05 August 2018

How to avoid a nuclear war

Andrew Cockburn quotes a four-star general, Lee Butler, former head of the US Strategic Air Command, and who wrote recently:
Arms control is now relegated to the back burner with hardly a flicker of heat, while current agreements are violated helter-skelter. ...Sad, sad times of the nation and the world, as the bar of civilization is ratcheted back to the perilous era we just escaped by some combination of skill, luck, and divine intervention. How to start a nuclear war, Andrew Cockburn, 'Harper's Magazine', August
Eric Schlosser's Command and Control, bears this out, with its alarming tales of accidents and blunders that came close to bringing about catastrophe during the Cold War. It's quite disturbing how little incentive the people in control, at all levels, have to think about the potential impacts on society rather than on themselves or the organisation of which they were part.

The goal of sustained nuclear peace makes an ideal target for the Social Policy Bond idea. It's a complex, long-term goal that will require diverse, adaptive solutions. It's a goal that, from all indications, is unlikely to be reached under current policy. And it's an easy goal to verify.

My proposal would be to issue bonds that reward a sustained period of nuclear peace. This could be defined, as, say the non-detonation of a nuclear device that kills more than 50 people for 30 years. They could be backed by a combination of governments, non-governmental organisations, philanthropists and members of the public. With sufficient backing the bonds would help offset and (one hopes) outweigh the the incentives currently on offer, which essentially are those of the military and weapons manufacturers to maintain a nuclear posture.

Those billions of us who would benefit from nuclear peace are presumably a massive numerical majority, but we have few means of expressing our wishes in a way that is likely to bring it about. The tendency is to assume that governments will do what's necessary, with the support of hard-working, well-intentioned people in the private sector.
But these people are not rewarded for success, which is not only problematic in itself, but also discourages people from investing in their efforts. More cogently, it's not working.

We need to reward those who achieve nuclear peace at least as much as those working to undermine it. We don't know exactly how to reduce the chances of a nuclear exchange, nor who will be best placed to do so, over the long period during which our goal is to be achieved, but we have no excuse for not encouraging people to find out. Nuclear Peace Bonds would apply the Social Policy Bond principle to this goal. Investors in the bonds would form a protean coalition of people dedicated to achieving it as efficiently as possible. Their goal would be exactly the same as society's. Human ingenuity knows no limits. Currently, too much of it is devoted to relatively unimportant or socially questionable. Nuclear Peace Bonds would encourage some of that ingenuity into helping avoid a global catastrophe.

My short piece on Nuclear Peace Bonds is here. The links in the right-hand column of that page point to papers on similar themes: Conflict Reduction, Disaster Prevention, and Middle East Peace

03 August 2018

Climate change: we're not really doing anything

David Roberts asks: 
Are any of the countries that signed the Paris agreement taking the actions necessary to achieve that target? No. The US is not. Nor is the world as a whole. Source: No country on Earth is taking the 2 degree climate target seriously, David Roberts, 'Vox', 29 April 2017
Disappointing, but hardly surprising. The two degree climate target is too abstract, too remote for most of us, who have far more (apparently) urgent, short-term priorities. As individuals, we might be lucky to receive subsidies for driving electric cars. But what good do they really do:
"...China’s 1m-plus electric cars draw their oomph from an electricity grid that draws two-thirds of its power from coal, so they produce more carbon dioxide than some fuel-efficient petrol-driven models. The world is losing the war against climate change, the 'Economist', dated 4 August.)
In essence, the incentives are all wrong. A broad definition of subsidy that includes tax write-offs can generate this headline, which tells us all we really need to know:
America spends over $20bn per year on fossil fuel subsidies, Dana Nuccitelli, the 'Guardian', 30 July
Even ignoring subsidies, if the incentives are there for us to extract and burn fossil fuels, then that is what we shall do. Similarly, if the incentives are there for landowners, car manufacturers, politicians and officials to engage in bickering, lobbying in defence of their own interests, and competing with other interest groups for subsidies - then that is what they will do. Much serious brainpower is being spent on resisting change or extracting privileges from government.
 
