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QUESTIONS AND SUGGESTED ANSWERS AND TOPICS FOR DISCUSSION IN CONNECTION WITH
THE 10 COPENHAGEN CONSENSUS CHALLENGES................................................................ ............................ 1
CONFLICT ....................................................... ........................................................... ..................................................... 1GOVERNANCE AND CORRUPTION .................................................. ........................................................... ....................... 3
FINANCIAL INSTABILITY ..................................................... ........................................................... ................................. 4GLOBAL WARMING AND CLIMATE CHANGE ..................................................... ........................................................... ... 5
SANITATION AND WATER.................................................... ........................................................... ................................. 7EDUCATION .................................................... ........................................................... ..................................................... 9MIGRATION .................................................... ........................................................... ................................................... 10COMMUNICABLE DISEASES ........................................................... ........................................................... ..................... 12
SUBSIDIES AND TRADE BARRIERS ........................................................... ........................................................... ........... 13MALNUTRITION AND HUNGER....................................................... ........................................................... ..................... 15
3 GENERAL TOPICS FOR DISCUSSION IN CONNECTION WITH THE COPENHAGEN CONSENSUS ... 16
DIFFICULT CALCULATIONS IN COST/BENEFIT ANALYSES...................................................... ......................................... 16THE MEANING OF SCARCE RESOURCES...................... ........................................................... ......................................... 17THE UN MILLENNIUM GOALS AND THE COPENHAGEN CONSENSUS........................... .................................................. 18
Questions and suggested answers and topics for discussion inconnection with the 10 Copenhagen Consensus challengesThis section includes 5 questions and suggestions for answers to each of the 10 challenges.
Furthermore, a number of topics for discussion have been listed for each challenge.
Conflict/Civil war
Question 1: What are the advantages of reducing the incidence and extent of civil
wars (apart from minimizing human suffering), locally, regionally, and
globally?
Answer: Civil wars bring about a reduction of economic wealth, both before,
during and after the actual conflict, and both locally, regionally and
globally.
At the local level the costs represent a shattered capital system,
increased military spending, and an increase in the number of diseasesand deaths (expressed in DALYs).
At the regional level there will also be an increase in the neighbouring
countries military spending.
Global costs include an increase in the rate of AIDS and production of
hard drugs (enabling the conflict-affected nations to finance their war
activities).
Question 2: How to calculate the economic loss incurred by an average civil war?
Answer: An average civil war lasts for 7 years. The economic loss is estimated as
2.2% of the GDP per year. After 7 years of civil war the total GDP will
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be 15% smaller than it would if no war had taken place. During the
post-war period it will take roughly 10 years for at given country to
return to its pre-war growth rate. Not until 21 years after the war will
the GDP have returned to the same level it would have achieved if no
war had occurred. The total economic welfare cost will be theaccumulated difference between the actual GDP of the individual years
in question, and the potential GDP that would have been achieved
without the war. One civil war amounts to a permanent loss of
approximately 1 years total GDP.
Question 3: In the calculation of the costs related to civil wars a number of items
have been omitted. Which items have been left out, and what may be the
reasons for omitting them?
Answer: The global costs incurred by civil wars and conflicts are generally
impossible to estimate. For instance, the production of drugs in variousregions of the world may perhaps in some cases even be a cause for civil
war or similar hostilities, and not only a consequence of such
conditions.
Question 4: Which crucial factors seem to contribute to the breaking out of civil
wars?
Answer: The current GDP, economic growth, and dependence on the export of
primary commodities.
Question 5: What possibilities exist for preventing and shortening future conflicts?
Answer: Prevention of conflicts:Aid and improved governance of income from
natural resources (e.g. diamonds).
Shortening of conflicts: Introduction of certification measures (e.g.
concerning diamonds, timber, and oil).
Discussion
The article assumes that one of the basic reasons for civil wars is the dependency on the export of
primary commodities (e.g. drugs, diamonds, and oil).
Congo is good example. The enormous natural resources of this country (e. g. diamonds) have
proved a curse rather than a blessing for its population. Congo also serves to demonstrate that
nowadays civil wars are very seldom local phenomena, but rather conflicts between regional or
even global interests.
