Fixing the World, Bang-for-the-Buck Edition
Our latest Freakonomics Radio episode is called “Fixing the World, Bang-for-the-Buck Edition.” (You can subscribe to the podcast at iTunes or elsewhere, get the RSS feed, or listen via the media player above.)
The gist: a team of economists have been running the numbers on the U.N.’s development goals. They have a different view of how those billions of dollars should be spent.
Below is a transcript of the episode, modified for your reading pleasure. For more information on the people and ideas in the episode, see the links at the bottom of this post. And you’ll find credits for the music in the episode noted within the transcript.
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[MUSIC: Vagabond Opera, “Hanumonsoon” (from Sing For Your Lives)]
Hey, podcast listeners, and happy holidays. The episode you’re about to hear, drawn from our archives, is called “Fixing the World, Bang-for-the-Buck Edition,” and it’s particularly relevant to this time of year, when a lot of us think about our charitable goals. You’ll hear how a bunch of economists have teamed up to measure the ROI, or return on investment, for the development goals set by the United Nations. In other words: if you only have $100 — or, in the case of the U.N., maybe $100 billion — and you’re trying to fight something like global poverty, what’s the best way to spend that money? What’s the ROI on early education vs. job training vs. small-business subsidies?
We do this kind of thing a lot here at Freakonomics Radio — try to measure the ROI on things that aren’t so easy to measure. So let me turn this around and ask you a question: what is the ROI, for you, from Freakonomics Radio? Does the time you spend listening to the show make your life in any way better, more pleasurable, less bewildering?
If you believe it does — if the number you put on its value is anything at all north of zero — well, I hope then you’ll consider making a contribution to WNYC, the public-radio station here in New York that produces our show. Just click here. Any and all contributions are appreciated, although you will find the rewards get better as you climb the dollar ladder: Freakonomics Radio t-shirts and mugs, autographed books, things like that. And if you decide that this program isn’t worth anything to you, not even five bucks — well, now we’ll know that too, and we’ll work harder in the future to make it worth more. But I do hope that you’ll donate. Thanks a million, or a billion, or $100 billion, whatever the case may be.
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[MUSIC: Nasimiyu, “Dandelions” (from Rules Aren’t Real)]
BJORN LOMBORG: My name Bjørn Lomborg. I’m a public intellectual, I guess you could say. And I run the Copenhagen Consensus Center, where we bring together lots of economists and seven Nobel Laureates to think about where do we spend money and do the most good per dollar spent.
DUBNER: Let’s say you want to “fix the world” — in some fashion, to some degree, as daunting and difficult as that may be. And let’s say that you have more than $100 billion a year to spend. This is not a fictional scenario. This is what really happens: development aid is a huge industry. So what kind of problems do we spend money on? And how are those problems chosen?
LOMBORG: We focus on a lot of different issues in the world, and many of them we focus on because they get lots of attention; they’re in the press they’re good stories, they have lots of crying kids, or cute animals. But of course in reality, what we need to do if we want to do good is to focus on where do we do the most good for every dollar spent. Now, a long time ago, I dabbled a little in this conversation and what should we be focusing on and I was pretty sure somebody must have looked at that. Surely somebody has given us the menu list, if you will, of society’s different choices and told us what are the bang for the buck for these different issues. It turns out that really nobody has, and for a fairly simple reason because if you’re working in any particular area, say if you work for education to small kids, or if you work for nutrition, or you work in global warming, or saving pandas, or whatever that thing is, you don’t really want to find out what’s the smartest thing because there’s a good chance that it’s not going to be your thing. But of course we want to find out as a society because we want to do the most good.
DUBNER: So that’s discouraging although obviously you provide an alternative to that. Let me ask you this: even within a realm, whether you’re saving pandas or thinking about poverty, famine, education – let’s say I’m focused on just the one realm and I’m not going to compare it to all the other projects. At least within my realm, don’t I want to be vigilant about measuring ROI, about seeing what I get for the money that we put into it?
