The British economics Lionel Robbins defined economics as "the study of the use of scarce resources which have alternative uses."  It's a pretty simple concept — if the cost of filling up one's gas tank increases from $40 to $80, then one has $40 fewer to spend on, say, that new pair of Nikes or tickets to the Astros game.  In the general economy, the concept can become more complex, particularly when government and politics get involved.  Additional taxes paid by businesses reduce the pool of money available for employee bonuses, capital investments, or additional employees.  Land used for planting corn subsidized for ethanol production is then not available to grow wheat or beans or other crops. 

Politicians rarely look towards greater efficiency in promoting policies; rather, typically the opposite is the goal of government initiatives, as few laws are typically required to coerce people to do what's in their own best interest, and in the abstract of a free market competition promotes greater efficiency.  I'm not likely to use my scarce resource of time on what is for me a highly inefficient task of working on my car; better instead for me to pay the mechanic to do so, while I use my time to work at something at which I am myself more efficiently deployed.

Few places are economics as defined by Robbins ignored more than in government action in health care and the environment.  As demonstrated by the recent debate over "cap and trade" legislation in the US Senate, politicians often are willing to commit much of the scarce resource of our paychecks to projects of undefined and even dubious merit.  Some estimates of the cost of the Warner-Lieberman legislation entered the trillions of dollars; yet no mention of the alternative use of these resources was discussed, and as mentioned above the benefit was nowhere defined.  The question remained:  what benefit would cap-and-trade bring, and at what cost?  Is cap-and-trade the most efficient use of our scarce resources, even if one accepts at face value the premise that global warming is in fact a man-made problem for which there is a legislative solution?  Are there other problems even more pressing than global warming that are more urgent, or even some "low hanging fruit" — problems that could be easily solved for a great number of people at a minimal cost?

A group of esteemed economists, including five Nobel Prize laureates, convened in a project called the Copenhagen Consensus.  Their task was to examine the state of the art in terms of research and capabilities to solve global problems in the following areas:  air pollution, conflict, disease, global warming, hunger and malnutrition, lack of education, gender inequity, lack of water and sanitation, terrorism, and trade barriers.  This group is no "industry hack", nor "in the pocket of Big Oil" — one of the lead researchers was also a lead author on the report of the Intergovernmental Panel on Climate Change — the group that shared last year's Nobel Peace Prize with former vice president Al Gore.

The group's findings were interesting, to say the least.  They found that "spending $800 billion over 100 years solely on mitigating emissions would reduce inevitable temperature increases by just 0.4 degrees Fahrenheit by the end of this century. Even accounting for the key environmental damage from warming, we would lose money, with avoided damage of just $685 billion for our $800 billion investment."  This hardly seems an efficient use of scarce resources.

The panel didn't advocate ignoring the effects of global warming; rather than cutting emissions by decree, however, in the manner of government command-and-control methods such as cap-and-trade, the panel instead advocated a dramatic increase in the research and development of alternative energy technologies such as solar panels.

Perhaps most interesting, however, was that even this consensus choice towards fighting global warming didn't crack the Top 10 list of the most cost-effective ways of helping the world's poor.  Unfortunately, the list of actual cost-effective impact actions as determined by the Copenhagen Consensus aren't flashy, and aren't likely to be front-page headlines.  Number 1?  Vitamin A and zinc supplements.  Number 3?  Iron supplements and salt ionization.

Perhaps most surprising was the Number 2 action.  Far from a government program, rather it is also an option that increases individual liberty:  increased free trade.  Yes, free trade is good for the poor, and good for the environment, regardless of the protectionist hostility aimed at it by people like Barack Obama, Lou Dobbs, and Pat Buchanan.  As Bjorn Lomborg, the political scientist who heads the project, states:  "It's true that trade doesn't immediately save lives, but it's proven that when people have more money they improve their health, their education and so on."  And people tend to have more money when they pay less for goods and services (as happens when tariffs are lifted on imports) and when they have increased markets for the goods and services they produce (as happens when import tariffs are reduced in other countries).

When politicians are spending money, they aren't spending their own money but rather they are spending ours.  The incentive is not efficiency, but rather the appearance of "doing something".  With global warming hysteria on the front page nearly every day, being seen as engaged in the "fight" against global warming is perceived as a good way to appear strong and visionary.  Instead, a truly visionary group of economists is showing us that there are better ways to allocate our scarce resources.

If truly helping people is the goal, rather than self-serving, short-sighted, political expediency, our politicians would be well-served to read the recommendations of the Copenhagen Consensus.