Against the background of this article (and any other material on conflicts) you may discuss the
anatomy of conflicts as well as the meaning of regional and global dominance (the ending of the
cold war may be said to have contributed to the solving of certain conflicts, while at the same time
having initiated others).
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The discussion may also include a debate concerning peacekeeping forces (cf. the paragraph on the
British military forces in Sierra Leone).
Other topics for discussion could be:
How far should/can the international society go in its efforts to end and shorten civil wars? Why is it apparently so difficult to allocate resources for the prevention of future conflicts and
the ending of current conflicts? (Cf. the discussion on, for instance, the European countries lack
of economic support for the rebuilding of Afghanistan).
Which conditions should exist before the rest of the world will interfere? The discussion may bebased on the conflicts in Yugoslavia and Rwanda. It might be maintained that the geographic
and strategic importance of Yugoslavia to Europe and its historical ties to Russia, France and
Germany played a part in Europes motivation for intervening in this conflict at a rather early
stage. Europe does not have similar close ties to Rwanda, meaning that there has been
correspondingly less incentive for intervening in this conflict.
Bad governance and corruption
Question 1: According to the article, which conditions are of crucial importance for
the corruption level of any country?
Answer: Small GDP, small growth and few investments, as well as bad
governance.
Question 2: To which extent can trade barriers and subsidies be expected to affect
the corruption level of a certain country?
Answer: Trade barriers and subsidies mean that there will be a market for
circumventing/achieving this. The mere existence and the nature of such
measures may be assumed to influence the extent of corruption.
Question 3: In what way is bad governance and corruption related to the other
challenges?
Answer: Bad governance and corruption reduces the effect of initiatives aimed at
tackling the other challenges. Better governance and less corruption will
increase the probability that initiatives launched and aimed at otherchallenges will be more successful.
Question 4: In what way does corruption affect the prospects of attracting foreign
investments?
Answer: Corruption may be considered as an additional cost for the individual
enterprise, meaning that its competitive power will be diminished when
producing in a corrupt country as opposed to placing its production
facilities elsewhere.
Question 5: What is the connection between legislation and corruption?
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Answer: The favourable conditions for corruption will always increase with the
complexity of the governing laws. The use of different tariff rates will for
instance result in importers being willing to pay a price for having their
goods registered as products with low rates, even if they really belong toanother and more expensive category. Implementation of uniform tariff
rates would eliminate this possibility.
Discussion
Bad governance and corruption represents a complex issue involving a number of parameters. The
article states for instance the importance of social and cultural conditions and the homogeneity of
the population. In this connection it may be discussed which measures might reduce the extent of
corruption.
Financial instability
Question 1: How does financial instability manifest itself?
Answer: In many different ways; for instance sudden and sharp currency
changes, substantial increase of the interest level, and a significant
increase in the number of borrowers not being able to service their
loans.
Question 2: What are the reasons for financial instability?
Answer: 1. An unstable economic policy, e.g. a very expansive fiscal policy
in which the Government will spend more than it earns.
2. Fragile financial systems.
3. An institutional weakness that may be the result of short-term political
interference, lack of regulatory agencies, etc.
4. Sudden reversals of capital flows as for instance experienced by
Brazil during the presidential elections in 2002, when the prospect of
having a new president had substantial effect on the capital balance, the
interest level, and the currency rates.
Question 3: What are the expected advantages and drawbacks of financial
liberalization?
Answer: The advantages include a higher probability for a lower market rate, a
more efficient allocation of resources, and an increased economic
growth. The prerequisite is, however, a consistent economic policy,
strong institutions, and a robust financial system; factors that are
already predominant in the industrial countries.
The drawbacks include an increased vulnerability to external impact,
and a greater need to adjust the countrys monetary policy to the rest of
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the world (the term for this is lack of monetary policy autonomy). This is
a crucial issue if the currency of a certain country must maintain a
specific value compared to other currencies (fixed exchange rate policy).
The fact that Denmark wants to maintain a fixed exchange rate in termsof the Euro means that our monetary policy will in reality be determined
by the monetary policy pursued by the Euro countries.
Question 4: What would be the advantages of introducing a single global currency?
