Fixing the World, Bang-for-the-Buck Edition

Although this is not a story about BI, the podcast actually mirrors a lot of attributes of BI and data analysts. Bjorn Lomborg is a public intellectual. He runs the Copenhagen Consensus Center, where he brings together lots of economists and seven Nobel Laureates to think about where do people spend money and do the most good per dollar spent.

In essence, BI helps people

  • Make better and informed decisions.
  • Improved ROI.
  • Point out fact against our intuition or conflicting arguments.

It tells you

“How a bunch of economists have teamed up to measure the ROI, or return on investment, for the development goals set by the United Nations. In other words: if you only have $100 — or, in the case of the UN, $100 billion let’s say — to fight something like global poverty, what’s the best way to spend that money? What’s the ROI on early education vs. job training vs. small-business subsidies?”

” … you can probably save one person from dying from malaria for about $1,000. You can probably save one person from dying from HIV/AIDs for about $10,000. Now, both are good deals, but you have to ask yourself, ‘Don’t we want to first save 10 people from malaria before you save one person from HIV?”

The following illustrates what BI should achieve but ignored by most people.

 “The “best” as in the most useful, most rational way – as opposed to just attacking the noisiest problems, or the most politically appealing ones.”

The following gives an interesting reaction of people towards BI, when BI data are against their intuition.

 “We used to be funded by the Danish government, from 2004 until 2012. One of the things that the Danish government did not like was that we said, ‘Yes global warming is real, it is a challenge, but the typical way that we solve it turns out to be a pretty poor investment of resources.’ When there was a change of governments here we went from a center right to a center left government, they actually cut off our funding.”

“… But we were talking to the U.S. U.N. ambassador, and she was very annoyed that we had pointed out one of her favorite targets was not a very good target. And so she said, ‘I really don’t like you pointing out that this is a bad target, but I really need to hear it.’ And I think that’s basically how they feel about it. Yes they understand the necessity. But it’s politically obviously not always convenient.”

“But I have to say, I would think they hate you. It would think that they sit around being very high-minded and kind of holistic, and then you come in and say, ‘Yeah, that’s nice, but let’s talk about the real world.’ “

The following statements show some examples of the ah-ha moment of BI.

 “I read an interview with an American economist called Julian Simon back in Wired Magazine in 1997. And he said, ‘Listen you think everything is getting worse with the environment, but actually most things are getting better.’ My immediate sort of reaction was, ‘Oh, right-wing American propaganda.’ But he said one thing that really stuck with me, he said, ‘Go check the data.’ And so I decided yeah, okay I’m going to check his data, I’m going to, you know, get some of my smartest students together, we’re going to have a fun half year and prove him wrong. But as it turned out, and if you also think about it of course in many of the obvious parameters, air pollution, water pollution has come down dramatically, we’re better fed, we have higher incomes, we live longer, we have better education, so most of the things in the world are actually going in the right direction, especially if you live in the rich part of the world. And so we realized, oh wait there is actually improvement. This does not mean that there are no problems. There are still lots of problems in the world. But it suddenly means, instead of saying that the world is coming to an end, we can start having a sensible conversation of alright, so which of the many remaining problems should we be most focused on.”

“So I was merely comparing the fact that it was an interesting fact, you could actually give clean drinking water and sanitation to every single person on the planet for $180 billion once. Isn’t it curious to say that we could either spend $180 billion every year and do fairly little about global warming, or just spend it once and do an amazing amount of good for more than a billion people? That was the start of my point of saying, well we should compare different priorities.”

“… Instead what you should be doing is if you want to get more poor kids into college, you should be giving them scholarships. That’s a much cheaper much more directed way to make sure that you get a better socio-economic profile in college…”

“… The costs associated with domestic violence are over an order of magnitude higher than the costs of civil war.”

Here is a nice conclusion from the podcast.

 “We like to think of ourselves as constructing a menu for society. Imagine if you go into really expensive New York restaurant and you get this wonderful menu but there are no prices and sizes on it. Unless you have a very good expense account, you’re going to feel a little uncomfortable ordering. But what we try to do is we put prices and sizes on those different menu points. Now, that doesn’t mean that the champagne or the caviar might not be your first choice anyway, but at least now you’ll know that you can afford less for dessert. So in some sense, what we try to do is we give people a sense of proportion. Now, this is not the only thing they’re going to use, but if they’ll just use a little bit of it, chances are we’ll end up with a slightly less inefficient, if you will, outcome. And that’s still great.”

Reference: Fixing the World, Bang-for-the-Buck Edition

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