An introduction to the Copenhagen Consensus 2008

Imagine that you are Bill Gates. Not to daydream about what to buy with a $58 billion fortune, but to consider how, like the Microsoft entrepreneur, you might give much of it away.

There are dozens of global challenges that could benefit from your philanthropy, but large as your financial resources are, they are not limitless. What would be your priorities? This week The Times is asking readers for their answers — while the Copenhagen Consensus project invites eminent economists to do the same.

Would your $50 billion be best spent on preventing the three great plagues of the modern era — malaria, tuberculosis and HIV, which claim tens of millions of lives each year?

Or might it be better to fund nutrition in developing countries, where almost 150 million children are underweight for their age and 200 million are chronically malnourished?

What about climate change, which many scientists consider to be the gravest threat of all? Should you invest in improving renewable energy technologies, to reduce reliance on fossil fuels?

Your choice would obviously be influenced by your social and political outlook, and by your perceptions of which challenges matter the most. But you might also want to be confident of getting a decent bang for your buck.

Is it possible to establish which of these challenges can be solved most cost-effectively, so that your generosity does the greatest good for the greatest number?

That is the question that a panel of eight economists, including five Nobel laureates, will attempt to answer next week, as the Copenhagen Consensus deliberates in the Danish capital.

Over the coming days, they will hear presentations from 30 specialists in particular global problems, each of whom will make the case for a menu of solutions in their fields.

Ten topics have been chosen for debate: terrorism; conflict; malnutrition and hunger; education; the role of women; air pollution; subsidies and trade barriers; disease; sanitation and water; and global warming. The panel will decide on a league table, to guide investments by philanthropists, charities and governments. The exercise is the brainchild of Bjørn Lomborg, the controversial Danish statistician whose 2001 book The Skeptical Environmentalist upset many scientists and green activists with a revisionist view of ecological issues.

Scientists, politicians and economists are split on how best to solve the great challenges of our time

The outcome of the first Copenhagen Consensus, held in 2004, proved equally contentious, not because of HIV’s place at the head of the list, but because of what was at the bottom.

Climate change is a reality, the panel argued, but the Kyoto Protocol was not a cost-effective way of addressing it. Limiting greenhouse-gas emissions would postpone the problem only slightly, and at unacceptable cost.

Some commentators considered this to be a thought-provoking injection of rationalism to an emotional debate. Others dismissed it as the consensus of a “random group” of economists lined up to endorse Dr Lomborg’s well-known scepticism about Kyoto.

Further criticism has been directed at the merit of considering these issues purely in terms of cost and benefit. Factors such as social justice, ecological stewardship and political acceptability are also important, but are exceptionally difficult to price.

Other development economists, such as Jeffrey Sachs, of Columbia University, think it misleading to present action on global warming, hunger and malaria as “either-or” options, when all these need to be addressed.

Dr Lomborg recognises these concerns, but argues that his initiative remains useful. “Clearly, there are other issues that matter as well as cost-benefit analysis,” he said. “But unless you put prices and values on things, it is difficult to make informed choices.

“What we’re doing is pricing up the menu. That doesn’t mean you have to pick the cheapest dish, or even the one that’s best value, but you want to know what they cost. Of course, it’s hard to compare carbon footprints with deaths from infectious diseases, but we often compare apples with oranges in everyday life. The challenge to these economists is to compare unlike with unlike as best they can.

“Too often, it’s the most photogenic and PR-friendly options that get priority. We want to step back and ask what’s actually most worthwhile.”

A sample of the solutions offered to five of the challenges are presented here. You can view a full list and choose your own priorities on our interactive table. We also want alternative answers, and your views about the process. Is it really useful to judge these problems in terms of cost and benefit? What other factors need to be taken into account?

The best contributions will be published next Saturday — alongside the economists’ prescriptions for the great challenges of our time.

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Copenhagen Consensus:

Conflict

Fallout from the conflict in Iraq may have disuaded governments from future intervention

The Challenge

The food crisis is increasing global political instability at a time when the risk of new civil wars is already rising. Many recently-negotiated peace settlements have left nations fragile, while the commodity boom and discovery of mineral resources in countries with weak governments have sown seeds for discord.

Since the Iraq war, the developed world has lost faith in using military force to reduce conflict. However, Iraq may be a misleading guide to the effectiveness of intervention.

Unlike the vast majority of conflicts, its civil war was sparked by an international war. The far more typical scenario is a relapse of political violence within a small, low-income, low-growth nation already troubled by fighting. This is the real security challenge that developed nations must deal with this decade.

Option One: Aid

Post-conflict aid designed to stop violence recurring is much more politically acceptable than the use of force. If it proves just as cost-effective - or more so - than military intervention, then it would clearly be a more attractive option.

The numbers

In a nation recovering from violence, each additional percentage point of national growth lowers the risk of conflict re-emerging by around 1.5 percentage points. This typically requires annual aid of $400m: it is very expensive.