Answer: Currency crises due to mismatches between the domestic currency and
that currency in which a loan has been raised would be avoided. This is
the case when the assets and incomes of a country are denominated in
the local currency, whereas its liabilities (debts) are denominated in
Euros or USD. When the currency of a country is depreciated it will
compromise that countrys ability to service its debt. This may beprevented by introducing a single, common global currency. The
drawback of this would be that individual countries will lose part of
their fiscal policy independence. For instance, it will no longer be
possible to devaluate the currency of a certain country if this currency
has previously been overvalued.
Topics for discussion
Issues concerning financial instability have been discussed for many years. A discussion about the
internal and external causes for financial crises would be relevant and beneficial.
External causes include instances when a countrys economic crisis is affecting the attitude of
investors to foreign countries, as experienced during the debt crisis of 1981-82 when the economy
of Chile was put under pressure due to the brief moratorium of Mexico.
Internal causes include:
fragile fiscal policy (e.g. when Government spending is too extensive) weak institutions (Indonesia 1998) unstable currency rates (Argentina 2001) a national financial system in which external financing is substantially cheaper than internal
financing. This will be the case whenever the government of a country undertakes the currencyrisk (Thailand 1997)
Furthermore, this article may form the basis of a discussion of foreign loans and the problems
related to them. Finally the consequences ofnothaving a tradition for IMF intervention in
connection with foreign financial crises may be discussed. This would clarify the actual role of the
IMF (to secure the international financial system) as opposed to the role it should not undertake (to
secure individual debt-ridden countries). This discussion may involve a debate of whether the IMF
measures are economically rational and to which extent a political superstructure is absolutely
crucial.
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Global warming and climate changes
Question 1: What does discounting mean, and why is this concept used?
Answer: Discounting represents the possibility of pricing future costs and
incomes.
Most people will for instance prefer to get paid USD 100 today instead
of getting them in one years time from now.
Discounting makes it possible to value the present value of getting paid
USD 100 in one years time.
The present value concept is used both in private and national economic
calculations. The determining factor in the value assigned to future costsand benefits is called the discount factor (r).
If the rate of return equals r it means that one USD invested today will
be (1+r)tafter t years. Correspondingly, one USD invested in t years will
be assigned the present value of 1/(1+r)t. With a discount factor of 5%
one USD in 10 years from now will correspond to 61 cents today.
Similarly, one USD in 100 years and using the same discount factor will
correspond to 0.8 cents today.
The higher discount factor, the lower will be the present value of future
incomes and expenses.
Question 2: Which discount rate has been selected for this article and for which
reason?
Answer: A discount rate of 1.5 per cent has been selected for our standard
calculations. In the article this is motivated by the fact that the time-span
of global warming and climate changes is very long. In case of a higher
discount rate, costs and benefits will amount to very little in the distant
future.
The problems with global warming are rather special, precisely because
it will take so many years before the effects can be expected to be felt,
whereas the majority of costs still have to be paid now.
Question 3: What is the value at risk method, and why should it be applied?
Answer: This method represents an attempt to minimize the risk of losses. The
article states that on the basis of the selected models it is estimated that
the temperature with a probability of 95% will increase by 1 9.3
degrees in case of a twofold increase of the carbon-dioxide content in
the atmosphere.
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Question 1: Why is it that more than one billion people have no guarantee of clean
water, and more than two billion people have no access to the most basic
sanitary facilities?
Answer: The primary reason is lack of money and knowledge. There is no globalshortage of clean drinking water, but the access to water is very
unevenly distributed.
Question 2: Why does the article recommend that projects should be embedded in
the local society and not be controlled by governments or donors?
Answer: Experience shows that local commitment and involvement is needed in
order to be able to secure the success of launched projects.
Furthermore, there is a risk that projects will become too technology-
ridden if they are controlled by governments or donors. Especially in
Africa we have seen that technologies should be as simple as possible,just as it is important to secure the know-how required for maintaining
installations after they have been constructed.
Question 3: Why is it of the utmost importance that the local population should be
educated in matters of hygiene and sanitation?
Answer: Only a few centuries ago the populations of the affluent countries began
to realize that there is a connection between sanitary and hygienic
conditions and diseases and death. The connection did not become
common knowledge until the latter part of the 19th century and the first
part of the 20th century, and a considerable share of the worlds
population still remains ignorant of this.
Question 4: What tasks will require the biggest amount of water: Food production or
water for domestic chores?
