Copenhagen Consensus Ireland’s role: doing best things first IIIS Conference, June

Copenhagen Consensus - home page

800 million are starving One billion lack clean drinking water Two billion lack sanitation Two million dying from AIDS each year 175 million international migrants 940 million illiterate adults Several billion people will be affected by global warming If the world decided to spend say $50 billion extra over next 4 years to do good… where should we start? There are lots of problems We need to prioritize

Climate Change Communicable Diseases Conflicts Education Financial Instability Governance and Corruption Malnutrition and Hunger Population: Migration Sanitation and Water Subsidies and Trade Barriers The 10 challenges

Climate Change Communicable Diseases Conflicts Education Financial Instability Governance and Corruption Malnutrition and Hunger Population: Migration Sanitation and Water Subsidies and Trade Barriers Solutions to the 10 challenges Kyoto, $100 carbon tax Health clinics, mosquito nets UN peace-keeping forces Money for school books Bonds in local currencies Training for judges Provision of micro-nutrients Lowering barriers to migration Clean drinking water Free trade

Prioritization is unpleasant That is probably why it hasn’t been done before Yet, any decision is still a prioritization Like a menu without prices and sizes

Prioritization is unpleasant Strong vested interests Organizations like UN tend not to prioritize between programs Lots of feel-good talk Dislike of putting anything at the bottom of the list Politicians prioritize every day

Utilizes the knowledge we already have Identifies and analyzes the world’s biggest challenges Estimate benefits and costs Create a prioritized list of opportunities to solve the challenges Rationality

10 world-class economists examine the 10 challenges 20 opponents - two per challenge The dream team 8 experts met in Copenhagen May to prioritize across topics People

Copenhagen Consensus approach

Why economists? Because economists deal in prioritization of scarce resources Broad and general expertise Long, valuable experience Unaligned and impartial Objections

Optimistically realistic example $50 billion over four years correspond to 20% of yearly total development aid UN wanted spending to double since 1970 – it has fallen by half since 1965 Method remains no matter the actual amount of money Why ”only” $50 billion? Objections

Comparing apples and oranges This is what we do every day Decisions imply comparing apples and oranges We are prioritizing every day But too often the prioritization is implicit and unclear Objections

”It is a crazy project, but it is even more crazy not to do it” Professor Bruno Frey from the Copenhagen Consensus dream team

Climate Change - how to limit global warming cost-effectively Temperature increase of between 1.4 and 5.8C by 2100 Many impacts of climate change happen in distant future Climate economists disagree on how to properly value this What can we do? Carbon taxes, Kyoto Protocol, Precautionary approach

Trillions of US $ at 1990 prices and ratios Value-at-risk carbon tax (high discount rate = 3.5%) 4,3005,8281,528Value-at-risk carbon tax (low discount rate = 1.5%) The Kyoto Protocol (high discount rate = 3.5%) The Kyoto Protocol (low discount rate = 1.5%) Optimal carbon tax (high discount rate = 3.5%) Optimal carbon tax (low discount rate = 1.5%) Net benefitBenefitsCosts Pricing the future Source: William R. Cline, ’Meeting the Challenge of Global Warming’, 2004 Climate Change

How is that possible Source: Wigley 1998 Climate Change

What can we do? Control malaria Control HIV/AIDS Strengthen basic healthcare services Communicable Diseases - 90% of avoidable deaths caused by communicable disease

Source: Anne Mills, ’Challenge Paper on Communicable Diseases’, 2004 Fighting disease pays off Scaled-up basic health services Control HIV/AIDS Control of malaria Net benefitBenefitsCostsBillions of US $ per year Communicable Diseases

What can we do? Reduce the risk of wars starting Shorten wars Decrease the risk of conflict restarting in the post-war period Conflicts - a country in conflict loses 20 years of economic growth

Source: Paul Collier, ’The Challenge of Reducing the Global Incidence of Civil War’, 2004 Only soldiers can stop war Military spending post-conflict to reduce risk of conflict repeating Aid post-conflict nations to reduce risk of conflict repeating -5.9-Natural resource tracking -3.9-Transparency in natural resource rents Aid as conflict prevention Net benefitsBenefitsCostsBillions of US $ per year Conflicts

What can we do? Raise the quality of schooling Increase demand for schooling Reduce the cost of education Education - reforms more needed than money

Source: Lant Pritchett, ’Towards A New Consensus for Addressing the Global Challenge of the Lack of Education’, 2004 Millions of pupils drop out Europe and Central Asia South America East Asia and the Pacific Central America East and South Asia South Asia West and Central Africa Complete ninth yearComplete fifth yearNever start school Percentage of children who Education

Tighter regulation would cost the global economy $100 billion each year What can we do? Introduce a new unit of international exchange based on a basket of emerging economy currencies Financial Instability - has reduced growth in poor countries by a fourth

Source: Barry Eichengreen, ’Financial Instability’, 2004 Financial crises are hard to avoid Pursuing an international solution to the currency-mismatch problem Creating a single world currency Reimposing capital controls Re-regulating financial markets Annual initial net benefits 2003 Annual Gross benefits 2003 Annual Gross costs 2003 Billion US $ Financial Instability

What can we do? Create greater transparency and better control of spending Reform government procurement Reform tax and duty collection Reduce bribery in the private sector Control multinational corporations Governance and Corruption - corruption costs more than $1 trillion each year

These ten politicians do not necessarily represent the most corrupt leaders in the world but are ten leaders where it has been possible to gather reliable data. Source: Global Corruption Report, 2004 Political corruption 0.07Philippines, Joseph Estrada Nicaragua, Arnoldo Alemán9 0.15Ukraine, Pavlo Lazarenko8 0.6Peru, Alberto Fujimori7 0.7Haiti, Jean-Claude Duvalier6 0.9Serbia, Slobodan Milosevic5 4.6Nigeria, Sani Abacha4 4.6Zaire, Mobutu Sese Seko3 9.3Philippines, Ferdinand Marcos2 33Indonesia, Mohamed Suharto1 Income from bribes in billions of US $CountryHead of government Governance and Corruption

