Thursday, June 01, 2006

$6 can change a life

I did a lot of graduate work on cost-benefit analysis, and spent a large part of my early career doing cost-benefit analysis for projects and programs. I got disillusioned because of two big problems.

  • Conceptual: There are big problems comapring apples and oranges. These problems are compounded because different people value apples and oranges differently, and different people place a different value on an apple today versus two apples tomorrow.

  • Usefulness: I found that despite the tens (or hundreds) of millions of dollars we spent on evaluation at the World Bank, the lessons learned were adopted very slowly.

But it is important not to throw the baby out with the bathwater. Sometimes it is useful to compare costs and benefits at a very general level just as a reality check on where funds are flowing. To this end, we have started doing some analysis on projects funded through GlobalGiving, because we believe it will be useful to donors.

We decided to start with the imperfect metric of "the cost of positively improving one person's life." This metric is very crude, and the data are still limited, but it is a start. Here are the initial results. In the last couple of years, it has cost about $6 to improve a person's life through projects funded on GlobalGiving.

When Eli and I were visiting Geneva Global recently, we found that they were coming up with siimilar cost numbers.

Within this, there are wide variations. For example, economic development projects cost more, and health, education, and human rights projects cost less. As mentioned, these are not directly comparable, because projects in one sector may have a greater impact on a person's life, or that impact may last longer.

Based on what we have to date, we estimate that more than 500,000 people's lives have been improved in some way through the 700+ projects funded on GlobalGiving.

We will continue to work on the numbers and over time will provide more details as we get more data.