Answer: Unquestionably the production of food. The water requirement for
human households amounts to approximately 20-50 litres per day. In
comparison, approximately 1000 litres are required for producing one
kilogram of cereal grain. On average, every human being uses about 70
times as much water for producing food as for performing domesticchores.
Question 5: By investing between 12 and 30 USD in a manual treadle pump ten
million potential users in Southern Asia would be able to increase their
income by approximately USD 100 per year. What could be the reasons
that not all smallholders acquire such treadle pumps immediately?
Answer: There may be many reasons for this:
It does not really matter that the value of peoples own production will
increase by USD 100 if there is no market for selling their products.
Without a monetary economy loans cannot be serviced. Also, there is no
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guarantee of a financial infrastructure, meaning that there are no money
lenders. Finally it may very well be that farmers have not yet become
aware of the connection between the use of treadle pumps and the
prospect of higher returns.
Topics for discussion
The text introduces a number of speculations concerning user charges in connection with water. On
the basis of these observations students may be asked to consider advantages and drawbacks related
to the introduction of such user charges.
This issue may very appropriately be illustrated with a simple equilibrium model of demand and
supply, where students are required to explain the extent of the demand if the price of water is set to
USD 0.
The debate may be extended to include a discussion of taxes on pollution, e.g. green taxes, the
effect of variations in fuel prices between Europe and the US, and the consumers choice of cars
(the nineties were characterized by low oil prices, and during this period the average weight of
private cars in the US increased to more than 2 tonnes).
The calculations related to working days lost due to lacking hygiene may give rise to a discussion of
the consequences for our own standard of living in connection with obtaining higher growth rates in
a number of developing countries, which will result in a correspondingly higher standard of living
and an increased consumption (cf. the article on subsidies and trade barriers).
Lack of education
Question 1: How can we support individual families with a view to improving the
education of children?
Answer: Analyses have shown that free school meals and contributions to
individual families on condition of their children attending school can be
very useful.
Question 2: Why do many third world children not attend school even though thephysical facilities exist?
Answer: Lack of economic opportunities, lack of time, and lack of incentive.
There is a clear connection between the economic situation of parents
and the probability of their children attending school.
Question 3: Why do developing countries in general have an education system that is
clearly inferior to that of affluent countries?
Answer: According to the World Bank the public school system in many
developing countries contain a number of structural flaws, meaning that
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only a fraction of the school system is able to deliver any quality
education. Experience shows that the chosen school model (which has
typically been adopted from their earlier colonial masters) does not in
itself result in inferior school systems and a low quality of learning;
these deficiencies are due to other conditions, as for instance poorlyeducated teachers, lack of control, absence of test procedures, etc.
Question 5: Which initiatives in the article will be the most important when it comes
to improving the quality of education in the developing countries?
Answer: Bigger budgets will only prove of importance if the additional funds will
be allocated to improving certain elements of the educational system
(teaching aids and materials, training of teachers, and infrastructure),
or provided that new teaching techniques and systematic reforms are
introduced.
Topics for discussion
Even if this is not directly apparent in this chapter, it might be a good idea to discuss why there is
obviously a tendency to build many new schools whereas the quality of the education is given no
high priority.
The reasons for this may be political and may be linked to marketability. In certain cases corrupt
politicians and other public sector employees may also wish to earn money on construction
contracts, or it may be that the construction of new schools pops up as an item during an election
campaign a possibility that is non-existent if public means are used to provide quality education.This issue is not limited to the educational sector, but is actually quite common in many contexts.
An example of the above is Brazil which has an inferior public education system (as illustrated in
the text). None the less the construction of several hundred new schools started in the 1980s in the
state of Rio de Janeiro, without any financing. Not surprisingly, there were no funds for finishing
the building of these schools of which many remained half-built for decades to come.
It may be discussed why money is not always sufficient for solving the problems within the
educational sector: Money has no effect without the necessary infrastructure or without the relevant
institutions.
MigrationQuestion 1: What advantages and drawbacks would free migration have for
a. recipient countries?
b. homelands of migrant workers?
Answer: a. For recipient countries it would mean an increased supply of workers
and thus increased possibilities for production (requires absence of
market barriers, e.g. high minimum wages). There would be both
winners (e.g. consumers) and losers in a recipient country (e.g. skilled
workers who will experience exacerbated competition, resulting in lower
wages).
