THE CREDULOUS SKEPTIC:

Copenhagen Consensus: Putting the world to rights: What would be the best ways to spend additional resources on helping the developing countries? Some answers (The Economist, Jun 3rd 2004)

IN RECENT weeks The Economist has been following and supporting the Copenhagen Consensus project—an unusual, ambitious and, some have argued, misguided attempt to set priorities among a range of ideas for improving the lives of people living in developing countries. Starting on April 17th, we began publishing, both in print and on our website*, reviews of essays commissioned by the organisers from leading economic researchers. Each of the papers addressed one of ten global challenges, and proposed possible responses. During May 24th-28th, a panel of distinguished economists assembled in Copenhagen. Their task was to review these papers alongside critical commentaries commissioned from other researchers, to question the various authors, and to decide what to make of it all.

The organising idea was that resources are scarce and difficult choices among good ideas therefore have to be made. How should a limited amount of new money for development initiatives, say an extra $50 billion, be spent? Would it be possible to reach agreement on what should be done first?

The drive behind this venture was supplied by Bjorn Lomborg, author of that modern classic of green demythology, “The Skeptical Environmentalist”. [...]

Altogether the challenge-paper authors offered 38 proposals for action. The panel chose to rank only 17 of these, deeming that for the other 21 there was too little information to make a clear judgment about the relative merits. (A proposal was included in the group ranking only if five of the members had included it in their individual ranking. Again, however, there was surprisingly broad agreement about which proposals to rank and which not. With only one or two exceptions, policies tended to be ranked either by all of the members or by none.)

With something close to unanimity, the panel put measures to restrict the spread of HIV/AIDS at the top of the ranking. The challenge paper on communicable diseases, by Anne Mills and Sam Shillcutt of the London School of Hygiene and Tropical Medicine, having reviewed the literature, reckoned that a package of preventive measures costing some $27 billion (in purchasing-power-adjusted dollars) over eight years would prevent nearly 30m new infections (reducing expected infections from 45m over the period to 17m). One study has calculated that part of this package, condom distribution combined with treatment for sex workers who are suffering from sexually-transmitted diseases, would entail a cost of just $4 for each disability-adjusted life-year saved. The implied ratio of benefits to costs is nearly 500—and this is assuming a value of life, based on GDP per head, that is significantly lower than the figure of $100,000 which the panel said it preferred to apply.

Not only are millions of lives directly at stake. In sub-Saharan Africa, the toll of AIDS is so terrible that whole societies are in danger of breaking down. Despite the fact that the issue has received enormous attention of late, efforts to remedy the problem are still curtailed by lack of funds. The daunting scale and urgency of the issue, no less than the estimated costs and benefits of prompt action, persuaded the panel to make this its highest priority.

The same paper made a similarly compelling case for more to be spent on the control and treatment of malaria. Several different interventions were recommended, notably the wider provision of bednets treated with insecticide. Distribution of nets does require a basic health-service network, but experience in Tanzania, for instance, suggests that coverage of the population can be substantially increased given extra resources. Benefit-cost ratios are high. The panel earmarked more than $10 billion of its hypothetical $50 billion for this and a range of other anti-malaria initiatives, putting the package as a whole at number four in the ranking.

In second place, just behind control of HIV/AIDS, came a proposal to attack malnutrition—iron-deficiency anaemia, in particular—through a targeted programme of food supplements. Again the evidence suggests that the idea is feasible, and that it offers exceptionally high ratios of benefits to costs. This would account for the remainder of the putative $50 billion.

What about trade reform? The panel was keen on it, as you might expect, but the issue caused more disagreement than any of the other top four recommendations. The net global benefits of free trade, including the elimination of agricultural subsidies, would be enormous, according to the challenge-paper by Kym Anderson of the World Bank, maybe running into the trillions of dollars. According to one view, the budgetary outlays needed to secure these benefits are actually zero, implying not just a huge flow of net benefits but also a benefit-cost ratio of infinity. Beat that.

But two cautionary notes were entered. First, eliminating farm subsidies, often demanded of rich-country governments as a pro-poor policy, would, at least in the first instance, hurt some developing countries: the ones, often the very poorest, that are and expect to remain net importers of food. A way must be found to help them. Second, trade liberalisation hurts some workers even in rich countries. More generous trade-adjustment assistance may therefore make sense, especially if it is aimed at workers displaced from industries struggling to survive in any case.

Proposals for spending more on water and sanitation were approved, and ranked high, in places six to eight inclusive, with little to choose among them. No education projects were ranked. Nor was Barry Eichengreen's intriguing proposal (see our Economics focus of April 17th) for the fostering of new bond markets. Nor were any proposals for better governance, except for the proposal to lower state-imposed costs on new businesses, which got the nod because the costs are low, the institutional requirements modest, and the possible benefits very great. In all these cases, the panel reckoned there was too little research to go on.

At the foot of the list stand the three proposals on global warming. All require sharp reductions in carbon emissions starting soon, reflecting the view of the challenge-paper author, William Cline, that bold action on the problem is warranted, and quickly. The panel, all in agreement, simply refused to buy it. The issue is real, they said, but not so urgent that such massive abatement costs need to be incurred right now. One of the commentaries on Mr Cline's paper, by Robert Mendelsohn of Yale University, proposed starting with a much lower carbon tax than implied by Mr Cline's three variants—at say $2 a tonne (compared with $150 in Mr Cline's “optimal” carbon-tax plan), rising in later years as more information on both the hazards and the technological opportunities became available. The panel thought that was more like it.

So the Copenhagen Consensus ended, surprisingly enough, in consensus. Mr Lomborg is again to be congratulated for his intellectual entrepreneurship. If rich-country governments want excellent value in return for an increase in their taxpayers' dollars spent confronting global challenges, they could do a lot worse than look closely at the highest-ranked ideas from this exercise.

It will be interesting to see how the economic Right, which has embraced Mr. Lomborg's environmental skepticism, reacts to his call for extensive intervention and considerable spending in the developing world. They were rather unhappy about the AIDs assistance plan the President put forth.

MORE:
The truth about the environment: Environmentalists tend to believe that, ecologically speaking, things are getting worse and worse. Bjorn Lomborg, once deep green himself, argues that they are wrong in almost every particular (The Economist, 8/02/01)

Posted by Orrin Judd at June 6, 2004 10:52 AM