Gene belabors economic theory—again!

Another dismal post about the dismal science.

Today, we look at The Copenhagen Consensus. A group of economists are presented with a thought experiment: let’s say you had $75 billion to spend on solving one of the world’s problems – how would you allocate your funds?

Economists, being the dismal people that they are, take no account of what is “moral” or “right” or what “ought” to be done. They just try to figure out where you get the biggest bang for your buck. Their answer? Micronutirents for kids. Providing vitamin A and zinc to 80 percent of the 140 million children who lack them would provide almost $17 in health benefits for every dollar invested.

Other items in the top ten:

  1. Micronutirents for kids
  2. Expanding free trade
  3. Fortifying foods with iron and salt
  4. Expanding immunization coverage of children
  5. Biofortification
  6. Deworming
  7. Lowering the price of schooling
  8. Increasing girls' schooling
  9. Community-based nutrition promotion
  10. Support for women's reproductive roles

The majority of the most-efficient solutions deal with health, thus proving the old saying, an ounce of prevention is worth a pound of cure.
The least-efficient proposal was a plan to mitigate global warming. Nobel Prize-winning economist Thomas Schelling noted that that spending $75 billion on cutting greenhouses gases would achieve almost nothing. In fact, the climate change analysis presented to the panel found that spending $800 billion until 2100 would yield just $685 billion in climate change benefits.

Economist Richard Nordhaus, in his book A Question of Balance: Weighing the Options on Global Warming Policies, draws a similar conclusion. Projects to massively reduce greenhouse gases end up costing more than they deliver—in some cases, many trillions of dollars more. OTOH, investing in alternative energy (wind, solar, etc.) and bio-engineering can produce great results for the amount spent on them.

The economists at Copenhagen felt funding research and development of low-carbon energy technologies was worthwhile, and ranked it 14th out of the 30 proposals they considered.

Other items at the bottom of the priorities list are proposals to reduce air pollution by cutting emissions from diesel vehicles; a tobacco tax; improved stoves to reduce indoor air pollution; and extending microfinance. These are not necessarily bad ideas. It’s just that other proposals provide more bang for the 75 billion bucks.

Your Comments, Thoughts, Questions, Ideas

Kirsten's picture
Kirsten says:

Hey Gene, Fascinating conference. So I looked at the executive summary of the gloabl warming report issued at the conference. Did you get a chance to read the full report? I could not tell if they include alternative energies when they refer to R&D and greener technologies.
Overall, I thought it was a good reminder that. globally, many lack consistent access to food, water, and the basics to keep them alive.

posted on Sun, 06/01/2008 - 9:44pm

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