How to Spend $50 Billion to Make the World a Better Place

1. Global challenges require prioritized, cost-effective solutions

If we had an extra $50 billion to put to good use, which problems would we solve first?

The Copenhagen Consensus brought together top economists to prioritize global challenges based on cost-benefit analysis. This approach aims to maximize the impact of limited resources by identifying the most effective interventions. The experts considered a wide range of issues, including:

• Climate change
• Communicable diseases
• Armed conflicts
• Education
• Governance and corruption
• Malnutrition and hunger
• Migration
• Water and sanitation
• Trade barriers

By analyzing the costs and benefits of various solutions, the Copenhagen Consensus provides a framework for policymakers and philanthropists to make informed decisions about resource allocation.

2. Climate change mitigation offers significant long-term benefits

A 1% increase in average life expectancy at birth results in an additional 0.3–0.4% of economic growth per year.

Long-term perspective is crucial when evaluating climate change interventions. Traditional economic analysis often undervalues future benefits due to high discount rates. Using a "utility-based discounting" approach, the benefits of climate action become more apparent:

• Reducing carbon emissions by 50% could limit temperature rise to 5.4°C by 2300, compared to 7.3°C in the baseline scenario
• The net present value of benefits from avoided damage is estimated at $271 trillion
• Aggressive carbon taxes, starting at $170 per ton in 2005 and rising to $1,300 by 2200, could yield a benefit-cost ratio of 2.1

While these interventions have high upfront costs, their long-term benefits for future generations are substantial.

3. Communicable diseases demand targeted interventions

For every $1 of government spending on education, only 20 cents reached the local primary schools targeted. Reforms that increased publicity (so that parents were aware of the money allocated) and improved monitoring raised this to 80 cents; not perfect, but an increase of 400%.

High-impact, cost-effective interventions can dramatically reduce the burden of communicable diseases. Three key opportunities stand out:

1. Malaria control: Insecticide-treated bed nets, preventive treatment for pregnant women, and improved drug therapies could yield benefit-cost ratios of 5-10.
2. HIV/AIDS prevention: Targeted programs could avert 63% of new infections between 2002-2010, with a benefit-cost ratio of about 50.
3. Strengthening basic health services: Increasing public health spending in poor countries could yield a benefit-cost ratio of nearly 4.

These interventions not only save lives but also boost economic productivity and reduce poverty.

4. Conflict prevention and resolution yield high economic returns

The cost of a single war is around $49 billion. To this we must add $5 billion of health costs, giving a total cost of $54 billion for a single low-income country.

Preventing and resolving conflicts can provide enormous economic benefits. Three key opportunities emerge:

1. Conflict prevention: Raising economic growth rates and improving governance of natural resources could significantly reduce the risk of civil war outbreak.
2. Shortening conflicts: Controlling international markets in commodities and armaments could reduce rebels' ability to sustain conflicts.
3. Post-conflict interventions: Targeted aid and international peacekeeping forces in the critical post-conflict period could dramatically reduce the risk of war recurrence.

The benefit-cost ratios for these interventions are potentially enormous, with international military intervention under UN auspices offering returns of up to $80 for every dollar spent.

5. Education reform must focus on learning outcomes, not just enrollment

Only 3.1% of Indonesian students scored higher in reading competency than the average French student, and the average Brazilian maths student achieves the same as the bottom 2% of Danes.

Quality, not just quantity, should be the focus of education reform. Simply building more schools or increasing enrollment does not guarantee improved learning outcomes. Key opportunities include:

1. Improving education quality through targeted interventions (e.g., providing textbooks, improving infrastructure, teacher training)
2. Experimentation with rigorous evaluation to identify effective practices
3. Systemic reform to create performance management and accountability

Community involvement, decentralized decision-making, and clear performance metrics are crucial for successful education reform.

6. Poor governance and corruption hinder development across sectors

Researchers at the World Bank estimate that $1 trillion is spent on bribes annually, some 3% of global GDP.

Tackling corruption is essential for effective development across all sectors. Five key opportunities for improving governance and reducing corruption are:

1. Increasing oversight and transparency through community involvement
2. Reforming procurement processes and civil service
3. Improving customs and tax administration
4. Simplifying business regulations
5. Supporting international efforts like the Extractive Industries Transparency Initiative

While difficult to quantify precisely, the benefits of reducing corruption are likely to be enormous, given its pervasive negative impacts on economic growth and development.

7. Malnutrition interventions provide excellent returns on investment

It was estimated that the value of the main monsoon crop across the whole of India could be increased from about $36–54 billion to $180 billion by building two million small check dams at a total cost of $7 billion.

Targeted nutrition interventions can yield high returns on investment. Four key opportunities stand out:

1. Reducing low birth weight through maternal health interventions
2. Promoting infant and child nutrition, including exclusive breastfeeding
3. Addressing micronutrient deficiencies (iron, iodine, vitamin A, zinc)
4. Investing in agricultural technology to increase food production

These interventions can have far-reaching impacts on health, cognitive development, and economic productivity. For example, vitamin A supplementation has been shown to have a benefit-cost ratio of over 140.

8. Migration policies can boost global economic growth

Moving 10 million people from low to high, same per capita averages Population (m) 2,501 965 Ave GDP($/year) 5,706 430 26,710 Total GDP ($bn) 31,760 1,065 25,773 Change in ave/tot 1 GDP (%)

Managed migration can significantly increase global economic output. Three key opportunities are:

1. Active selection procedures for skilled migrants
2. Guest worker programs for unskilled laborers
3. Policies to maximize the development impact of migration (recruitment, remittances, and returns)

Even modest increases in migration could yield substantial economic benefits. For example, allowing temporary immigration to increase industrialized country labor forces by just 3% could increase global income by $156 billion.

9. Clean water access is crucial for health and development

Drip irrigation is one example of the technologies used. This can give significant yield increases (20–70%) while using less water than traditional methods.

Expanding water access has multiple benefits for health, productivity, and poverty reduction. Two key opportunities are:

1. Community-managed low-cost water supply and sanitation: This integrated approach could yield a benefit-cost ratio of nearly 5.
2. Small-scale water technology for livelihoods: Technologies like drip irrigation and treadle pumps can significantly increase agricultural productivity for small farmers.

These interventions not only improve health outcomes but also contribute to economic development in rural areas.

10. Reducing trade barriers could dramatically increase global GDP

For the world as a whole, growth would rise from 3.2% to 3.8% a year, while for developing countries this would raise their average annual growth rate from 4.6% to 6.1%.

Trade liberalization offers enormous potential for global economic growth. Key opportunities include:

1. Removing all trade barriers and agricultural subsidies (estimated to increase global GDP by 1.8%)
2. Successful completion of the WTO's Doha round of negotiations
3. Regional trade agreements (though less impactful than global liberalization)

The benefits of trade reform extend beyond direct economic gains, potentially contributing to poverty reduction, disease control, conflict prevention, and improved education outcomes. Conservative estimates suggest a benefit-cost ratio of 24.3 globally, and 37.9 for developing countries.

Last updated: November 7, 2024