q&a copenhagen consesus topics

7/31/2019 Q&A Copenhagen Consesus Topics

1/18

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


2/18

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).


3/18

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?


4/18

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


5/18

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.


6/18

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.


7/18


8/18

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


9/18

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.


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


10/18

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.


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).


11/18

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.


12/18

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


13/18

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


14/18

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.


15/18


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?


16/18

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%.


17/18

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.


18/18

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?

q&a copenhagen consesus topics

Documents