24 July 2016

How we select our policymakers

How do we select our policymakers? By what criterion do we judge our potential leaders? No, it's not good looks, or ability to generate soundbites, or 'the common touch', or gender, race, or sexual orientation. Still less does competence have anything to do with it. Politico.com supplies the answer:
Inside the VP hunt: How Clinton picked Kaine

How tough was the vetting? Finalists had to turn over every password for every social media account for every member of their families.They had to turn over every password for every social media account for every member of their families. They had to list every piece of property they’d ever owned, and copies of every résumé that they’d put out for the past 10 years. Every business partner. Every gift they’d ever received, according to those familiar with the details of the vetting process. Inside the VP hunt, Edward-Isaac Dovere and Gabriel Debenedetti, 'Politico.com', 23 July 

23 July 2016

Political parties are divisive and unnecessary

John Lanchester writes about UK politics:
Political parties are the mechanism through which divisions in society are argued over and competing interests asserted. The trouble with where we are now is that the configuration of the parties doesn’t match the issues which need to be resolved. Brexit Blues, John Lanchester, 'London Review of Books', dated 28 July
Quite so. Society has become too complex for the old political parties which, I believe, will have to evolve much as the stonemasons did, into organizations that are less concerned with improving material circumstances than with ritual, bonding and inner development. In their place we could see new types of organization: ones with protean structure and composition that are dedicated to single issues.
In a Social Policy Bond regime, these organizations would target social or environmental outcomes. All their activities would be devoted to achieving broad, meaningful outcomes as cost-effectively as possible. Most of us agree that we need a society that both looks after its disadvantaged members and has a healthy, efficient business sector that will generate surpluses to pay for a welfare state. Broad, meaningful goals would encompass (for examples) health, education, the state of the environment, crime, and poverty; at an international level we could target the elimination of all war and civil war.

Of course there will be disagreements about priorities, but there will be more consensus about these goals than there is about the supposed means of achieving them. Political parties are failing. They cannot cope with society's complexities and are unnecessarily divisive. They're unlikely ever voluntarily to relinquish their over-sized role in making policy, but a transition toward a Social Policy Bond regime could see them decline or encourage them to reinvent themselves as something different, much as did the old stonemasons. For my thinking as to how this transition could be managed, see chapter 4 of my book.

12 July 2016

From operative to speculative politicians

The more I chat with politically interested people, the more I become disillusioned. Outcomes for the people they purport to represent mean far less to them than the other things that go along with identification with a political party or opinion: belonging to a group of like-minded (good or 'compassionate') people; the joy of differentiating themselves from the other (evil) lot; participation in group events and rituals; the convenience of having an ideology that both explains the world and generates apparent solutions to its problems.

I am respectful of all this. I recognize the need of all humans to engage with each other, to sing or dance together, to share our hopes, to be with people who have a similar world view for whatever reason, to identify with a clan or tribe; above all: to belong.What I do find problematic, though, is that the 'rightness' of such belonging, the elation and joy that come with satisfying a genuine human need, can lead participants to prescribe policies that they try to apply to people outside their in-group, without seeking the outsiders' buy-in - without, indeed, thinking it necessary or desirable. I've written (frequently!) about how the over-arching goal of any institution, however well intentioned, initially, however hardworking its members, becomes more and more that of self-perpetuation.

Most of us, if we're allowed to express ourselves coolly and freely, want to live in some sort of welfare state, with a safety net for the disadvantaged. We also want a healthy, productive, wealth-generating business sector. Yes, there will be differences of emphasis and priority, disagreements about procedure. But our overall goals are not that different. Not so different, surely, as to justify the mutual hatreds that we are seeing in the politics of many western countries today. These hatreds could bring about calamity, in the form of weakened societies, prey to those with far less edifying ambitions. The old Arab proverb comes to mind: 'a falling camel attracts many knives'.

