27 August 2014

Who cares about outcomes?

Politicians are skilled at doing the exact opposite of what they make us think they're doing. The policymaking process in the public mind is a tedious discussion of organizational structures, organizational funding, and regulation. The tedium is so ingrained that few of us take a deep interest unless we're being paid to. It's probably deliberate, at some level. So when politicians say they want to cut back on subsidies paid for fossil fuel consumption, it shouldn't really shock us that not only are such subsidies still being paid, they're actually increasing. The International Energy Agency tells us that:
The IEA’s latest estimates indicate that fossil-fuel consumption subsidies worldwide amounted to $544 billion in 2012, up from $523 billion in 2011, with subsidies to oil products representing over half of the total.World Energy Investment Outlook 2014, IEA, June 2014
As pointed out here, this is four times the level of aid given by the OECD's Development Assistance Committee ($134 billion in 2013). 

24 August 2014

Wisdom

I've long argued that social policy needs institutions that must be subordinated entirely to broad, meaningful outcomes. Instead, we have institutions whose over-arching purpose is self-perpetuation. Francis Fukuyama writes, wisely in my view:
The very stability of institutions, however, is also the source of political decay. Institutions are created to meet the demands of specific circumstances, but then circumstances change and institutions fail to adapt. One reason is cognitive: people develop mental models of how the world works and tend to stick to them, even in the face of contradictory evidence. Another reason is group interest: institutions create favored classes of insiders who develop a stake in the status quo and resist pressures to reform. America in DecayThe Sources of Political Dysfunction, Francis Fukuyama, 'Foreign Affairs', September/October
The current regime takes existing organizations as a given. Debate centres around their funding, composition, remit and structure. A Social Policy Bond regime would instead fund outcomes, and let bondholders decide on the optimal organizational form; one that, especially for remote social goals, would - or just as importantly - could change shape, size, and the projects it supports, constantly, in response to changing circumstances and our expanding knowledge.
[M]any [of the US's] political institutions have become increasingly dysfunctional. A combination of intellectual rigidity and the power of entrenched political actors is preventing those institutions from being reformed. And there is no guarantee that the situation will change much without a major shock to the political order.
Exactly. Social Policy Bonds would target outcomes directly, and let motivated bondholders and would-be bondholders compete continuously  to decide how best to achieve them. Intellectual rigidity under a bond regime would be penalised. Efficiency would be rewarded. All in stark contrast to the system not only in the US, but in much of the rest of the world. 

07 August 2014

Public service reform

The Economist talks about public service reform:
But voters, and thus politicians, are especially intolerant of civil-service inefficiency nowadays. One prompt is austerity. Another is technology, which is changing not only how public services are delivered—think of “massively open online courses” in education—but also the way they can be measured. Social networks enable users to grumble about hospital waiting-times and mathematics results. Perhaps the biggest pressure is the passing of time: private-sector workers are incredulous as to why civil servants should escape the creative destruction that has changed other offices around the world.
Quite. Why is it that the achievement of social goals remains (largely) a government monopoly? No good reason, other than vested interests and highly successful patch protection.

The Economist goes on to talk about pay and the need for long-term, strategic thinking. Politicians love to restructure and re-prioritize, to tinker with funding, and to appoint placemen in powerful positions. The remedies the journal suggests include better pay, reduced security for top public service positions and, perhaps, appointing some overlord who takes an exceptionally long-term view.

I have another suggestion: target broad, meaningful outcomes, and let a motivated market decide on organizational structures, composition and the projects they undertake. Under a Social Policy Bond regime there might or might not be 'destruction' of such organizations, as envisaged by the Economist and as occurs in a well-functioning private sector, but such destruction is a means not an end. Social Policy Bonds would ensure that any such destruction would occur only if it were truly 'creative' in the sense of better achieving society's goals, as defined in the redemption terms of the Bonds. 

It's likely that a new type of organization would result: one subordinated to the efficient achievement of meaningful social and environmental outcomes rather than, as now, the caprice of powerful interests, be they government or private sector.