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b. If the migrants maintain connection with their homeland and return
money/invest in their homeland, the effects of migration may be
compared to an increased export of goods and services. If, however, an
actual emigration takes place (i.e. former citizens only have a minimum
of connection with their country of birth), there is a risk that the resultwill only be a decrease in production possibilities. This is of special
importance if the majority of emigrants from a certain country are
persons of many resources and competences (educated people).
Question 2: What would mobility of the labour force mean to variations in wages
and income between the countries?
Answer: The immediate answer would be that we should anticipate a narrowing
of the gap between wages and incomes, however provided that the
migration activities do not drain the countries of origin of their educatedworkforce.
Question 3: The article states that migration will result in substantial economic
benefits not least for the recipient countries. And yet there is
significant resistance against migration, especially in Europe. Why is
this?
Answer: A number of reasons can be given, including the cultural and religious
differences between the immigrants and native residents. These aspects
are not of an economic nature. Furthermore, however, it appears that
especially countries with sound welfare systems and high minimum wage
rates and transfer incomes find it particularly difficult to have their
labour markets absorb the immigrants (this is for instance true for
Denmark, Sweden and the Netherlands). If the immigrants are not given
any employment, immigration may prove an economical burden rather
than a benefit.
Question 4: In the case of Tongo and Lesetho money transferred by migrants to their
families account for 37% and 26% of these countries GDP,
respectively. This means that the local economy will grow to be
extremely dependent on remittances. In which way do such means affectthose families and individuals who do not receive any money from
abroad?
Answer: The effect can be described in two ways that are partly interlinked.
Firstly, the import opportunities of the homelands will be improved (and
thus the possible consumption). Secondly, a majority of these means will
be spent within the local economy so that the economic impact due to the
multiplier effect will be bigger than the mere nominal value of the money
received by the families in question.
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The multiplier effect represents the final effect of a given amount
circulated in the homeland. The multiplier effect means that wealth
(added value) will increase by more than the original amount put into
circulation, cf. the following simple example:
A guest worker returns USD 100 to his family. Unless his family spendsthe entire USD 100 on buying imported goods, the final effect on the
local economy will be considerably bigger. It is assumed that the family
will spend USD 80 on buying local goods and services, whereas the rest
is spent on imported articles. This would increase the local production
of goods and services by USD 64 (also assumed to contain imported
goods representing 20%). This money will again be used for demanding
other goods and services, etc., etc.
The total effect of the original USD 100 will be an increase of the
overall demand by approximately USD 500, indicating a multiplier
effect of 5.
The higher content of imported goods, the lower the multiplier effect willbe.
Discussion
An obvious topic would be the immigration policy of various nations. Countries like Canada and
the US may be compared to Denmark. The former two have a clearly defined immigration policy,
whereas Denmark does not.
In this connection it might be relevant to discuss the institutional barriers existing for
immigrants/refugees in Denmark in relation to job possibilities (including aspects like high
minimum wages, strict education requirements, etc.)
This chapter may also be compared to the chapter on free trade as the mobility of the workforce can
be viewed as an alternative to the free mobility of goods. As it has been stated by a Mexican
minister, if you do not want our goods, you can have our surplus workforce.
The connection between trade and migration may also be discussed. The employment possibilities
and the economic growth of developing countries will improve if we buy goods that have been
produced in these countries. If we do not want their goods, many citizens from poor countries will
migrate in order to get a job.
Increased imports from the developing countries leading to an improved standard of living andbetter job opportunities in these countries will mean less incentive for the residents of developing
countries to migrate to the more affluent countries.
Communicable diseases
Question 1: There was a time when the numerous deaths due to AIDS epidemics
were not considered to have any significant economic impact, as this was
ascribed to the permanently high rate of unemployment in the most
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badly affected countries. Why has there been a change of opinion
concerning the purely economic costs related to AIDS?
Answer: Not until recently have we become aware of the crucial importance of
the dissemination of AIDS and the fact that it mainly infectscomparatively young people, including educated people in whom society
have invested considerable resources. The lack of teachers in Zambia
and the lack of doctors in South Africa is an aspect of this problem.
