warming.
It is particularly difficult to analyze the economics of
policies to limit such emissions because expected bene-
fits to be generated from such policy actions will materi-
alize only in the distant future, whereas many of the costs will be incurred much sooner. Therefore the way in which
future benefits are discounted to give a present value is
crucial: How much is the prospect of $100 earned in 50
or 100 years worth to us today? This is discussed below in more detail before the model used for evaluating the three policy options is described.
1 Center for Global Development and Institute for International Economics.
1
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How to Spend $50 Billion to Make the World a Better Place The state of global warming science and policy
The Intergovernmental Panel on Climate Change (IPCC)
provides a framework for scientists from across the world
to share and evaluate the data generated by a range of
computer models projecting future changes to atmospheric
composition, average temperatures, and climate patterns.
The IPCC periodically reviews this situation, most recently in the Third Assessment Report (TAR) published in 2001.
This report compiles a vast amount of detailed scientific
information, which is distilled into a “Summary for Policy-makers” agreed to by all participating governments. This
summary is the basis for planning future action.
The TAR projects an increase in averag
e temperatures
by 2100 in the range 1.4–5.8◦C (above the 1990 baseline).
It is also estimated that global average surface temperature rose by 0.6◦C from 1861 to 2000, and the panel concluded
that “most of the observed warming over the last 50 years
is likely to have been due to the increase in greenhouse gas concentrations.” Of the six recognized greenhouse gases,
carbon dioxide (CO2) plays the greatest role because it is emitted in the greatest quantities and persists for long periods in the atmosphere.
When projecting future temperature rises, the climate
models use a range of six benchmark scenarios, which give
rise to very different patterns of man-made carbon diox-
ide emissions. It is implicitly assumed in the TAR that all these scenarios have equal weight, and therefore that the
future temperature rise is equally likely to be anywhere
within the projected range. However, the analysis in this
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Meeting the Challenge of Global Warming
3
20
15
Base
10
5
Kyoto
0
−5
1995
2035
2075
2115
2155
2195
2235
2275
Figure 1.1. Climate damage as percent of GWP, baseline, and Kyoto Protocol
chapter assumes that some scenarios that predict low emis-
sions are extremely unlikely without economic incentives,
which means that future temperature rise would be towards
the upper end of the range.
International policy on mitigation of climate change is
focused on the Kyoto Protocol negotiated in 1997. This
treaty sets limits on emissions of carbon dioxide allowed
from industrialized and transition economies without mak-
ing any demands on the developing world. This agreement
was seen as the first, relatively small, step by the international community in a more ambitious, long-term program
of emissions reduction. However, there now seems little
chance of the Kyoto Protocol coming into force globally.
The USA has made clear that it will not ratify the treaty, both because of the economic harm it would cause and the uncertainty surrounding climate science. Russia seems unlikely