When eight economists considered how to spend $50bn, cost-benefit analysis was the name of the game. Mike Hulme laments a lack of sophistication
Have you ever won the jackpot? A £10 million Lotto rollover perhaps? Or have you at least dreamt of doing so? It is a game that most of us at some stage have played - what would you do if you won the Lotto jackpot? My own long-list of desirable investments would include a new sports pavilion for my local cricket club, improved cycle-track facilities for Norwich, a round-the-world tour with my family and a proportion for good causes. The way I would prioritise spending such a cash-limited windfall would include many factors - personal interest, ethical considerations, relationships and so on - by and large not easily reducible to economic cost-benefit analysis.
Bj?rn Lomborg is also a dreamer. Yet, in addition, he is someone who relishes challenging orthodoxy, whether it be the political establishment in his campaigning Greenpeace days, the environmental movement in his 2001 book The Sceptical Environmentalist , and now all of us in his latest book, Global Crises, Global Solutions . This book is an account of the process established in 2003 by the Danish Environmental Assessment Institute - under Lomborg's direction - to determine how the world should spend an extra $50 billion, hypothetically made available by wealthy countries. This process resulted in the Copenhagen Consensus 2004, a statement from a panel of eight eminent economists that was announced last May. The panel concluded that the best thing to do with such a windfall would be to invest in new measures to prevent the spread of HIV/Aids - $ billion would avert nearly 30 million new infections by 2010. Next, $12 billion should be spent on providing food supplements for the world's malnourished. In contrast, the panel claimed that investing in any of the three policy measures they considered that were aimed at tackling climate change would be a "bad" investment, with costs likely to exceed benefits.
Like fantasising over lottery winnings, this is a great game to play and we can all join in. Lomborg, however, set up an elaborate and rigorous process with precise terms of reference, rules of engagement and eligibility criteria. Legitimate investments - those that might conceivably do the most "good" outside wealthy nations - were long-listed by the institute committee; there were 32 challenges in all, reduced in the end to a short-list of ten challenges (or "crises") for which promising "solutions" were deemed to exist. To be eligible for playing the game you had to be a famous economist (ideally with a Nobel prize to your name) with the time to spend five days in Copenhagen and to read more than 600 pages of briefing material beforehand. Out of the 6.5 billion people on our planet, only eight qualified.
Is this more than a game? Who should listen to the panel of eight elite economists? Who should read this book? The dilemma Lomborg has identified, and which the Copenhagen Consensus was established to address, is real - namely, on what basis are priorities set for tackling some of the world's besetting problems? As he correctly points out, nation-states have mechanisms for priority-setting in the investment of public funds and, in democratic nations, these priorities can be challenged every four or five years. And as the Lotto example mentioned earlier shows, each individual has a unique set of rules -idiosyncratic maybe, tacit certainly - for deciding where to spend scarce, or not so scarce, personal resources.
But what about the international system for investing public funds? What criteria are used to select between investing in what may be equally deserving causes? As Lomborg asks, is it simply those causes that are fortunate enough to have the most powerful or the most articulate or the most celebrated advocates that win? Do we simply have to accept pronouncements such as that offered by Sir David King, the Government's Chief Scientific Adviser, when he stated last year: "In my view, climate change is the most severe problem we are facing today - more serious even than the threat of terrorism." I doubt his opinion is based on economic cost-benefit analysis.
This dilemma raises important and deeply political questions; indeed such questions are the very knotty problems that international politics, heads of state and foreign secretaries have to deal with week in, week out. My problem therefore with the Copenhagen Consensus - and hence with this book - is not that Lomborg is too ambitious or bold in his project; my problem is that he is not ambitious or bold enough.
There are three main reasons for this. First, the focus of the consensus is the rather academic one of allocating a hypothetical resource. It ignores the more pressing issues of securing the resource in the first place and of implementing policy measures effectively to ensure its desired investment.
