I worry that your stated estimates, aren’t really enough to secure adequate funding on traditional CBA grounds.
For example, it doesn’t work in many countries. There are only a fifth as many people living in the UK, so only a fifth as many beneficiaries. Thus the benefits internalised by the UK are a fifth as high, so the cost-benefit ratio is only a fifth as good. Moreover, the UK is poorer, so people are less willing to pay to avoid risk and the VSLs used by the government are substantially lower (I think about a fifth your stated figure — £2M), such that the package you list would dramatically fail the CBA by a factor of 25 or so in the UK. Many other countries are poorer or smaller than the US in some combination and will have trouble meeting this cost-benefit bar on the estimates you gave.
Even in the US, your estimates for the cost-benefit calculation aren’t really enough to make it go through. It would be if all these interventions were inextricably bound up as a package, or if all funding on them had equal effect. But CBA cares about marginal cost effectiveness and presumably the package can be broken into chunks of differing ex-ante cost-effectiveness (e.g. by intervention type, or by tranches of funding in each intervention). Indeed you suggest this later in the piece. Since the average only just meets the bar, if there is much variation, the marginal work won’t meet the bar, so government funding would cap out at something less than this, perhaps substantially so.
Moreover, your analysis suggests the package only marginally meets the cost-benefit threshold and requires some educated guesswork to do so (the amounts it would lower existential risk). Such speculative estimates that drive a large funding choice are usually frowned on in CBA. So even if it is marginally worth funding if government attention and capacity were free, it wouldn’t be a high priority.
My guess is therefore that a national package of interventions by the US would need to be notably more modest than this one to get funded purely on traditional CBA grounds, and much more modest to get funded in the UK or elsewhere, widening the gap between what traditional CBA gets us and what the addition of longtermist considerations could achieve.
But CBA cares about marginal cost effectiveness and presumably the package can be broken into chunks of differing ex-ante cost-effectiveness (e.g. by intervention type, or by tranches of funding in each intervention). Indeed you suggest this later in the piece. Since the average only just meets the bar, if there is much variation, the marginal work won’t meet the bar, so government funding would cap out at something less than this, perhaps substantially so.
Yes, this is an important point. If we were to do a more detailed cost-benefit analysis of catastrophe-preventing interventions, we’d want to address it more comprehensively (especially since we also mention how different interventions can undermine each other elsewhere in the paper).
On the point about the average only just meeting the bar, though, I think it’s worth noting that our mainline calculation uses very conservative assumptions. In particular, we assume:
A total cost of $400b rounded up from $319.6b
That all the costs of the interventions are paid upfront and that the risk-reduction occurs only at the end of the decade
The lowest VSL figure used by the DoT
The highest discount rate recommended by OIRA
A 1-in-1,000 GCR-reduction from the whole suite
And we count only these interventions benefits in terms of GCR-reduction. We don’t count any of the benefits arising from these interventions reducing the risk of smaller catastrophes.
I think that, once you replace these conservative assumptions with more reasonable ones, it’s plausible that each intervention we propose would pass a CBA test.
I think that these points also help our conclusions apply to other countries, even though all other countries are either smaller than the US or employ a lower VSL. And even though reasonable assumptions will still imply that some GCR-reducing interventions are too expensive for some countries, it could be worthwhile for these countries to participate in a coalition that agrees to share the costs of the interventions.
I agree that speculative estimates are a major problem. Making these estimates less speculative – insofar as that can be done – seems to me like a high priority. In the meantime, I wonder if it would help to emphasise that a speculative-but-unbiased estimate of the risk is just as likely to be too low as to be too high.
I guess this shows that the case won’t get through with the conservative rounding off that you applied here, so future developments of this CBA would want to go straight for the more precise approximations in order to secure a higher evaluation.
Re the possibility of international agreements, I agree that they can make it easier to meet various CBA thresholds, but I also note that they are notoriously hard to achieve, even when in the interests of both parties. That doesn’t mean that we shouldn’t try, but if the CBA case relies on them then the claim that one doesn’t need to go beyond it (or beyond CBA-plus-AWTP) becomes weaker.
