The Bjorn legacy: what will Lomborg say about Australian aid (and will anyone listen)?

Policymakers should embrace cost-benefit analyses, but be wary of their limits.

Last week, the University of Western Australia announced it would host Danish researcher Bjorn Lomborg's think tank, to be called the Australia Consensus Centre, for the next four years. I wrote a brief article about the news. Within a few hours, almost 40 strangers had emailed to tell me their versions of the "truth" about Lomborg.

One, a UWA-trained engineer in Perth, had contacted his alma mater's vice-chancellor immediately to express his "disbelief and dismay", saying the Dane's views on climate change were "short-sighted, underwhelming and completely contrary to Australia's best interests". Another called me sensationalist (and worse) because I dubbed Lomborg a "climate contrarian" rather than an "analytical and rational light" amid the "dark doomsday predictions" of climate scientists. Very few of the proffered opinions fell in-between those views.

This has been Lomborg's world for the past 15 years: despised and lionised with equal fervour. Times, Foreign Policy and Esquire magazines have lauded him as one of the world's most-influential thinkers. His two books, The Skeptical Environmentalist and Cool It, became global bestsellers; the latter was made into a film (albeit a commercial flop).

Yet while Lomborg has many backers, particularly in conservative circles, his work – at least that which touches on climate science – has been pilloried as misleading. Critics, including many academics, say he cherry-picks data that underplays the rate and consequences of global warming. Bloggers pore over every article he writes (and he is prolific, at least in the press) in search of errors; an entire book was published in 2010 as a result.

More recently, Lomborg's star was waning. Three years ago, the Danish government stopped funding the Copenhagen Consensus Centre he founded. He told The Ecologist magazine that he was the victim of politics. "I met with the woman who's now Prime Minister [Helle Thorning-Schmidt]. I said: 'I'd love to show you how the Copenhagen Consensus is a good idea,' and she looked at me and said: 'I think that probably might be right, Bjorn, but I will just get so much more mileage out of criticising you.' "


Inevitably, when Foreign Minister Julie Bishop invited Lomborg to Australia last month to become one of her department's advisers on aid innovation, the reaction was sharp. The shadow minister, Labor's Tanya Plibersek, questioned his involvement. "In particular, what kind of message does this send to our Pacific Island neighbours, who say dealing with the effects of climate change are some of the biggest challenges they face?" Within the Department of Foreign Affairs and Trade, staff were divided. Lomborg is a compelling speaker – although he is only one of 14 advisers to the department's "innovationXchange hub", the launch became, as one officer at the presentation put it, "the Bjorn Lomborg show". Many DFAT staff were impressed; some told the Informant they thought Plibersek's intervention was shallow and unnecessary. Others bemoaned the government's decision to involve Lomborg; a senior executive who "boycotted" the launch said: "I'm not taking part in meaningless stunts that have nothing to do with aid effectiveness."

Lomborg is used to controversy; he thrives on it. "It is instructive how much of the conversation ends up being about climate change, because it is such a pervasive issue of the elite conversations in rich countries," he tells the Informant. "Yet, when the UN asked seven million people around the world what matters most to them, it came last of 16 broad areas. I spend way too much time discussing mostly rich-world concerns like global warming while, for most of this world's population, the most important issues are their kids dying from easily curable diseases, lack of nutrition, poor education and indoor air pollution. Solutions to these problems and tens of others are the real solutions I would like to focus on."

Yet the climate debate is central to Lomborg's views on aid. He says the debate has led to about 25 per cent of global development aid being spent on climate goals. "It is morally problematic spending that much money to help so little, when there are so many other ways to help much, much more. When [US President Barack] Obama last year promised $3 billion to tackle global warming, it will likely postpone global warming by two hours at the end of the century. For comparison, that money could save more than 30 million kids from malnourishment. It could save three million people from dying from malaria. We have to ask what is best?"

