Doing Good Efficiently
COPENHAGEN – Policymakers can concoct many excuses not to invest in global aid and development projects. Three weeks ago, I joined a group of five Nobel laureates and three distinguished economists to undermine one of those excuses, by providing information about where money can achieve the most good.
For each issue examined, we focused on benefits relative to costs. To guide our thinking, we asked ourselves: if we had, say, an extra $75 billion to spend, where could we achieve the most good? We put each challenge on an equal footing. Massive media hype about some problems was irrelevant.
At the bottom of our list were the least cost-effective investments the world could make, with the best places to spend money at the top. The lowest place (see list) was given to dealing with climate change through cuts in CO2 emissions. This finding was based in part on research by a lead author for the Intergovernmental Panel on Climate Change – the group that shared last year’s Nobel Peace Prize – who noted that spending $800 billion over 100 years solely on mitigating emissions would reduce inevitable temperature rises by just 0.2 degrees Celsius by the end of this century. Even taking into account some of the key environmental damage from warming, we would lose money on the investment, with returns of just $685 billion.
That does not mean that the planet should ignore climate change. A better response would be to increase dramatically research and development into low-carbon energy– an option that gained a respectable mid-placed ranking on our list. It makes little sense for the world to impoverish itself by embracing a poor solution to one problem when there are more pressing challenges that can be resolved at smaller expense.
Similarly, we gave a low ranking to solutions to the challenge of outdoor air pollution. Many measures used in the developed world to reduce vehicle-caused smog – including particulate filters and “inspection and maintenance” schemes – are prohibitively expensive in the developing world.
We could get slightly higher benefits by focusing on indoor air pollution. One and a half million people die each year from the effects of using solid fuel on poor stoves without ventilation. Getting improved stoves to half the people affected would cost $2.3 billion.
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Our top-ranked solutions were in areas that we don’t hear much about. Unglamorous interventions like de-worming would allow children to be better nourished; lowering the cost of schooling would see children and nations benefit.
We concluded that there would be high benefits from providing micronutrients – particularly vitamin A and zinc – to undernourished children in South Asia and Sub-Saharan Africa. These help prevent neonatal death. The cost is tiny: reaching 80% of the world’s 140 million or so undernourished children would require a commitment of around $60 million annually, while the economic gains would eventually clear $1 billion a year.
Providing iron and iodized salt is another top investment. Fortifying products with iron costs as little as $0.12 per person, per year. We know that iron deficiency leads to cognitive and developmental problems. For $286 million we could get iodized salt and fortified basic food items to 80% of those in the worst-affected areas, with benefits estimated to be roughly nine times that sum.
A solution of a different sort is the removal of trade barriers. Even accounting for the costs to short-term losers (say, particular industries or workers with certain skills), the overall long-term benefits can be large. Unless the economies of developing countries grow, they will remain mired in poverty. By reducing trade barriers, per capita income will grow, enabling poor countries to address other problems by themselves.
This was the second Copenhagen Consensus. While our bottom-ranked solutions remained more or less the same as four years ago, the top-ranked item in 2004, prevention of HIV/AIDS, was rated lower this time because of subsequent progress.
This project provides a sound basis on which to measure and compare different uses of scarce resources. It might be fashionable to talk about just a couple of the globe’s challenges, but we could achieve a lot more if we focused first on where our spending would be most rational.
RANKING WORLD INVESTMENTS
1. Micronutrient supplements for children (vitamin A and zinc)
2. The Doha development agenda
3. Micronutrient fortification (iron and salt iodization)
4. Expanded immunization coverage for children
5. Improving agricultural technology
6. De-worming and other school-based nutrition programs
7. Lowering the price of schooling
8. Increasing and improving girls’ education by paying mothers to send them to school
9. Community-based nutrition promotion
10. Support for women’s reproductive role to reduce gender inequity
11. Low-cost heart attack drugs for developing countries
12. Malaria prevention and treatment
13. Tuberculosis identification and treatment
14. R&D in low-carbon energy technologies to combat global warming
15. Bio-sand filters for household water treatment
16. Pumps and wells to improve water coverage in rural areas
17. Conditional cash transfers to increase the number of children receiving education
18. Peace-keeping in post-conflict situations to reduce the risk of civil war
19. HIV “combination” prevention package
20. Total sanitation campaign to reduce the number of “open defecation” areas
21. Improving surgical capacity at district hospital level
22. Microfinance to women to reduce gender inequity
23. Improved stove intervention to reduce indoor air pollution
24. Large, multipurpose dam in Africa to improve water coverage
25. Inspection and maintenance of diesel vehicles to reduce outdoor air pollution
26. Low-sulfur diesel for urban road vehicles to reduce outdoor air pollution
27. Diesel vehicle particulate control technology to reduce outdoor air pollution
28. Tobacco tax to reduce heart disease and cancer
29. A package of R&D and mitigation to combat global warming
30. Mitigation of carbon emissions to reduce global warming