Contrary to his claims about the consensus realists, in this regard it is Lomborg who is the dreamer. For example, finding ways of pushing developed nations that currently allocate 0.25 per cent of gross domestic product (about $69 billion a year) for official development assistance towards their target of 0.7 per cent ($193 billion) would seem a more important priority for influential economists with time on their hands. With regard to implementation, Lomborg and the consensus are also silent. The messy world of realpolitik has already reached powerful consensuses about tackling some of the world's crises -the Kyoto Protocol and the Millennium Development Goals come to mind. Is not the priority now to implement, and to monitor effectively, such agreements rather than for eight economists round a Copenhagen table to arrive at a rather (too) neat and artificial formulaic consensus?
Second, the focus of the consensus is too short term and lacks political vision. In this respect, contrary to the above criticism, the consensus process and outcome is too realist. Lomborg defends the short-term perspective - "the next five years" - on the grounds that the panel wants to offer solutions that are tangible or provable. This might be sound for a certain class of problem-solving challenges, but I am not convinced it is appropriate for challenges such as climate change, arms proliferation and free trade. Here, actions taken in one electoral or economic cycle do not yield material or political reward for decades, if not for generations to come. No one who understands the climate system and the Kyoto Protocol would argue that the protocol, sensu stricto , will make a material difference to future world climate - but it is the political pathway the protocol opens up that is its most crucial feature. The lack of any coherent long-term political vision for the world means that at the heart of the Copenhagen Consensus is a rather mechanical and dispiriting utilitarianism - "this is what we should do because the balance sheet will benefit". This might be the world of The Economist (one of the sponsors of the Copenhagen Consensus), but it should not be the driving force for international politics, nor the essence of world leadership.
Notwithstanding the above two problems, the third reason why this exercise fails is that the boundaries of the consensus process are drawn too tightly. Lomborg's introduction to the process talks of the need to "think outside the box" with regard to global problem-solving and the role of international agencies. Too often such agencies end up competing with one another or repeating solutions that have failed elsewhere. This is fair criticism, yet the very design of Lomborg's consensus exercise demolishes one set of boundaries -institutional - only to replace it with another set - disciplinary.
Features that are not explored or justified in the book are the framing of the process around the concept of cost-benefit analysis and the criterion for panel membership, namely, that only world-leading economists have the skills necessary for prioritising. This limited framing and execution leads to a rather stunted and unconvincing outcome, as reported by the panel members.
Why should economists have the privileged voice here? Who will represent those other factors that we know instinctively need to go into prioritisation exercises - planetary stewardship, cultural values, national identity and principle? The irony is that Lomborg recognises this limitation while nevertheless claiming legitimacy for the consensus outcome. For example, in excluding the $1,000 billion military expenditure from the prioritisation exercise he concedes that the lack of consensus on cost-benefit analysis as applied to international relations disqualifies this dimension of global investment from his programme. I am therefore surprised that he thinks there is consensus about cost-benefit analysis as applied to some of those global challenges he did feel confident in tackling - migration, climate change and corruption.
In the end, Global Crises, Global Solutions reports a brave and well-organised venture aimed at challenging our thinking about what matters most in the world. The greatest value I suspect are the ten chapters - one for each challenge - that introduce the reasoning behind global-scale policy intervention, defend a subset of specific policy measures and allow informed and detailed debate through the contribution of two opponents for each respective challenge. The ranking exercise, on the other hand - and of course most of the subsequent publicity was concerned with the ranks - was largely an exercise in rhetoric and publicity.
Global Crises, Global Solutions is aimed at each one of us and, more significantly, at those who influence international investments. But it fails in this more ambitious goal of changing the world of international politics and development economics. The Copenhagen Consensus ends up being rather reminiscent of an (admittedly sophisticated) high-school exercise in citizenry, one in which all thinking sixth-formers ought to participate.
When repeated in 2008, I hope it moves from high school to university and embraces a more holistic view of what matters to humans.
Mike Hulme is executive director, Tyndall Centre for Climate Change Research, University of East Anglia.
Global Crises, Global Solutions
Editor - Bjørn Lomborg
Publisher - Cambridge University Press
Pages - 648
Price - £45.00 and £19.99
ISBN - 0 521 84446 0 and 60614 4