22 April 2019

Disaster in the antiobiotics market

Jeremy Farrar writes: 
There is no viable route to market for new antibiotics, however valuable they may be to society. A disaster is unfolding in the antibiotics market, Jeremy Farrar, 'Financial Times, 21 April
Incentives matter, which is why we urgently need to overhaul the ways in which healthcare is currently managed. Typically, the rewards to companies developing a drug are directly proportional to sales of that drug. Antibiotics are typically prescribed only for short periods: days and weeks,
Private investors backing such [drug development] companies counted on revenues being buoyed either by growing need for their products or by governments responding to calls to fix the market. 
What would it take to 'fix the market'? My suggestion, more radical than it should be, is that we reward anybody who improves society's health, including drug companies, in ways that correlate to their success in improving society's well-being. This could be done by (1) explicitly targeting 'improved societal well-being', and (2) setting up a system that supplies incentives for people and companies to do just that. We are getting to the stage where step 1 is a possibility. Quality Adjusted Life Years are one attempt to measure well-being. Step 2 is more difficult. My suggestion is that we apply the Social Policy Bond concept to health and that, at a national level, governments issue Health Bonds, which would reward those who bring about improvements in the long-term health of a country's citizens. For less developed countries, funds for the backing of Health Bonds could come from philanthropists, NGOs or rich countries.

'Anybody who improves society's health', I say above, because worthwhile improvements can originate in people and companies whose remit does not explicitly extend to health. A factory opening in a region of high unemployment, for example, might do a lot to improve the well-being of people living nearby. Under our current system, the factory would reap little reward for such a positive externality. Under a Health Bond regime, though, investors in the bonds would have an incentive to help an otherwise hesitant company to get their factory up and running. At all times, Health Bonds would encourage people to focus on the outcome we want to achieve - improved health - rather than the fortunes of drug companies, doctors, hospitals or other surrogate endpoints.

16 April 2019

Make votes matter

Make Votes Matter, is the title of a leaflet being distributed in the streets of the UK. It is the name of a 'cross-party campaign to introduce Proportional Representation to the House of Commons'. Currently, UK General Elections use the First Past the Post voting system, which has the merit of being immediately comprehensible, but the apparent disadvantage of under-representing small parties whose votes are widely distributed, and wasting the votes of people who oppose the occupiers of  'safe' constituencies. There's a lot more to be said for and against PR and FPTP. I suppose it's understandable, though regrettable that, in today's politics, people think their Member of Parliament cannot be expected to represent them if s/he is from a party they oppose. There's little magnanimity in party politics these days.

I actually don't think the differences between PR and FPTP are worth bothering about. We'd still be voting about things that don't really matter: for Members for Parliament, for their party, for what they say in their manifesto. For people, parties, promises, image, ideology, sound-bites and slogans, rather than meaningful goals. About those goals, I believe, there's far more scope for consensus than about all the paraphernalia that characterise current election campaigns. Politicians rarely do what they say they will do; still more rarely can they be held to account for what transpires to our economy, society or environment. But their campaigning and subsequent activities, as well as consuming great gouts of brainpower, sow the seeds of division: the 'narcissism of small differences'.

I advocate refocusing our attention on goals, and the inevitable trade-offs between them, rather than political parties or the voting systems. I think we should be choosing between outcomes that are verifiable and meaningful to all of us, rather than allow our policymaking to be steered by interest groups - be they billionaires, corporations or government agencies - which are the only bodies that have the resources and motivation to understand our arcane, protracted, policymaking mechanisms. You might almost think that the obscurantism of our political systems is a ploy to keep ordinary people away from positions of power. A political system focused on social and environmental outcomes would represent a threat to the political hierarchy but, I believe, it's necessary for reasons of both efficiency and buy-in.

