28 March 2017

The corruption of science

John Michael Greer writes:
Especially but not only in those branches of science concerned with medicine, pharmacology, and nutrition, the prostitution of the scientific process by business interests has become an open scandal. When a scientist gets behind a podium and makes a statement about the safety or efficacy of a drug, a medical treatment, or what have you, the first question asked by an ever-increasing number of people outside the scientific community these days is “Who’s paying him?” .... These days, in any field where science comes into contact with serious money, scientific studies are increasingly just another dimension of marketing. Dark Age America, John Michael Greer, 2016
It is a scandal, and it's no wonder that we are increasingly cynical about scientists' pronouncements on climate change, diet, or virtually anything else. Science, like politics, has become removed from the concerns of the people it's supposed to serve. The gap between on the one hand government and big business, and on the other ordinary people, grows ever wider. Without deliberate action that's unlikely to change, as many of the reason for the gap are self-reinforcing: more funding means more can be spent on advertising, and lobbying for still more funding and a more favourable - to corporate interests - regulatory environment. Ordinary people don't come into it. The result? Skepticism, cynicism, alienation, and despair. Not all the reasons for the gap can be ascribed to self-interest or malevolence, but it remains an urgent concern. 

My suggestion is that we start to express policy goals in terms of outcomes that are meaningful to ordinary people. Broad, long-term goals such as the improved health of a country's citizens, should guide the activities of all the agents, public- and private-sector that have anything to do with health: not only big pharma, but also the medical profession, agribusiness, retailers, schools, town planners, architects and so on. We cannot solve our health problems simply by spending more on organisations whose sole (stated) interests have to do with health. And just as health is not just a matter for drug companies alone, so crime is not just a matter for the police and the corrections industry. And so on.

Which is why I suggest we issue Social Policy Bonds that would not only target broad, long-term social goals, but also inject the market's incentives and efficiencies into their achievement. Social and environmental goals are more easily understood and more meaningful than the narrow, short-term goals of the bodies that are supposed to be achieving them but end up, as we see in science, spending much of their energy trying to justify their survival and expansion. With more comprehensible, explicit, policy goals, more people would engage with the policymaking process. Our views might be debated and over-ruled, but we'd have a greater understanding of the inevitable trade-offs that resource allocation entails. Importantly too, we'd have buy-in to policies that are not only currently remote from us, but also someitmes conflict with our interests. Most important of all, the goals of a Social Policy Bond regime would be understood by, and linked to, the concerns of all of us. It's a sad indictment that we cannot say that of our current system.

18 March 2017

Social Policy Bonds: the acceptable face of capitalism

Social Policy Bonds have many advantages over conventional policymaking. Mostly, they would be more efficient, as investors would have incentives to achieve society's social and environmental goals quickly and cost-effectively. Clarity and transparency of policy goals are further advantages, arising from the bonds' focus on, and explicit targeting of outcomes rather than the supposed means of achieving them. The question of which goals should be targeted is one that most governments evade or obscure, leaving a vague goal, most commonly 'economic growth', expressed as GDP per capita, to fill the vacuum. For much of history, that goal would have been strongly correlated with the improved well-being of a country's population. Nowadays, though, that correlation appears to be broken, with most of the gains in national wealth and income accruing to a minuscule number of people dubbed 'the elite'. In the US, for instance, the most recent data show that top 1% families captured 52% of total real income growth per family from 2009-2015 (source, pdf). 

Under a Social Policy Bond regime, we could ask whether society sees such inequality as a problem to be targeted directly or, rather, whether our main income goal is the alleviation of poverty. Even if inequality were seen as a problem in itself, it might not be necessary to target it for reduction. This is because Social Policy Bonds would be a means of acquiring wealth with which private gain is strongly correlated with public benefit. Many bondholders would be rich and, if their bonds were redeemed early, they would become richer. But this would be a socially acceptable way of acquiring wealth. Bondholders would become richer only by efficiently and quickly achieving society's targeted social goals. This means of accumulating wealth would allow other, less socially beneficial ways – inheritance, say - to be taxed more heavily. It might even transpire that investors would find achieving society's social goals will be easier than the sort of ethically questionable ways of acquiring wealth that constitute the ever more unacceptable face of capitalism. Social Policy Bonds: a new means of acquiring wealth that actually leads to a more cohesive society? Call them 'the acceptable face of capitalism'.