LOMBORG: And there is definitely more of that if you look for instance at disease, the World Health Organization has a disease priorities project where they’ve actually looked at what’s the bang for the buck for more than 300 different diseases. But when you’re a doctor, and you’re out there, and you’re confronted with a specific type of patients at your place, so you see malaria, or you see schistosomiasis, or you see some other disease, it’s really hard to say well maybe I should be somewhere else on the planet doing something else. You’re going to say, ‘I want to cure this disease.’ But there’s a lot more we can do for this amount of money. Just to give you one example, you can probably save one person from dying from malaria for about $1,000. You can probably save one person from dying from HIV/AIDs for about $10,000. Now, both are good deals, but you have to ask yourself, ‘Don’t we want to first save 10 people from malaria before you save one person from HIV?’
[MUSIC: The Jaguars, “Taco Taco” (from The Jaguars)]
Bjorn Lomborg runs the Copenhagen Consensus Center. What it tries to do is tell governments and other non-profits the best way to spend money to solve problems around the world. The “best” as in the most useful, most rational way – as opposed to just attacking the noisiest problems, or the most politically appealing ones.
LOMBORG: We are a very small organization, we are really just the guys who commission all the smart economists around the world to write the papers that actually estimate what are the costs and benefits. So we are seven full-time employees. Most of us are based in Budapest. I live in Prague. Our deputy lives in Sweden. We have one guy working in Australia, one in the U.S., but mostly we just make sure we find the smartest people on the planet. The smartest economists doing education or doing health or doing global warming, and then asking them, “What can you do, how much will that cost and how much good will it do?” We have a number of Nobel laureates that look at across all these different areas and basically say overall what’s the smartest thing to do, what’s the next smartest thing to do, the third, and so on, essentially rank all the great outcomes that we can look at.
DUBNER: Do you pay the economists for this analysis?
LOMBORG: Oh, yes.
DUBNER: OK, where does the money come from? How much do you spend in a given year and where does the money come from?
LOMBORG: We used to be funded by the Danish government, from 2004 until 2012. One of the things that the Danish government did not like was that we said, ‘Yes global warming is real, it is a challenge, but the typical way that we solve it turns out to be a pretty poor investment of resources.’ When there was a change of governments here we went from a center right to a center left government, they actually cut off our funding. And we moved to the U.S. where we get funding from private individuals and we’re trying to find a long-term solution for actually getting finding. So we’re a 501(c)(3) or a nonprofit in the U.S. We used to have a budget of about $2 million a year. Right now, we probably have a budget of a little more than $1 million a year. And we get it from private donations.
DUBNER: And for those who want to get under the hood of where those donations come from, since the current climate suspects that every donation comes with an agenda attached, describe for me the provenance of that money and if there are strings attached.
LOMBORG: There’s no strings attached. We’re very clear on saying we take no money from fossil fuels, and we do not let anyone direct what we’re going to do. So we have only taken money from private individuals and foundations that have accepted that. With that said, almost all of them have wanted to remain anonymous. There are a few like the Kaufman Foundation for instance who have accepted to say that they’ve given money to us. We’ve also got money from New Ventures Foundation, from the Randolph Foundation and from Rush Foundation.
DUBNER: Talk for a minute Bjorn, let’s go back to your —the book that put you on the map at least here and I assume there as well, The Skeptical Environmentalist which made a lot of environmentalists skeptical about you to say the least. Talk to me about why you came to the problem of climate change at all. You trained as a political scientist, yes?
LOMBORG: Yes, yes.
DUBNER: Why you came to the problem at all, what you conclusions were then in that book and where they’ve gotten to today 13 years later.