We need to target meaningful goals, and we need to motivate people to achieve them. The outcome we should be targeting must be a composite definition of climate stability, which should include indicators of plant, animal and human well-being as well as climatic variables and the rate of change of those variables. This targeted outcome would include reductions in the negative impacts of climate change. Targeting climate like this means that we don’t prejudge the best way of achieving it, which might well be reducing greenhouse gas emissions as the main approach, but would motivate people to look at all other potential approaches, including ones we cannot anticipate. We are learning more and more about the links between greenhouse gas emissions and the climate, and about ways in which we can prevent or mitigate climate change. 

We also need to enlarge and motivate the pool of people prepared to do something to tackle climate change. The fact is that the rewards to a successful pet food campaign manager can be in the millions of dollars, while someone trying to generate new ideas for tackling climate change that don’t fit in with Kyoto will have difficulty getting attention, let alone adequate funding. This points to the need to divert some private sector resources away from trivia and towards solving our most urgent environmental problem.

There’s more. We also need people to buy in to solving the climate change problem. Paris type agreements (or 'agreements') don’t do this. Just the opposite in fact: most people-instinctively resent imposed pseudo-solutions originating in remote bureaucracies.Climate change has become politicised. 

It is for all these reasons that I believe Climate Stability Bonds would be an improvement over current policy. Climate Stability Bonds would be backed by the world’s governments. They would be redeemable once a specified climate stability goal had been achieved and sustained. They would be freely tradeable and their value would rise or fall as the targeted goal become more or less likely to be achieved. The goal could be specified as a combination of climate and other indicators. The bonds would not prejudge the best ways of achieving their goal. They would reward the achievement of climate stability, however it is achieved. Investors in the bonds would have incentives to respond quickly and appropriately to new knowledge about what is causing climate change and to new ways of dealing with it. Governments would be the ultimate source of finance for achieving climate stability, but the private sector would allocate society’s scarce resources.

A Climate Stability Bond regime would express its aims in terms that people can understand. Its explicit goal would be climate stability. If people understand what a policy is all about, they can participate more in its development, refinement and implementation. This matters hugely when, as with climate change, government will probably have to rein in activities to which we have become accustomed. Current policy discourages buy-in to the extent that it is focused on the cutting back of net anthropogenic greenhouse gas emissions, which will impose heavy, and up-front, financial costs in pursuit of nebulous, much-delayed benefits.

Climate Stability Bonds, on the other hand, have a comprehensible, meaningful goal: the achievement of broadly- meaninfully-defined,  climate stability. They would channel the market’s incentives and efficiencies into the solution of our most urgent environmental problem. But with their focus on a set of meaningful goals, rather than a supposed means of achieving them, they would also encourage greater public participation and buy-in to the solutions they generate. We need a widely supported, coherent, and efficient response to climate change. Climate Stability Bonds have all those features. Paris and its predecessor, Kyoto, have none.

27 July 2018

Environmental goals need diverse, adaptive approaches

David Lauterwasser writes:
Free energy is nowhere around the corner, neither is truly sustainable energy.  Solar panels are made from sand, which is running out. The production of photovoltaic plates for solar panels requires tremendous amounts of energy, involves the excessive use of highly toxic chemicals and creates vast amounts of waste products such as silicon tetrachloride (three to four tons of which are produced for every ton of the desired polysilicon), which forms hydrochloric acid upon contact with water, is often casually dumped somewhere and already devastated landscapes in China. The Collapse of Global Civilization Has Begun, David B Lauterwasser, 'Medium', 14 November 2017

The life-cycle assessments required to establish the environmental benefits or otherwise of shifts in our behaviour are bedevilled by boundary issues, measurement difficulties, and the difficulty of weighing one type of environmental impact against another. They are better than blandly assuming that rail is ‘better’ than air travel, that solar power is better than coal-fired power stations but, for the making of robust policy, they would need to be continually reassessed in the light of our ever-expanding knowledge of the environment and our ever-changing environmental priorities. Government policy cannot be so responsive: if government did use life-cycle analyses with the aim of altering our behaviour, it would probably do so on the basis of one-time, necessarily limited, and possibly quite subjective assessments of environmental costs and benefits. It wouldn't be good enough, but even worse would be what we have now: environmental policy largely dicated by corporate interests, with attempts to mitigate disasters that are fast-moving and visual enough to make the television news.