12 March 2017

Fossil fuel subsidies

Two brief excerpts from the International Energy Agency's publication, World Energy Outlook 2016, highlight what happens when there's no guiding strategic vision for our planet's future:
The value of fossil-fuel consumption subsidies dropped in 2015 to $325 billion, from almost $500 billion the previous year. ... Subsidies to renewables are around $150 billion today. World Energy Outlook 2016, Executive Summary; link to pdf here
The drop owes something to what the publication calls a 'subsidy reform process' but also to lower fossil-fuel prices. As well as these billions, there are, of course, subsidies for the exploration, development and production of fossil fuels. These are difficult to assess because of the “lack of transparency in government and company accounts, and limited information on off-budget subsidies to producers" source. It's easy to see how these subsidies arose, and why they persist. What is more difficult to discern is how our policymaking systems can do anything to address them. Large corporations have immense political power, partly funded by the very subsidies whose withdrawal they can effectively resist. The multitude of smaller interests, those of ordinary people and the environment, have little weight in our policymaking system.

There's nothing new in such an analysis, but what I can offer is a means by which we can aggregate and represent the interests of the vast majority of human beings - now and in the future - who don't benefit from energy subsidies and who suffer from the environmental depredations they cause. We could issue Social Policy Bonds that target for improvement the health of humans, plants and animals. Backed by national governments, the bonds would channel the market's incentives and efficiencies into improving the environmental well-being of the entire planet. Large corporations could still make money doing what they do now, but they'd find it less profitable. They might instead re-focus their resources into more environmentally beneficial areas. The way the bonds work means that bondholders would pick the lowest-hanging fruit first. In other words, they would maximise the environmental improvement per dollar spent.

But perhaps most important of all, Social Policy Bonds would clarify what we, as a species, wish to see. The current arrangement, the one that subordinates mankind and the planet to the narrow, short-term interests of large corporations, came about without consulting the rest of us. It thrives because the policymaking process is opaque to ordinary people, concentrating as it does on legalisms, institutional structures and, as we see with energy subsidies, obscure funding arrangements. A Social Policy Bond regime would change that. Because the bonds' starting point would be social and environmental outcomes, the public could participate in the policymaking process. So, if we wanted to donate billions of our taxes to large energy corporations we could still do so under a bond regime. I doubt that we'd choose to do that, but if we did we'd be doing so with our eyes open.

For more about environmental applications of the Social Policy Bond principle see here.

02 March 2017

How we decide

How we decide whom we shall vote for: Andrew Tyndall, a media analyst based in the US, monitors American broadcast news media at his website the Tyndall Report. He found that the overwhelming majority of the time spent by the US media in coverage of the run-up to last November's presidential election was spent on coverage of (1) the candidates and (2) polling.What about policy issues?
With just two weeks to go, issues coverage this year has been virtually non-existent. Of the 32 minutes total, terrorism (17 mins) and foreign policy (7 mins) towards the Middle East (Israel-ISIS-Syria-Iraq) have attracted some attention. Gay rights, immigration and policing have been mentioned in passing. No trade, no healthcare, no climate change, no drugs, no poverty, no guns, no infrastructure, no deficits. To the extent that these issues have been mentioned, it has been on the candidates' terms, not on the networks' initiative. Andrew Tyndall, 25 October 2016
From my viewpoint, it doesn't really matter whether we, the public, are more interested in personalities and opinion polls than issues, or whether the almost total absence of policy discussion reflects the preferences of the mainstream media. The important point is that we do not, as a society, debate the outcomes we want to see. Policymaking in all the democracies, not just the US, has become so obscurantist as to become inaccessible to all except those who are paid to follow it. All that's left for the rest of us is to discuss the personality flaws of the candidates, and how people react to them. It's not an edifying spectacle, nor is it one that makes for social cohesion. Powerful interests, with much at stake and resources to match, follow policymaking and influence it in their favour. We have, then, on the one hand government and big business (which these days includes much of academia) and on the other, ordinary people and small businesses. The gap between the two is already wide, and appears to be growing wider.