Question 2: What could be the reason for the apparently modest interest on the part
of the developed countries in eliminating Malaria?
Answer: It is a disease that today literally only exists in the developing countries.
Question 3: What is the difference between micro- and macro-economic impacts?
Answer: The micro-economic impact is felt on an individual or household level,
whereas the macro-economic impact represents the economic
consequences for the entire society.
Question 4: Which share of the OECD countries GDP would be required if we were
to fight AIDS as defined in this challenge?
Answer: It would require approximately 0.04% of the OECD countries GDP.
According to Danida, the annual foreign aid of the OECD countries
amounts to approximately 0.2 0.25% of the total GDP for 2002. This
means that fighting AIDS will amount to approximately 15 20% of the
current foreign aid.
Discussion
Why does the prevention of AIDS seem to be much more efficient in the industrial countries and in
certain developing countries than in other especially African developing countries?
This is an opportunity to deal with the problem related to information channels and cultural
characteristics, including the fact that some political systems (e.g. in South Africa) have refused to
acknowledge the extent of the problem, not to mention the sources of infection. To this should be
added the economic aspects and the hurdle of getting people who possess a very modest
understanding of diseases and their dissemination to realize the full consequences of such a serious
a disease.
Recently there has been some discussion about the role of the pharmaceutical industry in fighting
and preventing outbreaks of AIDS. Of this follows a discussion of how to prioritize prevention as
opposed to treatment; and how we can maintain the equilibrium between the patent protection of
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research and development activities in connection with new drugs, and the requirement of cheap
medicine in the developing countries.
Subsidies and trade barriersQuestion 1: How should the concept of static gains be understood in connection
with the removal of subsidies and trade barriers?
Answer: Static gains are the immediate benefits arising from countries producing
those products of which they are the most efficient (or least inferior)
producers (cf. the theory on comparative gains). The gains are called
static because they are, viewed in isolation, non-recurring effects that
will all other things being equal result in countries experiencing a
brief growth in their GDP above the historic average, after which the
subsequent development will reflect the historic growth.
Question 2: How should the concept of dynamic gains be understood in connection
with the removal of subsidies and trade barriers?
Answer: Dynamic gains include variations like increased competition, easier
access to semi-manufactured products, and increased investments.
Contrary to the static gains these effects will bring about a permanent
increase in growth rates.
Question 3: What environmental effects should we expect a removal of subsidies and
trade barriers to have?
Answer: Elimination of subsidies and trade barriers may be assumed to increase
the global economic growth. In the poorest parts of the world this would
lead to significantly better standards of living. In the long term it may be
assumed to increase the demand for a clean environment through a
heightened environmental consciousness. Once a population gets
sufficiently wealthy it may be said to be able to afford having an
environmental conscience. However, the surrounding environment may
be expected to be more severely strained for a certain period, as the
income and purchasing power of the population rises from a low to a
middle income level (Kuznets curve may be included here). To thisshould be added some negative effects from increased transport
activities due to the improvements in trade and welfare.
Question 4: How can a regional trading cooperation damage the global economy?
Answer: An example: Country A and B enter into a regional trading cooperation.
A has previously been importing goods from C, who is cheaper. Because
of the common external tariff wall, country A will now buy goods from
country B. This means that production is transferred from C to B. The
consumer price will rise, and the demand will decrease. The result is
that the global increase in value will decline.
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Topics for discussion
Even though Europe and the US are advocating free trade a number of restrictions on internationaltrade continue to exist. This may lead to a discussion of possible losers and possible winners in a
free trade scenario. How can the resistance of various players be curbed?
The discussion may be based on the agricultural policy of the EU. Could the vast amounts paid as
annual subsidies to EU farms be allocated differently? There might be a possibility of compensating
farmers during a transitional period, or of subsidizing people who give up farming (as has been
done in the case of fishermen scrapping their boats).
It may also be discussed which countries are for and which are against the abolition of agricultural
subsidies, and why? A crucial aspect of this matter is whether a country is a net payee (e.g. France)
or a net payer (e.g. Great Britain) in relation to the agricultural subsidies of the EU.
The importance of lobbyism may also be dealt with; as may the issue that losers in the game of
trade liberalization will be easily identifiable, whereas winners will to a certain extent only become
visible over time (the theory on distributed benefits and concentrated costs).
