Market Incentives to End War: ebook now available

My book Market Incentives to End War: World Peace Bonds, is now available as an ebook at Amazon. It is short, at about 24000 words. A softback printed version should be available soon. I will make pdfs of the chapters available at SocialGoals.com for no charge, but if you would like to support my work please consider buying the ebook or the printed version when that becomes available. 

World Peace Bonds: Chapter 3

This is the first draft of the third chapter of a book I'm writing on World Peace Bonds. It is quite long. I will make all chapters freely available for download as pdfs once the book is finished. Comments are welcome.

Chapter 3: World Peace Bonds: an overview

This chapter describes a new financial instrument, World Peace Bonds, designed to inject market incentives into the elimination of violent political conflict.

World Peace Bonds

World Peace Bonds would be issued by a trusted financial institution. Funds for their redemption would be raised by a combination of governments, charitable bodies, non-governmental organisations, corporations, philanthropists and ordinary citizens – anyone, in short, with a genuine interest in peace. These would be the backers of the bonds: those who contribute funds for their redemption. The bonds would be issued on the open market and would become redeemable for a fixed sum only when the goal of world peace had been reached and sustained for a defined period, which I envisage to be at least thirty years. The targeted outcome of world peace would be rigorously defined, most probably in terms of an array of quantifiable elements, each of which would have to fall into a specified range before the bonds could be redeemed. Importantly, the bonds would make no assumptions as to how to minimise conflict—that would be left to bondholders.

Normal bonds are redeemable at a fixed date, for a fixed sum, and so yield a fixed rate of interest. World Peace Bonds would not bear interest and their redemption date would be uncertain. Bondholders would gain most by ensuring that the targeted elements of world peace were being achieved quickly. (Unless otherwise stated, hereafter ‘bonds’ refer to World Peace Bonds, rather than conventional bonds.)

The backers of the bonds, with the help of the United Nations, academic bodies, non-governmental organisations and charities, would collectively decide on the exact specification of the world peace goal. The bonds would be issued by open tender, as at an auction; those who bid the highest price for the limited number of bonds would be successful in buying them. Each bond would become redeemable for, say, $1 billion once the targeted level of peace, as certified by objective measurements made by independent bodies, had been achieved and sustained. Once issued, the bonds would be freely tradable.

Assume that World Peace Bonds, each redeemable for $1 billion, had been issued, and that they each sold for $100 million. People, or institutions, now hold an asset that gave them a return of 900 percent once the targeted peace level had been achieved. It is the prospect of this capital gain that would give bondholders a powerful incentive to do what they can to prevent and end deadly conflicts, and to do so as cost-effectively as possible.

Once issued the bonds would be freely tradable on the open market. Governments—including those currently engaged in deadly conflicts—might decide to buy World Peace Bonds. So too might non-governmental militant organisations and others who are currently financing violence. Or the issuers might give the bonds to certain of these bodies as a form of aid. Ownership of World Peace Bonds would enable these bodies to reap financial rewards by ceasing to foment conflict. They could do by taking on new roles that they have not even considered because they have had no incentive to do so.

But World Peace Bonds, being tradable on the open market, could be bought by other institutions or individuals at any time until redemption. Whenever potential investors in the bonds thought they could reduce conflict more effectively than current bondholders, then they would be in a position to offer more than the current market value of the bonds to the existing bondholders, and buy them. The financial costs of failing to reach the required target would be borne by bondholders, rather than those contributing to the redemption funds.

Bondholders would have the means, motive and opportunity then to use their own capital, or borrow on the strength of the redemption value of their bond holdings, or on the strength of any increase in the value of their bonds, to support projects that will prevent, or lower the level of violent conflict.

Note that the bond mechanism would be helped by the support and participation of governments or organisations actually engaged in conflict, but it would not rely on such support. The bonds might give rise to new, specialist organisations devoted to minimising violent political conflict as cost-effectively as possible. These organisations could use their anticipated capital gains from bondholding to finance those people or organisations, whether or not they are active participants in conflict, who could do most to build peace.

What would determine the price of the bonds? Most obviously, the market’s assessment of how close the peace target were to being achieved. The bonds would sell for small fractions of their issue price if people thought there were virtually no chance of world peace being achieved in their lifetime. People would differ in their valuation of the bonds, and their views would change as events occurred that made achievement of the targeted peace objective a more or less remote prospect. But the bonds, once issued, would be transferable at any time. Bondholders, having contributed to a lessening of the conflict, would see the value of their bonds rise. They could then sell their bonds and realise a capital gain.

The market prices of World Peace Bonds would be publicly quoted, just like those of ordinary bonds or shares. These prices would change over time, depending mainly on the market’s perception of the likelihood and timing of the world peace goal being achieved. (Expected returns from other financial instruments will also be a factor.) The bond price, and its changes over time, would be a source of information that would help those allocating conflict-reducing resources to do so as effectively as possible - this feature is discussed in the next chapter.