Social Policy Bonds could change that. They are focused entirely on the social and environmental outcomes we wish to see. 'We' meaning all society; not just policy wonks, ideologues and public- and private-sector interest groups. Social outcomes, under a bond regime, would be agreed and targeted for improvement. There's more consensus over such outcomes and the direction in which we want to move, than there is about the supposed ways of achieving them, or who we think will be better at achieving them - even when outcomes are actually under discussion which, as we see, is very seldom. And there's certainly more comprehension about what outcomes are than about the arcana that are such a feature of our current policymaking process. Of course, even under a bond regime, there would be disagreements about the priorities people would give to different goals but, importantly, even those whose strong opinions would be over-ridden, would have been consulted. More generally, with greater public participation in the policymaking process, there would be more buy-in - an essential feature that is largely absent from today's politics.

"How we decide" today is a risible process; one that is divisive and distracting. As a result "what we decide" is far removed from the concerns of ordinary people. Social Policy Bonds targeting broad, meaningful goals, would be a big improvement.

20 February 2017

Dealing with the unknown

Speaking ahead of an address to the Munich Security Conference, [Bill Gates,] the richest man in the world said that while governments are concerned with the proliferation of nuclear and chemical weapons, they are overlooking the threat of biological warfare. Bioterrorism could kill more people than nuclear war, Bill Gates to warn world leaders, 'The Telegraph', 17 February
One of the strengths of the Social Policy Bond principle is that we do not need to specify in advance the exact nature of the problem we want to solve. Many potential problems could arise from our denser, more linked, populations and higher technology. These are difficult even for a well-resourced government, or indeed any single big organisation, to anticipate, let alone do much to forestall. Hurricanes, tsunamis or pandemics are only a subset of a range of and disasters that threaten mankind. Others include the risks arising from new biological advances or scientific experiments that concentrate energy, or natural disasters such as asteroid impacts or volcanic super-eruptions. These threats are in addition to the 'known unknowns' of more widely understood catastrophes. Social Policy Bonds are versatile: depending on society's wishes, and the views of the bonds' backers, bonds could target any type of disaster that, say results in the deaths of 10 000 people within one week or its occurrence, however caused and in whatever part of the world.

Holders of such Disaster Prevention Bonds, would be able to redeem them only after a sustained period of, say, ten years, during which no such disaster has occurred. They would have incentives to anticipate potential disasters and to work to prevent them and mitigate their effects on human life. Today's disaster prevention policies are mostly carried out by bodies anticipating 'known' types of disaster, and mitigation strategies are often merely reactive. As well, few have the types of incentives that Disaster Prevention Bonds would put in place, that would reward the sustained absence of a disaster.

08 February 2017

Consensus and buy-in

From the current issue of the Economist:
Millennials are accustomed to tailoring their world to their preferences, customising the music they listen to and the news they consume. A system that demands they vote for an all-or-nothing bundle of election promises looks uninviting by comparison. Not turning out, 'Economist', 4 February
And not only millennials. There's palpable disillusion, cynicism and despair about where our political systems are taking us. There's consensus that they are not working, but little consensus about how to change them. In such circumstances, we appear to be drifting toward authoritarianism.

My suggestion? Instead of taking as our starting point the political party and its membership, let's focus on the social and environmental outcomes that we'd like to see. There's certainly more consensus over the in which direction we'd like to see broad outcomes move than there is about the supposed means of effecting that movement. I would say there's near total agreement amongst the global electorate that, for example, nuclear war is something we don't want. And while we do have organizations at every level trying to defuse conflict, they do not have the command of resources nor the expertise to look at the global interest over a period of decades. And unlike the 'defence' contractors or the ideological fanatics, neither do their rewards correlate with their success or otherwise in achieving their organizations' objectives. More fundamentally, because we take our current policymaking system as a given, the wishes of the vast majority of human beings have to be channelled through our over-worked, or entirely self-interested, or corrupt politicians and bureaucracies. Few people can afford to spend their time and expertise in working full-time to ensure nuclear peace. When the issue does exercise the public imagination, it invariably becomes a forum for energy-sapping, ideologically-based squabbling about partisanship and motives.

A Social Policy Bond regime targeting sustained nuclear peace would transcend party political differences. It would generate a motivated coalition of interests devoted to achieving that goal - which would be exactly society's goal, as laid down in the redemption terms of the bond. That coalition would be of diverse, changing composition and structure, but its goal of nuclear peace would not be subject to the whims and caprices of faddish ideology or party politics.

The same would apply to less lofty goals: there would be little debate about, for instance, the direction in which we'd want to see a nation's health go. We could debate definitions, targets and priorities but, unlike our current arcane policymaking system, these debates would be relatively easy to follow, so we should have greater public participation and hence greater public buy-in - an asset of crucial importance and one that's almost absent from today's politics.

