12 May 2021

Winning elections is not the same as running the country

Henry Kissinger is supposed to have said: 

One of the greatest dangers to democracy is the growing gap between those who can win elections and those who can run the state.

Quite so. I think there's also a growing gap between those who can win elections and those who wish to run the state, or have any interest in running the state efficiently. There are many reasons why people seek power, but running an efficient state doesn't seem to be an over-riding one. Power for its own sake, something that will bring future lucrative directorships or media appearances or promote sales of memoirs, or something to fill in those endless blank days after some other career- these seem to be more important as motivators for would-be politicians. 

Part of the reason for this is that running a state is less fulfilling than it used to be. Our democratic societies are too complex for a single person's influence to count for much. There are always competing interest groups to consider and long time lags between cause and effect. So politics is increasingly driven by personalities, sound bites, and trivia. At the same time we are failing to address huge, urgent social and environmental challenges. Politicians and bureaucrats have little incentive to tackle these challenges until they become emergencies. Structural weaknesses are papered over until it's too late. It makes little difference who's in power, and ordinary people know that.

Here's another idea: instead of voting for political party, or for the politician who looks best in the media, or for the ones that avoid real issues in the most convincing manner, how about letting us vote for outcomes? Not for the politicians who say they'll deliver outcomes, or for the political party that, way back in history, did once deliver outcomes, but directly for outcomes. Take, for instance, the goal of avoiding catastrophic climate change. That option was not offered by any of the British political parties. It's not on offer, in fact, anywhere, as a policy for which people can vote. What is on offer are promises made by members of a political caste to do something that might do something to reduce greenhouse gas emissions, which in turn might, but probably will not, do anything significantly to stabilise the climate. Then these promises, however nugatory, are broken anyway.

That's where Social Policy Bonds can play a part. Under a bond regime, the currency of debate would be outcomes rather than political parties or well-meaning but hollow promises. Politicians then wouldn't have to run the state, though they would have to articulate society's targeted outcomes, and continue to raise the revenue for their achievement. Politicians can actually do those things quite well - in the democratic countries at least. Outcomes are inherently more amenable to the sort of consensus and buy-in that are essential if we are to avoid serious economic, social or environmental problems. And Social Policy Bonds, as well as increasing transparency and stability of targeted goals, would minimise the cost of achieving them. More could be done with society's scarce resources than under the current system. Efficiency, transparency and buy-in: exactly what are lacking in today's system. No wonder, then, that participation in a general election is so low.

27 April 2021

The coolness factor

The 'coolness' factor: not the coolness that describes 'an aesthetic of attitude, behavior, comportment, appearance and style which is generally admired' but rather the coolness 'marked by steady dispassionate calmness and self-control' at times of high emotion. Currently I'm working on applying the Social Policy Bond concept to health, and one advantage of Health Bonds is that they would target outcomes decided on an unemotional, impartial basis at a time when the interests of the entire population are being considered dispassionately. That we are in dire need of such coolness is clear from this review of Nuclear Folly, by Serhii Plokhy:

... [Khrushchev’s] Oct. 23 [1962] Kremlin outburst—which appears midway through Serhii Plokhy’s superb “Nuclear Folly: A History of the Cuban Missile Crisis”—would appear to mark a significant contribution: an eyewitness account of one of the saga’s two key decision makers exhibiting not only uncontrolled anger but delirium. Khrushchev’s threat to “nuke” the White House, his “avalanche of contradictory orders,” constitute the most troubling behavior we could imagine in a leader “managing” such a crisis. ‘Nuclear Folly’ Review: The Big Red Gamble, James Rosen, 'Wall Street Journal', 19 April 2021

Indeed; it is striking how, at the highest level of national government, big decisions appear to be made on the basis of reactive, primal emotion. Rationality and the long-term interests of the people politicians are supposed to represent hardly figure at all:

