By BJORN LOMBORG
WE seldom acknowledge that lack of knowledge – ignorance, if you like – impairs the spending decisions of policymakers and international aid organisations. Yet their priorities are often set in an ad hoc way with little regard for achieving the largest welfare gains possible.
Recently, a rare attempt was made to improve the quality of decision-making in Latin America and the Caribbean.
The Consulta de San José in Costa Rica asked a group of leading economic experts to rank solutions to the biggest challenges facing the region.
For the first time, all the costs and benefits of more than 40 different policy options were laid out side-by-side. The results were eye-opening.
Over three days, experts heard evidence about the region’s biggest challenges and it became clear that politicians often make decisions based on limited knowledge.
They put money into unproven policy initiatives.
There is no clear evidence, for example, that shows how we can actually improve the quality of education in schools.
A programme to provide teachers with monetary incentives and professional training was recently established in Mexico, but research shows no significant impact on educational outcomes.
Domestic violence rates appear to be high in Latin America. The cost and damage is significant. Yet there is a disturbing lack of research to show what policy options have worked in the region.
Latin American and Caribbean governments need to know how to raise educational quality and combat domestic violence.
Having no proven strategies or relevant estimates of costs and benefits is frightening.
Both for domestic violence and educational quality, the Consulta highlighted a need for urgent research.
But the experts’ ranking of priorities also revealed some exciting and promising policy options.
At the top, they rated early childhood development programmes.
There is a compelling case for increased public investment at the start of a child’s life. This could mean providing day-care services and preschool activities, improving hygiene and health services, or teaching parenting skills.
Research shows that early childhood development programmes in Latin America lead to higher levels of school readiness, enrolment, and academic performance.
Mothers and older siblings become free to work or to further their own education.
These programmes should be emulated not just in the region but in other countries facing similar problems.
They are relatively cheap and have benefits between five and 19 times greater than the costs.
The next most important strategy that the panel identified – better fiscal rules – may not seem sexy, but it is attractive because it effectively costs nothing.
Though Latin America’s economies are doing well now thanks to reform and high commodity prices, there are underlying problems.
The goal is to implement a comprehensive set of fiscal responsibility laws that curb the ability of legislatures and ministers to increase spending relentlessly.
The rules need to impose limits on deficits, spending and debt and require transparency so that the public knows what’s going on.
If matched by a genuine commitment to develop fiscal credibility, countries could increase their economic growth substantially.
Third on the panel’s list is increased investment in the construction and maintenance of infrastructure.
Most countries in Latin America and the Caribbean spend less than 2% of GDP on infrastructure, compared with 3% to 6% in China and South Korea.
Investment is particularly needed in the road network to build the arteries that bring jobs and prosperity: most of the extreme poor in Latin America’s rural communities live 5km or more from the nearest paved road.
Other highly-ranked policy options include the establishment of independent agencies to evaluate rigorously government spending programmes, and more use of conditional cash transfer programmes that provide regular payments to poor households for meeting conditions like sending children to school.
At the bottom of the list, the expert panel gave very low rankings to the idea of restricting alcohol sales (as a proposed solution to health problems), educational voucher programmes, and prison drug treatment and reintegration programmes.
This does not mean that these policies do not work, but that their benefits are much smaller than those of higher-ranked strategies.
And there is debate about how effective some of them are. Educational voucher programmes, for example, took a knock when careful analysis of a Chilean programme found no positive effect on students’ performance.
While climate change and biodiversity have become hot issues elsewhere, the panel concluded that the policy option of preserving rain forests to create carbon sinks would have international benefits but local costs, so these problems should properly be thought of as global issues rather than specifically Latin American ones.
The Consulta succeeded in its goal of highlighting the most cost-effective ways to combat the region’s biggest problems.
However, it also underscored the areas where politicians are fumbling in the dark without decent research, and created a yardstick against which we can now measure policymakers’ spending decisions. – Project Syndicate

* Bjorn Lomborg is the organiser of Copenhagen Consensus, adjunct professor at the Copenhagen Business School, and author of Cool It and The Skeptical Environmentalist.