What would such a system look like? A Social Policy Bond regime would be one such system. It would set broad, long-range targets about which there is almost universal agreement. At the national level it could target better health, universal literacy, a cleaner environment. At the global level it could target conflict reduction, and the prevention and alleviation of disasters, whether natural or man made. Political debate would be about the exact definition of these goals rather than, as now, the supposed means of achieving them or peripheral issues such as institutional structures and funding arrangements. There would be healthy debate, under a bond regime, about priorities and time frames, but the way the bonds work would mean that there need be little discussion of who shall achieve society's goals or how those goals shall be achieved. The market for the bonds would ensure that they are always be held by the most efficient operators. And efficiency is a moving target: what is efficient today or in one part of the world today might be highly inefficient in future years or in a different region. Long-term goals will most probably require an array of diverse, adaptive approaches for their achievement - exactly the sort of approaches that government, or any single ordinary organisation, is incapable of encouraging, but that a Social Policy Bonds regime would stimulate. The bonds would lead to the creation of a new type of organisation, whose structure, composition and activities would be entirely subordinate to its goal, which would be exactly the same as that of the society that set it; a stark contrast with today's organisations, which have their own goals, independent of, and sometimes in direct conflict with, those of ordinary citizens.

09 April 2019

Waht should we target?


Policymakers rarely use explicit targets and still more rarely do they use them in a coherent manner. Take two high-level targets: the inflation rate, targeted by the UK, and the less-than-two degrees Celsius warming targeted by the Paris Agreement. Near explicit and implicit targets – de facto targets – are more common. National governments routinely target economic growth. As well as these macro-targets, there is a proliferation of  micro-targets: in the UK, waiting times at hospital Accident and Emergency departments, for instance. 
What do all these targets have in common? One is that they are set by people who are not charged with achieving them, and will be little affected whether they are achieved or not. Another is that they have little directly to do with social or environmental well-being. There might be a strong correlation between, for instance, GDP and material prosperity; there is likely to be a strong correlation between the two-degrees Celsius target and plant, animal and human well-being. But it's my view that, because there is no direct link, these targets fail to achieve societal buy-in. The two degrees target is too abstract. If more than two degrees leads to unacceptable depredations, why not aim directly to reduce the severity of those depredations? That would be a goal with which people other than scientists and policymakers could identify.

The implicit GDP target is also rapidly becoming discredited. It says nothing about the distribution of the gains from economic growth, and with the dramatic divergence between incomes of those at the top of the scale from all others, risks becoming as detached from social well-being as are indices of share prices – and for much the same reason.

If anything, the micro-targets are worse. Again, they are set by people who have little direct interest in seeing them achieved. As well, they are very easily manipulated or gamed, leading to perverse outcomes, none of which benefit people, and some of which worsen well-being.

Where does that lead us? Most components of social well-being are not explicily targeted. Sadly, as society grows more complex and diverse, unless things are explicitly targeted they tend to fall through the cracks. The environment has throughout recent history has suffered this fate, as have other essential, but similarly unquantifiable determinants of well-being such as social cohesion. In smaller societies, these elements of The Commons would be the subject of informal arrangements, often arrived at after a long evolutionary process.

That won’t work in today’s highly aggregated and increasingly diverse societies. People in positions of power are increasingly detached from everyday concerns – the things that microtargets or, more importantly, the market, fail to capture. Unlike in traditional societies, when things are neglected by the people who lead today’s societies they are ignored. Political discourse and resources get channelled into the few things that are targeted, including economic growth, and away from those elements that escape the market or some other form of quantification. As well as the environment, and these include some important components of mental and physical health. They aren’t targeted directly, so attract fewer resources than they should.

But, given that a return to traditional societies is not going to happen, targets based on aggregate numbers are essential. So: what should we target? My thinking is that we need to target broad social and environmental goals whose achievement would be inextricably linked to improved social well-being and generate buy-in. Economic growth doesn’t cut it; nor does the two degrees target. So what would qualify? Alleviation of poverty, improved physical and mental health, reduced impact of adverse climatic events on human, animal and plant life: these are all broad, meaningful goals, whose achievement would be both meaningful to all, and generate the buy-in sadly lacking when we target GDP, two degrees, or hospital waiting times. I am more ambitious even than such targets would indicate though. If, as I hope, we begin to target genuine, verifiable, meaningful outcomes, why stop at national goals? A Social Policy Bond regime, not having to specify how our goals shall be achieved, or who shall achieve them, could and should aim for global goals. I suggest that we explicitly target for reduction the adverse effects of both natural disasters and violent political conflict.