Europe represents one of the most important markets in the world. This may give rise to a debate
perhaps illustrated by means of a simple equilibrium model of what will happen to a) prices of
agricultural goods in Europe, and b) prices of agricultural products in the global market, following a
liberalization of the trade in such products.
The market size of the EU means that the global market prices of agricultural goods will increase in
case of trade liberalizations, which will benefit farmers outside the EU (and secure the survival of a
number of European farms). The Danish Statens Jordbrugs- og Fiskerikonomiske Institut hasestimated that every Danish citizen will have an additional DKK 2,600 annually for consumption
should a liberalization of the agricultural sector take place. Price increases of agricultural products
in the global market will, according to the World Bank, improve the standard of living for several
hundred millions of the worlds poorest people.
Malnutrition and hunger
Question 1: How big a share of the world population may be said to suffer from
malnutrition?
Answer: About 17%, the majority of which live in the Asia-Pacific region and in
the sub-Saharan Africa.
Question 2: Which population groups are most affected?
The rural population. It should be noted that the rural population are
mainly growing products for their own consumption and that their
income in terms of money is extremely modest.
Question 3: What plans of action does the article suggest?
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Answer: A reduction of the number of children with a low birth weight,
information about nutrition and breast-feeding, dietary supplements,
and investments in agricultural technology.
Question 4: Which of the remedies suggested in the article will result in the highestreturn (or the highest benefit/cost ratio)?
Answer: The supply of vitamin A.
Question 5: In which way does a low birth weight and lack of micro-nutrients affect
the economy?
Answer: A low birth weight and lack of micro-nutrients result in deterioration of
the immune system, a high mortality rate for infants, inferior education,
and thus a lower standard of living later on, as well as an overall lower
economic growth.
Discussion
The last part of the article discusses the technological development within the agricultural sector. In
that connection the green revolution of the 1960s and 1970s is mentioned. The green revolution
contained an element of what some people have called accidental GMO as well as refinement and
an increased use of fertilizers.
On basis of this article you may discuss the pros and cons of using genetically modified crops
what risks have been pointed out, and what advantages?
Furthermore, discuss to which extent the evaluation of risks and requirements depends onindividual, current standards of living. Why do certain industrial countries have a different view on
the advantages and drawbacks of GMO than a number of developing countries? It might be argued
that the significant European resistance to the use of genetically modified crops might be due to the
fact that our standard of living allows us to emphasize even very theoretical and hypothetical risks
compared to the advantages of reducing the prices on food. The main objective of less affluent
countries is simply to procure food.
3 general topics for discussion in connection with The
Copenhagen Consensus
Complex calculations in cost/benefit analyses
As a rule, economy is no exact science and cost/benefit analyses are no exception. This means that
the conclusions and results of the ten articles depend on the use of consistent models and on the
applied estimates being correct.
It is of vital importance that students realize that the computed results are not absolute. New
information and technological developments may shatter already calculated results. The material on
clean water and sanitation represents a good example. The development of low-cost methods for
drip irrigation in India has significantly altered the cost/benefit ratio compared to the use of
conventional methods, because the price of the required equipment has now been reduced by 50%.
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Another example can be found in the article on climate changes. A number of various models exist
for describing the connection between the emission of greenhouse gases and global climate
changes. Cost/benefit analyses of climate changes and measures aimed at curbing these will depend
on the correctness of the underlying models for the connection between global climate changes and
emission of greenhouse gases. Quite a few models exist, each with its own bid for theinterrelationships.
However, we must still ask ourselves: Should the mere difficulty of describing and valuing
problems deter us from trying? What will be the result if we choose notto quantify these issues?
Calculating the value of human lives, including the DALY value, has proved to be one of the most
controversial elements of the cost/benefit analysis. (DALY means Disability-Adjusted Life Year
and represents an estimate of years lost as a consequence of illness and death). Many people will
instinctively feel some sort of aversion against assigning a value to human lives, or even feel it to be
downright unethical. However, whether we like it or not, human lives are constantly being valuated
both directly and indirectly.
