Archive for July, 2008

Balloon, meet pin

Thursday, July 31st, 2008

Far from being a dismal science, I’ve always thought economics had a certain gimlet-eyed appeal. More often than not, economics is to ideology what the pin is to the balloon — the first, of course, being that which deflates the second. But economics is an equal-opportunity deflator, as I discovered a few days ago.

The background: I’ve long taken a perverse glee at the conclusions about climate change issued by the Copenhagen Consensus, the gathering of top economists who debate which global problems can be most efficiently addressed by throwing money at them. The current prescription for addressing global warming by reducing carbon emissions shows up at the bottom of the list. In the economists’ judgment, the cost of implementing carbon-reduction plans like those recently proposed by Al Gore would be far higher than the economic return. It would be akin to spending $50,000 to repair a 1992 Plymouth with a quarter-million miles on the odometer. No matter how much money you throw at it, you’re still gonna have a hooptie. (I’m not a global warming skeptic, by the way — at least not much of one — but I’m profoundly skeptical of the cures being proposed. Focus on that distinction, my progressive friends.)

But what comfort the economists giveth, they taketh away. Turns out they think defensive measures against terrorism are likewise a waste of money for what we’re getting.

I learned that on Monday, when I read this piece in the Wall Street Journal. The Copenhagen Consensus has put ten topics on the table for its 2008 discussion, and one of them is terrorism. The economists’ judgment is that counter-terrorism measures tend to only prompt a shift in tactics by the bad guys: Beef up embassy security, for instance, and terrorists will focus on other targets. Furthermore, transnational terrorists kill relatively few people, in reality. As the economists noted:

Increasing defensive measures world-wide by 25% would cost at least $75 billion over five years. In the extremely unlikely scenario that attacks dropped by 25%, the world would save about $21 billion. That figure is reached by adding up the economic damage caused by terrorists, and by putting a high economic value on the lives lost.

But even in this best-case scenario, the costs will be at least three times higher than the benefits. Put another way, each extra dollar spent increasing defensive measures will generate — at most — about 30 cents of return.

We could save about 105 lives a year, globally. There are few areas where we would consider spending so much to do so little. To put this into context, 30,000 lives are lost annually on U.S. highways.

See what I mean? Economics has way of biting the butts of liberals and conservatives alike.