23 May 2015

Progress in development

Social Policy Bond principles are slowly gaining acceptance. Here is the Economist writing about trends in development aid:

Now donors are trying a new approach: handing over aid only if outcomes improve. “Cash on delivery” sees donors and recipients set targets, for example to cut child mortality rates or increase the number of girls who finish school, and agree on how much will be paid if they are met. ... In cash-on-delivery schemes, recipients choose their own paths towards their targets, subject only to basic rules, such as respecting human rights. ... By setting and measuring targets, cash-on-delivery donors hope to spur healthy competition. It’s not what you spend, 'the Economist', 23 May
For my thoughts on applying the Social Policy Bond idea to development click here

09 May 2015

Distracting the masses

How government spends your tax dollars:

The EU has contributed €16m to Paramount’s new park in Spain. Russia’s government is helping to finance a nationalist-themed park near Moscow. But official handouts are no guarantee of success: 70% of the 2,500 theme parks built in China, many with generous state help, have closed down or are losing money. Theme parks in Europe: bumpy rides ahead, 'The Economist', 9 May
If governments everywhere didn't waste your money on propping up inefficient industries everywere or bailing out failed banks you might almost think their goal in subsidising theme parks is the single one of keeping us distracted. As it is, it's uncertain whether that is their main goal, or whether they just enjoy speculating on photogenic projects with your money. Why immensely wealthy multinational corporations are thought to be more deserving of help than the poor, or disabled, or the homeless is not obvious.

01 May 2015

Stupid incentives reward stupid behaviour

David Simon goes a long way toward explaining why policing in Baltimore has gone awry:

How do you reward cops? Two ways: promotion and cash. That's what rewards a cop. If you want to pay overtime pay for having police fill the jails with loitering arrests or simple drug possession or failure to yield, if you want to spend your municipal treasure rewarding that, well the cop who’s going to court 7 or 8 days a month — and court is always overtime pay — you're going to damn near double your salary every month. On the other hand, the guy who actually goes to his post and investigates who's burglarizing the homes, at the end of the month maybe he’s made one arrest. It may be the right arrest and one that makes his post safer, but he's going to court one day and he's out in two hours. So you fail to reward the cop who actually does police work. But worse, it’s time to make new sergeants or lieutenants, and so you look at the computer and say: Who's doing the most work? And they say, man, this guy had 80 arrests last month, and this other guy’s only got one. Who do you think gets made sergeant? And then who trains the next generation of cops in how not to do police work? I’ve just described for you the culture of the Baltimore police department amid the deluge of the drug war, where actual investigation goes unrewarded and where rounding up bodies for street dealing, drug possession, loitering such – the easiest and most self-evident arrests a cop can make – is nonetheless the path to enlightenment and promotion and some additional pay. Baltimore’s Anguish: Freddie Gray, the drug war, and the decline of “real policing.”, David Simon, 29 April
Two points I would make.

One: in our complex society we are going to have to target quantitative indicators. To do so effectively these indicators need to be meaningful to ordinary people must be, or must be inextricably linked to, improvements in well-being. The alternative to such indicators are the sort of Mickey Mouse, micro-targets that motivate the Baltimore police to maximise the number of arrests they make or, for instance, keep patients in UK ambulances hovering outside hospitals so that they can meet a 'seen within 4 hours of entry into hospital' micro-target. 

Two: incentives are important. People — even well-intentioned and hard-working people — will react to incentives; and if these incentives are to carry out stupid activities that conflict with society's well-being, then they will carry out those activities and we shall see a decrease in society's well-being. It's not that complicated.

29 April 2015

Immigration to Europe

The large numbers of people trying to migrate on flimsy boats from Africa to Europe are not all poor and desperate. The cost of arranging these trips is beyond the means of most. Many of the people on these boats would be entrepreneurs in their own countries if there were even a slight prospect of a better life there. So why isn't there? Why do they leave their culture, their families, their support network and pay large sums to criminals to arrange a very chancy, unpleasant trip to countries that certainly don't want them (to put it mildly).

Not the whole explanation, but a large part of it, are the corrupt, insane European Union trade policies including especially the Common Agricultural Policy which, by subsidising farm production in Europe and imposing formidable barriers to imports has made it very difficult for the food-rich African countries to step onto the first rung of the economic development ladder. Europe adopted the same policies with respect to tropical products and textiles, all at the behest of their own powerful farm lobbies and corporations.

So what did they expect? By creating 'fortress Europe' the Eurocrats exported poverty and instability to poor countries. At the same time they give a few million dollars of funds collected from taxpayers in 'aid' and expect these countries to be grateful. And they act concerned when, after decades of kicking these countries off the development ladder, they are besieged by Africans looking for a better life. It would be unhelpful, childish and arrogant to say 'I told you so', so I won't say it even if it's true – which it is.

22 April 2015

What really matters?