That said, I think some of our residual disagreement may be to do with me still not quite understanding what your paper is claiming. One of my concerns is that I’m worried that CBA-plus-AWTP is a weak style of argument — especially with elected politicians. That is, arguing for new policies (or treaties) on grounds of CBA-plus-AWTP has some sway for fairly routine choices made by civil servants who need to apply government cost-effectiveness tests, but little sway with voters or politicians. Indeed, many people who would be benefited by such cost-effectiveness tests are either bored by — or actively repelled by — such a methodology. But if you are arguing that we should only campaign for policies that would pass such a test, then I’m more sympathetic. In that case, we could still make the case for them in terms that will resonate more broadly.
What we’re arguing for is a criterion: governments should fund all those catastrophe-preventing interventions that clear the bar set by cost-benefit analysis and altruistic willingness to pay. One justification for funding these interventions is the justification provided by CBA itself, but it need not be the only one. If longtermist justifications help us get to the place where all the catastrophe-preventing interventions that clear the CBA-plus-AWTP bar are funded, then there’s a case for employing those justifications too.
which answers my final paragraph in the parent comment, and suggests that we are not too far apart.
I guess this shows that the case won’t get through with the conservative rounding off that you applied here, so future developments of this CBA would want to go straight for the more precise approximations in order to secure a higher evaluation.
And thanks again for making this point (and to weeatquince as well). I’ve written a new paragraph emphasising a more reasonable, less conservative estimate of benefit-cost ratios. I expect it’ll probably go in the final draft, and I’ll edit the post here to include it as well (just waiting on Carl’s approval).
Re the possibility of international agreements, I agree that they can make it easier to meet various CBA thresholds, but I also note that they are notoriously hard to achieve, even when in the interests of both parties. That doesn’t mean that we shouldn’t try, but if the CBA case relies on them then the claim that one doesn’t need to go beyond it (or beyond CBA-plus-AWTP) becomes weaker.
I think this is right (and I must admit that I don’t know that much about the mechanics and success-rates of international agreements) but one cause for optimism here is Cass Sunstein’s view about why the Montreal Protocol was such a success (see Chapter 2): cost-benefit analysis suggested that it would be in the US’s interest to implement unilaterally and that the benefit-cost ratio would be even more favourable if other countries signed on as well. In that respect, the Montreal Protocol seems akin to prospective international agreements to share the cost of GCR-reducing interventions.
Regarding your CBA:
I worry that your stated estimates, aren’t really enough to secure adequate funding on traditional CBA grounds.
For example, it doesn’t work in many countries. There are only a fifth as many people living in the UK, so only a fifth as many beneficiaries. Thus the benefits internalised by the UK are a fifth as high, so the cost-benefit ratio is only a fifth as good. Moreover, the UK is poorer, so people are less willing to pay to avoid risk and the VSLs used by the government are substantially lower (I think about a fifth your stated figure — £2M), such that the package you list would dramatically fail the CBA by a factor of 25 or so in the UK. Many other countries are poorer or smaller than the US in some combination and will have trouble meeting this cost-benefit bar on the estimates you gave.
Even in the US, your estimates for the cost-benefit calculation aren’t really enough to make it go through. It would be if all these interventions were inextricably bound up as a package, or if all funding on them had equal effect. But CBA cares about marginal cost effectiveness and presumably the package can be broken into chunks of differing ex-ante cost-effectiveness (e.g. by intervention type, or by tranches of funding in each intervention). Indeed you suggest this later in the piece. Since the average only just meets the bar, if there is much variation, the marginal work won’t meet the bar, so government funding would cap out at something less than this, perhaps substantially so.