For more about applying the Social Policy Bond concept to nuclear peace, see here. For health, see here. If you would like to consider supporting my work through patreon, please click here.

07 February 2017

Sacrifice on the altar of 'renewable energy'

From the current issue of  New Scientist:
Last week, air pollution in London soared to heights not seen since 2011. The usual suspects were named and shamed, including traffic fumes and a lack of wind. But joining them was a surprising culprit. "We think about half of the peak was from wood smoke," says Timothy Baker, part of a team at King's College London that monitors air pollution. The trendy log-burning stoves producing much of this pollution are marketed as a source of renewable energy that can cut fuel bills while helping reduce global warming. But recent findings suggest they pose a serious threat to the health of their owners, and are also accelerating climate change in the short term. If nothing is done to discourage log burning in homes, it could become the biggest source of air pollution in cities like London. .... Children are especially vulnerable ....  Where theres's smoke, Michael LePage, 'New Scientist', 4 February 
This is just one example showing how our governing institutions cannot deal with broad, long-term social and environmental problems. We have in mind something that sounds like an unarguable benefit: 'renewable energy', say, and target it, explicitly or implicitly. But we fail to take into account the broader, longer-term ramifications. There's no clarity about the distinction between means and ends. Something like 'renewability' - which is anyway a function of our ever-expanding scientific knowledge - is not an end in itself. At best, it's a means to certain ends, which are rarely specified, or specified in such vague terms ('sustainability') as to be subject to bureaucratic or corporate manipulation. The bigger picture is lost: in this instance, the health of vulnerable people and children is sacrificed on the altar of 'renewability'.

It's not good enough. We need to be reward the achievement of goals that are meaningful to ordinary people. 'Physical health' would be a good starting point. Defined in terms of objective criteria, such as longevity or Quality-Adjusted Life Years, a benign and far-sighted government could target the health of its citizens for improvement, and contract out the achievement of such a goal to bodies motivated to, and capable of, keeping up with relevant scientific advances. Our existing institutions and systems of government cannot do this, but Social Policy Bonds targeting health could. I have written about such bonds here. As society grows more complex and the linkages and time lags more intricate, so the scope for problems such as the increased air pollution described above or self-interested deception expands. We need a system that keeps the big picture in mind, and that starts with articulating what, as a society, we want to achieve. Our existing institutions, hard working and well intentioned as they doubtless are, have little incentive to advocate for goals broader than their remit. That worked in times and circumstances when the relationship between cause and effect was easy to identify and address. In today's society, that no longer applies. New organizations with an interest in seeing the big picture are necessary, and a Social Policy Bond regime would see their creation.



21 January 2017

What are economists for?

Markets are means, not ends

Though much of my working life was intended to promote free trade, I question most economists' adherence to it. On the grounds of freedom, I fully agree that governments have no business interfering with willing buyers' importing goods and services from willing sellers. With some caveats, concerning risks to plant, animal and human health, and labour and environmental standards, I do think people should be free to trade with one another. The other argument in favour of free trade is slightly more subtle, but no less persuasive: it's underpinned by the principle of comparative advantage. Essentially, it shows that international specialisation of labour can benefit all trading countries. There are, again, caveats, but generally the theory holds. My concerns are that, yes, a country, say, the US, will benefit from trade with China, but who within the US captures most of the benefits? Consumers, including many poorer consumers, do benefit from cheaper imported goods. But do those gains from cheaper goods outweigh the income lost from jobs now done overseas? Are most of the gains from free trade going to the owners of capital, rather than low-income labour? Comparative advantage says that even after compensating the losers countries benefit from free trade. The problem is that most of the losers are not being fully compensated.

There's what appears to be a similarly misplaced ideological commitment to something called 'markets' in such policy areas as health and education where these are mostly run by government. Much intellectual effort has gone into trying to implant in the public sector those disciplines that characterise the creative destruction of the private sector. This is the sort of work in which my profession seems to revel. (Along, incidentally, with making false predictions: here's how successful they were in predicting the Great Recession:  "As you can see, even in the third quarter of 2008, the best models we have missed the big recession entirely.")
Source: Economists' biggest failure, Noah Smith, 'Bloomberg', 5 March 2015




I don't know whether such efforts have been successful; I'm not sure anybody does. They have certainly been divisive and morale sapping, and have expanded bureaucracy, and led to such wasteful distractions as Mickey Mouse micro-objectives and 'teaching to the test'.