Social Policy Bonds would take a different approach. They would subordinate environmental policy to targeted environmental outcomes. It might be, for instance, that society wishes to reduce its use of fossil fuels. A Social Policy Bond issue that rewarded achievement of such a reduction would generate incentives for bondholders to bring it about at least cost. They might well carry out life-cycle analyses in their attempt to do so. But there is an important difference between the way do they would conduct their research and the way government would do so: bondholders have incentives to achieve their goal efficiently. This is likely to mean responding to and stimulating: increased knowledge of scientific relationships, and technical advances.

A single environmental goal, such as reduction in fossil fuel use, entails diverse, adaptive responses. These are precisely the sort of responses that government does very badly. Government can and should articulate society’s environmental goals, and can raise the revenue required to pay for their achievement: in the democratic countries it performs these functions quite well. But actually achieving these goals requires continuous, well-informed and impartial decisions to be made about the allocation of scarce resources. These, government does badly. For that purpose, the Social Policy Bond principle as applied to the environment, with their incentives to achieve targeted outcomes efficiently would, I believe, be far better than the current haphazard, one-size-fits-all approach.

19 July 2018

Wanted: humble billionaires

Most of our chronic social and environmental problems don't have simple solutions. Governments, though, are reluctant to relinquish power and therefore keen to control the funds and institutions whose ostensible purpose is to solve our problems - even when these bodies are manifestly overwhelmed, incompetent, or corrupt. It shouldn't be surprising that politicians, whose lifetime ambition has been to accumulate power, behave like this. It's a bit more surprising that billionaires are subject to the same conceit: 
Tech billionaires from Mark Zuckerberg to Bill Gates have done impressive philanthropic work, but they have both applied their hubris and their cash to failed efforts to try to reform education in America. It turns out that being great at computer software doesn't necessarily make you great in other areas. ...
Memo to tech billionaires: Just because you solved one problem with a simple solution doesn't mean all problems have simple solutions. Let's continue to register our displeasure with tech titans when they show their arrogance, and let's be a little more skeptical when they want to reinvent everything from food to space travel. Stop worshipping guys like Elon Musk, David R Wheeler, CNN, 17 July
So it seems that those who have power or money, having achieved their personal goals, think they are the people best placed to achieve society's goals. Social Policy Bonds are a means by which government or billionaires could both articulate society's wishes and channel funds into satisfying those wishes, without actually doing the work themselves. They could, instead, reward the achievement of our goals, without dictating who shall achieve them nor how they shall be achieved. They would still have the power to articulate these goals and to raise, or spend, the revenue required for their achievement - things that they are good at. But, under a bond regime, they would relinquish the control over how these goals are to be achieved. That would be difficult for politicians or billionaires to accept. But the stakes are high: our social and environmental challenges are too big and too urgent to be left to to those whose expertise lies solely, it seems, in the accumulation of power or money.

We need diverse, adaptive solutions, with time horizons longer than those of individual lifetimes. As a species, we now have massive potential to solve those problems that have bedevilled mankind for millennia: war, for instance, poverty, illiteracy, disease. Social Policy Bonds are a means by which we could motivate people toward solving these problems. Governments aren't likely to be the first to issue them. They owe too much to existing career paths, methods, and institutions. But billionaires? They could be more amenable to persuasion. They want to see the right thing done. All it would take is a bit of humility on their part so that they don't feel they have to be the ones doing it.