Moreover, your analysis suggests the package only marginally meets the cost-benefit threshold and requires some educated guesswork to do so (the amounts it would lower existential risk). Such speculative estimates that drive a large funding choice are usually frowned on in CBA. So even if it is marginally worth funding if government attention and capacity were free, it wouldn’t be a high priority.
My guess is therefore that a national package of interventions by the US would need to be notably more modest than this one to get funded purely on traditional CBA grounds, and much more modest to get funded in the UK or elsewhere, widening the gap between what traditional CBA gets us and what the addition of longtermist considerations could achieve.
Yes, this is an important point. If we were to do a more detailed cost-benefit analysis of catastrophe-preventing interventions, we’d want to address it more comprehensively (especially since we also mention how different interventions can undermine each other elsewhere in the paper).
On the point about the average only just meeting the bar, though, I think it’s worth noting that our mainline calculation uses very conservative assumptions. In particular, we assume:
A total cost of $400b rounded up from $319.6b
That all the costs of the interventions are paid upfront and that the risk-reduction occurs only at the end of the decade
The lowest VSL figure used by the DoT
The highest discount rate recommended by OIRA
A 1-in-1,000 GCR-reduction from the whole suite
And we count only these interventions benefits in terms of GCR-reduction. We don’t count any of the benefits arising from these interventions reducing the risk of smaller catastrophes.
I think that, once you replace these conservative assumptions with more reasonable ones, it’s plausible that each intervention we propose would pass a CBA test.
I think that these points also help our conclusions apply to other countries, even though all other countries are either smaller than the US or employ a lower VSL. And even though reasonable assumptions will still imply that some GCR-reducing interventions are too expensive for some countries, it could be worthwhile for these countries to participate in a coalition that agrees to share the costs of the interventions.
I agree that speculative estimates are a major problem. Making these estimates less speculative – insofar as that can be done – seems to me like a high priority. In the meantime, I wonder if it would help to emphasise that a speculative-but-unbiased estimate of the risk is just as likely to be too low as to be too high.
Thanks Elliott,
I guess this shows that the case won’t get through with the conservative rounding off that you applied here, so future developments of this CBA would want to go straight for the more precise approximations in order to secure a higher evaluation.
Re the possibility of international agreements, I agree that they can make it easier to meet various CBA thresholds, but I also note that they are notoriously hard to achieve, even when in the interests of both parties. That doesn’t mean that we shouldn’t try, but if the CBA case relies on them then the claim that one doesn’t need to go beyond it (or beyond CBA-plus-AWTP) becomes weaker.
That said, I think some of our residual disagreement may be to do with me still not quite understanding what your paper is claiming. One of my concerns is that I’m worried that CBA-plus-AWTP is a weak style of argument — especially with elected politicians. That is, arguing for new policies (or treaties) on grounds of CBA-plus-AWTP has some sway for fairly routine choices made by civil servants who need to apply government cost-effectiveness tests, but little sway with voters or politicians. Indeed, many people who would be benefited by such cost-effectiveness tests are either bored by — or actively repelled by — such a methodology. But if you are arguing that we should only campaign for policies that would pass such a test, then I’m more sympathetic. In that case, we could still make the case for them in terms that will resonate more broadly.
I’ve just seen your comment further down:
which answers my final paragraph in the parent comment, and suggests that we are not too far apart.
Yes, I think so!
And thanks again for making this point (and to weeatquince as well). I’ve written a new paragraph emphasising a more reasonable, less conservative estimate of benefit-cost ratios. I expect it’ll probably go in the final draft, and I’ll edit the post here to include it as well (just waiting on Carl’s approval).
I think this is right (and I must admit that I don’t know that much about the mechanics and success-rates of international agreements) but one cause for optimism here is Cass Sunstein’s view about why the Montreal Protocol was such a success (see Chapter 2): cost-benefit analysis suggested that it would be in the US’s interest to implement unilaterally and that the benefit-cost ratio would be even more favourable if other countries signed on as well. In that respect, the Montreal Protocol seems akin to prospective international agreements to share the cost of GCR-reducing interventions.