03 December 2018

It's not just nappies

Nappies, cloth or disposable, just won't go away. I've blogged about nappies before (here and here). A recent article in New Scientist revisits the issue, citing an updated report done in 2008:

...if cloth nappies were washed in full loads, air-dried on a washing line and reused on a second child, they resulted in 40 per cent lower greenhouse gas emissions than using plastic disposable ones. These benefits are likely to be even greater today [ie 2018] now that half the UK's electricity comes from low-carbon sources. Are disposable nappies really so terrible for the environment?, Alice Klein, 'New Scientist', 21 November
The question posed by the article raises a general question here as to policymakers go about legislating or regulating in order to solve social and environmental problems. Most of these problems are complex: they have multiple causes whose significance changes radically over space and time. Our current policymaking system usually looks at a problem, or a symptom of a problem, tries to identify a cause, then goes about trying to legislate or regulate that cause so as to moderate its adverse effects. That works well when the relationship between cause and effect is easy to identify. But such is rarely the case today, as the nappies example shows.

It's not just nappies. Climate change is the same: we cannot rely on government to identify the causes of a complex problem, then do the right thing and, eventually, regulate it. There is too much scope for mis-steps along the way. The causes might be many and varied, with time lags and linkages impossible to verify. Legislating is nowadays a cumbersome and arcane process, and is often opposed or delayed by powerful interests that stand to lose if it goes forward. Results of policies are rarely monitored; still less are policies modified in the light of their impacts.

These flaws are inevitable in the way we make policy today. Fortunately, I believe there's an alternative. We need to focus on outcomes, and let the ways in which these outcomes be achieved be decided, on a continuous basis, by people rewarded only for achieving them. So: rather than government trying to deal with the problem of (say) landfill by commissioning a one-time study of the comparative benefits of cloth versus disposable nappies using fossilised data, it would instead target for reduction the volume of landfill. Rather than try to work out why there are more adverse climatic events, government should reward reductions in the number and severity of such events. And rather than try to work out some alleged 'root causes' of violent political conflict, we could instead reward the sustained absence of such conflict, whoever achieves it and however they do so.

Not only would this be intuitively more efficient than current the policymaking process, it would also be much quicker. It's taken decades to get to where we are now with regard to the causes of climate change and...adverse climatic impacts are worsening. And we haven't even begun to identify root causes of war. We don't even know if there are any....

What I'm advocating is, of course, the Social Policy Bond idea, whereby we issue bonds that become redeemable only when a targeted social or environmental goal has been achieved. Investors in the bonds would themselves work out the best ways of achieving these goals, and they would be motivated to do so efficiently and continuously. It's a simple idea, but the ramifications are many and varied, and I've written about some of them in this blog and on the Social Policy Bonds website. As I say: it's not just nappies. The traditional way of doing things just isn't working any more. It's time to focus on outcomes.

29 November 2018

A new type of organisation

Jerry Z Muller writes about the use of metrics in medicine:
But metrics tend to be most successful for those interventions and outcomes that are almost entirely controlled by and within the organization’s medical system, as in the case of checklists of procedures to minimize central line–induced infections. When the outcomes are dependent upon more wide-ranging factors (such as patient behavior outside the doctor’s office and the hospital), they become more difficult to attribute to the efforts or failures of the medical system. Jerry Z Muller, the Tyranny of Metrics, February
One of the advantages of the Social Policy Bond idea, in my view, is that they could target things that are outside the remit of most existing institutions. So, for instance, holders of bonds targeting the health of a population would have incentives to encourage non-medical health-improving practices. Not limited to the more obvious interventions - exercise and diet, for instance - bondholders could, for instance, aim to lobby local authorities to make neighbourhoods more walkable, or to subsidise employment for people who would otherwise be at high risk of becoming depressed. And not only in medicine: the most efficient ways of solving our social and environmental problems may currently lie outside the remit of any of our existing institutions. Only a broad, long-term approach, as encouraged by Social Policy Bonds, would encourage people to investigate this possibility.