10 July 2018

Solitudinem fecerunt consilium canis cibum*

Douglas Rushkoff, after chatting to 'five super-wealthy guys — yes, all men — from the upper echelon of the hedge fund world', fills us in on their priorities:
they were preparing for a digital future that had a whole lot less to do with making the world a better place than it did with transcending the human condition altogether and insulating themselves from a very real and present danger of climate change, rising sea levels, mass migrations, global pandemics, nativist panic, and resource depletion. For them, the future of technology is really about just one thing: escape. Survival of the Richest, Douglas Rushkoff, 5 July
It's an unedifying picture. Would it look any different if a coalition of governments, non-governmental organisations, philanthropists, and the public backed Social Policy Bonds, aimed at solving our global problems?  It might just be that our current policymaking systems are so obviously inadequate that even those of us not wealthy enough to contemplate escape are so resigned or distracted that we remain passive when confronted by an array of potentially calamitous social and environmental problems. Perhaps a more coherent, well-financed, range of policy goals would encourage the super-rich to solve our problems rather than attempt to escape them, and enable more of the rest of us to be employed in such solutions, rather than in devising ingenious ways of advertising dog food. Possibly not, but isn't it worth a try?

*The Latin, according to Google Translate, for They make a desert and advertise dog food

02 July 2018

Target world peace actively, explicitly

John Lanchester quotes Adam Smith:
‘Commerce and manufactures gradually introduced order and good government, and with them, the liberty and security of individuals, among the inhabitants of the country, who had before lived almost in a continual state of war with their neighbours and of servile dependency on their superiors. This, though that has been the least observed, is by far the most important of all their effects.’ After the Fall, John Lanchester, 'London Review of Books', dated 5 July
Mr Lanchester doubts that this still applies: 'elites seem to have moved from defending capitalism on moral grounds to defending it on the grounds of realism. They say: this is just the way the world works,' and then writes cogently and readably about the crash of 2008, subsequent policy changes, and inequality. My focus here though is on the Adam Smith's point: "So according to the godfather of economics, ‘by far the most important of all the effects’ of commerce is its benign impact on wider society."

Francis Fukuyama pointed out that, once you have a common agreement to engage in voluntary, good-faith transactions, people engaging in market transactions can be highly individualistic and do not even need to like each other. It's hard to disagree, but trade, and especially international trade, can be disrupted by politics, with rancorous results. So here's my question: instead of relying on a highly politicised world trading system to achieve peace between countries, why not reward people directly for achieving peace? Perhaps it's because we believe at some level, like the ancient Greeks, that war is part of the natural order of things, so there's no point trying to do anything about it. Or perhaps it's because we think that bodies like the United Nations will succeed in bringing about world peace. Or it could be because our politicians and bureaucrats, and many of the rest of us, don't think there's much point looking too far ahead; and achieving a sustained period of world peace, by any definition, is going to be a long-term undertaking.

Which is where the Social Policy Bond principle applied to violent political conflict, can play a role. No single way of stopping war will work. We therefore need to encourage diverse, adaptive solutions, including feedback mechanisms that ensure that promising approaches are encouraged and, crucially, that failing approaches are terminated. It's unlikely that existing organisations, however well resourced, however well meaning, could do this, even if they had proper incentives. Organisations have their own objectives, of which the over-riding one is self-perpetuation; they have few incentives to be imaginative in their approaches to social problems. What is needed are highly motivated new organisations, whose goals are exactly congruent with society’s. Under a Conflict Reduction Bond regime these organisations might not have a stable structure, nor a stable composition, but their societally defined goal would be stable: a sustained period of peace would be the raison d’etre of such organisations. Their rewards would be inextricably tied to their achieving it. Conflict Reduction Bonds would be redeemable only when absence of conflict had been sustained for a defined period. These bonds would contract the achievement of peace to the market, instead of to the inevitably poorly-resourced, distracted or corrupted bureaucracies that are currently charged with the task. Peace, then, would not be an incidental side-effect of commerce and an ever more rickety world trading system, but the direct, targeted, explicitly rewarded a goal for highly motivated coalitions and their agents.

22 June 2018

Make Social Impact Bonds tradeable

It’s now thirty years since I first floated the idea Social Policy Bonds at a meeting of the Australian Agricultural Economics Society in Blenheim, New Zealand. My aim was to inject the market’s incentives and efficiencies into the achievement of social and environmental outcomes. Under a Social Policy Bond regime, bonds are issued on the free market for whatever price they will fetch. The bonds would be backed by either government or the private sector. They would not bear interest and would be redeemable for a fixed sum only when a targeted social or environmental objective has been achieved and sustained. The idea is that the holders of the bonds would form a coalition whose over-arching goal is exactly that of society: to achieve the targeted goal as quickly as possible.

