The Copenhagen Consensus strikes again. In the Boston Globe recently, the intrepid Triple Bottom Line Cost Benefit Analysis (TBL-CBA) wielding economists took on the problem that is Haiti. Shamelessly valuing human life, climate and making trade-offs regarding disparate and seemingly incomparable goals.
“In more than 40 new research papers, … researchers have covered everything from improving broadband access, rebuilding the electricity network, and creating an electronic voting system, to linking Haitian farmers to international carbon markets. Crucially, all the papers use cost-benefit analysis to make investments comparable. They estimate the costs as well as the social, environmental, and economic benefits, expressed in dollars.” (Emphasis added) Making dollars count in Haiti, Boston Globe, By Bjorn Lomborg April 24, 2017
The Copenhagen Consensus tackles big questions of setting priorities (The economics of optimism, The Economist, January 22, 2015). What should come first and what seemingly noble and worthy investment should not be made at all.
“Given that resources are limited, the question is this: What should come first? Where, among all the projects that governments might undertake to make the world a better place, are the net returns to their efforts likely to be greatest?” A modest undertaking, The Economist, March 4, 2004.
What are the objections to doing TBL-CBA?
- The ethical argument – You can’t put a dollar value on <fill in the blank>.
- The technical argument – Even if you do put a value on it, you’ll never get people to agree on how to value <fill in the blank>If you laid all of the economists in the world end to end they still wouldn’t reach a consensus.
- Oh, for a one-handed economist!
- The consensus argument – Even if economists agree on the value, we can’t prioritize or trade off <fill in the blank> and <fill in the blank>.
The Economist puts it this way:
“Can such an exercise ever hope to yield useful results—let alone the hoped-for “consensus”? It is entirely reasonable to be sceptical, such are the pitfalls of cost-benefit analysis. Aside from the technical difficulties entailed in valuing extremely distant and uncertain benefits (as in the case of action to mitigate climate change, for instance), not to mention the problems surrounding the choice of discount rate (so that costs and benefits extending over time can be expressed on a consistent present-value basis), there are also ethical puzzles involving the valuation of years of extra life or better health. It is little wonder that governments prefer to let such provoking questions lie quiet and unnoticed. And if the Copenhagen panel of experts does manage, despite these difficulties, to reach some kind of substantive agreement, there is little reason to suppose that politicians or the wider public will go along with a consensus reached among a group of economists, a tribe renowned in the wider world for its desiccated view of human welfare.” (Emphasis added) A modest undertaking, The Economist, March 4, 2004.
With Autocase we have taken on a relatively modest mission, to standardize TBL-CBA’s data inputs, provide defaults wherever possible, be transparent about the methodologies used to calculate costs and benefits, and provide a means to cheaply and quickly make comparisons between options and the net benefits for project stakeholders. We’ve done this for buildings and sites (green infrastructure for stormwater management) in Autocase.
How do we address the three objections to TBL-CBA?
- The ethical argument – if you don’t put a value on a tricky thing like the value of human life you are implicitly valuing it at zero. We’d prefer to be explicit rather than implicitly setting values of important things to zero. Autocase for Sites has 30 cost and benefit categories that can be toggled off if you don’t want to value on something. There is even an “Other Benefits” category if you have thought of something we haven’t.
- The technical argument – there is a lot of standardization and agreement in the scientific and economic community. Even where there is disagreement over a value there is still a range of opinion that can be used. In Autocase for Sites for example all inputs are described by a probability distributions derived from low-expected-high ranges. Triple Bottom Line Cost Benefit Analysis incorporating risk analysis means the reliability of the estimated results metrics can be presented as confidence intervals.
- The consensus argument – we provide defaults that we think are sensible. You are free to override them and put in your own inputs if you wish. Also, in Autocase for Buildings, Triple Bottom Line Results are broken into costs and benefits, with each cost and benefit split between the Owner, Occupant, and Community to show how all three stakeholder groups will benefit from your decisions.