LOMBORG: So, fundamentally, my book The Skeptical Environmentalist, was really a result of my own personal journey. I read an interview with an American economist called Julian Simon back in Wired magazine in 1997. And he said, “Listen you think everything is getting worse with the environment, but actually most things are getting better.” My immediate sort of reaction was, “Oh, right-wing American propaganda.” But he said one thing that really stuck with me, he said, “Go check the data.” And so I decided yeah, OK, I’m going to check his data, I’m going to, you know, get some of my smartest students together, we’re going to have a fun half year and prove him wrong. But as it turned out, and if you also think about it of course in many of the obvious parameters, air pollution, water pollution has come down dramatically, we’re better fed, we have higher incomes, we live longer, we have better education, so most of the things in the world are actually going in the right direction, especially if you live in the rich part of the world. And so we realized, oh wait there is actually improvement. This does not mean that there are no problems. There are still lots of problems in the world. But it suddenly means, instead of saying that the world is coming to an end, we can start having a sensible conversation of alright, so which of the many remaining problems should we be most focused on. There’s no doubt that global warming is real and it is a problem, but if you implemented the Kyoto protocol which back then was sort of the gold standard of what we were trying to do with climate, we could see that it would have a huge cost. The economic estimate was about $180 billion a year, and it would have a fairly small benefit; we would postpone global warming, somewhere between two and five years by the end of the century. So I was merely comparing the fact that it was an interesting fact, you could actually give clean drinking water and sanitation to every single person on the planet for $180 billion once. Isn’t it curious to say that we could either spend $180 billion every year and do fairly little about global warming, or just spend it once and do an amazing amount of good for more than a billion people? That was the start of my point of saying, well we should compare different priorities. And of course, I thought somebody else must have made this prioritization list. Somebody else must have looked at that. And nobody had. And so I thought well somebody should, and maybe it should be us.
DUBNER: You identified yourself at the top as a public intellectual. You also are a professor at a business school, correct?
DUBNER: With the Copenhagen Consensus project, what’s in it for you? Why are you doing this?
LOMBORG: Well I used to do game theory, and computer simulations, and I was writing papers that probably if I was lucky 100 people would read in my career. And I actually really, really liked it. I’m sort of a nerdy guy. I’m the kind of guy who can download Excel sheets at Saturday night and actually think it’s really funny. So it sort of gives you a sense of what drives me. And so I was totally content with living that life. But one of the things I also try to do is when you do stuff in academia, you should also help bring that argument out. So when I’d done my Ph.D., somebody from Danish radio actually called — like drive time radio, one of the most listened programs — and they said, “Would you care to talk on our program for three minutes about your Ph.D.?” I wasn’t smart enough at the time, but you know somebody said I should’ve said, “Yeah that’s like one minute per year, sure.” And so, I tried to convey what was it that I had done. Because I think it’s important that we give back. If we have all this knowledge and information, that should go to society. Because after all, they’re the guys who are paying for us reading good books. And so in some way, what I’m trying to do with the Copenhagen Consensus and the arguments that we’re engaged with right here and now is to try and give back that sort of argument so that we can make better decisions. And hopefully at the end of the day, we’ll end up making at least slightly better decisions, and so the world will end up being a much better place.
DUBNER: OK, let’s talk about then, your current project. Let’s start with development aid generally, or development goals generally. How much is spent globally in a year if you can tell me on development aid?
LOMBORG: Last year we spent $134 billion of overseas development aid in all kinds of forms.
DUBNER: Which in some ways is a monstrous amount, and in some ways is really not so much..
LOMBORG: Yeah, I mean we have to remember the total global GDP is in the order of $80 trillion, so we’re talking about less than half a percent. But remember, most of the money that we spend, we spend on ourselves. So in the U.S., you spend most of your money on the U.S. But to the extent that we care about other people around the planet, I think it’s great, I would love us to spend more. But we certainly want to spend whatever we end up spending on the rest of the world in the best possible way.
DUBNER: Right. And give me a sense of how that money breaks down, especially the U.N., what the U.N.’s share of that development aid is.
LOMBORG: Well, the U.N. is actually not all that much. Much of this is either given through direct development aid like in the U.S.A.I.D. and all the equivalent international countries, then there’s some that’s given to international organizations which you could claim is partly the U.N. through the World Bank, UNICEF, the others. And then there’s probably in the order of $20 billion that goes into the U.N. budget itself.
DUBNER: Now, that said, the U.N. is perhaps of outsize influence if for no other reason the publicity it generates when it decides what’s a goal worth going after and what’s not, yes?