The importance of the long term

Peace in the short term can signify nothing more than a temporary lull in overt hostilities, giving opposing sides time to accumulate more weaponry and continue to intensify hatred of each other. A temporary cessation of conflict could just be the precursor to an explosion of hostilities later on. But, a decades-long absence of conflict could be qualitatively different, in that it would help bring about a warm peace – difficult to quantify and define, but achievable simply because, with a long time horizon, bondholders would invest in, and benefit from generational changes in education, media influence, and the possibilities of forgiveness. Bondholders, in working towards a decades-long peace, could create a warm peace. Not always – Egypt and Israel have had a long period of peace marred by some degree of antipathy but even so, simply because of the length of that peace, war is less likely to occur: the military’s mindset and capabilities have atrophied over time.

Whatever holders of World Peace Bonds do, they will have successes and failures. But they will also have incentives to terminate projects that are failing and to refine and replicate their successes - to be efficient, in other words. Government has no such direct incentive. It rarely offers direct financial rewards for success, and its talent pool is limited, partly for that reason. It has a short-term focus, too often resorting to military action, and it would get into trouble if it advocated things like intermarriage, or sponsored sybaritic retirement for the world’s warmongers. Its actions tend to be one-size-fits-all, slow to adapt and advocated mainly because they have been done before, rather than because of their putated efficiency: government will always prefer approaches with which it’s familiar over innovative, promising, and successful initiatives that entail relinquishing some of their powers.

The field of conflict is one area where the private sector can and should be given the chance to operate more freely on the side of peace. Sadly, it is largely private, short-term incentives - to arms dealers, the military, politicians and fanatics - that keep conflict going. A well-funded bond regime with a long-term perspective would redress the balance.

Under a World Peace Bond regime, government could still play a role in defining our peace goal and raising some of the revenue for its achievement but, rather than wait for that to happen, the private sector could have to take the initiative. That could mean a combination of NGOs, interested corporations, charitable organisations, philanthropists and ordinary citizens. Probably all of these, with perhaps some government backing, would be needed to raise sufficient funding. A well-crafted issue of World Peace Bonds should gather support from a wide range of players: sustained world peace would benefit every person on the planet.

What to target?

The precise definition of World Peace Bonds’ goals is crucial.

The bonds could target a Conflict Index comprising a wide range of indicators of conflict and peace simultaneously, over the entire world. An index could comprise various components including:

• Number of direct and indirect deaths resulting from armed conflict.
• Numbers of refugees fleeing armed conflict areas.
• Military spending, on both materiel and personnel.
• Numbers of people in the military.

These individual components would all be targeted simultaneously and all have to fall within a specified range for a sustained period before the bonds would be redeemed. None of these components is simple to measure, so all would need to be carefully thought through, but that should not deter us from trying. The main focus could be on obvious, undeniable conflicts, where numbers killed directly can be relatively easily estimated; an example would be the war between Ukraine and Russia.

Key criteria are that components of a targeted conflict-reduction objective should:

• Represent, when targeted, ends in themselves, or be strongly and inextricably correlated with such ends, and
• Be possible to measure objectively, reliably and accurately.

These criteria will have some bearing on whether the goal of world peace is too ambitious, at least at first.

Variants

World Peace Bonds are the most ambitious variant of the application of the underlying bond principle. Because the scope of World Peace Bonds is so wide, it might appeal less to potential backers than more focused variants. As well, monitoring the progress toward achievement of world peace could be more difficult than for more focussed variants described below, depending on how the peace outcome is specified. It might be that one of those variants could be ideal as first application of the bond principle; a stepping stone toward the ultimate goal of world peace.

Regional Peace Bonds or bonds focusing on any region. Such bonds aimed at reducing conflict in a particular region would require less funding than World Peace Bonds and so are more likely to gain backing from those with an interest in that region. Conflicts would be easier to monitor for the region than for the entire world. The bonds could be issued for different continents or regions, with different targeted definitions of peace to suit local conditions. For instance, bonds targeting peace in the Middle East could readily target numerical indicators of dead and injured, as these figures are well-documented in comparison to other conflicts. In regions where casualty numbers are unreliable, other indicators would have to be targeted. These could encompass quality of life indicators, such as literacy, or the numbers of people moving across certain boundaries, or the value of weapons purchased by potential participants in conflict. Or conflict-related deaths could be estimated through demographic analyses of census data before and after conflicts, or through indirect mortality measurements such as survey questions on survival of siblings, parents, or spouses.  When appropriate, targets could be specified on the basis of random sampling of populations, with such components as 'proportion of interviewees who have lost one family member to violence' used, rather than unreliable aggregate casualty figures.

