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CATZ RESEARCH
Sudhir Anand Fellow in Economics
& Professor of Economics on the publication
of his new book, The Cost of Inaction
© The World Bank
The cost of not undertaking an action can be
much greater than the cost of undertaking
it. Inaction can lead to serious negative
consequences – for individuals, for society, and
for the economy. The consequences of a failure
to address extreme poverty, for example, include
child malnutrition, lack of basic education,
preventable morbidity, premature mortality, and
other costs borne by the poor. Failure to provide
primary schooling to children can lead to lower
future incomes, higher HIV/AIDS risk behaviors,
increased fertility, and numerous other costs.
To illustrate the application of the cost of
inaction (hereafter COI) approach, we have
conducted six case studies – three in Rwanda
and three in Angola. These studies highlight
the importance of identifying appropriate
interventions as sets of complementary actions,
not simply as isolated single actions. An
excellent example of an integrated intervention
is the scaled-up FXB-Village Program in
Rwanda, which consists of a set of tightly-knit
complementary actions designed to lift people
out of extreme poverty by enhancing their basic
capabilities. The other two actions in Rwanda
involve school feeding and secondary schooling,
respectively. In Angola, the interventions are:
provision of a community healthcare system,
strengthening of the education system, and an
adult and infant male circumcision program.
The COI approach distinguishes between
constitutive and consequential benefits. The
distinction is important because in addition to
the direct benefits which ‘constitute’ an action,
the consequential or indirect benefits of an
action should form part of the information set
to evaluate its benefits. Without an explicit
recognition of consequential benefits, they
may tend to get ignored. For example, reducing
maternal mortality will have both constitutive
and consequential benefits. The constitutive
benefit of an intervention to reduce maternal
mortality is fewer maternal deaths. But there
are also consequential benefits of mothers’
survival for their children’s early development,
health and education.
The inclusion of consequential benefits
highlights the fact that actions in one area
can lead to benefits in other areas. The COI
approach forces the evaluator to consider the
value of an action across different sectors.
For instance, the evaluation of an education
intervention should take account of its
consequential health benefits.
In COI analysis a plural approach is taken
to identify and value benefits. As in the
accounting of human development, COI
benefits are considered in three main
dimensions: health, education, and income. The
different types of benefit are listed separately,
and we can think of them as a vector of
benefits. The vector includes both constitutive
and consequential benefits, and quantified and
non-quantified benefits, with the quantified
benefits specified in monetary or non-monetary
terms. No attempt is made at reducing values
in different spaces to a common money metric.
By listing benefits in different dimensions
separately, the COI approach provides
information that supports discussion on the
evaluation of different outcomes.
Interventions directed at children lend
themselves particularly to COI analysis
50/SUDHIR ANAND