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October 14, 2013

An unbiased economic scorecard shows that global warming provides a net 1.3% GDP gain so far

How Much have Global Problems Cost the World? A Scorecard from 1900 to 2050 was editted by Bjørn Lomborg with many contributors They use an unbiased or at least a consistent methodology to assess the impact of global problems from 1900 to today and project forward to 2050.

There are often blanket claims that the world is facing more problems than ever but there is a lack of empirical data to show where things have deteriorated or in fact improved. In this book, some of the world's leading economists discuss ten problems that have blighted human development, ranging from malnutrition, education, and climate change, to trade barriers and armed conflicts. Costs of the problems are quantified in percent of GDP, giving readers a unique opportunity to understand the development of each problem over the past century and the likely development into the middle of this century, and to compare the size of the challenges. For example: how bad was air pollution in 1900? How has it deteriorated and what about the future? Did climate change cost more than malnutrition in 2010? This pioneering initiative to provide answers to many of these questions will undoubtedly spark debate amongst a wide readership.

* Unique, quantitative assessment and comparison of ten of the biggest challenges to human development, ranging from 1900 through to 2050
* Written by a selection of the world's top economists, brought together in one book by Bjørn Lomborg
* Challenges readers and invites debate, asking the fundamental question about humanity's scorecard: 'Are things getting better or worse?'

How much have world problems cost is a product of the copenhagen consensus.

All ten global problem assessment reports are at the Copenhagen consensus.


The above graph is only indicative as there is bound to be significant multiple counting (double, triple etc., like when deaths due to air pollution also count under health). However it is likely that the the proportion of multiple counting remains relatively constant across time, making the graph shape a reasonable proxy for the actual development.



Poor Health was 32% of GDP in 1900 and is 11% of GDP now and should be 5% of GDP in 2050

Climate change / global warming is real and man-made. It will come as a big surprise that climate change from 1900 to 2025 has mostly been a net benefit, rising to increase welfare about 1.5% of GDP per year. Why? Because global warming has mixed effects and for moderate warming, the benefits prevail. The increased level of CO₂ has boosted agriculture because it works as a fertilizer and makes up the biggest positive impact at 0.8% of GDP. Likewise, moderate warming avoids more cold deaths than it incurs extra heat deaths. It also reduces the demand for heating more than increases the costs of cooling, totaling about 0.4%. On the other hand, warming increases water stress at about 0.2% and negatively impact ecosystems like wetlands at about 0.1%. Storm impacts are very small, as the total storm damages (including naturally caused storms) are about 0.2%.

As temperatures rise, the costs will rise and the benefits decline, leading to a dramatic reduction in net benefits. After year 2070, global warming will become a net cost to the world, justifying cost-effective climate action.

The climate change assessment paper is here



Note there is water, sea level rise and ecosystem impacts but if a specific ocean cost needs to be included

Professor Robert Diaz of the Virginia Institute of Marine Science is a co-editor of "Valuing the Ocean" had a major 2012 study by an international team of scientists and economists that attempts to measure the ocean's monetary value and to tally the costs and savings associated with human decisions affecting ocean health.

The study estimates that if human impacts on the ocean continue unabated, declines in ocean health and services will cost the global economy $428 billion per year by 2050, and $1.979 trillion per year by 2100. Alternatively, steps to reduce these impacts could save more than a trillion dollars per year by 2100, reducing the cost of human impacts to $612 billion.

The world economy in today's dollars (without inflation) should be at least $200 trillion in 2050 and $400 trillion in 2100.

The $428 billion in 2050 would be about 0.2% of GDP in 2050 and 0.5% of GDP in 2100.

He notes that the study is unique in stressing the interactions between and among multiple threats, which include acidification, low-oxygen "dead zones," overfishing, pollution, sea-level rise, and warming.

So this impact of 0.2% of world GDP in 2050 includes global warming, pollution and overfishing. 0.1% impact on world GDP could be shared today for overfishing, pollution and warming.

Education and other impacts

Take education. Illiteracy today afflicts 23.6% of the world's population. Yet, in 1900 perhaps 70% were illiterate, and there will still be 12% left by 2050. In 1900, the world has barely more than one year schooling on average. Today, almost 7 years. The costs of illiteracy are huge: 12% GDP loss in 1900, 7% now and 4% in 2050.

Both areas showcase an amazing improvement.

But what about areas like biodiversity, global warming and air pollution?

The net impact on biodiversity has been declining over the 20th century, but will likely improve slightly in the 21st. Losses in the 20th century were on the order of 1% of GDP, whereas from 2000-2050 there will be a small 0.25% GDP benefit, because of reduced conversion of forests and better usage of agriculture.

Air pollution is not what you think. It is by far the biggest environmental problem in the world. And its impact has been declining for past 110 years. This is because most air pollution deaths are caused by indoor pollution from cooking and heating with dirty fuels. Over the 20th century, 260 million died from indoor air pollution in the Third World – about twice the toll in all the century’s wars.

Overall, in 1900, air pollution cost 23% of global GDP. Today it has fallen to 6% and by 2050, mainly because of much less indoor pollution, it will reach 4% by 2050.