LOMBORG: Yes, if they’re successful. Remember the U.N. constantly make all these proclamations. I’m pretty sure you didn’t know that you were living through the International Year of Crystallography —
DUBNER: I did not.
LOMBORG: — which the U.N. has assigned this year to be. And it’s also the decade for family farming. So they have a lot of things that they proclaim that don’t actually have a lot of influence. But there’s one set of goals that have had an outside influence for the U.N., and they’re like probably their biggest success. And that’s the ones that are called the Millennium Development goals, which basically set out a number of very specific targets from 2000 to 2015 with very specific goals.
DUBNER: Yeah, give us a very brief overview of those.
LOMBORG: Well they ended up being about 18 targets, and really we only remember about nine of them. So they were: halve the proportion of people living in poverty, halve the proportion of people starving, get all kids in school, reduce child mortality by two-thirds, maternal mortality by three-quarters, and get clean drinking water and sanitation to everyone.
DUBNER: And those goals worked out how?
LOMBORG: They have mostly worked out really well. We’ve spent a lot of money on them, there’s been a lot of focus and we have reached most of them reasonably well. Now there are some things, predictably, you know getting all kids in school – well that was never going to happen, because you can’t get the last kid into school. But we’ve gone from about eight out of 10 kids going to school to about nine, a little more than nine kids out of 10. Likewise, we’ve seen a dramatic drop in poverty. But again, remember, that’s also partly because of China. And of course that has very little if anything to do with U.N. proclamations. But we have seen a surprising decline in childhood mortality. In 1990 when the targets actually take their starting date, we estimate more than 12 million kids died before their fifth birthday. Today that number is below seven. It’s probably 6.6. So we’ve almost halved the proportion of kids dying. And remember we actually have slightly higher cohorts. So it’s a phenomenal achievement. But what is problematic is they actually promised two-thirds reduction. So what most people have heard is, “Oh, you didn’t manage, you didn’t make it,” because we only halved it. And so that’s the risk of setting too ambitious goals that most people have actually heard, “Oh, the U.N. failed.” Yes, but we failed on an incredibly ambitious target and we’ve actually made an amazing achievement.
They need to learn the trick of corporate finance officers who just reforecast whenever they need to, right? Instead of saying it was by two-thirds, say it was by one-third, and you get to half and you’ve succeeded.
[MUSIC: The Diplomats of Solid Sound, “Tennessee Toothpick” (from Instrumental, Action, Soul)]
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[MUSIC: Crushed Stars, “You in Frost” (from Obsolescence)]
Today we’re talking with Bjorn Lomborg. He trained as a political scientist; now he teaches at the Copenhagen Business School and he runs a group called the Copenhagen Consensus Center, which tries to measure the best return on investment for development dollars. We were talking earlier about the United Nations’ Millennium Development Goals, which were set for completion in 2015.
BARACK OBAMA: Nor can anyone deny the progress that has been made toward achieving certain Millennium Development Goals. The doors of education have been opened to tens of millions of children, boys and girls. New cases of HIV/AIDS and malaria and tuberculosis are down. Access to clean drinking water is up. Around the world, hundreds of millions of people have been lifted from extreme poverty. That is all for the good, and it’s a testimony to the extraordinary work that’s been done both within countries and by the international community.
Yet we must also face the fact that progress towards other goals that were set has not come nearly fast enough. The U.N. is choosing a new set of development goals to be met by the year 2030. Lomborg’s group applauds the millennial goals, but it’s trying to encourage the U.N. to think about its goal-setting a bit differently this time around.
LOMBORG: There was actually no good cost and benefit analysis, it was just a number of targets that all sound really good. And generally I also think they really are very good. But now the U.N. is going to redo the targets from 2015 and 15 years onwards. And this time, instead of having a very closed argument, it was basically a few guys around Kofi Annan who set out these targets back in 2000. And then everybody adopted them. This time they have said we want to hear everybody’s input. Of course that’s very laudable, but not surprisingly, it’s also meant that we probably have about 1,400 potential targets on the table. And so we need to make sure that we don’t just end up with a whole long list of Christmas trees as they call them in the U.N. jargon — you know, you just have everything and you wish for all good things, because they’re not likely to be as effective.