26 July 2014

New procurement in Barcelona and Philadelphia

Christopher Swope writes about changes in procurement in the cities of Barcelona and Philadelphia: 
Typically when cities buy goods or services, they spell out in strict detail exactly what it is they want to buy. But that level of specificity stifles innovation, because it restrains the inventiveness of companies who might bid on the work. It also limits the pool of bidders to established companies familiar with the sort of solution the tender asks for. Barcelona’s less proscriptive approach turns the old system on its head. Rather than laying out exactly what it wants to buy (say, bike lockers), Barcelona is laying out six problems it wants to fix (such as reducing bike theft). How Barcelona and Philadelphia Are Turning Procurement Upside Down, citylab, 18 July

Anyone familiar with Social Policy Bonds will see the similarity: specify outcomes, rather than the supposed means of achieving them: 
Responses could involve buying things, but they might also suggest new services, regulatory changes or any other means of accomplishing the goal.
Excellent - as far as it goes. This procurement system will stimulate diverse, innovative solutions. The difference, and it's a big one, between this mechanism and Social Policy Bonds, lies in how these various possible solutions are decided upon and rewarded.

It appears that after gathering together various diverse possible approaches, a selection is made, presumably of those approaches deemed (I'm not clear by whom) to be the most promising. And the reward?
Anyone around the world with a creative idea, including startup companies or even individuals, has a shot at a contract and all the market legitimacy that comes with that.
It's an improvement over the current system, but in comparison with Social Policy Bonds, I think it has weaknesses:
  • The selection of the most promising approaches might be open to favouritism, image, or corruption - in short, qualities that have little to do with efficiency. More seriously, it's a one-off selection, made under circumstances that will be very likely to change so as to make the selection sub-optimal. 

  • Once the selected approaches are made and implemented, there seems to be no further discipline: the team working on the selected approaches has little incentive to be or remain efficient. They've won the contract; there's every incentive to sit back and relax. 

Things would be different under a Social Policy Bond regime, whereby bondholders, that is those who are charged with implementing solutions, can continue to reap the rewards of doing so only if, in the eyes of motivated competitors, they are the most cost-effective provider of solutions. There is a continuous incentive on bondholders to be efficient. If they are seen to be inefficient, their bonds will be worth more to operators who think they can be more efficient, who will then buy them.

Also, under a bond regime, taxpayers (or whoever else backs the bonds) lose nothing if the specified goal isn't achieved. And if the goal is achieved, rewards will tend to be distributed to bondholders according to the contribution they make to achieving it, and their efficiency in doing so. All this makes a Social Policy Bond regime more versatile than this new procurement initiative, and one more capable of achieving larger, more remote goals, for which a single, unvarying, combination of operators is unlikely to remain at all times the team best placed to achieve society's goals efficiently.


12 July 2014

War and peace, and GDP

Readers interested in a meta-solution to the conflicts in the Middle East could do worse than read my short piece on Peace Bonds. Defining peace in terms robust enough for our purposes might not be easy, but the necessary thinking will help clarify exactly what we want to achieve. As in many other policy areas, there are plenty of statistics already being gathered and with some verification and supplementation a combination of them could be targeted by a Peace Bond regime. See, for instance, this site, for some indicators that we could target. 

On another note, David Pilling asks: has GDP outgrown its use? As I have repeatedly posted (here, for instance), the answer is an unqualified yes.

26 June 2014

Er ... we meant wind-powered cars

The Economist urges cuts in greenhouse gas emissions with this compelling argument:

Moreover, high temperatures do not affect only outdoor workers. [A] study found that a week’s worth of outside temperatures over 32°C cuts production in car plants by 8%. The costs of doing nothing, Economist, dated 28 June
Wow, this climate change business is serious: we must cut back on greenhouse gas emissions - and quickly - or we could see big falls in the numbers of cars being produced!

23 June 2014

Biodiversity

How much biodiversity do we want? It's unfortunate that we even have to ask this question, but until we answer it we're likely to see more and more extinctions, along the lines described by Elizabeth Kolbert. Biodiversity is difficult to measure but, again unfortunately, unless we do, and somehow set quantifiable targets, we shall lose it at a high rate as habitat loss and other mankind-induced environmental changes continue apace. Biodiversity, along with other unquantified but crucial contributions to quality of life is something else that is being be sacrificed by default in pursuit of an ever-higher Gross World Product; our de facto over-arching target.

How would a Social Policy Bond regime address biodiversity? We could target it quite directly, using a combination of proxies such indicator species, and areas (and contiguity) of land and sea set aside for conservation.We could also target for reduction the negative impacts of loss of biodiversity.


Myself, I'm no expert in these matters. But there are experts who, if we were motivated, could be brought into a discussion, culminating in biodiversity goals and priorities in ways that maximize society's well-being per dollar spent.

It's not being done, partly because our policymaking is stuck with a system that doesn't allow governments to set goals unless they also achieve them - something that, when it comes to complex, long-term, goals, requiring adaptive, diverse approaches, they cannot do well.