If this sounds familiar, it’s because my work led to the creation of Social Impact Bonds of which about 60, involving investments of more than $200m, have been launched in 15 countries, aimed at meeting various social challenges. There are 32 in the UK alone, with such goals as reducing recidivism rates and housing rough sleepers in London.

There’s one important feature, though, about my original idea that differentiates it from Social Impact Bonds: my intention has always been that the bonds be tradeable, whereas SIBs, also known as ‘Pay for Success’ bonds, are not. This is, in fact, a critical difference, and it is one that makes me ambivalent about SIBs (with which I’ve had no involvement). I believe their lack of tradeability limits the usefulness of SIBs in several ways.

Most importantly, it means they can tackle only short-term problems. Investors will buy the bonds only if they expect to profit from them. Because SIBs are not tradeable, people will have to hold them to redemption to make a profit. That in turn means that would-be investors would want any targeted goal to have a realistic chance of being achieved within their time horizon, which might be quite short, and certainly within their lifetime. This narrows the scope of the goals we can target and, indeed, SIBs have invariably narrow goals. Because their goals are so limited, so too are the opportunities for shifting resources to and from different approaches to solving a particular problem, and varying them as circumstances change. With a short payback period, investors in SIBs have no incentive to research and experiment with innovative approaches that have anything other the shortest lead time or are otherwise almost risk free.

Another important reason why the bonds should be tradeable, is because the identity and composition of the groups best placed to achieve a targeted objective will change over time. Our most urgent and challenging social and environmental problems will require multiple steps before they are solved. The people who are best at step one will not necessarily be those who are best at step two and all subsequent steps. We cannot even specify in advance what step one, or indeed any step, will entail; still less can we identify those best placed to take these steps. Tradeability means there be a market for Social Policy Bonds, which will ensure that the bonds will find their way into the hands of the highest bidders for them – who will be the best-placed to advance progress towards society’s targeted goal most efficiently. When the bonds are not tradeable, then we have something similar to the the way social policy is currently implemented: government identifies some organisation (most likely an existing body, often one of its myriad own agencies), and pumps money into it. If this agency is paid for performance (as in Social Impact Bonds), it has an incentive to perform well. This might be an improvement on the way things are usually done. But if, as so often, one or all of the steps necessary to resolve the targeted problem optimally lie beyond the imagination or competence of such a designated agency, then we are going to be stuck with current (woeful) levels of under-achievement in social and environmental policy.

Social Policy Bonds have the advantage in that they not only do not stipulate how society's goals are to be achieved, nor who shall achieve them. They will leave those decisions to the market, which will favour the most cost-effective coalition of operators at every stage on the way to achieving social goals.

Another advantage of the bonds being tradeable is that a market for the bonds would generate extremely useful information both for would-be investors and for policymakers. The value of the bonds will rise and fall depending on whether the market thinks the targeted goal will be achieved more or less quickly. These prices, and their changes, will be immensely valuable to those having to decide where to allocate society’s scarce resources, be they in the public or private sector.

One of the problems with SIBs is that, because their goals are relatively narrow, the costs of monitoring progress toward or away from their achievement will always be a higher proportion of the total administrative costs than they would under a regime that could target broader goals. It's almost as easy (or not much more difficult) to monitor national crime indicators, say, as to look at the behaviour of group of a few hundred specific ex-prisoners in one part of the country over several years.

And it is to achieve these broader goals that my original idea was intended. Goals such as improving the health of a population, eliminating poverty or achieving universal literacy. Social Policy Bonds could target global goals too: the ending of war, civil war, terrorism; the mitigation of climate change (or its negative impacts) or any global environmental problem, such as loss of biodiversity and preservation of the marine environment. These broad problems require a long-term outlook well beyond the purview of investors in Social Impact Bonds. To solve such problems, we shall need Social Policy Bonds which, because of their tradeability, will encourage the exploration, refinement and implementation of diverse, adaptive approaches.