My response is twofold. The first (predictably!) is to advocate Social Policy Bonds. The ostensible reasons for our polarized, dysfunctional politics, are not so much about our goals, but about the ways we think they shall be best achieved. We could instead debate social and environmental outcomes, about which there is more consensus and more objectivity. On a global scale, for instance, we could target the sustained survival of our species, or world peace, or the non-deployment of nuclear weapons. At a regional level, we could target Middle East peace. At a national level we could target universal literacy, or improvements in crime rates or environmental health. People understand these outcomes far more than we do the intricacies and legalisms of policymaking under the current system, and the structures and activities of those charged with achieving our social goals. And because we understand outcomes, we can participate in the policymaking process. Nobody would be perfectly satisfied by the array of specified targets, but there would be buy-in - something we need and something missing in today's organization- and activity- based policies.

Less frequently have I mentioned my second response: the deliberate refocusing of ideological politics away from policymaking and towards other, more inward-looking, activities. You might have thought that the economic and social shambles that was Marxism would have expired with the old Soviet Union. But it survives in China and elsewhere, not as an economic system, but as an extraordinarily potent ideology about an economic system. Freudian psychoanalysis, though discredited as a therapy, survives as a cult revolving around the life and work of Sigmund Freud. There is not a single proven example of a visit to Earth by an alien spacecraft – yet opinion polls consistently show that more than half of adult Americans believe in such an event.

Could our political parties and their associated ideologues take the same steps? They probably wouldn't take the initiative, but if it became the only means by which they survive, then they would surely do so. A Social Policy Bond regime could accelerate the process. Parties and ideologues are concerned with personalities, ideologies, activities, funding and institutional structures, all of which are the supposedly rational basis for their existence from which derives the positive features of belonging. Social Policy Bonds would lead to new types of organization which would erode that basis - but not the more edifying need for bonding. There is a precedent, and it is the world of Freemasons. Some groups of working or 'operative' stonemasons began to allow non-masons into the guilds. Operative masonic lodges raised money by charging the gentry for admission to their "mysteries".  (See here.) The guilds and mysteries persisted after the great British and European cathedrals had been built. Operative masons declined in number; 'speculative' masons took over, and today there are around six million freemasons worldwide.

Could our politicians and those with a vested interest in the power-structures to which they belong and from which they derive inspiration be persuaded to give up their dysfunctional organizations and divisive politics, and become 'speculative' policymakers? Then we'd be free to focus on social and environmental outcomes that are meaningful to ordinary people. I think everyone - politicians and public - would be happier if our potentially catastrophic 'operative' way of making policy became 'speculative' and focused more on inward enlightenment than on making an impact on the world.

02 July 2016

Compassionate woman, compassionate policy, cruel outcome

Compassionate woman, compassionate policy, cruel outcome:
IOM [International Organization for Migration] reports an estimated 222,291 migrants and refugees entered Europe by sea in 2016 through 26 June, arriving in Italy, Greece, Cyprus and Spain. Deaths in the Mediterranean so far this year are 2,888, compared with 1,838 through the first six months of 2015. Source
Nobody, least of all, Chancellor Merkel, wanted this. Compassion works in everyday life, with people whom we know, or with people whose need is desperate and urgent. As a policy, though, it fails. I think we should do better to target outcomes, rather than the supposed means of achieving them. If our goal is to reduce drownings in the Mediterranean, then reward people for achieving that outcome. If our goal is to improve the quality of life for ordinary Africans, then we should reward people for achieving that outcome. And if our goal is to reduce or eliminate conflict in the Middle East, then why not put in place a system of incentives that motivates people to achieve that?

Social Policy Bonds allow us to set these long-term objectives and to reward the people who achieve them. They don't sound compassionate relying, as they do, on monetary incentives, and many on the left disdain or despise the idea (and their originator!) for that reason. But monetary incentives - often known as salaries or wages as well as prizes or bonuses or profits - are the very basis of whatever prosperity there is on this planet. The wish to acquire more cash can be directed into social and environmental causes, as well as frivolous or destructive ones. The world would be better served if we all got over our hang-ups about money and with our wish to appear compassionate, and actually worked towards more compassionate outcomes. Or, as a line from the 1981 movie, Southern Comfort has it: "Comes a time when you have to abandon principles and do what's right."

