Fixing the World, Bang-for-the-Buck Edition: A New Freakonomics Radio Podcast
Here’s $2.5 trillion. You have 15 years to spend it. How do you distribute this money in a way that will achieve the most good for the world?
But with every interest group imaginable (and then some) scrambling for a slice of the aid pie, how do you decide which goals are the most worthy?
That’s the question addressed by this week’s episode. It’s called “Fixing the World, Bang-for-the-Buck Edition.” (You can subscribe to the podcast at iTunes, get the RSS feed, or listen via the media player above. You can also read the transcript, which includes credits for the music you’ll hear in the episode.)
Bjorn Lomborg has a few ideas about how the money should be spent. A self-proclaimed “public intellectual” and adjunct professor at the Copenhagen Business School, Lomborg also runs the Copenhagen Consensus Center, which tries to calculate the best return on investment (ROI) for each dollar spent on development aid.
Lomborg doesn’t actually perform these cost-benefit analyses. Since 2004, the Center has worked with 288 economists, 6 of whom are Nobel laureates (including Finn E. Kydland and Thomas Schelling), to carry out the studies.
When setting the Millennium Development Goals, then Secretary-General of the U.N. Kofi Annan worked with a close-knit team of advisors. Current Secretary-General Ban Ki-moon has overseen a considerably more open process; a call for public input yielded more 5 million recommendations. At the U.N., a High Level Panel (chaired by Indonesian President Susilo Bambang Yudhoyono, Liberian President Ellen Johnson Sirleaf, and British Prime Minister David Cameron), worked with an Open Working Group to represent the interests of 70 countries. This process, while laudable for its inclusivity, has created a different issue: 169 potential goals. And not all of them provide a good ROI.
The Copenhagen Consensus Center isn’t officially part of the U.N.’s decision-making process. But Lomborg that with so many billions of dollars about to be spent, it can perhaps provide some useful guidance on spending that money wisely
LOMBORG: 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.
A hat tip for this episode to Matt Ridley and his Wall Street Journal article “Smart Aid for the World’s Poor.”