The problem with lobbying

Michael Tomasky writes about the lobbyists against health care reform in the US:

At one point last year, more than 3,300 people were registered as lobbyists on health care. That's six for every member of Congress, House and Senate combined. ... In addition, it's worth remembering that, apart from lobbying legislators, these organizations spend vast sums for television and radio advertising. The Money Fighting Health Care Reform, 'New York Review of Books', dated 8 April

Lobbying is, of course, a legitimate activity. What makes it problematic, for me, is that it is almost all done by organizations, supposedly on behalf of their members. These organizations can be corporations, trade unions, NGOs, or other bodies, but they have in common that their over-arching goal is self-perpetuation. It is not the long-term interests of their members as individuals, still less of people in general. Lobbying today is, essentially, lobbying of corporate interests by corporations. And in achieving their main goal, they are remarkably successful. With corporations going bust everywhere, growing unemployment and a still-fragile economy, as Mr Tomasky says, 'federal lobbyists and their clients spent more than $3.47 billion last year [2009]. That is an all-time high, according to the Center for Responsive Politics, whose executive director notes dryly that lobbying is one business that appears to be "recession proof." '

We need a way of re-orienting policy towards the interests and aspirations of ordinary people. Transparency about what are government's goals would help, and a Social Policy Bond regime would necessarily bring that about. Under a bond regime, government funding would be inextricably tied to efficient achievement of agreed, explicit social and environmental goals. There would probably still be lobbyists - but no longer could they concentrate their efforts (and enticements) on the (much smaller) number of legislators. Instead they would have to convince the rest of us as to the justice of their cause. A stark contrast to, and I believe, a big improvement on the current system.

Social Policy Bonds: an alternative to the bolshevik approach

Comparing the relative economic performance of Russia and China, David Ellerman writes:

Another part of the pragmatic approach, also evident in China, is the willingness to allow parallel experiments in different parts of the country and then foster horizontal learning and the propagation of the successful experiments. This is an important part of the alternative to the bolshevik/jacobin approach of legislating the brave new world from the capital city to be applied uniformly across the country. Pragmatism versus economics ideology in the post-socialist transition: China versus Russia(pdf), David Ellerman, real-world economics review, issue no. 52, 10 March

This explains much of the relative economic success of China. Unfortunately it's not the way most of our social and large-scale environmental problems are tackled. For these, government agencies are usually in charge, and they adopt the top-down approach. They are also far more tolerant of failed experiments than any moderately sized private sector business can afford to be. (The largest corporations can often suppress competition so their inefficiencies can persist.) So while a competitive private sector fosters efficiency, the public sector does not. This is not only a waste of resources; it also limits our vision of what government - and only government - can do. When the public sector becomes a byword for inefficiency we don't, for example, even imagine that it can tackle such tenacious and seemingly intractable problems as violent political conflict, for instance, or global poverty.

And that's where Social Policy Bonds come in. Under a bond regime government would still do what it does best - and what only government can do: tackle large-scale social and environmental problems, and raise the revenue to reward people who solve them. But, by issuing the bonds, government would, in effect, contract out the achievement of our social goals to the private sector who would have exactly the same incentives to be efficient as any but the largest corporations have today to achieve their more limited goals. The current approach to tackling our most urgent and challenging goals is what Mr Ellerman would call bolshevik or jacobin. Social Policy Bonds would be the pragmatic alternative.

Business as usual

World recession? People being thrown out of jobs? House foreclosures? An imploding financial system? No worries - if you're a subsidised US farmer:

the United States budget for 2011 announced this February proposed to cut back spending by reducing agricultural subsidies by US$ 10 billion over ten years. It suggested that subsidies only be granted to farmers earning under US$ 250,000 a year, down from a current cap of US $500,000 a year, and cutting aid to crop insurance companies. According to Reuters, this proposal was rejected on 3 March by the U.S. House Agriculture Committee, who stated that changes to farm policies should wait until the next farm law is negotiated in 2012. Will budget deficits provide leverage for farm subsidy reform?, 'Global Subsidies Initiative'

Overcoming mistrust of science: Climate Stability Bonds

As a means of averting disaster, we might be better to formulate policy by targeting basic goals, such as human survival, rather than wait for evidence that will persuade enough people to ensure that action is taken, eventually, by our current political process. Too many influential organizations have vested interests in opposing policies that would benefit society as a whole. George Monbiot suggests that no amount of evidence will convince some people:

[I]n some cases debunking a false story can increase the number of people who believe it. In one study, 34% of conservatives who were told about the Bush government’s claims that Iraq had weapons of mass destruction were inclined to believe them. But among those who were shown that the government’s claims were later comprehensively refuted ... 64% ended up believing that Iraq had WMD. The Unpersuadables, George Monbiot, 8 March

One of the huge advantages of the Social Policy Bond approach is that the evaluation of evidence about such potential problems as climate change is done by private interests. If Climate Stability Bonds were issued, it would be potential purchasers of the bonds who would have to evaluate the evidence about climate change, its causes and consequences, and the best ways of dealing with it. They would have to do continuously from the time the bonds are first floated until they are redeemed. They would have every incentive to do so, and to do so impartially; that is, regardless of their opinion of the science, or the influence of powerful corporations or environmental bodies.