…policies are often adopted on the basis of less careful analysis than their importance warrants, leaving wide room for mistakes and misperceptions. Forces of knowledge destruction are often stronger than those favoring knowledge creation. Hence states have an inherent tendency toward primitive thought, and the conduct of public affairs is often polluted by myth, misinformation, and flimsy analysis. Source (pdf)
This type of thinking is particularly dangerous when military conflict looms. An article about Henry Kissinger's role in US foreign policy quotes him saying to US President George W Bush’s speechwriter, about radical Islamic opponents: ‘We need to humiliate them’. Comments like this abound in high politics. George W Bush himself cried ‘bring ‘em on’ at an early point in the invasion of Iraq. These are not examples of high-level thinking. The benefits of a Social Policy Bond regime would include the setting of social goals in a rational way. It's unlikely that random emotional outbursts would crystallise into policy in such a policymaking environment, however high up the hierarchy are the people who make them.

06 April 2021

Electric cars: another misguided policy intervention

Basing policy on current science and technology is fraught with difficulties. I have written about the problems of legislating to limit those gases currently thought to contribute to the greenhouse effect, and advocated instead rewarding people for achieving that which we actually want to achieve: a reduction in adverse climatic events. On a smaller scale, I am sceptical about governments promoting battery electric vehicles (BEVs). The reasoning is similar: our knowledge of the causes and the effects of our environmental depredations is incomplete and rapidly expanding. Take this excerpt from US research into a comparison of the environmental impacts of BEVs and internal combustion engine vehicles (ICEVs): 

BEVs may be responsible for greater human toxicity and ecosystems effects than their ICEV equivalents, due to (1) the mining and processing of metals to produce batteries, and (2) the potential mining and combustion of coal to produce electricity. These results are global effects, based on the system boundaries and input assumptions of the respective studies. In addition to a review of the literature, CRS focused on the results of one study in order to present an internally consistent example of an LCA [Life Cycle Analysis]. This specific study finds that the life cycle of selected lithium-ion BEVs emits, on average, an estimated 33% less GHGs [greenhouse gases], 61% less volatile organic compounds, 93% less carbon monoxide, 28% less nitrogen oxides, and 32% less black carbon than the life cycle of ICEVs in the United States. However, the life cycle of the selected lithium-ion BEVs emits, on average, an estimated 15% more fine particulate matter and 273% more sulfur oxides, largely due to battery production and the electricity generation source used to charge the vehicle batteries. Further, the life cycle of the selected lithium-ion BEVs consumes, on average, an estimated 29% less total energy resources and 37% less fossil fuel resources, but 56% more water resources. Environmental Effects of Battery Electric and Internal Combustion Engine Vehicles (pdf), [US] Congressional Research Service, 16 June 2020

This is not to say that BEVs are worse than ICEVs. It is clear that there is no single way of weighting and aggregating the adverse environmental impacts that points to a clear winner. And, even if there were, that could change, depending on either developments in technology, or improved knowledge about how the environmental depredations affect human, animal and plant life. On that basis then, I would argue that legislation to promote BEVs is misguided. Instead we'd do better, in my view, to stipulate those environmental outcomes that we want to achieve, and reward those who bring about those outcomes, however they do so.

14 March 2021

Markets can actually serve the public

Social Policy Bonds are poorly received by some, partly because they depend absolutely on markets. Markets have a bad reputation, especially in left-leaning circles for one reason that's justified, in my view, and two that aren't. 

Market forces have been invoked to justify subverted, manipulated, and gamed interventions. One example: leading corporations often seek to change the regulatory environment in ways that inhibit competition. They may have attained their dominance within a competitive market, but once there, they abuse their power to stifle would-be competitors. Very often, they find allies within government, including individuals whom they will reward handsomely with directorships or consultancies once their government careers end. Though the claim is that such behaviour is merely in accordance with free market principles, it is actually the antithesis of competitive behaviour in a free market. We see the results everywhere: grotesquely huge and powerful corporations, stifling or snapping up the competition, and abusing their dominance to influence government in ways that further concentrate their power and wealth. It's a valid reason for being sceptical when, say, a new financial instrument, such as Social Policy Bonds, enters the arena, claiming that the market's incentives and efficiencies can actually be channelled into the public good. 