22 March 2019

Perverse incentives in healthcare

The perverse incentives in healthcare are pervasive, worrying and unsustainable. Joseph Jarvis speaks eloquently about those that afflict the American healthcare system here. One example: he points out that investment in urgently needed new antibiotics is too low because the pharmaceutical industry prefers to develop drugs that will be taken for a lifetime, rather than a couple of weeks.


What the US and many countries have is a market not for health, but for treatment. It's nothing like a free, competitive market, being subject to the usual distortions and inefficiencies that ensue when big business manipulates the government and regulators. It's called a market, because much of it's run, nominally, by the private sector. But we are seeing worldwide a convergence of the interests of the public sector and big business, which often takes the form of policies that conflict with the goals of ordinary people. 

The 'market' is often evoked rhetorically, and that unfortunately discredits the whole notion of the market as the most efficient way we have of allocating society's scarce resources. There is a market in the US for healthcare, in the sense that the industry reacts rationally to the incentives on offer. But the incentives have little to do with the well-being of citizens, and a lot more to do with the short-term, narrowly measured, goals of doctors, insurance companies, hospitals and pharmaceutical companies. The perversity is that the healthier the citizenry, the more parlous the state of the medical industry.


Where does the Social Policy Bond idea come in? My starting point would be to define and reward the achievement of society's health goal, so that the structures and activities of the sectors that support that goal would be entirely subordinated to that goal rather than, as now, the other way round.

 
On a national level, physical health could be defined as a range of targets, all of which would have to be reached and sustained before we can say we have achieved our goal, at which point Social Policy Bonds targeting health could be redeemed. My suggestion is that our goal would include such targets as: longevity, Quality Adjusted Life Years, and infant mortality. There would be others, to be decided by experts in consultation with ordinary citizens.
Where does this get us? It puts in place a system whereby people are rewarded for bringing about actual improvements in health. Not for screening, or curing or treating disease, nor for selling drugs or health insurance. Those are indirect means to an end, rather than ends in themselves and the results are lamentable: pills that are no better than placebo (see here and here). Or incentives to over-diagnose and over-treat. Or to falsify or otherwise manipulate the results of drug trials.

Health Bonds would change all that. All the activity they stimulate and reward would be entirely subordinate to society's health goal. There would be a market - for the bonds - but it would be society's servant, not its master. The Social Policy Bond principle uses the market as a means to society's goals. It doesn't view the market as an end in itself. Under a Health Bond regime, the the end that the market serves under a bond regime will be society's health, as defined and targeted by society itself. The goals of those working in any field impinging on society's health would be exactly congruent with those of ordinary citizens: to improve society's health as quickly and efficiently as possible.

16 March 2019

Link to essay on Environmental Policy Bonds and climate change

My previous post described how we might fold the effects of climate change into goals for Environmental Policy Bonds, so that we could tackle all our urgent, big, environmental challenges, regardless of their cause, in ways that are more likely to generate buy-in than the current intense focus mainly on greenhouse gas emissions. I've written a longer essay on that theme, which is more suitable for people unfamiliar with the Social Policy Bond principle, here.

08 March 2019

Climate change and the environment

Climate change could be tackled in various ways. We could aim to throttle its causes. We could aim to keep the climate, as measured by a wide range of physical, biological and financial indicators stable. Or we could aim instead to target for improvement all aspects of the environment, whether or not their degradation has been caused by climate change.

Policymakers have mostly gone for the first option: to try to reduce greenhouse gas emissions, believing that they are the main driver of climate change. Myself, I've advocated in the past the targeting of an array of indicators, including the impacts of adverse climatic events, but also physical, social and financial measures of climate change.

