Economic & Social Affairs DESA Working Paper No. 30 ST/ESA/2006/DWP/30 September 2006 Achieving the Millennium Development Goals: What’s wrong with existing analytical models? Sanjay G. Reddy and Antoine Heuty Abstract Th is study critically evaluates analytical models presently used to estimate the cost of achieving the Millennium Development Goals (MDGs) from sources including the UN Millennium Project, the UN Development Programme, the World Bank and the Zedillo Commission. Eff ective strategic choices for achieving the MDGs must be based on sound assessments of the costs and benefi ts of alternative policies. However, the existing approaches are unreliable. Th ey derive from implausible and restrictive assumptions, depend on poor quality data, and are undermined by the presence of large uncertainties concerning the future. An alternative and less technocratic approach to planning is required. JEL Classifi cation: O11, O21 Keywords: Poverty, Development, Millennium Development Goals Sanjay G. Reddy is an Assistant Professor in the Department of Economics, Barnard College, Columbia University. Tel: 1212 854 3790, Fax: 1212 854 8947. Email: [email protected] Antoine Heuty is a Public Finance Economist, United Nations Development Programme, 304 East 45th Street, 11th fl oor. New York, USA 10017. Tel: 1212-906-3665. Email: [email protected] Comments should be addressed by email to the authors. Contents MDG Cost Estimates ................................................................................................................... 1 Th e Millennium Development Goals ................................................................................. 1 Global cost estimates .......................................................................................................... 2 Country-level cost estimates ............................................................................................... 3 Importance of cost estimates in the choice of strategies ................................................................ 4 Th e role of aggregate cost estimates in informing the choice between objectives ................. 4 Th e role of aggregate cost estimates in planning to achieve an objective .............................. 4 Th e role of disaggregated cost estimates in planning to achieve an objective ....................... 5 Analytical Requirements of a Cost Estimate ................................................................................. 6 Identify the cost concept .................................................................................................... 6 Accurately identify the baseline scenario ............................................................................. 6 Accurately identify the cost function .................................................................................. 6 Identifi cation of unit costs .................................................................................................. 6 Projection of unit costs over the coverage range .................................................................. 6 Main Methodological Problems ................................................................................................... 7 Unjustifi ed assumptions ..................................................................................................... 7 Weaknesses in Data ............................................................................................................ 14 Unpredictable Future Shocks .............................................................................................. 15 Conclusions ................................................................................................................................. 16 Principles underlying an alternative approach ..................................................................... 17 References .................................................................................................................................... 18 Appendix ...................................................................................................................................... 21 UN/DESA Working Papers are preliminary documents circulated in a limited number of copies and posted on the DESA website at http://www.un.org/esa/desa/papers to stimulate discussion and critical comment. Th e views and opinions expressed herein are those of the author and do not necessarily refl ect those of United Nations the United Nations Secretariat. Th e designations Department of Economic and Social Aff airs and terminology employed may not conform to 2 United Nations Plaza, Room DC2-1428 United Nations practice and do not imply the New York, N.Y. 10017, USA expression of any opinion whatsoever on the part Tel: (1-212) 963-4761 • Fax: (1-212) 963-4444 of the Organization. e-mail: [email protected] Typesetter: Valerian Monteiro http://www.un.org/esa/desa/papers Achieving the Millennium Development Goals: What’s wrong with existing analytical models? 1 Sanjay Reddy and Antoine Heuty Th is study critically evaluates existing analytical models used to estimate the cost of achieving the Millenni- um Development Goals (MDGs)—from sources including the UN Millennium Project, UN Development Programme, the World Bank and the Zedillo Commission. Eff ective strategic choice requires the comparison of the costs and benefi ts of alternative strategies. However, existing approaches to identifying the costs and benefi ts of alternative strategies for achieving the MDGs are unreliable. A practical alternative to these exist- ing approaches exists. Th e alternative approach to strategic choice rejects heavy reliance upon “technocratic” models conjectured to describe the reality, and substitutes informed decision-making that is periodically up- dated on the basis of new information and collective deliberation. Th e alternative diminishes the likelihood of costly errors that arise from faulty analytical models. In the next section, we introduce the MDGs. In the section that follows it, we discuss the impor- tance of cost estimates in the choice of strategies, establishing the rationale for estimating the costs of achiev- ing the MDGs—whether taken together or separately, and whether considered globally or in individual countries. Th e main -- conceptual and practical -- requirements of a cost estimate are studied next. Th e problems that beset the analytical models surveyed are examined in the following section. In the conclusion, we suggest an alternative to the technocratic approach to MDG strategy. MDG Cost Estimates Th e Millennium Development Goals Th e Millennium Development Goals (MDGs) are a set of eight specifi c (in many instances, quantitative) ob- jectives for the betterment of the human condition, including goals of poverty reduction and improvement in education, gender equality, health, and environmental quality2. Th e MDGs replace various previous UN initiatives to provide time-bound and quantitative global goals to guide and infl uence national and international strategies for development. Since its creation, the United Nations system has defi ned a wide variety of global goals with specifi c outcome targets, including, among others, ending colonialism (a focus especially in the period from the 1940s to the 1960s), accelerating economic growth through increased international assistance (a focus during the UN Development Decade in the 1960s and the three subsequent decades) and eradicating smallpox, malaria and other communicable diseases (a focus from the 1950s onward).3 1 We are grateful for the research assistance of Camelia Minoiu. We would like to off er our thanks to Diane Elson, Laura Reichenbach, Michael Ward, Jacques Loup, Kamal Malhotra, Joseph Lim and Mathieu Brossard for their detailed comments on the paper. We thank Chandrika Bahadur, David Grewal, Lynn McDonald, and Guido Schmidt-Traub for helpful conversations. We are especially grateful for the intellectual and practical advice of Rathin Roy and Jan Vandemoortele., Finally, the thoughtful comments provided by Sudhir Anand, Tony Addison, Santosh Mehrotra, Ann Pettifor, and David Sahn at a workshop in Florence have been of tremendous value in extending and revising the paper, as have comments by Michael Reich and Norman Daniels at a presentation at the Harvard Center for Population and Development Studies. 2 Each goal is associated with specifi c targets, eighteen in total; and each target is related to quantifi able indicators, forty- eight in total. Th e diff erent goals, targets and indicators are presented in Appendix 1. 3 For more detailed information on the history of UN global goals, see Jolly, R., 2003. 2 DESA Working Paper No. 30 In 1995, the OECD Development Assistance Committee (DAC) engaged in a year long process of reviewing past experiences and of planning long-term policies. Th is initiative resulted in the report Shaping the 21st Century: Th e Contribution of Development Co-operation, published in May 1996, which formulated seven goals extracted from the resolutions of UN conferences and meetings.4 Subsequent expert meetings led to the defi nition of quantifi ed International Development Targets (IDTs) (measured by 21 indicators) to be achieved by 2015 (United Nations, 2000). Th e MDGs are a synthesis of the International Development Goals agreed upon at the UN social development conferences and global summit meetings of the 1990s, and the Millennium Declaration adopted by heads of state at the Millennium Summit in New York in September 2000