DUBNER: OK, so describe the committee process, the triaging process within the U.N. and particularly the Open Working Group, which you’ve now formed a sort of relationship with. I’m not sure exactly how to characterize that relationship.
LOMBORG: Well, the U.N. has opened several different fronts. They have asked the public to come in with their priorities almost more than 5 million people have now answered what they think should be some of the top priorities. But of course that’s more around problems than around actual solutions. They had a high level panel including the Prime Minister from Britain, and the President from Sierra Leone and Indonesia and a number of other high dignitaries who came out with their proposal. And then they had the Open Working Group, which is a collection of 70 countries. Remember, the U.N. has 193 countries, so not everyone has been heard. But they’ve gone on for about 16 months, meeting very regularly and trying to make their set of goals. The problem is, the first set of Millennium Development Goals essentially had 18 targets. The high level panel had 58 targets. But the Open Working Group, their final document came out and had 169 targets. And so my problem here is if you say you have 169 priorities you in reality have none. And that’s why we need to find a way to make fewer, smarter targets.
DUBNER: OK, so the idea, your idea then is to create a cost-benefit analysis to help an organization like the U.N. and the Open Working Group decide which global goals to accept or to set based on cost and reality of achievement and impact. So do you feel that most of the decision makers in this realm, in the U.N. and related agencies are open to pure cost-benefit analysis, or are they, whether out of habit or incentive, wed to a more traditional political view?
LOMBORG: Oh, I think when you talk to them, and I’ve talked to quite a number of the U.N. ambassadors and their staffers, they all love the idea. I mean when we first went around to them, we told them we were going to do this long process where we had all these peer reviewed papers and they would be coming out this fall. And they were like, “This is exciting! Is there any way you could have this done by next week?”, was their sort of original inspiration. That was actually why we did a very rough and ready version where we simply went through their list and marked it up with green, yellow, and red colors to indicate whether it was a phenomenal, or a good, fair, or a poor target. And I think that was very influential in getting them to think about, “Oh wait, it’s not just about what sounds good, and what our country has decided, but it’s also about costs and benefits.” But of course, let’s be realistic. It’s not like they’re suddenly going to go out and say, “Oh, oh we were wrong about that, well we’ll go for something else.” But the world will spend $2.5 trillion on development aid over the next 15 years. So we’re leveraging huge amount of money. So if we can just make essentially the U.N. ditch one bad target and put one more good target in there instead, we could do hundreds of billions of dollars worth of good. And so, you know, we’re figuring we’re only going to change a little bit, but because we’re leveraging so much, we’ll actually end up doing a lot of good.
DUBNER: When I read the 17 major categories that the U.N. has put forth so far, it strikes me that development goals — what are called development goals — are often very much like macroeconomic goals. Some of them at least. So one here is “promote sustainable consumption and production patterns,” which sounds a lot like economics. And “promote strong, inclusive, and sustainable economic growth and decent work for all.” So, am I correct to assume that these committees that are working within the U.N. are full of economists, or are they not?
LOMBORG: My understanding is that they’re full of bureaucrats, and they come from a lot of different backgrounds, but they’ll probably a lot of them be political scientists, like myself. But they’ll be much more attuned to what is it that we typically focus on. So we had a good experience, for instance when I gave a presentation at the U.N. on our project, and people actually congratulated me afterwards for having done the best seminar that they’d ever experienced. And I was really flattered until they told me because nobody fell asleep. But we were talking to the U.S. U.N. ambassador, and she was very annoyed that we had pointed out one of her favorite targets was not a very good target. And so she said, “I really don’t like you pointing out that this is a bad target, but I really need to hear it.” And I think that’s basically how they feel about it. Yes, they understand the necessity. But it’s politically, obviously, not always convenient.
DUBNER: What was this target that wasn’t so good in your view?
