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A Special Series for the 2015 Skoll World Forum on Social Entrepreneurship

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Economics Can Make A World of Difference on SDGs

Economics Can Make A World of Difference on SDGs

March 2, 2015 | 4326 views

Right now, the United Nations is negotiating what might be one of the world’s most powerful policy documents. It could influence the movement of trillions of dollars, pull hundreds of millions out of poverty and hunger, reduce violence and improve education – making the world a better place. But much depends on this being done effectively.

In the year 2000, the UN established the Millennium Development Goals, which comprised 21 targets – most of them precise and achievable – in eight areas, including poverty and hunger, gender equality, education, and child and maternal health.

These goals have been hugely successful, not only in driving increased development funding but also in making the world better. For instance, the world promised to halve the proportion of people suffering from hunger between 1990 and 2015. And the progress has been remarkable. In 1990, almost 24 percent of people in the developing world were starving. In 2012, this figure was reduced to 14.5 percent, and if current trends continue, the world will reach 12.2 percent in 2015, just shy of the goal.

With the MDGs ending this year, we have to ask what’s next. At the 2012 Rio Earth summit, the UN started an inclusive process to define so-called Sustainable Development Goals (SDGs) for 2016-2030. Over the coming months, countries, UN organizations and NGOs will perform a complex dance to determine the next set of targets. But that’s easier said than done. Last summer, 70 UN ambassadors in the open working group proposed a dizzying list of 169 targets. Clearly we need to set priorities.

The SDGs will largely determine the allocation of the US$2.5 trillion development aid the world will spend until 2030. In order to spend the money most effectively and help as many people as possible, negotiators need to zero in on the targets that promise the biggest benefits for the investment.

Imagine sitting in a high-end restaurant with a menu lacking prices or portion sizes. You don’t know whether the pizza costs $2 or $2,000, or whether it will feed just you or your entire party. This is where the UN is today – lots of well-intentioned targets with no prices or sizes.

My think-tank, the Copenhagen Consensus, asked 60 teams of top economists, including several Nobel laureates, to identify which targets will do the most good for each dollar spent. Our economists have taken the 169 targets and evaluated the social costs and benefits of each.

In my book Prioritizing The World, released last year, I color-coded the SDG targets according to the recommendations of the expert teams. The best ones – the targets that promise to yield economic, social and environmental benefits 15 times (or more) greater than their costs – are highlighted in bright green. Less beneficial ones are dark green, mediocre ones yellow and the poor targets – the ones that cost more than the good they do – are red. Backed by thousands of pages of peer-reviewed economic research, this simple color scheme will hopefully help the world’s busy decision makers focus on picking the most effective targets.

Reducing malaria and tuberculosis, for example, is a phenomenal target. Its costs are small because solutions are simple, cheap and well documented. Its benefits are large, not only because it prevents death and prolonged, agonizing sickness, but also by improving societal productivity and initiating a virtuous circle.

Similarly, we should focus on at least halving malnutrition, because there is robust evidence that proper nutrition for young children leads to a lifetime of significant benefits – better brain development, improved academic performance, and ultimately higher productivity as adults. For every dollar spent on reducing malnutrition, future generations will receive at least $45 in benefits.

But at what point do goals simply become aspirations? While many ambitious goals are commendable, they may be unrealistic in practice – and could actually hinder progress. For example, setting an absolute goal of ending global malnutrition, warn the economists, may sound appealing, but is implausibly optimistic and inefficient. We cannot achieve it, and even if we could, the enormous resources required to help the last hungry person would be better spent elsewhere.

At the other end of the scale, some proposed targets are ineffective. Doubling the global share of renewable energy by 2030, for example, sounds great in theory but in practice it is an expensive way to achieve small reductions in CO₂ emissions. Instead, the focus should be on providing more energy to poor people, a proven way of achieving inclusive growth and poverty alleviation.

In order to reduce carbon emissions, removing fossil fuel subsidies in developing countries promises much greater benefits. Reducing these subsidies in countries where gasoline is sometimes sold for a few cents per liter would stop wasting resources, send the right price signals, and reduce the strain on government budgets, while also cutting emissions.

Ultimately the selection of the Sustainable Development Goals is political. No doubt, economics is not the only measure of what the global society should choose as its development priorities, but costs and benefits do play an important role. If well-documented economic arguments can help to swap a few poor targets for a few phenomenal ones, leveraging trillions of dollars in development aid and government budgets in the right direction, then even these small adjustments can make a world of difference.



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