Nuclear Peace Bonds would be the easiest to monitor. Redemption could be conditional on there being no use of a nuclear device that kills more than, say 500 people. They could also aim to eliminate all testing of nuclear devices.

Defined end point: World Peace Bonds could have a time limit, such that if the defined goal isn’t reached by a certain specified date, their redemption value decreases.

Variable redemption value: the escrow account into which redemption funds are placed can be swelled by further contributions. Instead of each bond being redeemable for a fixed sum, it could be redeemable for a fixed proportion of the funds at the time of redemption. One example: a group of governments or philanthropists could get the ball rolling by contributing to a redemption fund, then ask ordinary citizens to add to the total.

Which variant is chosen will depend mostly on the views of those who back the bonds, and how much backing the bonds attract. 

Paying for peace

Before each issue of World Peace Bonds, the bonds’ backers would have to decide approximately on the maximum they would be prepared to pay to see the targeted outcome achieved. Some backers, especially governments, might be primarily interested in the financial benefits of sustained peace. If world peace were being targeted, most governments would, ideally, contribute to the redemption funds, perhaps in proportion to their Gross Domestic Product. If reductions in a regional conflict were targeted, governments and private-sector bodies in, or adjacent to, that region would probably be the largest backers.

Even if the full benefits could not be achieved until several decades had elapsed, bondholders would benefit from progress toward that goal. Peace, most would agree, is a worthwhile goal independent of its economic or, seldom mentioned in the literature but increasingly significant, its environmental benefits.[i] We should be aiming to eliminate the human cost of violent political conflict, even though it resists quantification. Indeed, estimating any of the benefits from conflict reduction is going to be problematic but, fortunately, those backing a World Peace Bond issue need not be overly precise in their calculations. They could start by issuing bonds redeemable for as much as they can reasonably afford to spend on reducing any particular conflict. From then on, much of the work necessary to quantify any reduction in conflict per dollar outlay would be done by bidders for World Peace Bonds on the open market.

To see this, assume again that bonds were to be used exclusively in pursuit of a 50 per cent reduction in some targeted measure of conflict, and that one thousand World Peace Bonds are issued, each redeemable for $1 billion once this measure had halved and sustained. If the market decided that the issue value of each of these bonds were $100 million, then the net cost to the backers of achieving the targeted objective (ignoring administration costs and inflation) would be $900 billion. In other words, the market at the time of issue believes that the cost, including its profit margin, of achieving the objective would be $900 billion.

But suppose the bond issuers are in the dark about how much it will cost to achieve a targeted objective and instead of issuing 1000 bonds they issue 10 000, each with the same redemption value of $1 billion. They would then be liable for a maximum cost of $10 000 billion ($10 trillion). However, the market would still reckon that it could achieve the targeted objective for around $900 billion. So instead of valuing the bonds at $100 million each, it would bid up the issue price of each bond to around $910 million. The upshot of this is that the backers of the bonds would not have to estimate with any accuracy how much a targeted objective might cost to achieve, and they would put a cap on their total liability by limiting the number of bonds issued.

So the World Peace Bond mechanism would ensure that the market, rather than a handful of experts, decides roughly how much it would cost to reach a specified reduction in the level of violent political conflict. Participants in the market would do this when they bid for the bonds at issue and at all times afterwards. This fact, and the would-be bondholders’ incentive to minimise their costs, contrast with the current system in which the costs of reducing conflict, if they are calculated at all, are not widely known nor subject to competitive bidding. Under the current system, in fact, many of the organisations charged with reducing conflict have subtle incentives to inflate the costs of their doing so. They will not do this maliciously, and might not even do so deliberately, but it is probably fair to say that they are unlikely to be allocating their conflict-reduction resources with maximum efficiency simply because their livelihoods depend on their not doing so.

Note that the bonds’ backers could add to the redemption funds after floating at any time if it wanted to boost the efforts going into the reduction of worldwide conflict. They could do so from their own resources, or seek funding from others.

Getting governments on board

While the prime motivation for those backing the bonds would be the benefit to humanity, governments could have a more pecuniary interest. Depending on which governments are contributing to the bonds’ redemption funds, and which area of (potential) conflict they are targeting, they might well be interested in financial benefit they might gain by reducing conflict. A significant reduction in worldwide or regional conflict could allow the governments backing the bonds to divert spending away from the military and toward more edifying social or environmental services, or to lighten the tax burden on their populations. Added to this, though, would be the indirect financial benefits to participating governments (and others) who backed a Peace Bond issue. Even if these governments did not envisage any reduction in their own military spending as a result of a reduced level of conflict, their economies could benefit financially from the greater political stability of their region. If, for example, some countries found it possible to reduce their military expenditure, their economies could grow, their imports would increase, and the rewards to bond backers in other countries could take the form of expanded exports.