27 June 2016

Good policy is not about choosing a team

Michael Tomasky quotes Christopher Achen and Larry Bartels:
We conclude that group and partisan loyalties, not policy preferences or ideologies, are fundamental in democratic politics. Thus, a realistic theory of democracy must be built, not on the French Enlightenment, on British liberalism, or on American Progressivism, with their devotion to human rationality and monadic individualism, but instead on the insights of the critics of these traditions, who recognized that human life is group life.... For most people, partisanship is not a carrier of ideology but a reflection of judgments about where “people like me” belong. Can the monster be elected?, Michael Tomasky, 'New York Review of Books', dated 14 July
There are likely or possible explanations for this. One, perhaps, is that a country - still less a group of countries - is just too large a body of people with which we can identify. But more important is how this insight links with policymaking, and how it can be, and is, manipulated by those seeking power. So, for instance, it's regarded as 'compassionate' to approve of Angela Merkel's impulsive decision to welcome unlimited numbers of migrants from the third world. And the impulse truly was a compassionate one. Who would want to identify with the (relatively) hard-hearted approach of Australia towards boatloads of refugees and migrants? Or the (absolutely) hard-hearted approach of Saudi Arabia? People understand compassion and we all want to think ourselves compassionate.

It makes for disastrous policy. Migrants drowning in record numbers in the Mediterranean. People in Europe feeling let down by their elected representatives, generating widespread alienation and anger, more support for extremist parties, the erosion of free speech, British exit from the European Union and record gun sales throughout Europe.

It points to the irrelevance of outcomes as a determinant of policy in today's democracies. Bonding with 'people like me', signalling virtue and 'compassion', mutual back-patting: these are how we choose which policies and parties to back. I don't think there's anything particularly wrong or reprehensible with this - except that it leads to calamitous results, as we are seeing. Policymakers should hold themselves to a higher standard: instead of being compassionate, or acting compassionately, or allying themselves with the 'compassionate' side of an argument, they should be making decisions with a view to their likely outcomes.

Unfortunately, our system doesn't target outcomes and, especially, it does not target long-term outcomes. Politicians win points by seeming compassionate and human and empathic, regardless of the long-term results of their policies. Or by identifying themselves as being in opposition to 'compassion', unity, tolerance and all the other labels the other team likes to apply to itself.

The losers from all this are ordinary people including, especially and most tragically now, those thousands of Africans risking their lives trying to cross the Mediterranean.

Social Policy Bonds are a way of closing the gap between ordinary people and the politicians and bureaucrats who make the policy that determines how we live. Under a bond regime we could target long-term goals; goals that would not be swayed by striking televisual imagery, rhetoric, impulse or reaction. Ordinary people would help choose these goals and their relative priority far more readily than they can engage in policymaking in today's world. Crucially, policy goals - as distinct from the ways we achieve them - would be stable over time, and not subject to the whims and caprices of the 'people like us'.

Social Policy Bonds will never be seen as 'compassionate'. They channel people's self-interest into solving social problems. (I titled an early version of my book Give greed a chance.) People make money by achieving social goals, and if they're efficient, they make more money. That is anathema to the 'compassion' lobby, who are more interested in picking a team, banging a tambourine and advertising their virtue than actually finding the best ways of helping the most people. I would think, though, that the people we are trying to help - the poor, the disadvantaged, those who are illiterate after years of schooling, those whose lives are devastated by war - are more interested in outcomes than motives. I certainly am.

22 June 2016

The CAP is destroying Europe

George Monbiot's article today about our old friend, the European Union's corrupt, insane Common Agricultural Policy, does a great job in describing its wastefulness, its transfers from the poor to the very wealthy, and its disastrous environmental depredations.

I am perplexed therefore by his decision to vote for the UK to stay in the EU:
I will vote In on Thursday, as I don’t want to surrender this country to the unmolested control of people prepared to rip up every variety of public spending and public protection except those that serve their own class. But if we are to live in Remainia, we should insist on sweeping change. Daylight robbery and mass destruction: the EU is supposed to prevent them, not to deliver them. Leave well alone, George Monbiot, 'the Guardian', 22 June
Why Mr Monbiot thinks the EU is suddenly going to reverse itself and dismantle the CAP - which still swallows up 40 percent of the EU budget - is a mystery to me. It has been four decades since, as undergraduate agricultural economists, we learned about the CAP's calamitous impacts. In those 40 years the unelected EU decision-makers have shown themselves to be incapable of responding to economic, social or environmental rationality. Which is why I think Britons would do better to vote to leave the EU in tomorrow's referendum. Yes, as Mr Monbiot points out, the Leave campaigners have promised to keep subsidizing UK farmers. But if Britons don't like that policy, they can vote to change it. They still have a say in who become Members of the British Parliament, and they can vote against stupid, cynical, wasteful and destructive policies. But the people who make EU policy? We don't even know who they are or how they got there. And we certainly can't get rid of them.