This investment does not just reduce the risk of civil war, but also boosts growth. The overall benefits are worth nearly three times more than the costs.

Post-conflict aid therefore looks to be a good use for aid money, but not so spectacular that it would trump most other calls on scarce international public resources.

Option Two: Military intervention

Four new civil wars are expected to break out in the next decade in low-income nations.

The real problem with most peacekeeping interventions is that they are too short — the risk of renewed civil war in post-conflict situations declines slowly with time. The degree of risk reduction depends on the scale of deployment.

The numbers

Spending $850m on a peacekeeping initiative reduces the ten-year risk of conflict re-emerging from around 38 per cent to 7 per cent. A smaller military intervention would reduce the risk by a smaller amount.

Because of war’s horrendous and lasting costs, each percentage point of risk reduction is worth around $2.5bn to the world.

The economic benefits to the world from spending $1bn each year to reduce the risk of conflict add up to $12.6bn: each dollar achieves $12.60 of good.

Other Options

Conditional Aid: Linking aid to limits on military spending, to improve its cost-benefit ratio

Over-the-Horizon Guarantees: Providing (and delivering if necessary) a promise to intervene when a democratically-elected government is threatened by violence

Combined Peacekeeping and Over-the-Horizon Guarantees: Five-year peacekeeping operations, followed by over-the-horizon guarantees

Global warming

Global warming threatens the polar bear’s natural habitat

The Challenge

There is unequivocal evidence that humans are changing the planet’s climate. We are already committed to average temperature increases of about 0.6°C, even without further rises in atmospheric carbon dioxide concentration.

The world has focused on mitigation — reducing carbon emissions — a close look at the costs and benefits suggests that relying on this alone is a poor approach.

Option One: Continuing focus on mitigation

Even if mitigation — economic measures like taxes or trading systems — succeeded in capping emissions at 2010 levels, then the world would pump out 55 billion tonnes of carbon emissions in 2100, instead of 67 billion tonnes.

It is a difference of 18 per cent: the benefits would remain smaller than 0.5 per cent of the world’s GDP for more than 200 years. These benefits simply are not large enough to make the investment worthwhile.

The Numbers

Spending $800 billion over 100 years solely on mitigating emissions would lose money overall.

When you add up the benefits of that spending — from the slightly lower temperatures that would result — the returns are only $685 billion. For each dollar spent, we would get 90 cents of ‘good’ back. Mitigation alone will clearly not 'solve' the climate problem.

Option Two: Combining mitigation with other policies

In addition to mitigation, policy-makers must ensure that we adapt to climate change. Adaptation can mean doing things like growing drought tolerant crops, spending more on irrigation, developing rainwater storage systems, or proactively preventing the health issues that climate change poses.

But to make a real difference, the world needs to increase its research and development into carbon saving and sequestering technology.

The Numbers

Instead of spending $800 billion (in total present-day terms) solely on mitigation, we could keep the investment the same size but direct a small amount to adaptation policies, and $50bn each year to research into greener technology.

This research spend would add up to about 0.1 per cent of global GDP.

As the gap between the cost of carbon-free and carbon-emitting technology decreases, any tax on emissions should become smaller. This allows the research and development essentially to pay for itself.

With research and development in the mix, the total benefits from this $800bn investment would add up to more than $2,129bn. That is a more respectable $2.70 return on each dollar spent.

Other Options

Mitigation plus Research & Development: Investing immediately in R&D to make low-carbon energy options available more quickly, and to increase the effectiveness of mitigation in the longer term

Research & Development Only: Focusing investment on research and development to stimulate the shift to low-cost, low-carbon energy technologies

Disease

The majority of malaria fatalities come in children under five

The Challenge

Life expectancy is decreasing in some parts of the world. Ten million children will die this year in poor nations. This figure would be just one million if child mortality rates were the same as in rich countries.

The hurdle is not just poverty, — some poor nations have reasonably good health conditions — but getting cheap treatment and prevention methods to the Third World.

Some health problems receive a lot of publicity. But in areas that we hear less about, we could invest wisely to make a big difference

Option One: Tackling Malaria

In poor countries, malaria will claim more than one million lives this year - most of them among children under 5.

Measures to reduce its transmission are simple. We need to expand the coverage of insecticide-treated bed nets. We need to get more preventive treatment to pregnant women so they don’t transmit malaria to their children. And we need to ensure there is more indoor spraying with the much-maligned pesticide DDT.

Treating malaria is becoming harder than it was because of growing resistance of the malaria parasite to the cheapest, most common anti-malarial drugs. Some poor nations cannot afford the new artimisinin combination therapies that work best, and need financial support.

The numbers

It makes sense to combine prevention options like bed-nets with subsidies on the new treatments for poor nations. Spending $500 million would save 500,000 lives a year - most of them children.

Hunger

Malnourishment in children causes a number of related difficulties including subnormal educational achievement

The Challenge

The food crisis has reminded rich nations of the hunger and malnutrition that is a daily reality for many in South Asia and sub-Saharan Africa.