What really matters to voters? You might think, as I, naively, used to, that it's outcomes. But our politics and our policymaking process are almost entirely concerned with spending, institutional structures, legalisms, outputs or activities, all of which have very little bearing on outcomes that are meaningful to ordinary citizens. Come election time candidates and their handlers routinely emphasise almost everything except outcomes when canvassing for votes: the personality, gender, ethnic origin or social class of the would-be politician, or how they perform on television. I have proposed Social Policy Bonds as a way of subordinating all our politics and all our politicking to broad, meaningful outcomes, which would be more amenable to public participation and therefore help bridge the widening gap between politicians and the people they are supposed to represent. A mistake?

 Recent US research shows that:
[M]any average voters with strong party commitments -- both Democrats and Republicans -- care more about their parties simply winning the election than they do either ideology or issues. Unlike previous research, the study found that loyalty to the party itself was the source of partisan rivalry and incivility, instead of a fundamental disagreement over issues. Study: Most partisans treat politics like sports rivalries, instead of focusing on issues, University of Kansas, 15 April
Maybe then the Social Policy Bond concept, which focuses primarily on outcomes, is too idealistic? I think not. I believe that we, the voters, think of politics as a game only because our governing elites have made the policymaking process so arcane, long-winded and boring that only large institutions — public- and private-sector — can afford to pay people to understand and manipulate it. Naturally then, for our entertainment, we focus on whether our team, Democrat or Republican, Labour or Conservative, left or right will win their game, but the real game is government and big business versus the electorate. That match is too one-sided to generate much excitement.

14 April 2015

Anything but outcomes

Social and environmental problems are complex. Faced with these problems we delegate much of the responsibility for solving them to government. And how do those lucky enough to be given the chance of choosing who shall govern us go about it? One thing we don't do is look dispassionately at each political party's past record and choose on that basis. Even the experts don't do that. So how do we make our selection at the ballot box? We listen to promises by politicians about their stated spending priorities - inputs, in other words. Or we focus on the appearance of each candidate, or how well they come across on television. Now there's identity politics, as Brandan O'Neill writes:

If you want to see how small politics has become in the 21st century, just look at Hillary Clinton’s chucking of her hat into the 2016 US presidential race. Or better still, look at the response to her unveiling of her presidential ambitions, the chorus of cheers and whoops that greeted her decision to make hers a gender-focused, grandmotherly, womanish campaign, in which, as one excited observer puts it, sex - as in biology, not raunch - will form a ‘core plank’ of Hillary’s stab for the White House. What this speaks to is the suffocating extent to which the politics of identity, the accident of who we are, the lottery of our natural characteristics, is now paramount in the political sphere, having violently elbowed aside the old politics of ideas, and substance, and conviction. Hillary’s presidential launch confirms that, in the space of just seven years, identity has become pretty much the only game in the town of politics. The rise of Hillary and the death of politics, Brendan O'Neill, 'Spiked', 13 April
I'm not as cynical as Mr O'Neill. I'm not a great supporter of ideas or conviction in politics - not if they donit relate to 'substance' or, as I'd put it, meaningful outcomes. The fact is that not only do we not look at a politician's or a party's past record; often we cannot. There are too many variables, too many linkages and too many time lags for us to be able fully to evaluate past performance. Identity politics is a symptom of that problem, rather than a cause.

My solution? Social Policy Bonds. Agree on a set of broad outcomes, such as universal literacy, improved general health, reduced crime rates or, on a global scale, the elimination of violent political conflict (war and civil war), or catastrophe, whether natural or man-made. Then issue bonds that will reward people for solving these problems, however they do so. In short, target outcomes and don't focus too much on the identity or media performance of people who promise to spend taxpayer revenue on our behalf. Rely, instead, on a motivated coaltion of bondholders, who will have every incentive to subordinate all their activities to the achievement of society's targeted goals.

31 March 2015

Diversity and biodiversity

Jonathan Franzen writes about biodiversity and whether the emphasis on climate change is diverting worthwhile effort and resources away from conservation. He visits Costa Rica and looks at conservation efforts in the northern dry-forest region of Guanacaste:
The question that most foreign visitors to Guanacaste ask is how its model can be applied to other centers of biodiversity in the tropics. The answer is that it can’t be. Our economic system encourages monocultural thinking: there exists an optimal solution, a best conservation product, and once we identify it we can scale it up and sell it universally. As the contrast between Amazon Conservation and the A.C.G. [Área Conservación de Guanacaste] suggests, preserving biological diversity requires a corresponding diversity of approach. Carbon Capture:Has climate change made it harder for people to care about conservation?, Jonathan Franzen, 'New Yorker', dated 6 April
 This is something I've been advocating for years: to solve our biggest, most complex social and environmental problems we urgently need diverse, adaptive approaches. Social Policy Bonds would encourage such approaches in ways that current policy cannot. Yes, we need some high-level direction as to which objectives we should pursue, and yes, we need some broad system of revenue raising to finance the achievement of some of these goals. But we do not need top-down, one-size-fits-all, programmes based on fossilised science that have been tried, tested and (for the most part) failed. The world is too complex for that.