20 June 2016

Britain and the European Union

I am sympathetic to the idealism that led to the formation and development of what is now the 28-member European Union. I also see great value in having hundreds and thousands of bureaucrats, from all the member states, in Brussels, talking to each other; their children going to the same schools.

But, more and more, the people who work for the European Union; the administrators and politicians, are seen as - and indeed are - a separate caste. They have seldom worked outside government and they enjoy safety-nets and benefits that are decreasingly available to private-sector would-be employees, especially the young. The processes and institutions of the EU are opaque. The decision-makers are unknown and unelected. They dictate policies that are hugely important to ordinary citizens, such as those concerning immigration, without consulting the public and so without getting buy-in. Ordinary people cannot vote these people out and cannot engage in the policymaking process. There are few consequences for failure at any level of the EU bureaucracy. All this would be less intolerable if the European Union showed any sign of adapting to the wishes of the broader population. But I don't see that.
So I fear that this project is going too far, too fast, and without the consent of the vast majority of the public. If I could be persuaded that the EU and the people running it were keeping the peace, then I'd forgive all their hauteur and all their extravagances. Nothing would be worse than another European war. But the signs as I interpret them -  in Austria, France and elsewhere - are that we are seeing exactly the opposite: the European project, in widening the gap between politicians and ordinary people, is planting the seeds of exactly the sort of vicious nationalism that made its founding so necessary.

A vote in favour of Britain's leaving the EU might lead to worthwhile reforms. So might a close decision, either way. But I wouldn't bet on it. For British voters, I'd suggest that a Leave victory would help to close the gap between themselves and the people who make their laws, and reduce the risk of contagion from what looks increasingly likely to be a mean-spiritedly (at best) or murderously (at worst) nationalistic continent. 

09 June 2016

Metrics for World Peace Bonds

Metrics for World Peace Bonds, or: Why Long-term Goals are Best

Pondering the best metrics for peace, I came to think that with a goal for peace sustained over fifty or more years, metrics that target for elimination the use of deadly violence become more closely aligned with what we actually want to achieve. By this I mean that, with a decades-long goal, bondholders would have incentives not merely to prevent the outbreak of violence, but also to prevent the precursors to violence. From the point of view of the backers and issuers of World Peace Bonds this makes the metric of deadly violence more robust.

For example: the Cold War ended peacefully, but if World Peace Bonds issued in the year 1950 had targeted a period of sustained peace of just ten years then bondholders would have profited, despite the accumulation of ever more horrific atomic and nuclear weapons, during the period that preceded the Cuban Missile Crisis of October 1962. If the same bonds had been issued with a target of fifty years of sustained peace, then bondholders would have been motivated to reduce tensions, including by such means as reducing the weapons pile-up, or fostering better relations between the US and USSR. A ten-year goal would see the original bondholders making profits while the prospects for peace looked ever darker. A fifty-year goal would have seen the value of their holdings collapse before and during the Crisis.

The point is not only that peace sustained for a decades-long period encourages longer-term thinking. It is also that by choosing the longer-term goal, our targeting of a relatively easy-to-measure metric like deadly violence and its consequences, we shall inevitably do much to eliminate the much less quantifiable - but hugely important - precursors of violence. 

08 June 2016

PBR and SIBS: bring in tradability!

The Economist writes about Payment By Results (PBR) for public services in the UK, and cites these problems:

  • PBR can create strange behavioural incentives, including a phenomenon known as “creaming”. Given the emphasis on meeting targets, providers are often tempted to focus on the easiest-to-help people. 