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Lomborg's answer to that question – how to best spend aid funds – is to use the methology of his Copenhagen Consensus. It is a simple approach, which has its critics (of which more later). The UN has proposed 169 millenium development goals for the next 15 years. The consensus enlists teams of economists to analyse the costs and benefits of these goals and determine which represent best value for money – i.e. how many dollars of social good are created for every dollar spent achieving that goal. The aim, Lomborg says, is to focus only on development that represents "phenomenal" value for money. He says prioritising just 19 value-for-money goals instead of all 169 would have the potential effect of quadrupling foreign aid – without spending an extra cent.

In Lomborg's view, his method helps policymakers bypass vested interests by making clear which option is the rational decision. "Our point is that when you have lots of great ways to help the world – like combatting malnutrition and tuberculosis – and some ways that almost don't work – like fixing corruption – we should focus our attention on the problems we can solve. Spending money on issues where we do little or no good is wasteful, because we could have spent those resources doing lots of good."

Although the Dane's zeal attracts global attention, there is nothing new about cost-benefit analyses in international development. The economist who heads the Australian National University's Development Policy Centre, Professor Stephen Howes, says such analyses are among the oldest ideas in aid and have been used for at least 50 years. Yet they are relied on less today than in the past, he suggests, because aid practitioners realise their limits in a development context. "Something like governance is almost impossible to measure but that doesn't mean it's not important," Howes says. He notes how difficult it is to measure benefits in health and education, even in a wealthy country where there is a lot of socio-economic data at hand. "Take the example of deciding to invest in primary, secondary or tertiary education. We can't even do that effectively in Australia because no one agrees on the benefits."

Yet Lomborg says his centre has mostly resolved the problem of inconsistent analyses. "That's why it is crucial to use the same values of, for instance, human life and discount rates across all these areas, as our project does. And then they do become comparable. What we see is that it is often easy to improve health outcomes, whereas it is notoriously difficult to improve education outcomes. That suggests we should focus on the big wins from health first, and find smarter ways to tackle education."

One way to improve education, he says, "is to improve the kids instead of the education". "Early childhood nutrition makes kids' brains develop better and makes them learn more, even if they are in crappy schools. Turns out that this is one of the most efficient ways to improve education. Another innovative way is to teach rural children and their parents about the income increase they would get in the city from completing high school. This intervention is very cheap and makes the children stay longer in school and increases completion rates significantly."

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Nonetheless, Lomborg is a long way from reaching a consensus over his method. Another ANU professor, earth scientist Will Steffen, is blunt. "Taking a cost-benefit analysis approach is exceptionally narrow and, in my view, in the case of climate change, it's actually stupid. Why is it stupid? We need a planet we can live on. If we took Bjorn Lomborg's approach ... and if we fixated only on our immediate problems, we would became absolutely overwhelmed by the longer-term consequences of the problems we neglected."

Steffen says it is widely accepted that a climate that is four degrees hotter, which appears likely if there is no significant action to reduce warming, would make swathes of Australia largely uninhabitable. Many Pacific Island communities, which are among Australia's priority aid recipients, would become entirely unviable. "What's the cost of having a country disappear? How can that be modelled? You could ask the President of Kiribati about Lomborg's approach and he would laugh. You can't reduce questions like this to bean-counting exercises.

"What Lomborg's saying is we shouldn't walk and chew gum at the same time. But we must do multiple things at the same time – urgently. Just because we've got some immediate problems with nutrition and education doesn't mean we shouldn't deal with climate change. In fact, it would be counterproductive if we didn't deal with them together."

Lomborg isn't quite saying the world should take no climate action. His latest recommendations suggest abandoning the UN target of limiting warming to two degrees, but adopting a three-degree target instead. He also suggests dumping subsidies for fossil fuels and renewables, such as solar and wind power, but investing more in research on energy technologies ("present policies designed to reduce emissions ... are failing and cannot be effective until better technology is available"). Such a proposal should be funded, he says, "with a slowly rising carbon tax" – advice his Abbott government backers are unlikely to care to hear.

Yet while he doesn't deny climate change – indeed, he advocates some actions that would mitigate it – he dismisses Steffen's views as "a great example of climate exceptionalism: because climate is exceptional it should not be compared with everything else". "Professor Steffen paints an unrealistic scenario of climate change possibly displacing millions in the Pacific across the century, but ends up ignoring that, right now, 18 million people die each year because of poverty."