I'm now more inclined to the third option, and think we should try to solve our environmental problems however they are caused, rather than focus on trying to prevent climate change. My thinking is partly a result of humanity's having done almost nothing actually to stop the climate changing.

 For buy-in we need meaningful outcomes


What’s wrong with targeting greenhouse gas emissions?

  • We don’t really know what’s happening to the climate;
  • We don’t really know why it's happening;
  • We don’t know whether trying to reduce greenhouse gas emissions will solve whatever the problem might be;
  • We do know that targeting greenhouse gas emissions will have large upfront costs, and that any benefits will be way into the future, uncertain and, even on the best advice of the experts, tiny.

Admittedly the science appears to say that greenhouse gas emissions are changing the climate in ways that adversely affect human, plant and animal life, though it’s less convincing about the effects of reducing these emissions. But that’s not really relevant. There’ll be no action taken, and indeed there have been no significant actions taken (see here, here and here), because, in my view, the relationship between greenhouse gas emissions and adverse impacts is too tenuous and abstract to generate buy-in. And buy-in is what we urgently need.

Note that I am not suggesting we don’t target greenhouse gas emissions: only that any decision to do so needs to be made on the basis of whether it’s the most efficient way of achieving our environmental goals.  Professor Jem Bendell paints a cataclysmic picture:
The evidence before us suggests that we are set for disruptive and uncontrollable levels of climate change, bringing starvation, destruction, migration, disease, and war…
>My suggestion is that planetary well-being would be better enhanced by aiming explicitly to reduce such scourges -  starvation, destruction, disease and war, than by targeting, or pretending to target, greenhouse gas emissions. Reduced starvation, disease and war are goals that are less abstract and more meaningful to ordinary people than climate change. By targeting them we’re more likely to generate the buy-in that is essential to bring about changes that will create, at least in the short term, losers. All the evidence tells us that, after many years of exhortation, dire warnings, and extreme climatic events, there’s very little buy-in to the goal of reducing greenhouse gas emissions.

As well as aiming to reduce starvation, disease and war, we could explicitly target also environmental goals that mean something to the non-experts whose buy-in is necessary. These could include reduced air and water pollution, less noise, reduced impacts of adverse climatic events, and reduced loss of biodiversity.

It’s not so difficult: we re-frame and, if necessary, re-orientate policy to meet these goals, rather than a target level of greenhouse gas emissions which is, at best, only a putative means of achieving some of them.

Environmental Policy Bonds

I propose that we reward the sustained achievement of our environmental goals. Further, I propose that we do so in ways that channel market forces – the most efficient way we yet know of allocating society’s scarce resources – into the achievement of our environmental goals. I further suggest that we do this is by nationally or globally backed Environmental Policy Bonds. These could target our biggest environmental challenges, regardless of their supposed source. A bond regime would allow us to target long-term goals, and stimulate research into diverse approaches to solving our problems.

Importantly, the bonds wouldn't dictate how our environmental goals shall be reached. It's quite possible that investors in the bonds will find that targeting greenhouse gas emissions for reduction is the most cost-effective way of solving some of our environmental problems. The crucial distinction between such targeting, and the way emissions are being targeted today, is that bondholders will target emissions only if doing so - at the time and in the areas they decide to do so - is the best way of achieving our goals. They will be making their decisions on the basis of the science (and economics) of the relevant time and place, rather on the fossilised science of today. Their solutions, unlike today's non-solution, will be diverse and adaptive. And - another important difference - the people who look for and implement them will be rewarded only if they are actually successful in improving our environment.

