Copenhagen Consensus

I've talked before about efficient giving, and now there's a Slate article on the best use for a dollar. (via Marginal Revolution). More interesting is the Copenhagen Consensus, where a group of economists attempted to rank proposed solutions to the world's greatest problems according to cost/benefit ratio. Their highest ranked category contained:

  1. Fighting HIV/AIDS
  2. Providing micronutrients to reduce malnutrition
  3. Free Trade
  4. Fighting Malaria

Note that 2 of these 4 (AIDS/Malaria) were among my suggestions for where money spent could have the greatest utilitarian impact. And unsurprisingly for economists, global warming proposals were ranked dead last.

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"Free Trade" comes in third

"Free Trade" comes in third in a cost/benefit analysis? Funny, I would have thought it would come in first... since it's, you know, free. As in zero cost. The people who are imposing trade barriers just need to stop.

Presumably these economists

Presumably these economists were analyzing costs and benefits in the real world, where political change takes money and effort, rather than some fantasy world where politicians will suddenly see the light.

Fair enough. The proponent

Fair enough. The proponent author lists the costs as "those associated with negotiation rounds, support for policy think tanks, adjustments for companies and workers and social costs and welfare payments for the temporarily unemployed." (see PDF here). "Support for policy think tanks" does in fact sound like advocacy costs, and the "adjustments and welfare payments" are essentially buying votes. I wonder how many of the other challenges include the cost of persuading people to implement the solutions as part of the costs of the solutions, instead of things like distributing mosquito nets or researching antiviral drugs. [1]

Even so, the paper's author says in the introduction: "This chapter argues that phasing out these trade-distorting policies should be the highest priority among the opportunities assessed. Not only would this strategy have a direct effect on poverty reduction, but there would also be indirect benefits across the full range of CC challenges. Moreover, the relatively small costs of adjustment to reform would leave plenty of the notional $50 billion to be spent on second priorities."

I guess he got outvoted by the rest of the panel, getting the bronze instead of the gold.

[1] I wonder what the cost would be of persuading everyone to shut the hell up already about climate change, thus solving that particular challenge nicely. :)

Turns out I'm not the only

Turns out I'm not the only one with such thoughts. Some interesting excerpts from the "Final Results" summary (see PDF here):

Some of the proposals (for instance, the lowering of barriers to trade or migration) face political resistance. Overcoming such resistance can be regarded as a “cost” of implementation. The panel took the view that such political costs should be excluded from their calculations: they concerned themselves only with those economic costs of delivery, including the costs of specific supporting institutional reforms, that would be faced once the political decision to proceed had been taken.

[..]

The panel considered three main proposals for global trade reform: first, multilateral and unilateral reduction of tariffs and non-tariff barriers, together with the elimination of agricultural subsidies [..] In the case of trade reform, lives are not directly and immediately at risk. However, the first proposal — free trade — was agreed to yield exceptionally large benefits, in relation to comparatively modest adjustment costs, both for the world as a whole and for the developing countries. Accordingly it was ranked third. (Some members of the panel argued that since this proposal need not involve any budgetary outlays, it should be acted upon in any case, regardless of the resources available for additional budget outlays.)

So the panel put free trade behind AIDS prevention and micronutrients because no lives were immediately at risk. Seems like an odd conclusion for a panel of economists. If free trade creates more wealth, then that wealth can immediately be put into saving lives through more AIDS prevention and micronutrients. AIDS prevention saves lives; AIDS prevention plus free trade saves even more lives.

Free trade should have been at the top of the list.

what was the return on

what was the return on investment period for the cost/benefit analysis. curing the world of AIDS or Malaria can have positive short terms affects but reversing global warming (if indeed it exists) will take much longer and we may not see the ROI in our lifetime.

