Sunday, August 31, 2014
10

A Better World Is Here

COPENHAGEN – For centuries, optimists and pessimists have argued over the state of the world. Pessimists see a world where more people means less food, where rising demand for resources means depletion and war, and, in recent decades, where boosting production capacity means more pollution and global warming. One of the current generation of pessimists’ sacred texts, The Limits to Growth, influences the environmental movement to this day.

The optimists, by contrast, cheerfully claim that everything – human health, living standards, environmental quality, and so on – is getting better. Their opponents think of them as  “cornucopian” economists, placing their faith in the market to fix any and all problems.

But, rather than picking facts and stories to fit some grand narrative of decline or progress, we should try to compare across all areas of human existence to see if the world really is doing better or worse. Together with 21 of the world’s top economists, I have tried to do just that, developing a scorecard spanning 150 years. Across ten areas – including health, education, war, gender, air pollution, climate change, and biodiversity – the economists all answered the same question: What was the relative cost of this problem in every year since 1900, all the way to 2013, with predictions to 2050.

Using classic economic valuations of everything from lost lives, bad health, and illiteracy to wetlands destruction and increased hurricane damage from global warming, the economists show how much each problem costs. To estimate the magnitude of the problem, it is compared to the total resources available to fix it. This gives us the problem’s size as a share of GDP. And the trends since 1900 are sometimes surprising.

Consider gender inequality. Essentially, we were excluding almost half the world’s population from production. In 1900, only 15% of the global workforce was female. What is the loss from lower female workforce participation? Even taking into account that someone has to do unpaid housework and the increased costs of female education, the loss was at least 17% of global GDP in 1900. Today, with higher female participation and lower wage differentials, the loss is 7% – and projected to fall to 4% by 2050.

It will probably come as a big surprise that climate change is expected to be mostly an increasing net benefit – rising to about 1.5% of GDP per year – in the period from 1900 to 2025. This is because global warming has mixed effects; for moderate warming, the benefits prevail.

On one hand, because CO2 works as a fertilizer, higher levels have been a boon for agriculture, which comprises the biggest positive impact, at 0.8% of GDP. Likewise, moderate warming prevents more cold deaths than the number of extra heat deaths that it causes. It also reduces demand for heating more than it increases the costs of cooling, implying a gain of about 0.4% of GDP. On the other hand, warming increases water stress, costing about 0.2% of GDP, and negatively affects ecosystems like wetlands, at a cost of about 0.1%.

As temperatures rise, however, the costs will rise and the benefits will decline, leading to a dramatic reduction in net benefits. After the year 2070, global warming will become a net cost to the world, justifying cost-effective climate action now and in the decades to come.

Yet, to put matters in perspective, the scorecard also shows us that the world’s biggest environmental problem by far is indoor air pollution. Today, indoor pollution from cooking and heating with bad fuels kills more than three million people annually, or the equivalent of a loss of 3% of global GDP. But in 1900, the cost was 19% of GDP, and it is expected to drop to 1% of GDP by 2050.

Health indicators worldwide have shown some of the largest improvements. Human life expectancy barely changed before the late eighteenth century. Yet it is difficult to overstate the magnitude of the gain since 1900: in that year, life expectancy worldwide was 32 years, compared to 69 now (and a projection of 76 years in 2050).

The biggest factor was the fall in infant mortality. For example, even as late as 1970, only around 5% of infants were vaccinated against measles, tetanus, whooping cough, diphtheria, and polio. By 2000, it was 85%, saving about three million lives annually – more, each year, than world peace would have saved in the twentieth century.

This success has many parents. The Gates Foundation and the GAVI Alliance have spent more than $2.5 billion and promised another $10 billion for vaccines. Efforts by the Rotary Club, the World Health Organization, and many others have reduced polio by 99% worldwide since 1979.

In economic terms, the cost of poor health at the outset of the twentieth century was an astounding 32% of global GDP. Today, it is down to about 11%, and by 2050 it will be half that.

While the optimists are not entirely right (loss of biodiversity in the twentieth century probably cost about 1% of GDP per year, with some places losing much more), the overall picture is clear. Most of the topics in the scorecard show improvements of 5-20% of GDP. And the overall trend is even clearer. Global problems have declined dramatically relative to the resources available to tackle them.

