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Monday Morning Development Newsletter:  


The Cynical Economist
: Getting Our Priorities Straight
By Lykke E. Andersen*, La Paz, 27 November 2006.

There are many gigantic problems in the world (hunger, diseases, wars, corruption, lack of safe water, pollution, climate change, etc.), but there are also a great many efforts to solve these problems (hundreds of professional development organizations, thousands of NGOs, millions of volunteers, billions of dollars of foreign aid).

So, why is progress towards solving these problems so painfully slow?

One possibility may be that we haven’t gotten our priorities straight. Clearly we can’t fix everything at once (if we could, all the problems would already have been solved), so we should try to apply the limited funds available for fixing global problems to the areas where they can do the most good.

Setting priorities was exactly the purpose of the Copenhagen Consensus, arranged by Bjorn Lomborg (author of the The Skeptical Environmentalist) in 2004. A panel of highly regarded economists (several of them Nobel Prize laureates) listened to experts from each field about the magnitude and urgency of each problem, possible solutions, and the estimated costs of implementing these solutions (1). Then each of the 8 panelists ranked the problems independently and finally they reached a consensus ranking to which they all agreed.      

The top four priorities in the final ranking were the following: Control AIDS, reduce malnutrition, liberalize trade, and fight malaria. The benefit-cost ratios for treating these problems would be enormous (40 or more) and $50 billion would go a long way towards solving these problems.

At the very bottom of the list of priorities were the efforts to reduce global warming. Not because global warming was not considered a serious problem, but because the solutions proposed so far are not effective, and because compared to the other problems, it is not very urgent.

The expert in the climate change area, William Cline (2), estimated that it would cost $128 trillion (in net present value terms using a discount rate of 1.5%) to reduce the rise in temperatures by the year 2300 from the baseline of 7.3°C to 5.4°C. He also estimated that the benefits would be twice as high (due to the low discount rate and extremely long time frame), but since nobody can predict what the world is going to look like 300 years into the future, the latter number has a lot of uncertainty associated with it (a standard deviation of at least $200 trillion, I would guess).

From the cynical economist’s viewpoint, it therefore looks a whole lot better to spend $50 billion to tackle some very serious and urgent problems in poor countries rather than wasting $128 trillion trying to reduce the average global temperature by a couple of degrees, with unknown, distant benefits. Just to be on the safe side, we might want to invest a $1 billion in climate change research, in order better to understand our climate, and perhaps $2 billion in research on how to manage change and improve our capacity to adapt not only to climate change, but also to all the other kinds of change that we are sure to experience in the coming centuries.

If we get our priorities straight now, the costs of climate change in the future may turn out to be quite limited as people have long since moved out of the most vulnerable activities (tropical agriculture), or because a big volcano erupted and sent temperatures downwards instead of upwards, or because the present interglacial period ends (as it is scheduled to this millennium), or because of any number of unforeseeable developments.

So if you really want to help make the world a better place, especially for those who are seriously disadvantaged, it would probably be a good idea to stop contributing to the global warming hype and instead concentrate on fighting the killer diseases that wreak so much havoc in developing countries.

 
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(*) Director, Institute for Advanced Development Studies, La Paz, Bolivia. The author happily receives comments at the following e-mail: landersen@inesad.edu.bo.
(1) See the book “How to Spend $50 billion to Make the World a Better Place” edited by Bjorn Lomborg and published by Cambridge University Press in 2006.
(2) From the Center for Global Development in Washington, D.C. and member of the IPCC Working Group III.

Ó Institute for Advanced Development Studies 2006. The opinions expressed in this newsletter are those of the author and do not necessarily coincide with those of the Institute.

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