05 March 2019

The metrics of tyranny

In our complex, populous societies we're not going to escape the use of metrics as indicators of social well-being. Social Policy Bonds aim to target targets that are meaningful to ordinary people. They therefore need metrics that are carefully devised, robust, verifiable and, preferably, easy and cheap to monitor. A Social Policy Bond regime, ideally, would use reliable metrics in a considered, coherent manner. There are dangers in taking metrics as ends in themselves, in using them incoherently, and in ways that conflict with people's well-being. Unfortunately, that's the direction in which we're moving. Having read The tyranny of metrics by Jerry Muller I've written about the limitations of metrics. I've also mentioned Campbell's Law. An article in the Economist does much to justify Mr Muller's and my skepticism:
Take the World Bank’s annual comparison of business regulations around the world. One country stood out in its latest ranking: China, which had languished in 78th place the previous year, jumped to 46th. India seemed to have improved, too, rising 23 spots, to 77th. Those remarkable ascents have less to do with the ease of doing business in those places than with their governments’ determination to achieve good grades. Some 40 people work in a Chinese government unit dedicated to improving its World Bank score; perhaps 200 toil in India’s. At least 60 countries have teams that focus on the index. (My emphasis)  Life and society are increasingly governed by numbers, 'The Economist', 23 February
Our societies aren't going to return to the times when policy is made for groups of 150 (see Dunbar's number). It follows that metrics will be the means to determining how well society is doing. Currently our governments rely on a motley array of narrow, short-term, Mickey Mouse micro-targets, including the de facto target of Gross Domestic Product, with their many flaws, some of great consequence. A Social Policy Bond regime, by contrast, would channel people's goals and expertise into answering fundamental questions: what should we target? What are the essential elements of social and environmental well-being? Where do we, as a society, want to be heading? Our obscurantist political systems allow our rulers to duck these questions and distract us all with spurious arguments about ideology, personality, image and sound bites.


The tyranny of metrics metrics of tyranny

It gets worse. In some societies metrics are already explicitly weaponised (from the same article):

In China, for example, Zhima Credit, a popular private service, measures “personal characteristics”, “online behaviour” and “interpersonal relationships”, among other things. A high rating entitles people to a fast-track visa for Singapore.

23 February 2019

Climate change: the people have spoken

Consider the destruction of a rainforest to make room for a palm oil plantation. Or some island jurisdiction changing its tax laws. Or catching a plane from London to New York. All have effects, some of which can be captured by a market, some of which cannot. If globalisation means anything, it means that these effects can have ramifications far beyond the territory in which they take place. 

Many of our actions have impacts on the physical environment, and most of  these aren't captured by the market. Economists call these externalities. The negative impacts of fossil fuel use include air pollution. Even limiting ourselves to the impacts of air pollution, we don't know all the long-term effects. We suspect that they are or will be deleterious to human, animal and plant life. (In net terms, that is: some populations will benefit.)

The problem policymakers face is that the positive externalities of, say, fossil fuel use are upfront and of similarly huge dimensions to the negative. Every plane flight hugely benefits the passengers on board, their pals, the crew, and the others employed by the airline industry ... and then there's the freight. A fraction of these positive impacts, but not all, is captured by the market. At least as compelling are the positive externalities resulting from fossil fuel use in general: the benefits of electricity, heat, air conditioning.

To summarise: the market captures and quantifies some but not all of the impacts of a transaction. It misses a lot of positive and negative impacts. It fails to capture any impacts of anything we do that is not a transaction. All this is to say that fossil fuel use has huge positive impacts as well as negative, and we cannot say whether the negative effects outweigh the positive. The market does not, and cannot help us, because there's no way we can know and weight all the objective impacts accurately, but also because many impacts are subjective and unquantifiable.

Climate change: do we care?

Take climate change. The net negative impacts on human, animal and plant life of climate change – probably better termed climate breakdown – are incalculable and massive. Possibly catastrophic. We are pretty sure, but not certain, that greenhouse gas emissions cause some, maybe much, maybe all, of climate change.

We can, though, be more certain about whether we really care about the threat of climate change. And the answer is a resounding: not really. Lots of conferences, exhortations, subsidies for renewables (though not as many as for fossil fuels - see below), stirring rhetoric and doom-laden prognostications. Some change? Sure, at the margins. But meaningful results? No, no, no.