Spoonie - If reversing

Spoonie -

If reversing global warming were on the table, that would be one thing; the problem with the IPCC and Kyoto bunch is that every model concedes that if we followed Kyoto and reduced emissions, etc, we'd at best buy a few years before it would get to the temperature level forecast for doing nothing. As it stands, Kyoto is a phenomenally stupid idea- incur massive costs now and curb no warming in the long run.

Serious climate change control plans must include sequestration (as well as nuclear) along with emission reduction. The net should be negative, otherwise you're just whistling past the graveyard. UNtil such a proposal is on the table, it's a rational bet to just say no to climate change mitigation proposals.

Especially since we don't

Especially since we don't even know if we are simply in a natural warming trend, a manmade warming trend, no warming trend, or what. There is ample evidence that the trend identified is significantly skewed by measuring temperature data in metropolitan areas, for example. There is also good evidence that much of the temperature data is suspect due to poor measuring and record keeping. It's hard to mitigate something that you haven't effectively measured.

Eric, I believe there is

Eric,

I believe there is anthropogenic global warming on top of any natural trend. I don't think that implies anything though, unlike others in the debate who think that establishing that fact is the be all and end all of the debate. Its just the first step. The second step is how to mitigate it- either by carbon sequestration (natural or with artificial aid) or building seawalls, evacuating low lying islanders, etc etc. I have not yet heard serious arguments on this; IPCC desperately wants to control economic development and so will brook no other discussion other than "emissions reduction", even though their own projections show that emission reduction will not have any appreciable effect on APG.

And don't forget the fact

And don't forget the fact that the sun is burning brighter than anytime in recent history. Again, not to dismiss there being some anthropegenic warming, but that clearly isn't the whole story.

The important thing, though, is that the harm of global warming is small and delayed, and the cost of reducing economic growth is huge and immediate. There is nothing selfish about saying: Let our rich and technologically advanced grandchildren deal with it. They will almost certainly be better off inheriting a warmer, wealthier world.

In fact, there is good

In fact, there is good evidence that the European Dark Ages were ended by a warming trend after the last minor ice age.

Issues:

- The evidence for and against global warming, whether natural or anthropogenic, or both, is very inconclusive.
- There is little, or no, understanding of what the impact of global warming is and whether it is good, or bad.
- There is no evidence that ocean levels GLOBALLY are rising. There are local changes, which have been occurring throughout history.
- Total ice volume on earth actually appears to be increasing.
- There is no consensus about how to change global warming IF it is actually a problem, and there isn't even consensus about that.
- History shows us that just about every Malthusian catastrophe that has been the dreaded demon of its generation has been mitigated by the technology and knowledge of the next generation. Go back to the 50's and 60's and look at the literature related to the belief that human population growth would cause a dieback to global famine when we outgrew our food supply. The same voices were yelling about ZPG then too.
- There are technologies on the near term horizon that make the oh so detested oil technologies relatively obsolete. If there is a problem due to emissions, that will solve it. And make some folks fabulously wealthy along the way.

Conclusion? Global warming, controlling emissions, etc. are being used by those who believe in zero sum economics and want to control the zero sum game.

Eddie, Maybe the problem is

Eddie,
Maybe the problem is that it can be hard to tell where the wealth from more trade will end up, especially given the serious problems with institutions in the nations that are hardest hit by HIV and malnutrition. AIDS and micronutrient interventions tend to be more focused on a single goal, whereas free trade gains would probably be diffuse and there's no guarantee in these nations that the increase in wealth would go toward these goals.

Lisa, that of course is the

Lisa, that of course is the reason so few people actually like a free market. The reality is that free trade gains will go toward the goals that the individuals comprising the market feel are best suited and most efficient from their perspective. Amazingly enough, this approach has allowed "the West" to conquer most childhood diseases, eliminate poverty in the real sense (as opposed to the political idea of poverty as some mythical income number), lengthen our lifespans, increase our luxury time, etc. So, these are all things that folks think we should target for improvement. They don't want to trust the free market to improve them because what if the silly buggers decide to buy burritos instead, after all.