LOMBORG: It was the idea that we should have gender-disaggregated data. So the idea is to say that if we get more data to support the fact that women get less education, that they get less well paid, and so on it will actually help stimulate the point of getting more gender equality. It’s a very nice idea. The problem is our economists tell us that we actually have enough data to achieve this.
DUBNER: You know, you speak as though the dynamic between you and them, your group and their group is good, and it is an Open Working Group after all that called for comment from the public, including yourselves. But I have to say, I would think they hate you. It would think that they sit around being very high-minded and kind of holistic, and then you come in and say, “Yeah, that’s nice, but let’s talk about you know the real world.” And persuade me that that’s not the dynamic.
LOMBORG: No, I think you’re capturing part of it. You know, clearly their life would be easier if there was no one else commenting form the outside and it certainly would be easy if there was nobody marking up some of their text with red. On the other hand, they also want to help the world. They want to leave a lasting legacy. And they know just saying something that sounds beautiful and looks great in nicely written documents is not the way to save the world. So I think they appreciate that when we say they’re red, for all the other targets, for all the ones that their negotiation partners proposed, they’re like, “Yay, that’s right, that’s what we said!” But of course then when we say, “One of your own targets is also pretty poor,” yes, then they get a little annoyed. And at the end of the day we recognize this is inevitably going to be a discussion that has lots and lots of other parameters. But if we can push it a little bit towards more efficiency, because we’re leveraging $2.5 trillion, we can do a lot of good.
DUBNER: OK, so Bjorn, let’s get into the findings of your group. The Open Working Group of the U.N. has according to your report 169 total targets within more than a dozen major categories that range from poverty and famine to climate change and sustainable industrialization. You ranked more than two dozen of these targets phenomenal and a slightly smaller number than that poor, everything else in the middle. So talk generally just for a moment about what it takes to turn a goal into a phenomenal ranking versus a poor ranking.
LOMBORG: Well, there’s a number of different things. It has to be very clear and it has to be very one-directional, so you’re not trying to achieve things that are really at cross-purposes. But then mostly it needs to be something that we know how to do and we know how to do fairly cheaply and it will do a lot of good. And unfortunately, a lot of the targets that the U.N. has set up turns out to be one of those things where you say, oh all good things for all good people, and we don’t quite know how we’ll work it out. And if we try and do it, it will probably be fairly costly, and it will probably not do as much good. So that’s what defines a poor target. And of course we want to push more into phenomenal targets.
[MUSIC: Arian Saleh, “Better in Blue” (from The Cobblestone EP)]
DUBNER: Let’s get into some of the specific whys of a phenomenal versus a poor ranking. Let’s start with food security — “ending malnutrition in all its forms including under nutrition, micronutrient deficiencies” and so on. You said the “ending” is a bad goal perhaps because it’s perhaps impossible, but you did rate that phenomenal, versus a poor ranking for “developing food systems that are more productive, sustainable, resilient, and efficient,” and so on. Talk about the difference between those two, why one is great, and why one is really not great.
LOMBORG: The first one, and again if we disregard the end because we will not be able to end this, but what we should be saying is get down to two or three percent malnourishment, which is both reachable and actually would be a phenomenal achievement.
DUBNER: Where are we now?
LOMBORG: We’re at 13 percent I want to say. So you know we could definitely do a lot better. And the reality is we know that that’s very cheap. It’s essential making sure that you get, especially kids, good food for the first couple years. And we know how to do that, that’s by making sure that they get micronutrients, which is fairly cheap, and we can distribute it in the health days that are typical across much of Africa and Southeast Asia. And then we need to have emergency opportunities to get lots of calories to babies when they’re severely underfed. Both of which are fairly low-cost; we estimate per child it’s about $96. And the benefits are phenomenal. We know from studies around the world that if you can get better nutrition to kids, their brain develop more they stay longer in school, they learn more. Even if they’re in a crappy school, they’ll learn a lot more. And actually if you avoid being stunted, which is one of the best ways to show that you’ve been malnourished, you make three times the income when you become an adult. So basically you’re much, much more productive person in society. So we estimate that for every dollar you spend on that very simple way of avoiding malnutrition, you do about $59 worth of good. Now, the other target you asked about essentially tries to say we should do all good things. There are some of these things we don’t quite know how you would do. But let me just take the sort of obvious contradiction. On the one hand, you want to be more environmentally sustainable, which is a great thing, which means putting in less fertilizer, less pesticides, having less intensive agriculture. On the other hand, you want to get food enough so that everyone is fed and they’re fed cheaply with good food stuffs, which typically means you need to put in more fertilizer, more pesticides, more intensive farming. And so you’re essentially asking to do both things. Now, I’m sure there are some ways that we could actually develop a target that would still make some sort of balance and actually could be OK. But it’s not obvious that this would be more than OK, and it’s very likely that we would just simply end up taking parts of it and end up making it a pretty poor policy.