What could bondholders do?

Some people might buy World Peace Bonds as they would a lottery ticket, or a publicly quoted company share. They would think that their bonds’ value might rise even if they did nothing to help achieve peace. Such passive investors would want to become ‘free-riders’ hoping to benefit from any increase in the bond price without actually participating in any peace-building activities. But the way markets work would limit the opportunities for this sort of investor. The more bonds these would-be free riders collectively owned, the more remote the targeted lower level of conflict would become, and so the more they would stand to lose as the aggregate value of their bond holdings fell. (A fuller discussion of free riding appears in chapter 5.) At some point, then, it would become worthwhile for these passive investors either to become, or to sell their bonds to, active investors.

Active investors would finance initiatives aimed at ending conflict. They could use their own capital, or borrow on the strength of the redemption value of their World Peace Bonds, or on the strength of any potential increase in the value of their bonds, to support projects that help reduce political violence. They would have every incentive to co-operate with each other to help achieve the targeted peace objective, and to do so as cost-effectively as possible. Their motivation would arise from the expected capital gain they would experience as the value of their bonds rose in line with the enhanced probability of the early reduction of targeted conflicts.

The lower the targeted level of political conflict the more likely bondholders would be to undertake projects that would pay off only in the long term. It would be unsatisfactory to achieve a low level of violence just for a short period. The ultimate objective is a sustained low level of political violence, and that is how the targeted objective must be specified. \

Bondholders could work to influence governments, including those of countries that supply the weapons that fuel conflicts. They could try to influence financial supporters of conflicts to redirect their funding into less malevolent activities.

Bondholders could also lobby, or work with, governments to, say, give a higher priority to peace studies in schools, but they could also develop peace-teaching projects of their own. While immediate peace might not result, much more could be done to enhance the prospect of peace in the future. Bondholders could, for instance, make strenuous efforts in conflict-ridden regions to have some mixed classes of children of different nationalities, religion or ethnic origin at kindergarten and school. They could finance sports matches between opposing sides of current or potential conflicts. They could promote anti-war messages on social media or set up exchange schemes for children or students of opposing sides. They could arrange for the most virulent warlords and preachers of hate to take one-way, first-class journeys to luxurious holidays in remote resorts with limited access to communication facilities. They might even subsidise intermarriage between members of different nationalities, tribes or religious communities.

Bondholders would be open to trying out these and other trust-building and conflict prevention measures that would be viewed with suspicion when undertaken by officially approved bodies.

They could lobby western governments to improve trade access to poorer countries, or promote foreign direct investment into, conflict-ridden regions, so as to give the populations of these countries some means of becoming prosperous other than by plunder. Economic development would give people a chance to build trust and take a stake in a peaceful future and a better life for their children-a chance that many regimes still deny to their own people. It could open the eyes of people to the virtues and rewards economic growth and give them stakes in a brighter future. But, as we saw above,[ii] economic growth can also make conflict more likely: bondholders would have continuous incentives to look for instances where that is happening, and to follow alternative conflict prevention measures where it is.

There are plenty of other activities that bondholders could support, including such mundane measures as promoting adherence to international treaties and laws, and improving data collection on violence. These are only examples, of course, though they do illustrate the potential for those in authority to undertake peace-building initiatives that they currently cannot, or do not want to, consider. In reality, bondholders would be likely to undertake a range of initiatives, the precise nature of which need not be known in advance. It would be up to bondholders to decide on those programmes that would give them the best return for each dollar they spend, and this means they would look for and put into action ways of achieving peace that they believe will be most effective.

Many NGOS and aid organisations already pursue some of these activities but they typically operate on a small scale and are underfunded in relation to the tasks required to ensure long-lasting peace. Under a bond regime bondholders would have powerful incentives to divert funding into the most promising of these activities, or into existing or new conflict-reduction projects, regardless of who is carrying them out: the sole criterion would be the likely conflict reduction achieved per dollar spent.

An ambitious conflict-reduction target would encourage bondholders to undertake indirect activities that have a long-term payoff. They could divert more funds into existing efforts at poverty reduction, improved governance and the strengthening of the rule of law. There is an emerging, though not unanimous consensus that democratic forms of governance are conducive to certain public goods including not only peace, but also human rights and economic development. So bondholders might lobby governments to rule fairly and to represent all segments of their population in a reasonably equitable manner. Such efforts could help diminish the appeal of extremist views that can lead to terrorism.[iii]

Other activities could be undertaken in regions already torn by conflict, and that could erupt in violence again. These could include the disarmament, demobilisation and reintegration (DDR) of ex-combatants, considered crucial to achieving lasting peace after conflict.[iv] Bondholders could encourage the inclusion of DDR programmes in peace agreements, and help finance rehabilitation and re-insertion packages for ex-combatants. They can forestall future conflict by helping ensure that all ex-combatants are treated equally regardless of former affiliations.[v]

Trading the bonds

World Peace Bonds, once floated, must be readily tradable at any time until redemption. The operation of such a ‘secondary market’ would be critical to the working of the bond mechanism. Many bond purchasers would want, or need, to sell their bonds before redemption, which might be a long time in the future. With a secondary market, these holders would be able to realise any capital appreciation experienced by their holdings of World Peace Bonds whenever they chose to do so. Tradability would make the bonds a more attractive investment in the first place.