Mr Monbiot is gloomy about the prospects of doing things the conventional way:

The battle over climate change suggests that the more clearly you spell the problem out, the more you turn people away. If they don’t want to know, nothing and no one will reach them.

But even people with a visceral distrust of science; even those who genuinely believe that climate change isn't happening, could not rationally oppose a Climate Stability Bond regime, under which the costs of failing to assess the risks accurately would be borne not by taxpayers, but by those who are willing and able to accept that risk by investing in the bonds. By targeting the desired outcome - a climate with tolerable impacts - governments or whoever issues Climate Stability Bonds could avoid the divisive, arduous and protracted process of evaluating the mass of evidence about climate change. It would be much easier to generate buy-in to the goal of climate stability, than to massive and shifting scientific evidence that will underpin any activities taken to bring it about.

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Low-hanging fruit

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The way big organizations work, whether they be public or private sector, there's often little incentive to explore cheap but effective ways of improving performance. There's little glamour attached to mundane ideas and, where status is correlated with budget size, little reason to adopt them when there's a more expensive option available. This mentality, of course, is encouraged by an environment in which outcomes don't matter. But when people do care about outcomes, there's a surprising amount of low-hanging fruit available for the plucking. Here's the result of using checklists for surgical procedures for 8000 patients for six months:

In every hospital major complications were reduced by 36 per cent and the death rate was halved. One minute with Atul Gawande, 'New Scientist', 20 February

This is outcome-based policy at its best. (See here for more.) All 167 hospital trusts in the UK are now adopting this simple innovation.

A Social Policy Bond regime would similarly encourage the adoption of efficient techniques, even if they are unglamorous. It would build efficiency incentives into all activities aimed at achieving the targeted goal. As Dr Gawande's work indicates, the scope for improvement under the current system is quite astonishing.

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More transfers from the poor to the rich

George Monbiot writes about the UK Government's feed-in tariffs for electricity produced by photovoltaic (PV) panels:

The government is about to shift £8.6bn from the poor to the middle classes. ... On April 1st the government introduces its feed-in tariffs. These oblige electricity companies to pay people for the power they produce at home. ... . Solar PV is a great technology - if you live in southern California. But the further from the equator you travel, the less sense it makes.... It’s not just that the amount of power PV panels produce at this latitude is risible, they also produce it at the wrong time. In hot countries, where air conditioning guzzles electricity, peak demand coincides with peak solar radiation. In the UK peak demand takes place between 5 and 7 on winter evenings. A great green ripoff, George Monbiot, 1 March

And so on and on.... This is what happens when policy is determined by image, sentiment, lobbyists and corporations. It's policy as if outcomes don't matter in the least.

A Social Policy Bond regime wouldn't allow this sort of nonsense to occur. Correction: it would - but only if people actually wanted it. That's to say, if people deliberately choose to transfer millions of pounds from the poor to the rich and to fraudsters, they could do so under a bond regime. The difference is, they'd be doing it with their eyes open, instead of having their view obscured by a policymaking regime that is concerned mainly about image, the welfare of corporations and government agencies, and arcane debate about structures and process.

Who cares about the planet so long as Al Gore look silly

One of the virtues of the Social Policy Bond approach is that setting goals would be done deliberately, consciously and more rationally than it is now. Consider this quote from David Brooks, a 'New York Times' columnist says:

I have to confess, I am not at my best when dealing with environmental issues. On the one hand, I totally accept the scientific authorities who say that global warming is real and that it is manmade. On the other hand, I feel a frisson of pleasure when I come across evidence that contradicts the models. I don’t know if this is just because I distrust people who are so confident they can model complex systems or because I relish any fact that might make Al Gore look silly. Source (quoted here)

This sort of puckish perversity does matter, especially when widely promulgated in the mass media. In the absence of referendums about climate change and other major policy issues, it stands in for, and influences, received opinion. Yet his conclusion doesn't even reflect Mr Brooks' own opinion about the fact of climate change. Our current system gives us so little influence over policy that we treat the whole process as an entertainment.