The overall score is hard to deny. The realist assessment is that the optimists have it.

Education only looks at lack of literacy

Progress in educational development in the World since 1900 has been slow and uneven between countries. Providing basic education for all children in developing countries has been and remains an unmet challenge of governments and international organizations alike. This is in sharp contrast to recent findings in the economics literature on the catalytic role of human capital for economic growth and social development in general. Using a newly constructed matched data set on education and national accounts in the 1950 to 2010 period we estimate the loss of income and equity associated with not having a faster rate of human capital accumulation using alternative methodologies and specific country examples. Such loss is projected back (1900-1950) and forward (2010-2050) using plausible assumptions regarding what countries could have done in the past or may do in the future to accelerate human capital formation. Our findings suggest that the welfare loss in terms of per capita income conservatively ranges from about 7 to 10 percent. Improved educational attainment is also shown to have an effect in reducing income inequality.

Full advanced education can have a far bigger positive impact.

Air Pollution



Gender inequality assessment paper

The assessment considers the worldwide costs from 1900 to 2050 of continued gender inequality. The main cost is considered to be the inefficient underutilization of women in production. This can be measured in terms of their correspondingly lower earnings and expressed as a percentage of actual GDP per annum. This loss is estimated to lie in the range of 4 percent to 37 percent of world GDP per annum over this time period, depending on the year and the assumptions made. The losses due to gender inequality are declining as a percentage of GDP over this time period, but the absolute sizes of the losses are still quite substantial, since world GDP is growing so substantially over this period. This can be seen in part by comparing the losses in terms of 1900 GDP: In 2050, which has the lowest potential losses (4 percent) as a percentage of GDP based on the lower loss projections, the loss attributable to gender inequality comprises 328 to 1019 percent of total world GDP as of 1900, which is a range of $6 to $20 trillion in 1900 dollars, well over what world output was worth in 1900.



New Scientist covers the book and interviews Lomborg.

For each problem, contributors quantified the damage done to humanity and the planet from 1900 until today, and also that projected to happen by 2050. Take air pollution. How much death and destruction did it cause in 1900 or in 2013? And what do we project its damage to be in 2050?

We then translated this into dollars, using standard estimates for the value of a human life. While this concept can seem alien, it is regularly used as a way to guide policy – for example, does the value of human lives saved outweigh the cost of installing safety barriers on a highway? To get the relative size of a problem, we compared it with the total resources available to tackle it, to arrive at a percentage of GDP per capita for each.

Of course, GDP is by no means a perfect measure. Yet it is a widely used and robust indicator. It is strongly correlated with most desirable measures, including education, health, democracy, lack of corruption, lack of poverty and the United Nations Human Development Index.

We were not able to evaluate all the challenges facing humanity, but I think most would agree that our list includes 10 of the most important:
air pollution
climate change
conflicts
education
gender inequality
health
loss of biodiversity
malnutrition
trade barriers, and
water and sanitation.

For many of these, ours is the first economic evaluation of the entirety of the problem. I hope this will inspire others to cover other areas such as resources, infrastructure and corruption.

So what does this research show? Neither the pessimists nor the optimists are entirely right. But the optimists win on points – the majority of indicators are going in the right direction.

Biodiversity is tricky. From 1900 to 2000 there was a definite loss because of increasing human encroachment on nature. This was partly offset by the increase in agricultural production, but not nearly enough. The total loss is about 1 per cent of GDP.

However, our prediction is that for the next 50 years, humans will damage and encroach less while agriculture becomes more productive. Many richer parts of the world will reforest. In total, it is likely that there will be a very small, net benefit.

Google books has several pages of the book.

Cost of armed conflict using opportunity cost model


Cost of military is 1.6 to 1.7% of GDP

Armed conflict assessment.



Water and Sanitation

An Assessment Paper on water and sanitation was written by Marc Jeuland, David Fuente, Semra Ozdemir, Maura Allaire, and Dale Whittington and released as a chapter in How Much Have Global Problems Cost the World?

Water and sanitation are emotive headline topics that still cause 6–7% of deaths in developing countries -- yet progress has been and will be extraordinary: the death rate related to water and sanitation per 1,000 in developing countries was 1.5 in 1950, slashed to 0.4 today and again to 0.2 by mid-century. Although the rate is falling the numbers are still high: deaths by 2050 will likely still be around 1.7 million, mostly in sub-Saharan Africa, though down from 2.3 million today and 2.7 million of a much smaller population in 1950. It is great progress but still needs much more.

And progress does not just mean huge infrastructure projects: simple improvements such as chlorination or hand-washing reduce illness significantly, while piped water may make little difference if basic hygiene is not improved.

Measuring the impact in economic terms is not only about disease and death. This year, collecting water will take – mostly women – 74 billion hours, making up one-third of total losses. In all, the economic losses to developing world GDP from poor water and sanitation have already fallen from some 2% of GDP in 1950 (1/5 of GWP = 0.4% of GWP) to 0.13% in 2013 (about 35% of GWP = 0.05% of GWP). By mid-century losses will be down to just 0.02% (and maybe 60% of GWP = 0.01% of GWP).

Water and sanitation assessment (89 pages)

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