As the bonds were traded, they would tend to flow towards those who would be most able to help reduce the targeted components of conflict. In fact, though, an actual flow of bonds would not be necessary. Large bondholders might decide to subcontract out the required work to many different agents, while they themselves could hold the bonds from issue to redemption. The important point is that the bond mechanism would ensure that the people who allocate the finance for conflict-reducing projects had an incentive to do so efficiently and to reward successful outcomes, rather than merely to pay people for undertaking activities. At the limit we can conceive of just one single buyer of all the bonds. If this buyer were determined to hold on to the bonds until redemption, then the bonds would function as a sort of performance-related contract, with the backers paying only when the objective had been achieved. The buyer could contract out most or all of the work required to achieve the objective, with the incentives given by the World Peace Bonds for speedy accomplishment cascading down from the bondholder to those subcontracted to do carry out conflict reduction.

Too large a number of small bondholders could probably do little to help achieve peace by themselves. If there were many small holders, it is likely that the value of their bonds would fall until there were aggregation of holdings by people or institutions large enough to initiate effective peace-building projects. As with shares in newly privatised companies the world over, World Peace Bonds would mainly end up in the hands of large holders—be they individuals or institutions. Between them, these large holders would probably acquire the majority of the bonds. Even these bodies might not be big enough, by themselves, to achieve much without the co-operation of each other. They might also resist initiating projects until they were assured that other holders would not be free riders. So there would be a powerful incentive for all bondholders to co-operate with each other to help bring about peace. They would share the same interest in seeing targeted objectives achieved quickly. So they would share information, trade bonds with each other and collaborate on conflict-quelling projects. They would also set up payment systems to ensure that people, bondholders or not, were mobilised to help build peace. Bondholders would either trade bonds or make incentive payments to ensure that any proceeds from higher bond prices, or from redemption, would be channelled in ways most likely to reduce conflict. Large bondholders, in co-operation with each other, would be able to set up such systems cost-effectively.

Box: a new type of organisation

Most of our social and environmental goals are the responsibility of organisations, be they large or small, public- or private-sector. Much of their energy is, in my view, devoted to self-perpetuation; so much so that, for our chronic social problems in general, and for war in particular, I believe a new sort of organisation is required. World Peace Bonds could lead to the creation of such an organisation.

How would this happen? Consider what people buying bonds targeting world peace might do. They would want to see some appreciation of the value of their World Peace Bonds even if they have no intention of holding on to them until the long-term target of sustained world peace has been achieved. While they would have competed against each in the market to buy their bonds, they would quickly see that their bonds will lose value unless they can, tacitly or otherwise, collude with other bondholders to help achieve our peace objective. Their interests would be best served by setting up systems to vet potential conflict-reduction projects and to oversee existing ones. Importantly, too, they would set up payments systems, so that those working to achieve world peace are paid according to their contribution toward that goal.

The bondholders themselves might run this organisation but it would differ from conventional organisations in that composition (bondholders) could be constantly changing. If it decided to employ more-permanent staff members to oversee some or all aspects of the work being done to bring about peace, that would be done only if it would help accelerate achievement of that goal. There need be no such body: that would be up to bondholders themselves. At every level of decision-making, the over-arching concern would be efficiency: the maximisation of peace-achievement per dollar spent. Under the bond regime the structure, composition and activities of everybody from bondholders, any oversight organisation they might set up, down to contractors and subcontractors would be entirely subordinated to the efficient, rapid achievement of sustained world peace.

Give greed a chance

Bondholders might not have to be terribly sophisticated in their choice of projects. World Peace Bonds would work on the principle that both bondholders and the people whom they pay (whether as contractors or as recipients of, to put it bluntly, bribes) are highly motivated by financial incentives. Chapter 1 mentioned the conflicts in Lebanon, whose economic dimension has generally been underestimated. There are other cases, as complex as Lebanon in which economic incentives, while not a root cause, can prolong conflict.[vi] In Sudan and west Africa currently (2025) internal wars are prolonged by competition for natural resources—oil, gold, diamonds, minerals—with armed groups and state actors alike seeking to exploit the chaos for financial enrichment, often at the expense of civilians.[vii] In conflicts such as these, bondholders might be able to reduce conflict quite directly and unsubtly simply by making appropriate financial transfers to certain individuals.