What Social Policy Bonds would do, in effect, is redraw the boundaries of the organisation to take in factors that are currently untargeted, or targeted only incoherently and unsystematically. By focusing on broad metrics, applying to large populations, the bonds would encourage investors to consider all the important potential influences on the value of their bonds. A new type of organisation would come into being, composed of a protean coalition of bondholders, all of whose activities would be devoted to achieving our social goals as efficiently as possible. They would have powerful incentives to investigate and implement measures that achieve these goals regardless of whether or not they currently fall under the remit of existing bodies. Under a Social Policy Bond regime, efficiency and effectiveness in meeting our challenges would determine the structure and composition of our goal-achieving bodies.

23 November 2018

The jellyfish are taking over

Bill McKibben writes about the shrinking world:
Until now, human beings have been spreading, from our beginnings in Africa, out across the globe—slowly at first, and then much faster. But a period of contraction is setting in as we lose parts of the habitable earth. Sometimes our retreat will be hasty and violent; the effort to evacuate the blazing California towns along narrow roads was so chaotic that many people died in their cars. But most of the pullback will be slower, starting along the world’s coastlines. Each year, another twenty-four thousand people abandon Vietnam’s sublimely fertile Mekong Delta as crop fields are polluted with salt. As sea ice melts along the Alaskan coast, there is nothing to protect towns, cities, and native villages from the waves. How extreme weather is shrinking the planet, Bill McKibben, 'New Yorker', dated 26 November
Human, animal and plant life is under siege on many fronts. Any species closely attuned to its environment and incapable of moving to a different one is vulnerable. Loss and degradation of habitat, climate change: the human race is, in effect, prioritising current quality and quantity of (human) life at the expense of the long-term survival of the natural world, of which we are part. It's not been a deliberate choice, but it's what's happening.

The issues are too complex and slow moving for politicians to understand. Our policymaking systems are too cumbersome and corrupt to adopt policies that threaten the short-term interests of big corporations. Rather (or: as well as) despair at our collective fate, I suggest that we bypass our usual policymaking mechanisms and explicitly target the goal of long-term human survival.

The practical form of this could be the issuing of Social Policy Bonds that target an array of environmental indicators, including the well-being of human, animal and plant life. It's practical, in the sense that it doesn't require detailed scientific surveys or guesses as to how our targets will be achieved. Only the outcome - in the form of an acceptable range for each indicator - need be targeted; each indicator remaining in that range for a sustained period of, say, thirty years. Politicians could still play a role in raising the revenue for the achievement of this goal, and in articulating our species' exact wishes.

But it's not going to be happen. Governments aren't going to relinquish their power to allocate resources to favoured bodies. True, there is a good number of Social Impact Bonds around, but politics in general is ever less concerned with outcomes, and more with image, identity, personality and ideology. I don't think philanthropists either are going to fund anything that threatens the status quo. But on the off chance that there is any interest in aiming for the long-term survival of humanity and our planet, these two papers suggest how it could be done.

And the jellyfish? As Mr McKibben writes: "we have found ourselves unable to swim off beaches, because jellyfish, which thrive as warming seas kill off other marine life, have taken over the water."

11 November 2018

Metrics and their limits

Stefan Collini summarises the most important weaknesses of using quantifiable data - metrics - as described in Jerry Z Muller's book The Tyranny of Metrics
Misdescription of purpose is fundamental: in the attempt to find outcomes that are measurable, complex characterisations of purpose are replaced by quantifiable results. ‘Goal displacement’ is also a major problem: where a metric is used to judge performance, energy will be diverted to trying to improve the scores at the expense of the activities for which the metric is supposed to be a proxy. ... But there are less obvious effects too, such as discouraging risk-taking, undervaluing co-operation and common purpose, and the degradation of the experience of work. Kept alive for thirty days, Stefan Collini, 'London Review of Books' (subscription), 8 November
I see the need to rely on metrics as a product of big government, itself a function of the highly complex, highly aggregated societies in which we live. What is termed multiculturalism doesn't help either. Lacking a common history and common values, our needs are less readily appreciated by any large centralised body. So our politicians have to rely on quantifiable data. In this, our national governments have more in common with other big organisations (corporations, trade unions, other governments) than with the people it's supposed to represent. All these institutions have two main things in common: first, that their over-arching objective is that of self-perpetuation, about which I've writen before. Second, that they rely heavily on easily quantifiable data.