DUBNER: Let’s talk about a couple of education goals then. You are in favor, you give a phenomenal ranking to the idea of increasing the proportion of kids who are able to access and complete pre-primary education. Do you want to talk for just a second about the returns to that?
LOMBORG: Again I should just say that it’s not just me who are saying this, we asked 32 of the world’s top economists across all of these different areas, and this is their evaluation. So it’s not because I’m sitting here and saying, “Hmmm, I think this or that.”
DUBNER: Fair enough, thank you.
LOMBORG: But the economist that looked at education actually shows that we have managed to get most kids into primary education, but there’s a lot of kids that don’t go to pre-primary education, preschool. Partly it’s very cheap because you don’t need all that much qualifications to teach. It’s very easy to get kids in there because they don’t really compete with anything else. The parents are not saying, “Oh but you could make a living wage instead.” And they’re also much more open to having girls especially go to these preschools. So we can do something that is cheap, and we actually know that this leave lasting effects on being able to better educate yourself also in the future, even if you don’t get a formal education. So we estimate that the benefits are in the 30s. So probably for every dollar spent you do $33 worth of good. Now, is this a true number? Of course it’s not; it’s an estimate. But it gives you an indication that this is probably one of those places where you would get excellent return on your dollar.
DUBNER: OK, so big return on pre-primary education, what about post secondary, college and so on?
LOMBORG: Yeah, the problem is that the way it’s formulated, they want to promise, and this is typical for these sorts of documents, they want to promise everybody to be able to get into, for instance, university. It’s a beautiful idea, but the problem is for most countries it ends up being a way to subsidize rich people’s kids to go to college. If you make college free, because most of the attendees at universities are from the high classes, that is effectively a subsidy to rich people’s kids. Instead what you should be doing is if you want to get more poor kids into college, you should be giving them scholarships. That’s a much cheaper much more directed way to make sure that you get a better socio-economic profile in college. But let’s not kid ourselves. This is not what makes productivity dramatically rise in the first 30 or 50 years of development. That’s much more about getting everyone educated so they can read and write.
DUBNER: Let me ask you about a phenomenal and a poor ranking the Copenhagen Consensus Center has given for two goals in the climate change arena. Phenomenal mark goes to the proposal to “by 2030 phase out inefficient fossil-fuel subsidies.” But a poor mark to the proposal to “double the share of renewable energy in the global energy mix by 2030.” At first blush those might seem to be contradictory. Explain why one gets phenomenal the other poor.