However,  other reasons for people's disdain of markets are less valid. People see the rewards to those who succeed in a wide array of markets as almost as unjustified as lottery winnings. And there is some truth that those who do so succeed are those who are best placed to take risks. As in most human endeavour luck is important. But less appreciated is that there are risks, and also that profits take time to accumulate. We focus on the millions (or, now, billions) that accrue to the luckiest or most ruthless, or the most efficient operators, many of whom do provide goods and services that improve society's well-being - but we do not account for the time necessary to reap those rewards.

As well, people focus purely on the rewards, often inordinately huge, without seeing that these rewards don't merely enrich a few people at the top. They also increase the supply of the goods or services that generate those riches. Or, they should do, and would do, in competitive markets.

So while I understand people's doubts that markets can serve the needs of all in society, I'd ask them to be open-minded and look in detail at Social Policy Bonds, which, while they would probably make some already wealthy people or organisations even wealthier, at least in the short run, would do so only in strict proportion to their success in solving our social and environmental problems.

07 March 2021

SocialGoals.com

I have updated the design and underlying software of the Social Policy Bonds website, and have aimed to modify or eliminate dead links. Any comments on the upgrade would be gratefully received.

15 February 2021

'Sustainability' is a meaningless goal

 The New Scientist, in a feature about fishing, quotes an expert:

The word 'sustainability' doesn't mean anything. You can actually overfish sustainably - you can reduce the stock to a tiny fraction of is original abundance and fish the rest sustainably. It's like cutting an immense forest, but leaving a few trees standing, which you harvest sustainably. Daniel Pauly, quoted in Plenty more fish in the sea? by Graham Lawton, 'New Scientist', 13 February

One advantage of the Social Policy Bond concept is that it obliges policymakers to come up with clear, unambiguous, verifiable goals. 'Sustainability' just isn't good enough. You might almost think its elasticity and prevalence are designed to ensure that business can continue continue as usual, not only in fisheries but in forestry, climate change, or indeed any aspect of the environment. Unfortunately, setting verifiable goals is difficult for governments. There are genuine as well as spurious reasons at to why this should be. One is that there are too many unforeseeable variables that could affect movement towards targeted goals and that have little to do with government performance. We can hardly expect, therefore, government to do otherwise than promulgate vague, meaningless goals that have little to do with social well-being. 

I advocate, instead, that government relinquish some of its goal setting role, and instead seek to articulate and refine society's goals. Such goals, I believe, would extend beyond the time horizons of particular government administrations. They would be broad and verifiable but, most importantly, they would be meaningful to ordinary people, in a way that such goals as 'sustainability' - or proportion of youngsters going to university, or waiting times in hospitals etc - are not. 

Discussing Social Policy Bonds I often emphasise the gains that could be made by injecting the market's incentives and efficiencies into the achievement of social and environmental outcomes. But perhaps even more important would be the bonds' role in obliging society as a whole to define clearly what those outcomes actually are. In such a policymaking environment goals as devoid of meaning as sustainability would not clear the first hurdle.

01 February 2021

Nuclear peace: no time to lose

The Economist recognises the threat posed by nuclear proliferation:

If the nuclear order starts to unravel, it will be almost impossible to stop. ...Stopping proliferation also requires spotting it. ...The International Atomic Energy Agency, the world’s nuclear watchdog ... is overburdened and under-funded, and needs to keep up with technological change. The world ... cannot afford to downplay the dangers of nuclear proliferation. Today’s nuclear diplomacy may seem a slog, but it is as nothing compared with the lethal instabilities that arise whenever regional nuclear-armed rivals confront each other. There is no time to lose. Who will go nuclear next?, The 'Economist', 30 January (emphasis added)

My contention is that too much human ingenuity and attendant funding are channelled into activities of little, no, or negative social utility, such as advertising dog-food, hedge funds or high-frequency trading. People react rationally to the incentives on offer, and such activities, unfortunately attract some of the brightest minds on the planet.