  • In addition, the economics of PBR can work against innovation. Providers of public services must pay their employees and suppliers. It is difficult, especially for small firms, to wait around for a payment based on how they have done.  Pay up, the 'Economist', 4 June
It goes on:
The question, then, is not whether to get rid of PBR, but how to make it work better."
My suggestion? Make the contracts tradable. Then government can specify broad, much longer-term objectives which would encourage participation of a much wider range of potential service suppliers at every stage of the pathway towards goal achievement. Unlike under PBR there would be creative destruction of useless interventions and inefficient agencies.

The article also mentions Social Impact Bonds, of which there are now 32 in the UK and the most famous of which 'seems promising'. I have posted before about Social Impact Bonds, which, while I think they may be a much-needed improvement in neglected policy areas, would benefit greatly by being made tradable (and so becoming Social Policy Bonds, as I conceived them). You can now search this blog for keywords such as Social Impact Bonds, or see here and here for my short papers on them.

27 May 2016

Nuclear war? Yawn, yawn

The current Economist writes about North Korea's nuclear capability. Amidst many worrying facts cited are these:
North Korea is thought to have a stockpile of around 20 devices. Every six weeks or so it adds another.  Source

Two engines from Soviet-era R-27 submarine-launched ballistic missiles were coupled together to provide the propulsive power and range for a warhead carried by a KN-08 to hit the east coast of the United States. It is not known how many R-27s North Korea has, but up to 150 went missing from Russia in the post-Soviet 1990s. Source
The R-27, a submarine-launched ballistic missile, has the explosive power of 1 Megaton, or about 50 times that of the bomb that was dropped on Hiroshima.

I have no solution to the problem of nuclear proliferation and its attendant risks of catastrophe. I don't think anyone has, despite valiant efforts by well-meaning people working for governments or international organizations. But what I can offer is a means by which we channel more of our human ingenuity into solving that problem, rather than expending time and energy on activities of very little social value (see here for instance, or here). In other words, a way of motivating more people to put more high-quality effort into reducing the risks of a nuclear catastrophe.

That way entails issuing Social Policy Bonds that target for reduction either man-made conflict, or disasters of any kind. Bonds could be specially issued to target the risk of a nuclear explosion. How would this work? First, funds would be raised from any source - public- or private-sector or both - to back bonds that would be redeemable for a fixed sum only when there has been nuclear peace for a sustained period of, say 30 years. These bonds would  be issued on the open market for whatever price they fetch. The goal, being long-term, could mean that the bonds would sell for very little. So any movement to increase the likelihood of sustained nuclear peace would see an improvement in the bonds' value. The bonds would be tradeable, so holders (or their agents) could benefit in the short term by doing things that, in the eyes of the market, bring us closer to our long-term goal. The effect would be to reward people for helping achieving the goal efficiently. Nuclear Peace Bonds would create a protean coalition of people who have a powerful incentive to explore, investigate and implement the most effective (at any given time) array of measures that bring us closer to our goal. With such a big, remote objective, no single approach will work. A bond regime would stimulate diverse, adaptive solutions to the problem of nuclear proliferation.

The current policymaking system can work well when the relationships between cause and effect are readily identifiable. But for problems like the risk of nuclear catastrophe, which are large-scale and have multiple causes, the Social Policy Bond idea offers a better solution. Our nuclear peace goal fulfils other key criteria that point to the advantages of a bond regime :

  • Current approaches are either ineffectual or inefficient;
  • A robust and verifiable metric. I suggest 'a nuclear detonation that kills 500 or more people within 24 hours'; and 
  • Financial rewards to those involved in achieving objectives are currently uncorrelated to their effectiveness or efficiency in doing so.

Currently, there's a jarring mismatch between the fears of, and risks to, almost everyone on the planet and the resources devoted to mitigated them. A shift in resources away from ingenious ways of manipulating financial markets, or ingenious commercials for dog-food, would undoubtedly (in my view) be a worthwhile public good. But our current policymaking system doesn't encourage such a re-orientation of priorities. Instead, we have people, many of whom are dedicated and hard working, working through outdated bureaucratic channels to achieve bureaucratic goals in ways that do not reward directly and immediately reward success or deter failure. Nuclear Peace Bonds would be change all that, to the long-term benefit of all of us, including generations yet unborn.