A Social Policy Bond regime would reward those who achieve such long-term goals as maintaining or increasing biodiversity, without stipulating how these goals shall be achieved. Government, or a group of governments or non-governmental bodies or philanthropists could work together to articulate society's goals and raise revenue for their achievement. But the actual achieving would be done by bondholders (or people paid by bondholders) who would be motivated to form a coalition of interests entirely devoted to achieving society's goals with maximum efficiency. This coalition would probably vary in composition and structure over time, as would the projects it initiates. But at any one time, the market for the bonds would ensure that only the most efficient programmes will be implemented.

22 March 2015

The role of government? To extract revenue

David Graeber began this piece by writing about Ferguson in the US, and the criminalisation, in the US, of violations of administrative codes:
Almost every institution in America—from our corporations to our schools, hospitals, and civic authorities—now seems to operate largely as an engine for extracting revenue, by imposing ever more complex sets of rules that are designed to be broken. And these rules are almost invariably enforced on a sliding scale: ever-so-gently on the rich and powerful (think of what happens to those banks when they themselves break the law), but with absolute Draconian harshness on the poorest and most vulnerable. Ferguson and the Criminalization of American Life, David Graeber, 19 March
I don't think this should greatly surprise us. Government, like any other big organization, has as its one over-arching goal that of self-perpetuation. Like churches, trade unions, universities or any other institution, governments usually start out meaning well, and are staffed by hard-working and, often, individually ethical employees. But at some point the organization's stated objectives are forgotten and we end up with scenarios similar to that which Mr Graeber describes. Government bodies don't face the discipline of markets or competition and if they limit their corrupt behaviour to the less powerful, they can get away with it indefinitely.

Social Policy Bonds are a means by which any organization trying to achieve social goals will always be focused entirely on those goals. The very structure and composition of the organizations would be determined, dynamically, by their need to achieve society's goals as efficiently as possible. And it is society's goals that they would be achieving: their own goals, including that of self-perpetuation, would be subordinated to those goals set by society and targeted by Social Policy Bonds. It's a stark contrast between a bond regime that articulated society's wishes and rewards those who achieve them, and today's world, in which even those bodies charged explicitly with looking after the public interest end up in conflict with it. Or, as Mr Graeber concludes:
Most Americans no longer feel that the institutions of government are, or even could be, on their side. Because increasingly, in a very basic sense, they're not.

06 March 2015

Tried, tested and failed

Concluding a piece about the growing dangers arising from nuclear proliferation the Economist says:
But for now the best that can be achieved is to search for ways to restore effective deterrence, bear down on proliferation and get back to the dogged grind of arms-control negotiations between the main nuclear powers. The unkicked addiction, 'the Economist', dated 7 March
My question is twofold: who will do the searching and what incentives will they have to get it right? On present trends we can be pretty sure that responsibility for a nuclear exchange-free world will fall to nationalist politicians, corrupt bureaucrats (national or United Nations), well-meaning bureaucrats (same) or well-meaning, dedicated but underfunded people working for non-governmental organizations. The same people, in short, who have collectively brought us, let's be factual, to the brink of nuclear catastrophe.

It's not just the identity of these people that's the problem; it's also that they have little financial incentive to maintain nuclear peace. They are not paid according to performance. So they have little incentive to explore innovative ways of forestalling proliferation or use of nuclear weapons that might do a better job than the existing, tried tested and failed methods.

I can't suggest 'ways to restore effective deterrence' but I can suggest a way that would encourage others to find such ways, and reward those that are successful. We could issue bonds that become redeemable only after a sustained period - thirty years, say - of nuclear peace. It would be up to the resulting coalition of motivated bondholders to explore the best ways of taking all the steps necessary to bring about that goal. These would probably include measures that existing bodies, because of their status or their short time horizons, do undertake nowadays, including, for example, building trust between schoolchildren of all nationalities and religions. Approaches encouraged by such Conflict Reduction Bonds would be diverse, because one single approach will not work, and adaptive, because the most effective measures are likely to change with time.  For a longer essay click here, and for the application of the Social Policy Bond principle to the Middle East click here.

26 February 2015


The [UK] government’s health policy reached new levels of absurdity last October, when it was announced that GPs would be paid £55 for every diagnosis of dementia they could enter in a patient’s notes. Cash for Diagnoses, Gavin Francis, 'London Review of Books' dated 5 March

I'm convinced policymakers have no idea how to specify societal goals. They don't seem to realize that goals that are narrow and short term can, and most likely will, conflict with those that are broad and long term. So it is with the nonsense described by Mr Francis. From where might the initiative for such incentive payments arise? Mr Francis points the finger:

This debacle is just the latest example of a medical culture, promoted by successive governments over the last twenty years, that rewards over-diagnosis and the prescription of drugs over personalised, professional care.
Our governments seem incapable of looking after society's interests. They seem to think that doing what they can to meet the demands of the most powerful lobby groups, including government agencies, is equivalent to looking after the interests of all their citizens. It isn't. 

A Social Policy Bond regime would be quite different. It would target and reward meaningful improvements in the health of the entire population. It would take a long-term view, and could do so because it would focus exclusively on its target outcomes. It would reward the people who achieve our health goals whoever they are and however they do so. For more on how the Social Policy Bond principle could be applied to health click here.