The cost-benefit analysis provides a vital, independent injection of data on which sound decisions can be based.
PORT AU PRINCE: A sad reality of this hyper-partisan, politicized era is that many policy proposals are immediately identified as either “left-wing” or “right-wing” and lauded and derided by partisans as if by rote, with little room for discussion about soundness or impact. But there is an alternative that could help us get past this political divisiveness: using data to help us focus on the policies and investments that would have the biggest positive impact on society.
This may sound like an idealistic thought experiment dreamed up in an ivory tower, but data-driven policies are having a real-world impact in several countries.
In Bangladesh, the government is officially exploring measures that independent economists from there and around the world concluded would do the most to increase prosperity and wellbeing. And in Haiti, local and international experts are studying dozens of policy ideas to do the same.
In both countries, the well-established methodology of cost-benefit analysis is being applied to interventions as varied as anti-poverty measures, agricultural tariffs, child immunization, legal aid reform, e-government solutions, and rebuilding the armed forces.
Cost-benefit analysis sounds superficially cold or perhaps even cruel. It reduces a complex policy to a stark set of figures: if we invest one extra dollar (or euro, taka, gourde, or peso), we will get a return that is x times higher. This simplicity belies some complex number crunching from experts. Consider one investment studied in the project Haïti Priorise: agro-silviculture, which assists farmers to grow trees among crops and pastureland.
There certainly are economic benefits: farmers receive extra income from selling leaves, seeds, and timber. There are also social returns, in the form of lower rates of malnutrition, because the additional crops generate more nutritional value than what is being grown currently. There are also strong environmental benefits, such as a reduction in CO₂, better water flow to reduce flooding, and a boost for natural pollination processes.
The cost-benefit analysis includes all of this: economic benefits, social benefits for the country, and environmental benefits (and perhaps costs) for the world. As a result, this approach cuts across the political spectrum.
A cost-benefit analysis of the United Nations’ development goals illustrates this. On the one hand, it found that freer trade would be one of the best development policies, lifting 160 million people out of poverty and making every person in the developing world US $1,000 better off, on average. Although out of favor with the Trump presidency, free trade is a right-wing staple. But, by establishing the benefits to the world’s worst-off, the research also provides reasons for the left to reconsider their opposition to it.
Conversely, another highly recommended development priority, improved access to contraception and family planning, is strongly supported by the left and often opposed by the right. The research points not only to reduced maternal and child mortality, but also to economic benefits, perhaps giving the right more reasons to take another look.
Typically, governments do not conduct cost-benefit analysis except in limited ways, examining at one policy at a time. This scattered approach prevents policies from being compared. Instead, taxpayer money is often spent on whatever issues receive the most media attention or have the most engaged stakeholders.
Cost-benefit analysis should not be the only input to a government’s decision-making. But for countries like Bangladesh and Haiti, it provides a vital, independent injection of data on which sound decisions can be based.
In Bangladesh, three top priorities were identified by the research and by a panel of experts including a Nobel laureate and Bangladeshi development specialists: e-government solutions, improved TB response, and child nutrition. This work is also informing the National Nutrition Plan of Action, as well as “Digital Bangladesh” policies. The Bangladeshi government’s own think tank is helping to disseminate the information about top-ranked solutions to ministries and government entities.
In Haiti, researchers are still working—but early results show promise. A surprising study examines preventable deaths from trauma and illness. There are many health system challenges, which other researchers in the project explore. But one answer could be more ambulances. Only 2 percent of accidents and emergencies are reached by free ambulances, of which there are just 100 for a population of ten million.
R. Christina Daurisca, an economist at the Haitian Ministry of Public Health and Population, found that nearly 4,000 lives could be saved annually by creating a national ambulance network. But this comes with a high annual price tag of around US $33 million—more than 1 percent of Haiti’s entire national budget. Each dollar spent will create nearly three dollars of social benefit—a solid, if not outstanding investment.
A more modest option could, in the short term, do much more for every dollar spent. Training teachers and community leaders across the country to act as paramedics and first responders would have a one-time cost of just US $1.1 million but would save around 700 lives every year. Each dollar would produce US $16 of social good, helping Haiti much more.
The research for Haiti, Bangladesh, and, soon, two Indian states helps provide inputs that allow any of us to answer the question, “Where will extra resources achieve the most good first?” It is an approach that I believe should inform every country’s policy discourse.
With answers that are bound to please and upset people on both sides of the political divide, paying more attention to unbiased analysis of costs and benefits could be a way of finding the most sensible policies on which all of us can agree.
The author is Director of the
Copenhagen Consensus Center and a visiting professor at the
Copenhagen Business School