The under-funding of the IAEA is not the only reason for the Economist's (and my) alarm at the nuclear threat. The Agency is like any other organisation. Though its employees are no doubt hard working and well meaning they are not rewarded in ways that are linked to their success or otherwise in carrying out the Agency's ostensible goal. Like every organisation, it has its own incentives, and one of its most important is likely to be self-perpetuation

I think that the nuclear threat is too significant to be left to one under-funded organisation. I suggest instead that : 

  • We clearly define what we want to achieve: most obviously the continuation of nuclear peace, but we could also encompass other goals, such as reductions in the number of nuclear warheads, and the number of nuclear powers.
  • We reward the sustained, simultaneous, achievement of all these objectives.
  • We supply adequate funding that encourage such achievement - and are prepared to increase those rewards if necessary.
  • We then contract out the achievement of this array of objectives  by means of Nuclear Bonds, made available to everyone - public- or private-sector - on the open market. 

What would happen? Most likely a new sort of organisation would arise: one whose goals are exactly congruent with society's goals. Its structure and composition could vary over time, but at every point would be those that would best achieve and sustain nuclear peace. As project-initiators and implementers, they will do what they can to achieve nuclear peace, see the value of the bondholdings rise, realise their gains from holding the bonds (or receiving payments from bondholders), and sell their bonds to others who can better carry out the next steps towards achieving and sustaining the specified goal.

For more about applying the Social Policy Bond concept to nuclear peace see here.


19 January 2021

We need to direct ends, not means

John Kay, reviewing Mission Economy, discusses the author, Mariana Mazzucato's, contention that 'we need a “solutions based economy”, driven and co-ordinated by more powerful governments engaged in every stage of the process of innovation' in order to solve urgent global problems as effectively as the Apollo space programme achieved its goal of landing men on the moon and returning them to Earth. But, Mr Kay writes:

Apollo was a success because the objective was specific and limited; the basic science was well understood, even if many subsidiary technological developments were needed to make the mission feasible; and the political commitment to the project was sufficiently strong to make budget overruns almost irrelevant. Centrally directed missions have sometimes succeeded when these conditions are in place; Apollo was a response to the Soviet Union’s pioneering launch of a human into space, and the greatest achievement of the USSR was the mobilisation of resources to defeat Nazi Germany. Nixon’s war on cancer, explicitly modelled on the Apollo programme, was a failure because cancer is not a single illness and too little was then — or now — understood about the science of cell mutation. Mao’s Great Leap Forward, a vain bid to create an industrial society within five years, proved to be one of the greatest economic and humanitarian disasters in human history. At least 30m people died.

With political direction of innovation we regularly encounter grandiosity of ambition and scale; the belief that strength of commitment overcomes practical problems; an absence of honest feedback; the suppression of sceptical comment and marginalisation of sceptical commentators. Mission Economy by Mariana Mazzucato — could moonshot thinking help fix the planet?, John Kay, 15 January (emphasis added)
I agree: political direction of innovation doesn't work. But political direction of the outcome, I believe, can work, if the necessary innovation is contracted out to motivated bodies, be they in the public or private sector. Governments are good at specifying goals, and democratic governments are good at specifying society's goals. They are also efficient at raising the revenue necessary for their achievement. Where they are not so effective is in dictating how that revenue shall be spent and who will do the spending. As Mr Kay continues: 

All these were seen in Britain’s experience with Concorde, the Channel Tunnel and the AGR nuclear reactor programme, some of the worst commercial projects in history. More recently, there is the £12bn wasted on the NHS computerisation programme ....

This is why I continue to advocate the Social Policy Bonds concept, which allows governments to do what they are best at: specifying a desirable outcomes, while letting motivated bodies compete for the right to join a protean coalition that will co-operate, continuously, until the outcome has been achieved. In that way, goals can be long term in nature - see my piece on global goals, for example. The composition and structure of that coalition can and, most likely, will change, but at every point in time, its attributes will be subordinated to the over-arching goals specified by government, in consultation with the public. Whoever issues Social Policy Bonds - and it needn't be government - cannot specify the diverse, adaptive policies that will be necessary to solve our most urgent, big, complex problems. But they can specify the outcome, and in so doing ensure that the most efficient problem solvers are rewarded in ways that directly correlate with their contribution.

11 January 2021

How better to solve our global problems?