And yet, the past couple hundred years demonstrates that the market will allocate resources to just those problems. I would suggest that if AIDS, micronutrients, etc. are actually the significant problems in those countries that they are suggested to be, then the market would naturally allocate the increase in wealth to those problems. And do so more efficiently than a targeted program of investment would. This is why I agree with eddie, free trade should be #1 on the list. Free trade, increasing the wealth of the nations that need to solve the other top 4 problems, will naturally lead to solving those problems as well. Or the market will determine that they aren't the most pressing and significant problems.

I have a sister-in-law that

I have a sister-in-law that cured her malaria with one liter of 10ppm colloidal silver. I suspect cs will also cure HIV/AIDs altho the studies are inconclusive.

But this cure doesn't put money in the "right" pockets.

I make it for pennys, I take it, I know what it does.

But I expect derision from those who know nothing about it
because that's what I did before I made and used it.

Come to my blog and check the numerous links I've collected
on it in the right panel under "Colloidal Silver".

Here's a quote from the

Here's a quote from the "Copenhagen Consensus": "Combating HIV/AIDS should be at the top of the world’s priority list… About 28 million cases could be prevented by 2010. The cost would be $27 billion, with benefits almost forty times as high."

I told you that so I could tell you this: The population of Iraq is roughly 25 million people. $27 billion is a fraction of just this year's supplemental funding request from the Dubya Squad for funding of the war in Iraq.

Eric, I agree totally.

Eric,
I agree totally. Increasing wealth really is the key to solving all their most pressing problems; a lot of other interventions are just a band-aid on a hemorrhage. But I wonder if there's some feeling that if resources are specifically allocated by governments or charities toward AIDS or micronutrients, then people can say "Look there at what we're accomplishing". There's a sense that we can see what's being done, in an immediate way. The gains from trade are certainly there, but harder to see. And I would also guess that gains from trade might trickle down (though I may be wrong). Interventions that don't make everybody better off at once can be targets of really heavy criticism (you're making the rich richer!!!) from people, especially those who don't think economic freedom is the answer to their ills.

Well obviously if they think

Well obviously if they think economic freedom leads to wealth inequality or overall poverty they won't favor it. And fewer still value freedom for it's own sake.

Lisa, I think your points

Lisa, I think your points are right on target. Which simply means, no matter how much money is allocated to those problems via governments and charities, the misery will continue.

[...] Recently, Patri

[...] Recently, Patri Friedman posted an excerpt from the Copenhagen Consensus over at Catallarchy. He pointed out that economists agree that the [...]

eddie said: “Free Trade”

eddie said: “Free Trade” comes in third in a cost/benefit analysis? Funny, I would have thought it would come in first… since it’s, you know, free. As in zero cost. The people who are imposing trade barriers just need to stop.

Free Trade is not free. It is not "zero cost", especially when you're talking about many of these countries in which HIV and malaria are problematic. In order for free trade to be "zero cost", the trading partners have to be similarly competitive. This is rarely the case if the country in question has been protected by import tariffs in the past. If your country is involved in free trade and yet it is at a competitive disadvantage, there will be a significant immediate and medium-term cost: layoffs, wage reduction, bankruptcies, corruption and exploitation, increased crime, reduced standard of living, poor morale, and human rights violations.

The pain and suffering will continue until competitiveness improves, which is contingent on the improvement of: (1) manufacturing and operational processes; (2) management and training practices; (3) workplace and societal culture; (4) corporate governance and corruption; (5) education, skills, attitudes, and experience of the workforce.

The problem is that the above-mentioned improvements are aspirational and self-fulfillment type goals that are superceded by more immediate and tangible needs like food, shelter, health, financial survival, and family (think Maslow's Hierarchy of Needs). If the immediate and medium-term impact of free trade results in unemployment and widespread financial distress (which it will), progress towards long-term efficiency and productivity gains demanded of the workforce and corporations by free trade will greatly delayed if not abandoned.

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