Most people would agree that humankind faces huge and urgent challenges, including war, nuclear proliferation, climate change and poverty. Yet, while there is almost universal consensus that these challenges need to be met, our politics is crippled by venomous, divisive tribalism, obsessed by ideology and personality. The gaps between policy and goals, and between people and politicians grow ever wider. Social Policy Bonds, by injecting the market’s incentives into achieving humanity’s long-term ideals could help close these gaps.

A shorter version of this post appeared recently on the Alliance Magazine website.

16 June 2018

The environment: it's complicated

 From the current New Scientist
It turns out that vegan-friendly alternatives to fur and leather, as seen on display at Australia’s recent Fashion Week (above), can harm sea creatures, because they are made of that other pervasive ecovillain: plastic (see Vegan-friendly fashion is actually bad for the environment). The evidence is not yet clear, but some animal fabrics may be the least harmful choice overall. Such unintuitive outcomes crop up again and again when we try to make ethical lifestyle choices. As New Scientist has reported, ditching disposable plastic bags for a fetching cotton tote only pays off after you have used it 131 times, due to the large environmental burden of cotton – which is also an issue for clothes. Beware the bandwagon, 'New Scientist', 13 June
The sort of life-cycle analyses (LCAs) required to establish the environmental benefits or otherwise of shifts in our behaviour are bedevilled by boundary issues, measurement difficulties and the difficulty of weighting one type of environmental impact against another. They might be better than blandly assuming that vegan clothes are 'better' than animal fabrics, rail is better than air travel, solar power is better than coal-fired power stations, etc, but for the making of robust policy LCAs would need to be continually reassessed in the light of our ever-expanding knowledge of the environment and our ever-changing environmental priorities.

Government policy cannot be so responsive nor, probably, can any single organisation - at least not as currently structured. If government did use life-cycle analysis with the aim of altering our behaviour, it would necessarily do so on the basis of a one-time, limited, and possibly subjective assessment of environmental costs and benefits. It’s not good enough, but even worse would be what we largely have now: environmental policy based on corporate interests, 'what feels right', media stories and the launching of visually appealing initiatives that attract air time but are otherwise useless.

Social Policy Bonds would take a different approach. They would subordinate environmental policy to targeted environmental outcomes, which could be national or global. Say, for instance, that we wish to preserve the Earth's marine environment. A Social Policy Bond issue that rewarded the sustained achievement of such a goal would generate incentives for bondholders to bring it about at least cost. They might well carry out life-cycle analyses in their attempt to do so. But there is an important difference between the way do they would conduct their research and the way government, or any supra-government body would do so: bondholders have continuous long-term incentives to achieve our goal efficiently. This is likely to mean responding to and stimulating increased knowledge of scientific relationships, and technical advances. Investors might conduct LCAs, but they would do so in ways that optimise the benefit to the marine environment per dollar spent.

Effective environmental policy must take a long-term view and for national or global goals, will need to encourage diverse, adaptive approaches. The environment and our knowledge about it are just too complex for an 'it feels good', command-and-control approach that, for instance, brands animal-derived clothing, or plastic shopping bags as bad. Diverse, adaptive approaches to addressing complex problems are precisely the sort of responses that government does very badly. However, government does have crucial roles in articulating society’s environmental goals and in raising the revenue to
pay for their achievement: in the democratic countries government performs these functions quite well. But actually achieving society's social and environmental goals is a different matter. Such achievement requires continuous, well-informed and impartial decisions to be made about the allocation of scarce resources. For that purpose, Social Policy Bonds, with their incentives to achieve targeted outcomes efficiently would, I believe, be far better than the current ways in which environmental policy is formulated.