Of course, this does not mean that there are no more problems. Although much smaller, problems in health, education, malnutrition, air pollution, gender inequality, and trade remain large.

But realists should now embrace the view that the world is doing much better. Moreover, the scorecard shows us where the substantial challenges remain for a better 2050. We should guide our future attention not on the basis of the scariest stories or loudest pressure groups, but on objective assessments of where we can do the most good.

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  1. CommentedClyde Israel

    1. Hurricane damage from climate change? Pielke has indicated there is not connection. What data are you using?
    2. What is the cost of saving 3 million lives through vaccinations? If it were not done what is the economic impact? Is the expense worth the effort?
    3. Cost of poor health is at 11%, down from 32%of global GDP at the outset of the 20th century. Drug companies are highly profitable. Do you have numbers to further explain this correlation. Is the expense of current healthcare worth it?
    Global problems have declined? More info please, I understand the main points, however, further reading will provide insight, e.g. are people happier with their lot in life?

  2. CommentedJeffrey Scofield

    GDP is a poor indicator of human well being. There's a joke that demonstrates how using GDP per person as a metric is intentionally distorting. The joke starts off, " Bill Gates walks into a bar.." Broader metrics should be used to not skew the intended message. The consequences you mentioned in loss to biodiversity, and in particular in my field of marine ecology, are enormous redistributive consequences driven by the failure of free market fundamentalists to manage growth responsibly.

      Portrait of Bjørn Lomborg

      CommentedBjørn Lomborg

      Dear Jeffrey Scofield.

      Thanks for your comment. I understand that it seems intuitive that GDP per person should be a poor indicator of human well-being, but actually it is. Take a look at its correlation with the UN's Human Development Index, which also looks at health and education, www.bit.ly/XxQw0B.

      Or look at the large number of alternative quality-of-life (QOL) indexes. In a paper studying six of these, *five* were worse at estimating human happiness than GDP per capita (http://bibliothek.wzb.eu/pdf/2012/i12-201.pdf).

      Finally, remember, this research project does not assume that GDP is the only important issue. It specifically takes into account health, air pollution, global warming, biodiversity, gender, war etc.

      all the best
      bjorn

  3. CommentedMukesh Adenwala

    Kindly excuse my unfinished post - I failed to mention the fact in my post. Here it is: Just to mention one fact: there has been a steep increase in divorces and children living with single parents since 1970s.

      Portrait of Bjørn Lomborg

      CommentedBjørn Lomborg

      Dear Mukesh.

      Thanks for your comment and question. We've looked at the impact of problems compared to the overall resources available to fix them. In that way, it doesn’t matter if the resources come out of public or private spending (though the general tendency has been towards a higher proportion of public spending).

      But while the topics covered, like health, education, war, gender, air pollution, climate change, and biodiversity, are definitely important, this is only a first attempt and I would like to see many more issue areas covered in the future. We did not look at, e.g. the impact of rising proportion of single parents, though I would presume that there is both a negative (fewer resources, less emotional support) and a positive (divorce allows people not to be stuck in dysfunctional relationships) impact. Moreover, I would also expect the overall impact to be much lower than for instance health, war and education.

      I hope our project will be an inspiration to many more making similar, peer-reviewed analyses on all the un-covered areas to contribute to a more complete overview.

  4. CommentedMukesh Adenwala

    Mr. Lomborg I have not read your "Scorecard....", but would like to pose this question. It makes sense to believe that because of rise in productivity, which in turn was possible because of availability of better technology, cost of several services must have declined. But there seems to be a possibility that the costs that were hitherto borne by the governments (think education, health, transport, power, food, etc.) are now being borne by general public. This would have increasingly happened since 1970s because the economic ideology changed under the influence of Chicago School. If and to the extent this has actually happened (I don't know), transferring the costs to public might have deleterious effects on overall welfare. I am reminded of Professor Elizabeth Warren's assertions made in 2007 in "The Coming Collapse of US Middle Class". Just to mention one fact: I wonder if the costs to people have been quantified and calibrated in your calculations. Thank you.

  5. CommentedProcyon Mukherjee

    The Limits to Growth in the last segment covered the global environment where the state of global equilibrium is slated to be achieved by the poise that negative and positive feedback loops bring in. While the positive feedback loops have constantly been boosted by the financial markets, the negative ones are constantly been stymied and ignored by the pressures of political processes; the real cost of several externalities remain trivialized and ignored and the internalization of these costs would make the future look far more grim than what the book suggested. The reason why we still live in a better world now is because we choose to remain ignorant of the future of our children; our forefathers were less ignorant.