Things were simpler in earlier days:
[W]e prefer to take our chance of cholera and the rest than be bullied into health. A leading article from the [London] Times, 1 August 1854, in response to government measures to provide basic sanitation.
Problems themselves were more obvious; the causes of problems could be more readily identified, and so could solutions to some of them. Governments were largely successful in their policy interventions on behalf of the disadvantaged: they instituted basic health and education for their own populations. They provided other public goods, such as law and order, and sanitation. And they did so with great success and sometimes, as the quote shows, against strident opposition.

In our industrial societies, with their large, complex economies, government bodies have far more complicated tasks, but they still believe that the best way solving problems is to look for causes and try to treat those. And they still believe that they are best placed to perform these tasks. Government has enlarged its role and largely supplanted families, extended families and local people in supplying a range of welfare services to those who need them. Increasingly government is turning to numerical indicators to manage its resource allocation.

But this use of indicators is relatively recent, unsystematic and unsophisticated, as Messrs Collini and Muller relate. Few indicators are targeted explicitly for a sustained period: the targeted range of inflation in, for instance, the UK, is a rare (and not especially helpful) exception. Other indicators, such as the size of hospital waiting lists, don’t measure what matters to people, or are prone to manipulation. Even when numerical goals are clear and meaningful they are rarely costed, they are almost always too narrow and short term, and they are largely driven by existing institutional structures. Those broad targets that are targeted with some degree of consistency tend to be economic aggregates, such as the inflation rate, or the rate of growth of Gross Domestic Product — which appears to be the de facto measure of success of rich and poor countries alike.

But GDP’s shortcomings as a single indicator of the health of an economy are well known: amongst other failings, GDP does not take into account changes in the quality of the environment, or the distribution of income, it ignores human capital (the education and skills that are embodied in the work force) and leisure time, and it ignores such social problems as crime and homelessness.

Much of what matters most to us - family, relationships, connection with nature, meaningful work etc - is impossible to quantify. Unfortunately, the underlying assumption, as Mr Collini tells us, is that:

...the right structure of incentives and penalties will ultimately improve the bottom line of any business. Organisations whose rationale is not the maximisation of profit, such as schools, hospitals, universities, museums and so on are a challenge to this idea because their ‘product’ does not take financial form. So some equivalent has to be found – the numbers passing certain exams or being treated within certain times – on the basis of which quantitative targets can be set and performance rewarded or punished accordingly.
What's to be done? My suggestion is that we target broad, long-term goals that are meaningful to ordinary people. They should be quantified by indicators or targets that are inextricably linked to people's well-being. Achievement of these goals must be exactly congruent with achievement of society's wishes, as articulated by democratic governments in consultation with its citizens. And the achievement of these goals should be contracted out in a way that lets market forces - the most efficient way yet devised of allocating our scarce resources - play their role in maximising efficiency.


I suggest that we issue Social Policy Bonds to target such goals as: stabilising the climate, achieving universal literacy, improving citizens' health, and preventing nuclear conflict. By issuing the bonds, a government, or coalition of governments and others, need not specify how such long-term goals are to be achieved, nor who shall achieve them. Broad national or global goals can be more reliably quantified and are much less costly to monitor than narrow, short-term goals which, amongst other deficiencies, allow problems to be shifted to non-targeted areas or time periods.