Bidders for the bonds could invest any sum they choose in the bonds. If their bond holdings are small, they might not be able then individually to do much about achieving peace, and most likely their bonds would be bought up by larger players. But derivatives in the bonds could magnify the opportunities to, for example, corporations that currently benefit from armament sales or private militias: they could buy call options or futures in the bonds; their holdings could moderate their opposition to conflict-reduction activities, or serve as insurance against serious reductions in military spending.

Under a bond regime, bidding for the right to benefit financially from conflict-reduction would not be limited to a few likely operators, but would be open to all who are prepared to undertake, or to finance the undertaking of, projects that would help achieve the targeted objective. And it would be open continuously, from the time the bonds were issued until the time they were redeemed.

This continuous opportunity to buy and sell what are, in effect, fractions of the contract to achieve sustained world peace (or derivatives in the bonds) would imply a liquid market for the bonds; their prices being openly quoted would, as we shall see in the next chapter, generate information of great value to a broad range of decision makers.

---

[i] See Impact of war on the environment: ecocide, by Wirtu Yohannes Desalegn and, Abdela Umer. Frontiers in Environmental Science, Volume 13, 2025, https://www.frontiersin.org/journals/environmental-science/articles/10.3389/fenvs.2025.1539520, DOI=10.3389/fenvs.2025.1539520

[ii] In the Introduction

[iii] Responding to terrorism: what role for the United Nations? International Peace Academy, report of a conference held on 25-26 October 2002, New York.

[iv] A Framework for lasting Disarmament, Demobilization, and Reintegration of

former combatants in crisis situations, IPA-UNDP Workshop Report, 12-13 December 2002, New York.

[v] Ibid.

[vi] See Conflict Economies in the Middle East and North Africa, Chatham House report Published 25 June 2019 Updated 18 October 2023 ISBN: 978 1 78413 332 0

[vii] Global Risks Report, 2025, World Economic Forum, 15 Janaury 2025. https://www.weforum.org/publications/global-risks-report-2025/in-full/global-risks-2025-a-world-of-growing-divisions-c943fe3ba0/, sighted 21 July 2025.

World Peace Bonds: Chapter 2

This is the first draft of the second chapter of a book I'm writing on World Peace Bonds. I don't expect to find a publisher in the book industry, so I will probably end up publishing it myself. I will make all chapters freely available for download as pdfs once the book is finished. Comments are welcome.

Chapter 2: Toward a solution: markets and outcomes

The previous chapter touched on some of the difficulties of identifying causal relationships between conflict and its possible precursors and looked at some of the real-world institutional rigidities that bedevil the prevention and ending of conflict. All these difficulties point to the need for a rational, flexible and adaptive mechanism for allocating conflict-reduction resources. This chapter makes the case for channelling market forces into efforts aimed at achieving sustained world peace.

Markets

The resources for all conflict-reduction activities are limited and, in economic theory, and on all the historical evidence, markets are the most efficient means yet discovered of allocating society’s scarce resources. Unfortunately, many believe that market forces inevitably conflict with social goals. Understandably so, since in recent decades deregulation of some economies and an enhanced role for markets has led to staggering and disturbing levels of inequality of income and wealth, while and many social and environmental problems appear to have worsened. As well what ought to be free, competitive markets are often undermined or distorted by powerful bodies, and the terms ‘free markets’ and ‘competition’ are invoked in support of activities that have little to do with raising societal well-being.

So it is important to remind ourselves that market forces and self-interest can be channelled into achieving public, as well as private, goals. Often, these private goals coincide with social goals, so that, for instance, the market routinely performs vital tasks such as food distribution and the provision of such indispensables as home medicines, baby needs, furniture and other consumer goods. These are exceedingly complex tasks but, left to the multiplicity of agents operating in reasonably competitive markets, they are accomplished in ways that fulfil not only the private goals of the firms and consumers involved but also society’s goal of efficient supply of goods and services. This feat results from the combination of the self-interest of large numbers of market players, and their ability to react appropriately to ever-changing circumstances. Some would attribute the triumph of the western market economies over the state-controlled, centrally-planned economies of the Soviet Union and its satellites to the victory of materialist motivations over political ideals. But it is more likely that the market’s efficiencies and incentives had won out over central direction; that decentralisation had triumphed over dirigisme.

Governments tend to be centralist in their instincts. In practice, this has meant that market forces are rarely allowed to play a significant role in organising the production and distribution of those goods and services that governments supply. Government agencies also operate in a non-competitive environment, which discourages self-evaluation.[i] Since governments in the developed countries now spend on average about 42% of their Gross Domestic Product[ii] these are significant deficiencies. One result is that public services, such as health, education and housing, seem perpetually to be in crisis.