It's true that our political systems are so corrupted by their proximity to the ultra-rich that the long-term interests of millions of ordinary people count for less than the short-term goals of billionaires. The ultra-rich and their lackeys in and out of government are responsible for some of this: fossil fuel subsidies are estimated to be worth $160-200 billion per annum, and we are pretty indulgent in letting billionaires dictate policy. But that cannot be the complete answer. It's more like a cop-out.

The billionaires people have spoken

The fact is that we have collectively chosen not to do anything significant about climate change. We’ve chosen quality and quantity of life in the short run, over quantity and quality of life in the longer term. We find it easy to do this, in my view, because:

  • 'Climate change' is too abstract. and
  • We focus too intensely on greenhouse gas emissions, whose effects aren't fully known, and whose reduction might or might not do anything significant to bring about a more benign climate at some indefinite future time. 
My suggestion is that rather than address or pretend to address what we suspect, but don't know for certain, and cannot prove, is the principal cause of climate change (greenhouse gases emissions), we should try to deal with environmental depredations, whether or not they they are caused by climate change.

Limiting greenhouse gas emissions isn't happening and isn't going to happen. Even if the billionaires were to switch sides, most of us don't really want it to happen. The costs are upfront, the benefits nebulous and long term. What we want, what we can understand, relate to, and identify with, are reductions in the more tangible environmental pathologies: flood, wildfire and other adverse climatic events, loss of biodiversity, loss of wilderness, pollution of the air and seas. It's not solely an issue of presentation. We are more ready to pay taxes to help human, animals and plant life than we are to do something that might reduce the increase of some measure of global temperature some decades hence.

So I suggest that we divert resources from trying to reduce greenhouse gas emissions to solving other environmental problems, including those caused by climate change.

One way we could do this is by massively backing global Environmental Policy Bonds. These could target our biggest environmental challenges, regardless of their supposed source. The bonds would reward the achievement of verifiable, meaningful environmental outcomes. Examples: cleaner air, cleaner seas, reduced losses of biodiversity and habitat. We could target for reduction those environmental ravages that we now attribute to climate change including species loss and the impacts of adverse climatic events. The way the bonds would work means that investors would work out for themselves at all times, whether or not the best way of dealing with our environmental challenges is to tackle what we think are their root causes.

We need diverse, adaptive approaches. No single, top-down, one-size-fits-all policy will work. Environmental Policy Bonds can encourage the array of diverse, adaptive approaches that we need to begin to solve our environmental problems.

16 February 2019

Why don't we target trust and empathy?

Dr Elliott Barker asks How do we prevent crime?:
It seems incredible to me that as a society we don't publicly advocate those values upon which all harmonious social interaction depend - trust, empathy, and affection. Why shouldn't society - all of us collectively - reinforce our own latent awareness that these values are where it's at, and why shouldn't we do this at least as frequently and effectively as we allow ourselves to be reminded to drink Coca-Cola? How do we prevent crime?, Dr Elliott Barker, 'The Natural Child Project', February
Dr Barker calls for scrutiny of policies affecting infants and toddlers and a recognition that capacities for trust, empathy, and affection are more important than superlative exam results or musical virtuosity. Indeed, achieving such goals can conflict with child rearing practices that produce an adult capable of harmonious, co-operative human existence.

What's this got to do with Social Policy Bonds? Quite a lot, I think, and not just in respect of crime. Social and individual well-being are legitimate targets for government - at least as legitimate as educational achievement. It's entirely plausible that Dr Elliott is correct in that trust, empathy, and affection contribute mightily to well-being but my point is that, under our current system, few of us are motivated to find out whether he is or not, and that even if it could be shown that he is, few are motivated to do anything about it. At the individual level, sure, there are parents who have the time and energy to devote to child-rearing and who share Dr Elliott's insight. But they still have to contend with social forces, heavily influenced by government policy and its de facto targeting of economic growth at the expense of our social and physical environment.