For more about application of the Social Policy Bond principle to the environment see here

13 June 2018

Superbugs: disastrously misaligned incentives:

William Hall and others write: 
When asked what she would do with a useful new antibiotic, the chief medical officer for England, Sally Davis, said that the drug “would need a stewardship program”—that is, that systems would have to be in place to make sure that the antibiotic was only prescribed when absolutely necessary. Indeed, limiting unnecessary use is essential to keep bacteria from becoming resistant to new antibiotics, and thus essential for our continued health.
While this is a cogent strategy, it doesn’t coincide with the marketing goals of the drug industry: “When a really useful new antibiotic is found, the company that invests in it cannot rely on high sales for return on investment.”  William Hall et al, Superbugs: an arms race against bacteria, quoted by Jerome Groopman, The bugs are winning, 'New York Review of Books', dated 28 June
The interests of the drug companies - and of those who target, implictly or explicitly GDP - don't merely fail to coincide: they are in conflict with each other. Discovering and manufacturing a new antibiotic is expensive so, when a pharmaceutical company succeeds, it has every incentive to maximise sales in the relatively short period before its patent runs out. With such misaligned objectives, you'd hope government would take the long view and give the health of its citizens (and, incidentally, the welfare of farm animals fed prodigious quantities of antibiotics so that they'll grow more rapidly) a higher priority than the short-term interests of pharmaceutical companies. But no: it's the farmers and the pharmas who override the interests of ordinary people. You know, those of us who can't afford to follow and manipulate an absurdly complex policymaking process, nor pay others to do so.

The authors of Superbugs estimate that the total number of people dying annually from resistant microbes is at least 1.5 million and, extrapolating from US estimates, they estimate the costs to health services at about $57 billion and the loss in world productivity at $174 billion. There are currently no financial incentives for anyone to take the long-term view, though it's in almost everybody's interests for somebody - most likely government - actually to do so. As individuals, we know what needs to be done: ensure that doses of antibiotics are carefully regulated and that research into new antibiotics continues. Developing effective antibiotics, Hall et al write, should be recognised as a public good, which would justify government intervention. They blame short-term thinking for the absence of such intervention.

Applying the Social Policy Bond principle to the health field could be one way of meeting the challenge, and might be easier and less contentious for government to do than more direct intervention. Government could issue Health Bonds aiming for improvements in the general health of the population over a period of decades. One necessary approach would then be to optimise the use of, and research into antibiotics. Doing this would generate rises in the value of the bonds, and so reward investors. Government would have to do little more than raise the funds for the bonds' redemption and articulate, with the help of experts and input from the public, health goals for the population. After that, it would be up to bondholders to pursue these goals. The overarching objective of investors in the bonds would then coincide with those broad, long-term goals. The investors, and the people they contract, would have incentives to bring about society's health goals as efficiently as possible - a stark contrast with the current system.

10 June 2018

Outcome-based policy and buy-in

In my efforts to promulgate Social Policy Bonds I’ve usually emphasised their efficiency, which arises from a number of sources, including their harnessing of market forces, their encouragement of diverse, long-term approaches, and their capacity to adapt to changing circumstances. I’ve also stressed their transparency: because the bonds target broad, meaningful outcomes, ordinary people will understand them more.

This, in turn, means another hugely important benefit: buy-in. When we understand what a policy is all about, we can participate more in its development, refinement and implementation. This would apply even if our views are over-ridden by others: at least, we'd have been consulted. A Social Policy Bond regime would express its goals as outcomes that are meaningful to real people. Such outcomes would be more comprehensible to more people than the current unstated or unconsidered, vague, or platitudinous goals that characterise current policymaking all over the western democracies. Discussion about outcomes, rather than the alleged means of achieving them, would be more accessible than current policymakers' emphasis on legal pathways, funding arrangements, institutional structures and composition, and other arcana. You might even think the system has been specifically designed to keep ordinary citizens out of it.

If people have the chance of participating in such discussion, we shall come to understand the limitations and trade-offs that are intrinsic to public policymaking. This means quite a few things, but to my mind buy-in is the most important. It's likely this would reconnect citizens with our policymakers; it would entail the sharing of responsibility and concern for policy initiatives.

This matters hugely when government has to do things that hurt people's narrow, short- or medium-term interests. Dealing with environmental depredations for instance; or raising taxes for a multitude of purposes. The current system discourages buy-in because it's difficult to follow. As such, it's easily influenced by the wealthy or powerful, be they in the private- or public sector. This does much to widen the gap between politicians and the people they are supposed to represent. Social Policy Bonds, because of their focus on outcomes, would help close that gap.