How to Spend $50 Billion to Make the World a Better Place, ed. by Bjorn Lomborg
$50 billion is 0.2% of the sum of annual U.S. and E.U. GDP. To put that in perspective, 0.2% of a $50,000 income is $100.* If you had $50,000 and you wanted to make the world a better place, why would you limit yourself to $100? Kinda stingy, I think, especially if the money that you're spending is play money (i.e., pretend).
That said, this book is the result of a fantastic idea: assemble the world's best economists, bring in a bunch of other great economists to present the results of benefit-cost analyses of incredibly important problems, have the best economists rank the solutions to the problems from top to bottom in terms of their efficiency and then draw the line at ... an arbitrarily low budget.
My solution? Draw the line somewhere else. Don't be so stingy. It's pretend money for gosh sake.
Policies that deal with climate change rank last. I don't really have a problem with this. The issues on the list ahead of climate change are very much terrible and things I'd be happy to spend $100 on if someone had the gumption to try to fix them. That said, climate change doesn't seem to get the full treatment.
The usual way of conducting a benefit-cost analysis is to consider whether the benefits of policy A exceed the costs. This is the wrong way but we do it anyhow because sometimes we don't know the benefits and costs of other alternatives, or, we choose to ignore some good alternatives. The correct way to conduct benefit-cost analysis is to compare the benefits and costs of a range of alternatives. The idea is, policy alternative A might have benefits greater than costs but alternative B, or even C, might have net benefits that are even greater. Society should pursue the policy alternative that yields the greatest net benefits.
The climate change alternatives in William Cline's chapter don't represent the entire range of alternatives (quoting from his 1992 book promo: "an aggressive program of global action to limit greenhouse warming"). The benefits are greater than the costs but the alternatives are the most costly (e.g., Kyoto) leading to the low rank. In his comments, Robert Mendelsohn suggests other, less aggressive, alternatives. The world's greatest economists are intrigued by his suggestions but we're left hanging as to whether these might crack the arbitary $50 billion threshold -- below which we can't do anything to make the world a better place.**
Notes:
*As always, a numbers check is welcome.
**Ah, I got that off my chest.