This is where Social Policy Bonds could enter the picture. Instead of seeing 'free trade' and 'markets' as ends in themselves, why not see them as means to an end, and so why not target those ends directly? All the empirical evidence backs up economic theory that markets are the best means we have of allocating society's scarce resources. The definition of economics I was taught is the allocation of scarce resources in order to meet prescribed ends. Most countries don't bother with broad social or environmental goals. By default, therefore, the implicit goal becomes something like Gross Domestic Product per head, or its growth rate. Occasionally a social or environmental problem becomes so acute - and visual - that it becomes impossible to ignore, so resources are devoted to solving it. But we can do better than that. Instead of seeing free trade or markets as ends in themselves, we can yoke them to a higher purpose, as defined by society and its government. That would probably mean helping those severely disadvantaged, including those who suffer from the freeing up of international trade.

So I think society should define certain ends and use markets to achieve them. This has to be at a broad level, because resources can readily move between sectors. Under a Social Policy Bond regime, government would do what it is best at: articulating society's goals, whether they concern health, education, or extreme poverty; and raising the funds  necessary to achieve them. And markets would do what they are best at: allocating our scarce resources in order to achieve our social goals with optimum efficiency.


18 January 2017

Land use and mental well-being

Society's long-term goals often conflict with the short-term, narrow, outlook of our political systems. As well, many of the most valuable things in life are often ignored by our economic and political systems, because they cannot readily be converted into monetary terms. Some contributors to air pollution, for instance, are still disregarded in most countries. The consequences to plant and animal life of loss of habitat are usually ignored too.

But I'll look today at mental health, and specifically the negative impact on it of certain forms of planning and land use. Society's mental health goals are difficult to quantify, but I think we can be reasonably sure that our recent patterns of development of the built environment and land use increase alienation, loneliness, anxiety and depression. A brief extract from a recent article on land use in the US:
[W]alkable communities and co-housing — sound exotic to American ears. Thanks to shifting baselines, most Americans only know single-family dwellings and auto-dependent [ie car-dependent] land use. They cannot even articulate what they are missing and often misidentify the solution as more or different private consumption. But I do not think we should just accept that when we marry and start families, we atomize, and our friendships, like our taste in music, freeze where they were when we were young and single. We shouldn't just accept a way of living that makes interactions with neighbors and friends a burden that requires special planning. How our housing choices make adult friendships more difficult, David Roberts, 'Vox', 16 January
My own belief is that the evidence that US-style suburban patterns of settlement are injurious to mental health is compelling, though perhaps not proven nor provable. But my opinion isn't important. What is important are these points: 
  • Few of us have any incentive to find out whether in fact our land use patterns do create or exacerbate psychological problems for large numbers of people, and 

  • Even were we to find that suburban living does destroy communities, lead to alienation and atomisation, and so aggravate psychological problems, policymakers have no incentive or capacity to do anything about it.
Acute mental health problems - the sort whose consequences are tragically newsworthy - do get some passing attention. But long-term mental well-being counts for very little in our economic and political systems. Just as policymakers failed to consider most aspects of our physical environment for decades until the consequences of doing so became too difficult to ignore, so too are mental problems and their causes neglected today. And, as the excerpt above implies, if we don't even know what we're missing, there's very little chance of either the market or benign central planners doing anything to help.

Perhaps Social Policy Bonds targeting for improvement the mental well-being of all citizens could be a solution. They could function as a way of representing the interests of people as human beings, as distinct from economic units. Such bonds, in targeting mental health indicators, could act as a countervailing force to the weight given to financial indicators in the property sector. Quantifying mental health might appear difficult, but there is important work being done in this area: examples are here and here.

Mental health is a hugely important issue, but there are others equally important that are similarly ignored by policymakers. There are measures being taken to help avoid nuclear war, for instance, but they are laughably small in relation to the enormity of the problem. The few people charged with conflict reduction - hard working and well meaning though they undoubtedly are - are not paid for their success in doing so, nor do the aggregate funds on offer reflect the urgency and magnitude of the challenge. Which is why I believe we should back Social Policy Bonds that reward the achievement of sustained nuclear peace - an indispensable requirement for humanity and one that is routinely ignored by policymakers. Just like long-term mental health.