What about world peace? Are government-backed organisations like the United Nations any more efficient in allocating conflict-reduction resources? Unfortunately all these bodies’ decisions about conflict reduction are subject to the same deficiencies as those of their contributing governments. They are centralised, unexposed to competition and rarely carry out meaningful self-evaluation. Most of the time governmental conflict-reduction activities are also uncoordinated with those of non-governmental organisations (NGOs), whose own spending is probably more flexible and efficient.

The tragedy is that market incentives operate all too freely in the market for the weaponry that creates so much horror and misery. We saw in the Introduction that world military expenditure in 2024 reached $2718 billion. By contrast, extraordinarily few global resources are committed to the prevention, management, or resolution of the world's most prevalent wars, almost all of which take place in poor countries. Nor, in relative terms, is much spent on peacekeeping and post-conflict reconstruction. The annual budget for UN peacekeeping is about $5.6 billion.[iii] Preventive diplomacy missions cost only a tiny fraction of this amount: the United Nations Department of Political and Peacebuilding Affairs (DPPA), which leads the UN’s preventive diplomacy and conflict prevention work, operates on an annual budget of approximately $80 million.[iv]

Given the huge benefits that sustained world peace would generate: financial as well as humanitarian, it’s an indictment of the way things are currently being done that we spend so little, collectively, on trying to eliminate conflict. It speaks to the failure of the current conflict reduction systems that we don’t think it worthwhile to devote funds to conflict reduction at anything like sums commensurate with the potential benefits of sustained world peace.  

The manifold complexity of conflicts, the proliferation of possible root causes, the intricacies involved in conflict-reduction: virtually all aspects of conflict cry out for a diverse, adaptive solutions of the sort that competitive markets can provide. The key, I believe is to find a way of channelling the market’s efficiencies and incentives into bringing about world peace.

Inputs, outputs and outcomes

Always taking peace as our goal, some definitions are required:

Inputs into conflict-reduction activities and organisations would comprise such items as expenditure on conflict prevention, numbers of full-time equivalents of organisations devoted to conflict reduction, or spending on peacekeeping.

Outputs are products or services that are directly attributable to the performance of a conflict-reduction agency. Examples include: the number of patrols carried out by peacekeeping forces; firepower of weapons withdrawn from conflict areas by a decommissioning agency; proportion of time that communications and Information Technology services to a conflict-reduction agency are up and running. Outputs however efficiently supplied, do not necessarily lead to more favourable, or more efficiently supplied, outcomes.

Even if market forces were introduced into the supply of conflict-reduction outputs, there would be a major problem: outputs do not necessarily bring about better outcomes.

Outcomes are desirable sets of circumstances, which are likely to be influenced by both an agent’s outputs, and by factors outside agents’ control. Targeted conflict-reduction outcomes could include: numbers of people killed by violent political conflict; numbers of refugees from conflict - see discussion in text below. Our world peace goal would include these, and other metrics that are meaningful to human populations. The terms ‘objectives’ and ‘goals’ are used synonymously in this text to mean outcomes.

Governments have tried to introduce more-market methods into achievement of some of their objectives. But they have been less willing to experiment with the stipulation of outcomes, as against outputs or other simple numerical targets. There have been efforts to link payments and other rewards such as autonomy to outcomes in, for example, the UK,[v] Kenya,[vi] and Indonesia.[vii] These and other similar efforts have been successful – but limited in scale and application. Part of the difficulty with extending outcome-based incentives is that the existing conflict-reduction institutions are taken as given, which drastically limits range of outcomes that can be considered, for two related reasons:

• Existing institutions are unlikely to encourage innovative approaches. This is partly because they have established ways of doing things: innovation has upfront costs: staff need to be retrained or recruited. And partly because the time scale on which they operate makes such investment in innovation unattractive.
• Institutional inertia of this kind bedevils innovation in many areas. Sometimes institutions achieve their ostensible objectives but, for obvious and understandable reasons, do not dissolve themselves. In so many institutions, be they government bodies, aid organisations, religious organisations, trade unions or universities, self-perpetuation becomes an end in itself – and one that often overrides all others. We shall say more about the need for a new type of institution below.

More charitably, it is fair that bodies should not be penalised if the outcomes they are charged with achieving are not reached because of circumstances that are beyond their control. But that means that these bodies have little incentive to look at these circumstances to try to bring them within their control, nor to manage the risks and so maximise their performance against those circumstances that cannot be controlled. Most organisations simply are simply not big enough to take on these tasks.

The result is that institutions charged with reducing conflict aren’t rewarded according to how successful they are in actually achieving them. Even at the individual level actual outcomes matter little: nominees for the Nobel Peace Prize included Benito Mussolini in 1945 and Joseph Stalin in 1948, while more recent awards to Henry Kissinger (1973), Yasser Arafat (1994), Aung San Suu Kyi (1991) and Barack Obama (2009) have been, to say the least, controversial.