LOMBORG: Most people when you talk about it, certainly when we’re reaching out to an American audience will think that fossil fuel subsidies are something of the First World. It’s actually not. By far, the majority of fossil fuel subsidies come in Third World countries where many countries are subsidizing their basic provisions like bread and also gasoline as a way to keep their population quiet. Iran spends almost $75 billion, which is a huge proportion of their national budget, likewise with Egypt, some of the other big ones are Russia, China, India, Saudi Arabia, and that actually helps destabilize anything else those powers can do because fundamentally they can’t afford to provide, for instance better healthcare, or better education, or many of the other things because they’re spending a huge amount of their resources on fossil fuel subsidies. Of course they’re also at the same time encouraging overuse of fossil fuels and thereby more emissions of CO2. And also of course, if you for instance subsidize gasoline. You’re basically helping people who can afford a car, which will typically be the rich people. So in reality, cutting these subsidies has benefits on all those different accounts, and will probably leave the state much better able to do the things that it should actually be focusing on, namely for instance education and health and so on. When you talk about getting more green energy, it’s something that a lot of us in the rich West like, we want to have more solar panels and wind turbines. The problem is for most people in the poor world it’s about getting access to electricity. And that access is mostly, not always, but mostly much cheaper with fossil fuels. There’s an estimation from the Center for Global Development in D.C. that looked at, you know, Obama has pledged to help electrify Africa. And the U.S. is probably going to spend about $10 billion doing so. That’s very wonderful. But if you spend it, which Obama will probably do mostly on renewables, they estimate that you can help about 20 million people come out of darkness, and hence poverty. But if you spent the same $10 billion on gas, you could lift 90 million people out of darkness and poverty. So the fundamental point here is to say that you can do much, much better and so unless you are very careful with your subsidies to green energy you will actually end up doing pretty poorly and very likely actually less than one dollar back on the dollar.
DUBNER: There’s one set of numbers here that is so astonishing I just want to run them by you and ask you to briefly comment. The costs associated with domestic violence are over an order of magnitude higher than the costs of civil war. Two hundred ninety million kids are beaten every month at a cost of $8 trillion compared to the $170 billion cost of civil wars.
LOMBORG: Yeah, I mean it’s a great outcome of a study, and this is the first time they put numbers to what’s the cost of domestic violence. And clearly this is only an approximate number. It basically takes what’s the cost of an assault in the U.S. and then scale it so that if you know you only make one-tenth of what the U.S. makes, the cost of that assault is also one-tenth. But even then, because there’s so many kids, as you mention 290 million kids that are abused each month, and there’s almost as many women that are abused every year, it’s a much, much bigger number — even though all our TV overflows with Syria and Iraq and — these are definitely serious issues. It’s actually much less so than the problem of domestic violence. So it’s both women and kids that sum up to $8 trillion, or about nine percent of global GDP.
DUBNER: Alright, let me ask you this then. Economists have a saying they like. They’ll say that, “Oh that sounds great in practice, but does it work in theory?” — right? And that’s because economists love theory and analysis and math — all of that is often much more elegant than the real world, wooly as it is, will allow. So let me ask you the opposite, what you’re doing by constructing a cost-benefit analysis of these development goals sounds great in theory, but what about in practice? How do you translate what you’ve learned to the real world and make it actionable, make it worthwhile? In other words, is anyone going to listen to you and act on it?
LOMBORG: Well I think a lot of people are listening as we talked about before. We’re not the only input to this conversation, but if we’re just part of that input, it becomes harder to ignore really, really great opportunities, and it becomes harder to ignore that some of the proposed targets are not very good. We like to think of ourselves as constructing a menu for society. Imagine if you go into really expensive New York restaurant and you get this wonderful menu but there are no prices and sizes on it. Unless you have a very good expense account, you’re going to feel a little uncomfortable ordering. But what we try to do is we put prices and sizes on those different menu points. Now, that doesn’t mean that the champagne or the caviar might not be your first choice anyway, but at least now you’ll know that you can afford less for dessert. So in some sense, what we try to do is we give people a sense of proportion. Now, this is not the only thing they’re going to use, but if they’ll just use a little bit of it, chances are we’ll end up with a slightly less inefficient, if you will, outcome. And that’s still great.
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Freakonomics Radio is produced by WNYC Studios and Dubner Productions. This episode was produced by Joel Werner, David Herman, Greg Rosalsky, Gretta Cohn, Caroline English, Suzie Lechtenberg, and Chris Bannon. We had help from Daniel Dzula. Our staff also includes Arwa Gunja, Jay Cowit, Merritt Jacob, Christopher Werth, Alison Hockenberry, and Kasia Mychajlowycz. If you want more Freakonomics Radio, you can also find us on Twitter and Facebook and don’t forget to subscribe to this podcast on iTunes or wherever else you get your free, weekly podcasts. Thanks and, once again, Happy Holidays.
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