  6. CommentedShane Beck

    Funny you should mention the book "Limits to Growth". Several papers have concluded that their predictions were basically accurate:

    Graham Turner (2008). "A Comparison of `The Limits to Growth` with Thirty Years of Reality". Commonwealth Scientific and Industrial Research Organisation (CSIRO)

    Hall, C. & Day, J. Revisiting the Limits to Growth After Peak Oil. American Scientist, 97 (2009): 230 -238,

    Ugo Bardi. The Limits to Growth Revisited. Springer 2011

    I'd say the authors of Limits to Growth have one up on you; their predictions have been stood the test of time....

      Portrait of Bjørn Lomborg

      CommentedBjørn Lomborg

      Dear Shane.

      Thanks for your comment. The predictions from Limits to Growth really haven't done well. Nutrition is not collapsing but continuously increasing, pollution is not strangling us but actually dramatically decreasing, and we're not running out of stuff, but rather having more easy access. Almost all indicators are moving in the right direction.

      You can see this documented in my article from last year with Foreign Affairs, http://lomborg.com/sites/default/files/Art%20BL%202012-06-20%20Alarmism%20Foreign%20Affairs.pdf.

  7. CommentedMatt Stillerman

    I am not a fan of measuring human well-being in economic terms. It simply gives the wrong answer in too many cases, as pointed out by E.F. Schumacher. For example, medical improvements have caused an increase in debilitating and expensive chronic conditions, by curing some acute diseases that would have been fatal in the past. Should we claim that extending these lives is not a net benefit, in spite of the cost? And, should we count the very high cost of caring for those chronicly ill people as a positive contribution (as it is in the GDP calculation)? These questions avoid the real issue: there are benefits to extending life that cannot be quantified economically.

    One of the worst failings of this form of economic analysis is that it does not address risk. For example, the micro-biome near the surface of the ocean produces about half of the oxygen that we breathe, and this ecosystem is very poorly understood. It is certainly possible (a risk) that ocean acidification will disturb this system, and halt the production of oxygen. What value should we place on half of the oxygen in our atmosphere? (Talk about inelastic markets!) How do we assign a probability to the unknown risk that our disturbance (acidification) will shut down photosynthesis? And, even if we could do that, how do we place a value on the resulting lottery?

  8. CommentedBrian Hoffer

    Good post. As with most positions, this one hinges on how you define your terms. In my view, the pessimists are the people who actually effect change. These are the people who say:

    "Gender inequality is a problem, and things will only get worse if something isn't done about it." And, "Indoor air pollution is a problem, and things will only get worse if something isn't done about it." And, "Biodiversity loss is a problem, and things will only get worse if something isn't done about it." And, yes, "Global warming is a problem, and things will only get worse if something isn't done about it."

    These people get labelled pessimists, scolds, Cassandras, and much worse. But it's worth remembering that 1) Cassandra was right, and 2), that the improvements we've seen over the past 150 years were not achieved by the kind of optimist who sits back and does nothing, content in the assurance that things will simply get better on their own.

  9. CommentedProcyon Mukherjee

    The Limits to Growth in the last segment covered the global environment where the state of global equilibrium is slated to be achieved by the poise that negative and positive feedback loops bring in. While the positive feedback loops have constantly been boosted by the financial markets, the negative ones are constantly been stymied and ignored by the pressures of political processes; the real cost of several externalities remain trivialized and ignored and the internalization of these costs would make the future look far more grim than what the book suggested. The reason why we still live in a better world now is because we choose to remain ignorant of the future of our children; our forefathers were less ignorant.

  10. CommentedJose araujo

    Is this a promotional article for a book??? I'm disapointed Project Syndicate allows this kind of schemes.

      Portrait of Bjørn Lomborg

      CommentedBjørn Lomborg

      Dear José.

      Thanks for your comment. This is not a promotion for a book, but hopefully an interesting teaser for an academic project where you can read all the papers online here: http://copenhagenconsensus.com/projects/how-much-have-global-problems-cost-world.

      Pls let me know if you find some of the papers interesting!

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