The Social Policy Bond principle is different. Under a bond regime governments - or any wealthy group of people, corporations, or non-governmental organizations - could set goals as lofty and long-term as a world of maximum biodiversity (however it's defined), and reward the people who achieve these goals. We need now, more than ever, diverse, adapative approaches to challenges such as biodiversity loss or, for that matter, violent political conflict; huge threats, but ones that are largely ignored in pursuit of goals whose only virtue is that they can be measured by accountants.

09 June 2014

Foundations of bone and sand

Twenty-five years after the world first moved to protect the ozone layer, British scientists have found three new potentially damaging gases in the atmosphere. While they do not expect the gases to do much damage to the ozone layer, think they may add to global warming. Threat from new gases found in air, Alex Kirby, 4 June
For years now I've been railing against building policy on fossilised foundations. To put it briefly, government does not know how best to achieve society's goals. When it looks at climate change it relies on science done in the 1990s; its policy is to cut back on greenhouse gas emissions - or rather, those gases identified as greenhouse gases more than 15 years ago. But what if, as I've been asking for not quite15 years, the science is wrong? Or outdated? The policymakers, true to form, have no answer except to continue building on crumbling foundations.

When society is changing so rapidly, when our scientific knowledge is expanding at an ever-increasing rate, then policy should target outcomes, rather than the supposed means of reaching them. A Social Policy Bond regime would do this. It would encourage diverse, adaptive approaches to whatever it identifies as the problems arising from, in this example, climate change. Our current policymaking system cannot adapt. It puts the interests of current organizations, be they public or private sector, first, and if it does build new organizations, it does so on ossified foundations.

04 June 2014

Targeting human devastation

I've posted before about the flawed nature of what has become, by default, society's de facto indicators of success: Gross Domestic Product (or GDP per capita) and its rate of growth. In the absence of any targets that are actually correlated with societal well-being, GDP has been enshrined as the target, par excellence, by which our governments measure their progress. It's highly misleading at best, for reasons I've outlined previously, so it comes as no great surprise that on 22 May:
Istat, Italy’s statistical body ... will from October ..include drug trafficking, prostitution, and alcohol-and-tobacco smuggling in its economic-output numbers.... In fact, then as now, Italy was merely one of the first countries to announce its compliance with international accounting standards. Reporting illegal economically productive activity in which all parties take part voluntarily is required under EU rules known as the European System of Accounts.... Sex, drugs and GDP, 'the Economist', 31 May
Well why not? It's no more illogical than doing what we have been doing for decades: assuming that economic activity generates societal well-being - an assumption that is increasingly at odds with reality. 

We urgently need to target explicitly things that we actually want to achieve: universal literacy, for instance, world peace, or even the survival of the human race. In the absence of such targets, the vaccuum is filled by that grotesque proxy for success: Gross Domestic Product. It's a shambles.

22 May 2014

The moral case for tax avoidance

George Monbiot writes about Scotland's deer-stalking estates and grouse moors:
Though the estates pay next to nothing to the exchequer, and though they practise little that resembles farming, they receive millions in farm subsidies. The new basic payments system the Scottish government is introducing could worsen this injustice. [Andy] Wightman calculates that the ruler of Dubai could receive £439,000 for the estate in Wester Ross he owns; the Duke of Westminster could find himself enriched by £764,000 a year; and the Duke of Roxburgh by £950,000. I'd vote yes to rid Scotland of its feudal landowners, George Monbiot, 'the Guardian', 19 May
It's not so much the wastefulness of such subsidies, nor the environmental devastation they wreak, nor even the lunacy of taking money from ordinary people to subsidise wealthy aristocrats and monarchs. Rather, the issue is the persistence of such stupid, corrupt policies, which have hardly changed in the several decades since they were first exposed and their impacts quantified. We have no systems in place to act on the voluminous evidence of their disastrous (for more than 99 percent of the population) effects. This is one big disadvantage of making policy as if outcomes are irrelevant: nobody has incentives to terminate failed policies. Instead, the beneficiaries of lucrative-but-stupid policies, have every incentive to oppose their withdrawal, and the means by which to do so.

Mr Monbiot goes on to describe the visual impacts:
The hills in many parts look as if they have been camouflaged against military attack, as they have been burned in patches for grouse shooting. It is astonishing, in the 21st century, that people are still allowed to burn mountainsides – destroying their vegetation, roasting their wildlife, vaporising their carbon, creating a telluric eczema of sepia and grey blotches – for any purpose, let alone blasting highland chickens out of the air. Where the hills aren't burnt for grouse they are grazed to the roots by overstocked deer, maintained at vast densities to give the bankers waddling over the moors in tweed pantaloons a chance of shooting one.