What about things that cannot be readily or reliably quantified? Family, mental health, some aspects of the Commons? Perhaps government's role here should be that of laying down minimum standards based on those criteria that can be measured, and then backing off: making sure it doesn't discourage diverse approaches, ensuring that its regulations do not favour the large at the expense of smaller concerns, be they voluntary, non-profit, co-operative or smaller businesses. Neither this approach, nor a Social Policy Bond regime, will come about easily. They would mean government relinquishing some of its power to create bodies, allocate funding, and have a large say in how to solve our social problems. But, in our ever more complex world, it's not particularly good at these things, and a bond regime would still need government to articulate society's wishes and to raise the revenue for their achievement. These necessary functions, democratic governments are actually quite good at. If all this sounds far fetched the question to ask is: in a world of increasing social and environmental complexity, facing urgent, huge challenges (climate change, nuclear proliferation etc), and rising political impotence and extremism... what is the alternative?

03 November 2018

Between gods and government

The Actuary interviews Maurice Ewing, managing director of Conquer Risk:
"I thought economics would be talking about 'big picture' issues, but realised that, over time, the profession  had become focused on purely academic questions. What was noticeable was the inability of neo-classical economics to explain financial crises." Richard Purcell quotes Maurice Ewing, 'The Actuary', October
I share Dr Ewing's disenchantment with the economics profession, and have written elsewhere (here, for instance) about how all institutions, including not only universities, but also government agencies, religious bodies, trade unions, large corporations and the rest have as their over-arching goal that of self-perpetuation. Which is why I advocate instead a new type of organisation; one whose structure and composition are adaptive and determined solely by their effectiveness in achieving society's goals. Mr Purcell's article continues:
To help monitor risk culture and policies designed to nudge behaviour, Ewing thinks we also need to change key performance indicators so that they are not arbitrarily set and are designed with the people meeting the target in mind.
This makes sense if we take the 'people meeting the target' as a given - which presumably will be the guiding assumption for companies. Extrapolated to the achievement of broad social goals, however, it doesn't work. Our larger goals should not be limited by the capabilities of people currently charged with helping to achieve them. We can and should aim for ambitious targets: eliminating poverty, universal literacy, the ending of war. These are long-term goals, but we can target them by issuing Social Policy Bonds. Under a bond regime, the coalition that works to achieve our goals would not take 'the people meeting the target' as a given. The coalition would be a protean body; its composition and structure changing adaptively, wholly determined by their efficiency in achieving its targeted goal.

Sadly, we all seem to share the limited purview of governments. The goals that I espouse, (world peace, universal literacy etc), we assume are beyond the reach of mortal man and delegate responsibility for achieving them to deities or their supposed representatives on Planet Earth. People do good work in making incremental gains in social and environmental well-being but, for the big picture goals, we need to do things differently. A Social Policy Bond regime need not be constrained by the unambitious and self-interested goals of existing organisations. Rather than rely on divine intervention it could realistically target our most ambitious goals by deploying the best way of allocating society's scarce resources yet devised - market forces - in ways that encourage and reward only the most efficient and effective initiatives.

25 October 2018

Say no more

Excerpts from two sources show just how wide the gaps between our political systems and citizens have become. First, from the UK:
I looked at the Bank of England data and it was 3.5% of business lending went to manufacturing, a century or so ago that number would have been more like 80% and that’s a trend that has been going on for a long time. And you compare this 3.5% going to manufacturing with 75% going to either finance or real estate and you can see that something’s wrong, finance has become kind of unmoored and disconnected from the real economy. How oversized finance sectors are making us poorer, Nicholas Shaxson, September
And from the US, Jane Mayer writes about the role of the Koch brothers in the presidential election of 2016:
In fact, amazingly, in 2016 the Kochs’ private network of political groups had a bigger payroll than the Republican National Committee. The Koch network had 1,600 paid staffers in thirty-five states and boasted that its operation covered 80 percent of the population. ...[T]he Koch network was sponsored by just four hundred or so of the richest people in the country. Election Night 2016, Jane Mayer, 2017
There's little more to be said, except that that within our current policymaking systems, there is no self-correcting mechanism. People become wealthy within the system, and use that wealth to manipulate the system to make themselves even more wealthy. Even if the gap between politicians and people were seen to be a problem, there's nothing within our current political systems to close it. It keeps growing wider. It's clear now that anything that, on the one side, billionaires big business and politicians can do to extract resources from ordinary people and small businesses, they will do. Our ruling caste gets away with it because policymaking, by accident and design, has become an arcane, protracted process, comprehensible only to those directly involved in it or paid to follow it.