Social Policy Bonds would bring some rationality to policymaking. Instead of focusing on personalities a bond regime would start out by considering which social and environmental goals we should aim to achieve. Because it is entirely focused on meaningful outcomes, it would bring more people into the policymaking process. We'd think carefully about which outcomes we want to target, and how we'd rank them and, in contrast to the current system, we'd do so relatively dispassionately.

Lamentable

I refer to the standards of debate and the aspirations of some of our political representatives:

Mr Farage [UK Independence Party] drew jeers on Wednesday when he told the chamber of the European Parliament that Mr Van Rompuy had "the charisma of a damp rag" and the appearance of a "low-grade bank clerk". Source

It seems it's now respectable to judge our leaders by their appearance or whether they have charisma or not. Our political process is so corrupted and obscure that, it seems, we rely on a politician's image when it comes deciding whether or not they're worth voting for. Mr Farage is probably in sympathy with a large part of the electorate in this. It's the system that's at fault, and the fault is that we have become habituated to judging politicians by anything except outcomes. In a rational society outcomes would matter most. The problem is that society is so complex, and the political process so arcane, that identifying cause and effect in politics is largely impossible.

One result is the disengagement of ordinary people from the policymaking process. Corporations and lobbyists take their place. In a vicious circle, the wide gap between politicians and the people they are supposed to represent grows every larger. The current system makes it too easy for politicians and bureaucrats to evade or deflect censure for their inefficient or bad policies.

Social Policy Bonds would, I think, have many advantages. One is that they would refocus political debate on outcomes that are meaningful to ordinary people. In stark contrast to the current system, rewards would be inextricably linked to achievement of these outcomes, and the outcomes would be clear, explicit and stable. More people could be involved in the policymaking process; they would also have more realistic views about what can be achieved with public funds and about the inevitable trade-offs that have to be made. One huge benefit is that people would buy in to the process and the resulting goals. In such a process, we'd assign the personality or appearance of politicians correctly - as zero.

Crisis of capitalism

Capitalism succeeds mainly because of creative destruction: the failure of businesses that respond inefficiently or not at all to the concerns of ordinary people, as manifested in a relatively free market. It fails when businesses become so big that they constitute monopolies, or so powerful that they can manipulate the trade and regulatory environment to suit their short-term interests at the expense of the longer-term interests of society and the environment. Such failure takes the form of inefficiency and a widening gap between government and big business on the one hand, and ordinary people and smaller enterprises on the other.

We are beginning to see a crisis of capitalism playing out now. Government and big business have done their best to subvert creative destruction, and are powerful enough to succeed. They are the most influential entities in our societies and they are big enough to distort or eliminate the market's way of responding to individuals' wishes. The result will be more central planning, and the increased alienation of ordinary people from the political process.

Social Policy Bonds might be a way of reconciling the need for centralised guidance of our large societies with the equally important need for efficiency - and freedom. They would contract out the achievement of our social and environmental goals to the private sector. Inefficient players would find themselves bid out of their part of the contract. Our goals would still be large scale, but the organizations of people with a vested interest in achieving them - holders of Social Policy Bonds - could be of any size, with a constantly varying composition. More important, these organizations would be subject to creative destruction. That's a marked contrast to the current system, under which the organizations supposed to help achieve our social goals are government agencies, whose immunity from creative destruction and whose close relationship to big business are at risk of discrediting the best features of capitalism and market forces for a long time to come.

Gaming the system, again

Further to my previous post about Mickey Mouse micro-objectives in education: here's a story that describes something else that can happen when incentives are perverse: teachers changing their students' answers on tests from wrong to correct.

Use broad, meaningful, numbers

Severe winter weather in England. Some schools decide to close, others to stay open. Marjorie Clarke from Devon, in a letter to 'the Independent', explains why:

[I]f a school decides to close, it will not affect the official attendance record, but if it opens and only half the pupils attend, this will be counted as poor attendance.... Letters, 'The Week', 16 January

...and the school penalised accordingly. School attendance records like this constitute another in the UK's prolific series of Mickey Mouse micro-objectives.

Using numerical indicators and targets is perhaps a regrettable, but largely inevitable part of governing large, complex societies. My work on Social Policy Bonds has convinced me that those numbers that are used should be as broad as possible, and inextricably linked to what we are really trying to achieve. There needs to be more clarity about means and ends. School attendance, for instance, however measured, is not a social goal: better educational outcomes are.

So my advice to the UK Government, or any well-intentioned body aiming to achieve meaningful social and environmental goals, is to think carefully about what you want to achieve and, as far as possible, reward people for achieving. It sounds simple, and it's the underlying principle of Social Policy Bonds. But with the odd exception it's rarely been deployed, and when it has (see here, for one example), it's seldom by governments, who are responsible for by far the biggest sums supposedly devoted to achieving social goals.