And this is the core of the Lomborg controversy: his view that the best solution to climate change is wealth. The UN estimates that, in 2070, the average developing country citizen will be almost six times richer than today. Lomborg says that, as a result, extreme weather will have much less impact, "just like hurricanes kill few people in rich Florida but thousands in poor Guatemala". The environment, too, would be generally better protected, "because we know that richer communities protect forests and biodiversity more".

He also questions Steffen's claims about the planet's future liveability. "The UN climate panel finds that the total costs of doing nothing at all against global warming, which we're not suggesting, will incur costs on the order of 0.2 to two per cent of GDP by the 2070s. This is not trivial but it is in no way the end of the world. Even estimates for warming far beyond what is likely, at six degrees, will perhaps cost a sizeable 10 per cent of GDP."

Here, Lomborg stretches rather too far. There is nothing close to a consensus on what a six-degree world would look like; a mere decimation of the economy, as he suggests, is a relatively mild projection compared with some forecasts. We can discuss loss of GDP but we would be wiser to discuss what that likely means: war, famine, cultural genocide, loss of states, the regularisation of extreme disasters – a semi-apocolyptic world. The last time global temperatures rose six degrees (at the end of the Permian age 250 million years ago), 95 per cent of species disappeared.

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Over the past decade, many senior officials, notably former productivity commissioner Gary Banks, have lamented the absence of evidence-based policymaking in Australian government. Banks urged public servants to familiarise themselves with cost-benefit analysis techniques and apply them more regularly to their work. There has been some slow progress, particularly in assessing infrastructure projects, though the approach still appears to be novel, even alien, to many areas of the bureaucracy (consider the case of the national broadband network, or the bizarre secrecy surrounding counterterrorism spending).

Not that economic modelling always leads to better policies. As The Australia Institute's executive director, Richard Denniss, says in the latest Monthly, it is sometimes used to deceive. He says many economists had calculated it would be cheaper for the world to endure climate change than to prevent it. "The models they use to draw this bizarre conclusion are built on thousands of assumptions about everything from the value of human life to the willingness of consumers to buy smaller cars if petrol becomes more expensive. If any one of those assumptions is wrong, the answer will be wrong. If hundreds of the assumptions are out, the answer becomes meaningless."

Cost-benefit analysis has a role in public debate, Denniss says, as long as it isn't used "to limit the menu of democratic choices". "Instead, it should be used to help explain the trade-offs. Good modellers aren't afraid of explaining their assumptions."

To Lomborg's credit, he never shies from debate. Nor does he hide his centre's work. His approach, whatever controversy and criticism it attracts, is open to scrutiny (which he cops).

By contrast, the Australian aid program falls far short of the transparency it preaches, a point Bishop rightly made when she became minister. She has promised greater openness, though this change is not yet apparent. For example, our former aid agency, AusAID, launched a "transparency charter" in 2011 and promised to publish all audit reports online as a matter of routine (it didn't). When I asked DFAT recently if it had inherited the charter when it engulfed AusAID, and whether it would comply with it, it simply would not answer. (Willingness to discuss policies and projects publicly is one area in which Lomborg will hopefully offer advice.)

But is Lomborg really likely to affect Australian aid? The innovationXchange hub of which he is a part is small. Despite its importance to the minister, it is still seen by some in the department as an isolated "special project"; part of Bishop's ongoing turf war with her portfolio colleague, Trade Minister Andrew Robb. Bishop has also emphasised that she wants the shrinking aid program to "complement our diplomatic and security efforts". That's hardly measurable, nor does it have much to do with aid effectiveness. What would Lomborg's consensus make of that goal?

If anything, Lomborg's new role says little about our aid policy but rather more about the government's approach to such appointments. The question is whether Lomborg and his ideas, as he promises, will "annoy people" on both sides of politics – benefactors included. He certainly has a knack for being heard. Perhaps he can start by spruiking a carbon tax.

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