That, and society's increasing complexity, is why I suggest politics be rejigged to focus on outcomes that are meaningful to ordinary people, and that market forces, currently subverted or gamed by the wealthy, be instead channelled into the public good. That's where Social Policy Bonds would enter the picture. It's true that, under a bond regime, many investors in the bonds would be rich and, if their bonds were redeemed early, they would become richer. But this would be a socially beneficial way of acquiring wealth. The value of their bonds would rise only if society's targeted outcome, as articulated by democratic governments, become more likely to be achieved quickly. The goals of investors in the bonds and society would be exactly congruent.

A less obvious benefit of a bond regime is that, being a socially beneficial way of acquiring wealth, it would divert human and other resources away from other less socially beneficial ways, like, for instance, much of banking or speculation in real estate.

14 October 2018

They got away with it in agriculture, so why not everywhere else?

George Monbiot writes about the European Union's corrupt, insane Common Agricultural Policy:
I’m a Remainer, but there’s one result of Brexit I can’t wait to see: leaving the EU’s Common Agricultural Policy. This is the farm subsidy system that spends €50 billion a year on achieving none of its objectives. Farmed Out, 12 October
(I would say "stated objectives".) I'm not a remainer, and the CAP is one reason why. There's little to add to Mr Monbiot and others' litany of the CAP's disastrous effects on the environment, small farmers, animal welfare, Africa and human health, but the persistence of the CAP is illustrative:

(1) It's been widely challenged for decades, yet its beneficiaries are wealthy and powerful enough to resist any meaningful reform.

(2) Agriculture in all the rich countries is a sector in which government involvement has been pervasive and long lasting.

The key question is: in whose interests are these agricultural policies? The answer is clear: agribusiness and landowners (especially the biggest). The losers? The rest of us: people who eat, taxpayers, plus the farmed animal population, plus the physical environment. Even would-be farmers don't benefit: they have to buy land at prices inflated by government subsidies.

It's not just agriculture. Increasingly, the complexity both of society and our policymaking process is being weaponised in favour of the people who own and run corporations, or the people they pay (in or out of government) to understand and influence policy. Government and their paymasters can get away with this because we accept a policymaking system that doesn't explicitly target outcomes that are meaningful to ordinary people. Currently policymakers can - indeed must - express their decisions as vague declarations of intent and changes in institutional funding and composition, or legislation. Their focus is on the supposed means of achieving vague outcomes, rather than on the outcomes themselves.
 
Issuers of Social Policy Bonds would in contrast have to be explicit about their objectives: transparency and accountability are built into a bond regime, as surely as they are excluded from the current policymaking apparatus. Insane, corrupt programmes, such as Europe's Common Agricultural Policy, have platitudinous, vague, mutually conflicting goals, which sound lofty and high-principled but actually end up shovelling vast sums of taxpayers' and consumers' money into the bank accounts of agribusiness corporates and their lobbyists. If outcomes were built into policymaking, as they would be under a Social Policy Bond regime, such policies would get nowhere. Instead they have lasted for decades, at great cost to everybody except a few millionaire businessmen and landowners, a burgeoning, parasitical bureaucracy and lobbyists . Oh, and fraudsters.

It's the persistence of such stupid policies as the CAP, which swallows up about the 40 percent of the EU budget, that makes imperative a systemic change in the way we formulate policy. Twenty-seven years ago, P J O'Rourke could write this, about the American political system in general, and that country's Farm Bill in particular:
I spent two and a half years examining the American political process. All that time I was looking for a straightforward issue. But everything I investigated - election campaigns, the budget, lawmaking, the court system, bureaucracy, social policy - turned out to be more complicated than I had thought. There were always angles I hadn't considered, aspects I hadn't weighed, complexities I'd never dreamed of. Until I got to agriculture. Here at last is a simple problem with a simple solution. Drag the omnibus farm bill behind the barn, and kill it with an ax. Parliament of Whores, P J O'Rourke, 1991
Since then, little has changed in agriculture, but the complexities in society and policymaking have proliferated and continue to perplex ordinary people. Consequentially, the gap between our corporate-political caste and the people they are supposed to represent has continued to widen. Clarity and transparency about policy objectives are essential if that gap is ever to close. Rewarding people who actually achieve these goals, rather than bodies who merely say they will, will also be necessary. Social Policy Bonds would fulfil both requirements.