Malnutrition in mothers and their young children will claim 3.5 million lives this year. Global food stocks are at historic lows. Progress is distressingly slow on the United Nations goal of halving the proportion of hungry people by 2015.

Tragedy on an individual scale adds up to hardship on a national level. Shortened lives mean less economic output and income. Hunger leaves people more susceptible to disease so that more money has to be spent on healthcare.

Those who survive the effects of malnutrition are less productive. Physical and mental impairment means children benefit less from education.

Option One: Micronutrient supplements

Improving the quality of developing nation diets is as important as improving the quantity of food.

More than a hundred million children are deficient in Vitamin A, which causes eyesight and immunity problems.

It is estimated that a fifth of the world’s population is at risk of zinc deficiency, which can stunt growth among young children.

The numbers

Providing Vitamin A capsules to one person for a year costs just 20 cents. Zinc supplements cost a dollar.

Reaching 80 per cent of all children aged under-two in sub-Saharan Africa and South Asia would require annual spending of $2.4 million for Vitamin A, and $58 million for Zinc.

The economic benefits from improved future earnings and reduced healthcare spending would add up to $240 million each year. In other words, every dollar spent would generate economic benefits worth $17.

Option Two: Nutritional education

Another tack to consider is to encourage developing nation households to change their food practices, to create lasting dietary improvements.

Education would be more expensive than any of the shorter-term interventions like micronutrient supplements, but could create enduring improvements among the world’s poorest billion people.

Pregnancy and post-pregnancy are an opportune time to provide nutritional education to mothers, and can lead to a reduction in the probability of underweight babies and an increase in growth-rates for infants.

The numbers

Creating community-based, volunteer-managed education campaigns to cover 80 per cent of South Asia and sub-Saharan Africa for one year would cost $798 million.

This would reach eight out of ten children aged under 2. The annual benefits from a reduced burden on the healthcare system and healthier population would equal $10 billion: the benefits are twelve times higher than the costs.

Other Options

Micronutrient fortification: Adding iron to basic food items like flour, to prevent anaemia, and iodising salt, to eliminate goitre

Biofortification: Breeding plants with a higher micronutrient content

Deworming: Providing two de-worming treatments annually for 80 per of children between ages 1 and 3, in Africa and South East Asia

Terrorism

In the years after the September 11 attacks billions of dollars have been spent on counter terror measures

The Challenge

Harsh security measures at airports make us feel safer, but what we see as a visible reassurance is a display of billions of dollars poorly invested.

Trans-national terrorists take, on average, just 420 lives each year and cause relatively little economic damage.

An extra $70 billion worldwide has been spent annually on homeland security since 2001. Although there has been a 34 per cent drop in trans-national terrorist attacks, there have been 67 more deaths, on average, each year.

This is entirely predictable. Terrorists have responded rationally to the higher risks imposed by tougher security measures and shifted to fewer attacks that create more carnage.

Hardening targets is a poor way to save lives. Policy-makers who want to reduce the terrorists’ toll have stark options.

Option One: Greater international cooperation

While many terrorist groups share knowledge, governments jealously guard their autonomy over police and security matters.

If political obstacles could be overcome, nations could work together more coherently to clamp down on the charitable contributions, drug trafficking, counterfeit goods and illicit activities that fund terrorist attacks.

This would be ineffectual at reducing small events such as ‘routine’ bombings or political assassinations, but would significantly hamper spectacular attacks requiring a lot of planning and serious resources.

The numbers

Doubling the Interpol budget and allocating one-tenth of the International Monetary Fund’s yearly financial monitoring and capacity-building budget to tracing terrorist funds would cost about $128 million annually. Stopping one catastrophic terrorist event would save the world at least $1 billion. Under these assumptions, this would mean a return of about $9 on each dollar spent.

Option Two: Increased proactive response

To see what extra money on proactive measures would achieve, we can look at the effects of Operation Enduring Freedom, an offensive campaign that included the United States-led invasion of Afghanistan.

In the two years after 2001 (when there was the greatest proactive anti-terrorism campaign, and before other countries started to pull out), there was a 13 per cent reduction in international terrorist attacks - but 159 more annual deaths and 916 more injuries, on average, than in the ten years before. The exercise may have meant terrorists chose different targets.

The numbers

Policymakers undaunted by the extra bloodshed might pause when they consider the economics. In monetary terms, each dollar of the Operation’s $35.5 billion cost over this time achieved around ten cents worth of good.

Other Options

Business as Usual: Continuing with current levels of counter-terrorism spending and the world’s present focus on counter-terrorism options

Augmented Defence: Nations likely to be victims of trans-national terrorism focus on making key targets harder to attack

Sensitive Foreign Policy: The United States makes a significant change in foreign policy, designed to present a positive image and negate terrorist propaganda, including a significant increase in aid that is made without strings attached

Times Online

Copenhagen Consensus