The efforts against AIDS
Having studied the issue that received bottom
priority, we may also take a look at the issue that received top
priority - viz. fighting AIDS. This issue was expounded by the
challenge paper on communicable diseases by Anne Mills and Sam
Shillcutt. They presented an extensive overview of what benefit/cost
ratios could be obtained by various measures against AIDS. An overall
package for HIV prevention that has been published in the Lancet by
Stover et al. (8) was adopted without modifications. It contains
such elements as school-based AIDS education, outreach for professional
sex workers, distribution of condoms, mass media campaigns, and
treatment for sexually transmitted infections. The full cost of
scaling-up this programme and sustaining it until 2010 will be $27 bn,
and the price for each infection averted will be about $1,000. These
figures, published in 2002, were adopted without modification in the
Copenhagen Consensus report. The overall HIV prevention package is
predicted to yield a benefit/cost ratio of more than 40. It presupposes
political commitment and improved infrastructure, but there is no
certainty if these conditions will be met.
In the basic assessment of the costs and benefits, a
3 percent discount rate was used. But because of the short time span,
changes in discount rate mattered little.
In the calculation of benefits, income for surviving
persons was converted to purchasing power parity (PPP), which tends to increase the benefits. In all other
issues in Copenhagen Consensus, income was not converted. Therefore,
the analyses are not strictly comparable.
This assessment therefore seems to be slightly
biased.
Improved infrastructure is presupposed, but the costs for this are not
included; and the discount rate is relatively low compared with the
case of climate change.
Illogical ranking
When the results of
the conference are presented, we get the impression that they are
ranked according to benefit/cost ratios, with the highest ratios
leading to the highest priorities. But this impression is false.
The expert panel did not bother to present the
corresponding benefit/cost ratios in the priority list, so the reader
cannot readily check the basis for setting the priorities. If one makes
an review of the ratios, however, it appears that the ranking was not
based on these. Instead, the ranking was subjective, based on the panel
experts´ own opinions on the world´s problems.
Furthermore, some of the calculations need slight corrections. When
such corrections are carried out, the alternative ranking list becomes
substantially different from its original version. This serves to
emphasise that prioritisation is shaky - a few slight amendments, and
priorities shift.
Details
on the ranking and benefit/cost ratios are available in (9).
The scale of the effort
In Copenhagen Consensus, the panel was asked to rank
the projects in answer to the question: "What would be the best ways of
advancing global welfare, and particularly the welfare of developing
countries, supposing that an additional $50 billion of resources were
at governments´ disposal?" The money was to be spent over 5
years.
In this context, that amount is very little,
especially when compared with total military expenditure, which amounts
to about 1 trillion dollars per year, of which the USA spend about 0.44
trillion dollars. Or it can be compared to the total world subsidies
which are about 0.9 trillion dollars. Of these, about 0.3 trillion
dollars are agricultural subsidies, whereas the rest are mainly for
fisheries, energy production, and transport. Thus, the $10 billion per
year earmarked in Copenhagen Consensus represent approx. 3 % of all
agricultural subsidies, or 1 % of all subsidies. Or, again, it could be
compared with the purported benefits obtained if we remove all trade
barriers and subsidies. These benefits, according to the Copenhagen
Consensus result, are at least $254 billion per year. This is much more
than the $10 billion per year earmarked in the conference scenario.
By setting the earmarked amount so low, the members of the panel were
forced to allocate money only to projects that give an extremely high
rate of return on invested capital, in a short time. With a larger
amount - which would still be realistic - they would have been able to
address several of the world´s problems at the same time.
This is especially relevant when it comes to the
challenge of climate change. In Cline´s paper for the conference
(3), the costs - during 300 years - of an optimal procedure to combat
climate change would be $128 trillion before discounting, or $35
trillion after discounting at a rate of 1.5 % per year. These amounts
may be smaller if society spends more on alternative energy sources,
but they will still be large. In comparison, the amount that Lomborg
proposes for all aspects of global welfare is $0.05 trillion.
That is only 1/700 of what is needed for climate mitigation in
Cline´s example. So, what good could one do with a sum sufficient
to reduce climate change by 1/700th of that needed? The effect would be
scarcely measurable. No wonder, therefore, that such an investment did
not appear attractive in Lomborg´s scenario.
It is clear that the costs caused by climate change
will be huge. Even if it pays off, the spending of $35 trillion in
present value to prevent future damage may seem prohibitively large.
But this expenditure is distributed over many years. Around the
year 2045, the "costs" will amount to c. 1 % of the total income of the
world (the GWP). Would we be willing to spend 1 % of our riches to
avoid all the damage that climate change could cause -
knowing that if we do not do it, even bigger costs will fall upon our
descendants, and in ways overe which we have no control?
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