At the very outset (pdf), I envisaged that Social Policy Bonds could be used to solve global problems, because that is where their advantages over other policy mixes would be most marked. These advantages arise because:

  • Current global solutions are lacking. Take climate change, or the possibility of nuclear war. There are many initiatives being undertaken by well-meaning, hard-working people in many institutions worldwide. But measured in terms of outcomes - reduced probability of adverse climatic events, or nuclear war - the results of all this endeavour are unimpressive.

  • Under a bond regime, resources can readily shift to where they will do most good. 'Good' being measured as objectively as possible, with such tools as Quality Adjusted Life Years. Consider just two areas into which huge quantities of human ingenuity are concentrated: financial trading and marketing. The financial rewards from excelling in these activities far outweigh those who that accrue to people involved in efforts to diminish the prospects of, say, violent political conflict. The mismatch between what could be done, and what is being done can be seen by considering the co-existence of both neglected tropical diseases and high-frequency trading.

  • A mix of diverse solutions are required. No single solutions, of the type favoured by governments or supra-national bodies, are going to solve humanity's global problems. We need a mix of diverse, adaptive solutions, which vary continually with both space and time - always with the aim of being maximally efficient. Governments can specify, and raise funds for, the ends of such solutions, not their means.

  • Most global problems require long-term solutions; they extend beyond the lifetime of individuals, corporations or government bodies. But people today receive their income from such organisations, and organisations have goals that differ from those of humanity. Their prime goal, after their idealistic beginnings, often becomes self-perpetuation, which can not only be inconsistent with humanity's goals - it can even conflict with them.

For all these reasons, I believe Social Policy Bonds offer the best hope for humanity. Our goals are more stable than those means of achieving them currently thought to be optimal. Our governments are good at raising revenue, and they can articulate society's goals, but they are not very good at solving complex problems or thinking for the long term good of society, even when that is their goal. There is no shortage of human ingenuity or other resources, but we do need incentives to divert such resources into areas where they can do most good. Social Policy Bonds, backed by national governments and issued by a global body (it could even be an private-sector organisation) are, in my view, the best way forward. I cannot think of a better alternative.


04 January 2021

Centrally planned goals are fine

I haven't read Seeing Like a State: How Certain Schemes to Improve the Human Condition Have Failed, by James C Scott, published in 1999. (There is a good review of it here.) The description on the Amazon page sums it up: 
Centrally managed social plans misfire, Scott argues, when they impose schematic visions that do violence to complex interdependencies that are not -- and cannot -- be fully understood. Further, the success of designs for social organization depends upon the recognition that local, practical knowledge is as important as formal, epistemic knowledge. The author builds a persuasive case against "development theory" and imperialistic state planning that disregards the values, desires, and objections of its subjects. He identifies and discusses four conditions common to all planning disasters: administrative ordering of nature and society by the state; a "high-modernist ideology" that places confidence in the ability of science to improve every aspect of human life; a willingness to use authoritarian state power to effect large-scale interventions; and a prostrate civil society that cannot effectively resist such plans.
While we're content to let the market's efficiencies work in the private sector, our current way of solving social and environmental problems is, in essence, centrally managed. The result is something like a policy monoculture, and the results are predictably lamentable. But the important distinction to make is that between centrally planned outcomes and centrally managed ways of achieving them. We all want to see such centrally planned goals reduced poverty, the ending of violent political conflict, and universal literacy, for examples. Government does a good job at articulating our wishes in these and other areas. But centrally planning the ways of achieving these goals just does not work. We need diverse, adaptive solutions; ones that take into account circumstances that vary with time and space. Central planning can't do that and the results of its failure are widespread and tragic. 

Which is why I advocate Social Policy Bonds. Under a bond regime we would set goals and contract out their achievement to people motivated to investigate and implement the only the most efficient projects. These projects would adapt to changing circumstances, and be sensitive to local conditions. Under a bond regime, the complex interdependencies about which Scott writes, which cannot be understood by government, need not be understood by government. Instead, via an automatic system of cascading incentives, Social Policy Bonds would encourage diverse, adaptive initiatives that would contribute to achieving our large-scale - even global - goals.