A new paradigm

Consider those conflict-reduction operations that are currently performed by the United Nations, national governments or other inter-governmental bodies: conflict assessment, conflict mediation, peacekeeping, arms verification, reconciliation, and re-integration of combatants. In some cases their efforts to reduce conflict are by-products of programmes focused on other social problems. But more importantly, such resources as are devoted specifically to conflict-reduction are allocated to activities or institutions, rather than any targeted outcome. And, unfortunately, the most important of these bodies are organised along the same lines as the governmental bodies in the developed countries that are charged with social and environmental responsibilities:

• they are centrally run, either by governments, or by intergovernmental agencies,
• they do not explicitly reward the reduction of conflict, and
• they subordinate the achievement of outcomes to existing institutional structures and payment mechanisms.

The many non-governmental organisations, working diligently in conflict-reduction and related areas, suffer from similar problems. They are small, and while their own resources might be very well managed, and allocated in ways that maximise returns, they do not receive funds in proportion to their success or otherwise in their chosen field of endeavour.

No single solution is going to work. The world’s conflicts arise from a multiplicity of causes. What is needed then is a way of preventing or defusing war that is flexible enough to identify and deal with root causes when doing so will be the most practical and efficient way of reducing conflict, but that can also operate even when the causes or aggravating factors are obscure, unknown or intractable. For some conflicts there might be nothing wrong with current methods: all that is needed are more resources. But for other conflicts, totally new approaches and institutions might be necessary, and people must be motivated to look for, find and use them. We cannot prejudge whether this conflict or that can best be solved by any particular method. Circumstances are always changing, and no conflict is exactly like any other.

An ideal solution then would encourage a range of diverse and responsive approaches. It would mobilise the interests of the large majority of people in every country of the world who want peace. It would find ways of co-opting or subsidising those people in positions of authority and power who want to build peace, and at the same time it would bypass, distract, or otherwise undermine, those opposed to that goal. It would operate on a large scale, so that variables outside the control of smaller bodies can be brought under control, and so that resources can shift to where they will be most efficient.

Ideally too, it would use market forces: the multiplicity of causes of armed political conflict, and the need for a wide range of diverse, adaptive solutions strongly suggest that market approach could be effective. If market forces could be harnessed into the achievement of a specific, targeted conflict-reduction goals, their pluralism and incentives would work better than current methods at directing scarce resources into their most efficient use. Greater efficiency in terms of conflict reduction per unit outlay could bring about double benefits: it would be an end in itself, but it could also attract more resources into conflict reduction.

The rest of this book describes a new financial instrument, World Peace Bonds, which are intended to channel the market’s incentives and efficiencies into ending for all time what must surely be the world’s most urgent and terrible social problem: war.

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[i] Why states believe foolish ideas: non-self-evaluation by states and societies, Stephen Van Evera, Massachusetts Institute of Technology, Political Science, Department and Security Studies Program, 10 January, 2002.

[ii] OECD: Government at a glance, 2025, https://www.oecd.org/en/publications/2025/06/government-at-a-glance-2025_70e14c6c/full-report/general-government-expenditures_395dfea8.html, sighted 6 July 2025.

[iii] Sum is for the year ended 30 June 2025. United Nations Peacekeeping: How we are funded, https://peacekeeping.un.org/en/how-we-are-funded.

[iv] United Nations DPPA: Giving peace a chance. 2020-2022 Multi-Year Appeal Mandate: https://dppa.un.org/sites/default/files/6141_unny_appeal_2021-v28_i.pdf

[v] Some local area agreements attach reward grants to the achievement of specific, agreed-upon goals—like crime rate reduction or environmental improvements—focused squarely on outcomes. The Use of Sanctions and Rewards in the Public Sector, the National Audit Office, September 2008. https://www.nao.org.uk/wp-content/uploads/2008/09/sanctions_rewards_public_sector.pdf, sighted 18 July 2025.

[vi] Some teachers were rewarded based on their schools' results in government exams, a clear instance of outcomes (student achievement) rather than outputs (teaching hours taught) being rewarded. Rewarding bureaucrats: Can incentives improve public sector performance?, IGC Growth Brief, March 2017. https://www.theigc.org/publications/rewarding-bureaucrats-can-incentives-improve-public-sector-performance, sighted 18 July 2025.

[vii] Villages received incentive payments based on performance on specific health indicators—such as increasing prenatal visits and reducing malnutrition. This directly tied rewards to measurable health outcomes rather than simple activity counts. IGC Growth Brief, March 2017. https://www.theigc.org/publications/rewarding-bureaucrats-can-incentives-improve-public-sector-performance, sighted 18 July 2025.