Social well-being, trust, empathy, affection: these are difficult qualities to measure. The effects of their absence, though, are measurable, and politicians try to deal with some of them - especially those that could be televised - with an array of short-term measures: more money for the police, more prescription drugs, decriminalising narcotics, and so on. But they have little inclination to think long term. A Social Policy Bond regime, because the bonds are tradeable, could help in achieving such long term goals as social cohesion and the other contributors to well-being described by Dr Elliott. It could, for instance, target for reduction such pathologies as crime, mental illness, and other effects of social alienation and lack of trust. Our current political systems are inescapably short term, though and they focus on more immediately and readily quantifiable indicators - such as GDP and academic achievement - regardless of the longer-term cost to individuals and society of doing so. As Dr Elliott says:
It seems peculiar in a society in which schooling is mandatory from age 6 to 16 that we turn out graduates who have no preparation for the one job they are almost certain to have - raising children. Surely, before conception is a possibility, boys and girls should appreciate the permanent emotional damage that can result if the emotional needs of a young child are not met.
Dr Elliott is pessimistic about whether we will do anything to avoid such emotional damage. I will leave the last word to him: 
Why won't such preventive measures be taken? There are many factors. In part, it is because we are presently attuned to a shorter time frame politically and psychologically than prevention necessitates. In part we are misled by the excitement and drama of intervention after a problem has occurred. The cops and robbers game for example is the stuff of much of our entertainment. In part it is because today's casualties have greater motivation to lobby for their own immediate needs than for prevention of tomorrows' victims. In part it is because an impossible level of proof is demanded whenever we discuss changes that appear to tamper with our present values. But mostly we just know that such proposed solutions to crime prevention are "naively idealistic."

13 February 2019

Humanity versus vested interests

A correspondent asks me why the Social Policy Bond concept hasn't yet been implemented. A good question, especially as the non-tradeable version (Social Impact Bonds, also known as Pay for Success Bonds, etc) is becoming more widely deployed and much discussed. So...why not Social Policy Bonds?

I suspect part of the answer is that Social Policy Bonds are a threat to existing institutions: politicians, because they would have to relinquish their control over who shall achieve social goals and how they shall be achieved; and government agencies, such as education, police, health departments, because investors in the bonds would subordinate all their funding decisions to efficiency and, in many cases, new organisations and new techniques will be more efficient than existing bodies with their entrenched ways of doing things and fairly limited remits. Just one example: the best way of reducing crime rates in a disadvantaged area might be to subsidise employment there, rather than increase funding for the local police force. Or a cost-effective way of reducing the numbers of people killed or injured in car accidents might be to lay on free mini-cabs or taxis or have teams of dedicated, paid drivers whose sole job would be to ferry people from pubs, bars, nightclubs, home at night. That might be really cost effective but, under our current system, there's nobody to speak up for such a policy, and it would be opposed by vested interests. More dramatically: nobody really want to live under threat of nuclear war, but currently there are no bodies with sufficient influence and motivation to ensure that won't happen. Sure, there are teams of dedicated people in international bodies striving valiantly to reduce conflict but, the resources, including brainpower, just aren't there. Big money has less interest in avoiding nuclear catastrophe than it does in devising imaginative ways of selling dog-food. And why not? It's reacting rationally to the incentives on offer - which (I think) are perverse in that they prioritise the narrow short-term interests of a few corporations (and, arguably, a few dogs) over the survival of millions of human beings.

Another reason for the absence of Social Policy Bonds from the scene could be the hysterical nature of today's politics, where shrieking abuse at the opposition has supplanted making policy to improve society's well-being as the prime activity. So solving social problems is seen as a 'left-wing' goal, and using markets is seen as 'right-wing'. In more enlightened times, you'd think a policy that uses markets to improve social well-being would unite both left and right; but that's not happening. So while I'm partly encouraged by the slow spread of Social Impact Bonds, I'm also concerned that - especially if they become so common as to escape public scrutiny - they will end up serving vested interests at the expense of society as a whole.

For more about Social Policy Bonds see my home page. For my concerns about SIBs see here and here, as well as some previous blog posts.