What can we do? Prevent underweight births Promote breast feeding Provide vitamin and mineral supplements Invest in agriculture Malnutrition and Hunger - nearly 800 million people chronically undernourished

The table does not show the total effect of a systematic response to malnutrition. Within each of the four areas are other alternatives that could also lower the consequences of malnutrition. See for a detailed explanation. Source: Jere R. Behrman, ’Hunger and Malnutrition’, 2004 It costs to be poor 8, Investment in agrotechnology in developing nations 4, Providing Vitamin and Mineral supplements to reduce the prevalence of Deficiency Diseases 4,80 - 7, ,064 Promoting Breastfeeding and improving infant and child nutrition 0,58 - 4, ,000Reducing the prevalence and Underweight Births Benefit-Cost ratio Per Capita Benefit US $ Per Capita Cost US $ Malnutrition and Hunger

Migrant workers send more money home than total overseas aid from governments What can we do? Select immigrants actively Manage temporary “guest” workers better Proper legal status of unskilled workers Manage recruitment, remittances and returns Population - migration promotes greater global equality

Source: Philip Martin, ‘Copenhagen Consensus: ‘Challenge Paper on Population and Migration’ The benefits of migration 0.220,00010, ,0001,000, ,000100, ,0001,000 Aggregate gain billion US $ per yearNet individ gain per year (US $)Number Net - benefits of more migration Population: Migration

One billion people lack clean drinking water Two billion people lack sanitation What can we do? Community-managed, low-cost water supply and sanitation Small-scale water technology Sanitation and Water

Source: Frank Rijsberman, ’The Water Challenge’, 2004 Clean water is a pre-requisite for life Small-scale water technology Community-managed-low-cost water supply and sanitation Net Benefits US $ billion Annual benefits US $ billion Annual Costs US $ billion Sanitation and water

Very low costs - extremely high benefits: up to $2,400 billion a year Will benefit both rich and poor countries We need political will - not big investments Subsidies and Trade Barriers - how to increase global wealth

Source: Kym Anderson, ‘Subsidies and Trade Barriers’ Improving wealth through trading All figures are in billion US $ per year Pessimistic Doha: 25% liberalization of trade barriers and agricultural subsidies 2, ,455 Full reform: 100% liberalization of trade barriers and agricultural subsidies 1,177511,228 Optimistic Doha: 50% liberalization of trade barriers and agricultural subsidies Subsidies and Trade Barriers

The Copenhagen Consensus list

Bad projects - four opportunities were rated bad 17 Climate Change Value-at-risk carbon tax 16 Climate Change Kyoto Protocol 15 Climate Change Optimal carbon tax 14 Migration Guest worker programs for unskilled workers

Fair projects - four opportunities were rated fair 13 Communicable Disease Scaled-up basic health services 12 Malnutrition Reducing the prevalence of low birth weight 11 Malnutrition Improving infant and child nutrition 10 Migration Lowering barriers to migration for skilled workers

Good projects - five opportunities were rated good 9 Governance and corruption Lowering the cost of starting a new business 8 Sanitation, Water Research on water productivity in food production 7 Sanitation, Water Community-managed water supply and sanitation 6 Sanitation, Water Small-scale water technology for livelihoods 5 Malnutrition Developing new agricultural technologies

4 Diseases - Control of malaria Mosquito nets and effective medication could halve the incidence of malaria Costs: About $13 billion Benefits are at least five times the cost Very good projects - four opportunities were rated very good

3 Subsidies and Trade Barriers - Free trade Costs: Very low Benefits: Up to $2,400 billion a year Will benefit rich and poor countries alike Very good projects - three opportunities were rated very good:

2 Malnutrition - Providing micro-nutrients Resolves diseases caused by iron, zinc, iodine and vitamin A deficiency 2 billion people lack iron Costs: About $12 billion Very good projects - three opportunities were rated very good:

The best project 1 Diseases - Control of HIV/AIDS The scale and urgency of the problem are extreme, particularly in Africa 28 million cases would be prevented by 2010 The costs would be $27 billion, with benefits almost forty times as high

Objections So did you get it right? Climate Change –Thomas Schelling’s story False choice –We should do it all –Iraq war costs $100b

Alternative approach - Copenhagen Consensus Youth Forum Parallel conference to the expert meeting 80 university students from 25 countries Mostly students from developing countries An open debate on prioritization Is the list “correct”?

Strikingly similar to the experts list Malnutrition and diseases at the top – climate change at the bottom Consensus - result from Copenhagen Consensus Youth Forum

The path ahead - international Debate

The path ahead - research Cambridge University Press Global Crises - Global Solutions We need better Information: Education, Conflicts, Financial Instability Copenhagen Consensus 2008

The path ahead - many areas of application This approach can be used everywhere as a rough-and-ready recipe for prioritization The world: G8 In regions: Latin America or Middle East In single countries: Millennium Challenge Account In organizations: the UN, World Bank, USAID In the European Environment Agency For Ireland?

Using Copenhagen Consensus for Ireland 1) Use CC for Ireland’s priorities Do the top things first Do your own CC 2) Regularly check whether you are doing the best things first Ask how much good year’s money did Reprioritize

Map out a future over time: Copenhagen Consensus again in 2008, 2012 etc. Make us focus on solutions Don’t do things that do little good at high costs Don’t do things we don’t know how to fix Ireland’s opportunity – focus on solutions doing: - Most good - At lowest cost - Now The path ahead - triage