12 October 2018

The finance curse

Nicholas Shaxson writes about the UK's 'finance curse':
A growing body of economic research confirms that once a financial sector grows above an optimal size and beyond its useful roles, it begins to harm the country that hosts it. The most obvious source of damage comes in the form of financial crises – including the one we are still recovering from a decade after the fact. But the problem is in fact older, and bigger. Long ago, our oversized financial sector began turning away from supporting the creation of wealth, and towards extracting it from other parts of the economy. To achieve this, it shapes laws, rules, think tanks and even our culture so that they support it. The outcomes include lower economic growth, steeper inequality, distorted markets, spreading crime, deeper corruption, the hollowing-out of alternative economic sectors and more. The finance curse: how the outsized power of the City of London makes Britain poorer, Nicholas Shaxson, ''The Guardian',5 October
It's not just the finance sector that works to influence policy in ways that drain resources away from ordinary people and small businesses: governments the world over are in thrall to big business. They act as though the interests of big corporations coincide with those of the citizens they are paid to represent. Our economies and societies are so complex that they can believe this, or act as though they believe it, with impunity. The Social Policy Bond idea is an attempt to re-orientate policymakers so that they again think in terms of the well-being of citizens, rather than the financial health of private- or public-sector bodies whose operations might, or might not, generate net welfare gains.

Almost all of us want to see a healthy business sector and an effective welfare system for the most disadvantaged. Government, and often, only government, can and should do the basics: infrastructure, education, health up to certain levels. But when things become complicated we should be targetting ends, rather than the supposed means of achieving them. The finance sector, which should be the financial services sector, has become grotesquely enlarged because of this confusion. So:


Lending to businesses outside the financial world – which many people might think the principal activity of a bank – represents about 3pc of the activity of British banks. The City services only itself, John Kay, 'The Telegraph' (London), 9 September 2015
Fine if the bankers want to do other things, but they shouldn't siphon funds from the rest of the economy, nor manipulate the regulatory environment, to do them. A Social Policy Bond regime wouldn't confuse ends with means, and wouldn't subsidise big business at the expense of ordinary citizens and small businesses. As Mr Kay puts it: 'We do not need an army of the overpaid and overbonused buying and selling from each other.' We don't need it and we certainly shouldn't tax people to pay for it.

06 October 2018

Human nature is peaceful

People (like me) who believe world peace is possible are often put in a box labelled 'Idealists.' So weapons continue to pile up and when we see the horrors of war on our tv screens, we sigh as though violent human conflict were inevitable. The wealthiest amongst us plan escape routes or prepare for war's aftermath. The rest of us dutifully contribute to peacekeeping efforts by such bodies as the United Nations, though with no expectation that they will actually achieve very much.

In War, Peace and Human Nature, Douglas Fry et al argue that (1) the belief that war is part of human nature is itself destructive and (2) war is not part of human nature.

A view, erroneous though it may be that war is ancient and presumably thus reflects some natural feature of humankind or human social life, feeds a suspicious and hostile view toward other peoples and countries, making the preparation for war and the practice of war that much easier. The reasoning, or in many cases “gut reaction,” seems to be: if war is in human nature, then we’d better be prepared to fight and perhaps strike first. This implicit assumption, in great part simultaneously stemming from and reinforcing of the violent view of human nature, can be seen as contributing to arms races, preemptive strikes, excessive spending on weapons, hostility toward others, and inordinate fear of other nations or groups, who are by this thinking, naturally inclined to attack. I am suggesting, in other words, that in widespread assertions that war is ancient, we are seeing a cultural belief with very important real world ramifications. Such a view may be in the short-term self-interests of a minority (e.g., arms dealers), but it is not in the long-term interests of humanity overall.
It's an important point. And much of the rest of the book backs up the assertion, that over the whole period of human existence, war is not an intractable feature of humanity, Mr Fry has this to say, summing up the evidence gathered and written up by other contributors to the book:

[Steven] Pinker's thesis that chronic war stretches back over the far-reaching millennia before the agricultural revolution is not substantiated by the actual data. ... The worldwide archaeological evidence shows that war was simply absent over the vast majority of human existence .... —the time period beginning far to the left side of [an n-shaped] curve. But with a gradual worldwide population increase ..., the shift from universal nomadic foraging to settled communities, the development of agriculture, a transition from egalitarianism to hierarchical societies—and, very significantly, the rise of state-level civilization five thousand to six thousand years ago—the archaeological record is clear and unambiguous: war developed, despots arose, violence proliferated, slavery flourished, and the social position of women deteriorated. This comparatively recent explosion in pre-state and then state-based violence is represented on the rising left side of the letter n in the curve, but taking place within the last 10,000 years. (My emphasis.)
Conclusions? People who believe world peace is possible are not being irrational or going against human nature. Violent political conflict is not inevitable.

Where does the Social Policy Bond idea fit in? Simply: knowing that world peace is possible, we can issue World Peace Bonds as a way of rewarding the people who help achieve it. There are reasons why such bonds have not been issued (they're untried, they threaten existing institutions ...etc) but a big one is that people think that world peace is some Edenic, idealistic vision, not for this world. What Mr Fry and the other contributors to his book show is that world peace is not only possible, but it was, for the greater part of man's existence, a reality.

29 September 2018

Giving greed a chance

Looking at the scale of social and environmental problems that mankind faces, you might think that we don't have the resources necessary to make fundamental changes in the way we operate. Changes such as eliminating extreme poverty, improving health outcomes, dealing with environmental problems, and reducing violent political conflict. The good news, though, is that we are not short of funds to address these, and other, challenges.
Brooke Harrington in Capital without borders, writes about people working in the wealth management industry:
Their work radically undermines the economic basis and legal authority of the modern tax state.... Using trusts, offshore firms, and foundations, professionals can ensure that inequality endures and grows in a way that becomes difficult to reverse short of revolution. Brooke Harrington, Capital without borders, September 2016
And then there is corporate welfare.  Nathan Jensen writes, about the US:
Every year, states and local governments give economic-development incentives to companies to the tune of between $45 billion and $80 billion. Why such a wide range? It’s not sloppy research; it’s because many of these subsidies are not public. Do Taxpayers Know They Are Handing Out Billions to Corporations? 'New York Times', 24 April
People are behaving perfectly rationally given the incentives on offer. In most cases they are behaving perfectly legally too. But the result, from an ordinary person's point of view is a massive misdirection of resources into activities that are destroying our social and physical environment. We have greed - otherwise known as self-interest - and we have untold wealth. It's my contention that we could solve the world's problems without having to rely on changing human nature, by redirecting our greed and that wealth into unambiguously useful activities.

The vehicle by which we could do this is the Social Policy Bond. The idea is that Social Policy Bonds direct self-interest into achieving socially beneficial outcomes. Governments don't have to try to work out how to achieve these outcomes, nor who shall be charged with doing so. It is the self-interest of bondholders that ensures that resources flow only the most efficient ways of achieving our goals.With just a little bit (relative to the magnitude of the problems at hand) of tinkering, we can substitute 'our goals' meaning humanity's goals, for those individual and corporate goals, the pursuit of which is not only diverting resources from more useful activities, but is actively undermining our chance of survival. Social Policy Bonds would channel our self-interest into the achievement of these goals. It would seem to be safer and more humane to do issue Social Policy Bonds and give greed the chance to solve our problems, than to carry on as we are and hope that the revolution Ms Harrington fears turn out not to be catastrophic.