Every society has its limits to the price it is willing (or able) to pay in order to save another human
life. If not, our transport system would look differently. We would for instance have many more
roundabouts instead of dangerous intersections, and also more fire stations and hospitals. This
indicates that we are in reality making the difficult assessment of human lives every day. Such
assessment will naturally again often represent an implicit and indirect consequence of the choices
and priorities made by politicians.
One method for valuating human lives is to estimate the direct economic cost related to the loss of a
specific human life. The value of a human being is thus said to equal the added value lost by society
when the person in question dies. A direct consequence of applying this method is that the value of
people who are not directly contributing to societal productivity (e.g. old-age pensioners and
children) will invariably be estimated as very low or zero. This method may also be used forestimating the minimum value of one human life. There are, however, also methods based on
peoples willingness to pay. In this method valuation does not depend entirely on the productivity
of human beings, just as there is a possibility of including non-economic aspects. The method based
on willingness to pay results in higher valuation than the economic valuation method. The Danish
Institut for Miljvurdering has published a brief memorandum on the valuation of human lives.
This can be downloaded from www.imv.dk.
The utility value of a project will to a large extent depend on the selected method for valuating
human lives and DALYs. The application of the various methods means that the actually applied
cost, e.g. in case of the loss of one human life, will not necessarily appear to be exactly identical in
all cost/benefit analyses. This is also true for analyses performed in connection with TheCopenhagen Consensus. The article on communicable diseases, for instance, is based on a different
DALY valuation than the article on clean water and sanitation.
As many people do not like the idea of quantifying human lives we may ask ourselves whether we
would be better offnotdoing such calculations. The Copenhagen Consensus has been based on the
conviction that we have an obligation to make even the most difficult calculations; that a strategy
of refraining from making any calculations or models will notbe any better, simply because we are
not entirely aware of the connections and values with which we are operating. Similarly, we are in
no better position if we consider it to be unpleasant to quantify a human life. All other things being
equal it must be assumed that the risk of making the wrong decision will be greater in case we do
notattempt to design any models meaning that without any knowledge we are more inclined to
fail than with some amount of knowledge, no matter how incomplete this may be.
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The meaning of scarce resources
The Copenhagen Consensus has attempted to prioritize solutions to the worlds major challenges.
The background is the assumption that the most affluent countries in the world will decide to grant
an additionalUSD 50 billion in development aid in the course of the next four years.
A number of critics of The Copenhagen Consensus have stated that a budget maximum of USD 50
billion is too conservative. These critics have compared the USD 50 billion with the vast and annual
worldwide military spending. This leads directly to a discussion of the difference between money
used to do some good in the world (altruistic actions) and money used in to further narrow
national interests (including military budgets). Is it at all realistic to envision the US being
persuaded to transfer allocated means from their military budget to foreign aid purposes?
The USD 50 billion equals an increase of the total annual global development aid by approximately
25%. The amount thus represents a significant, though not unrealistic increase of the foreign aid.
Should it become possible to increase this amount even further, for instance by transferring some
funds from the military budget, the current prioritization will still be valid though now with the
additional opportunity of being able to solve some of the problems that had otherwise been given alower priority.
The UN Millennium Goals and The Copenhagen Consensus.
The UN Millennium Goals represent the following main objectives:
1. Eliminating extreme poverty and hunger2. Implementing basic education for everyone3. Improving the status of women and equal rights4. Minimizing the number of infant deaths5. Improving the health conditions of mothers6. Fighting HIV/AIDS, malaria and other diseases7. Securing environmental sustainability8. Developing a global partnership for development
It will appear that part of the problems/objectives is also a part of the ten Copenhagen Consensus
challenges, e.g. hunger, education, HIV/AIDS, and malaria.
The big difference between the UN Millennium Goals and The Copenhagen Consensus is that The
Copenhagen Consensus explicitly attempts to rank concrete suggestions for solutions to these
problems according to their economic benefits. It is a prerequisite that the return on investedresources will be maximized. In the UN Millennium Development Goals all objectives are,
however, equally weighted.
It may be discussed why the UN have chosen neither to prioritize their objectives, nor to make any
explicit evaluation of which problems should preferably be solved first.
Most people will presumably agree that we are living in a world with scarce resources if only
because of the unwillingness of various nations to contribute to UN projects. What should be the
reason for not wanting to prioritize our efforts?