Policy and rationality

John Kay points out that:

Each year, a million children die from malaria. Those who live in areas where the disease is endemic, and survive, acquire a degree of immunity. They remain vulnerable through their lives to episodes of disease, which sap their energy and productivity. Perhaps a billion or more malarial episodes occur every year. We mostly judge risks by their salience. … Salient risks are those that everyone is talking about or that we have recently encountered.

It’s natural, though still irrational, that in our own lives we respond to events that are ‘salient’, even if they are unlikely to occur or recur. We are fallible human beings, and it’s our nature to respond emotionally to salient events. But policymakers should do better. They fail us when they react irrationally, with taxpayer funds, to events that have assume a media profile out of all proportion to their real impact.

In the five years since 11 September 2001, Patrick Buchanan writes, “85,000 people have been murdered in the USA …not one in a terror attack.” But you’d never know that from the actions of our politicians.

The solution? Social Policy Bonds, which would target, say, premature deaths impartially; that is, without regard for whether they are caused by terrorism, murder or road accidents. Or, if we truly believe that deaths from terrorism count more than those caused by conventional acts of violence, then under a Social Policy Bond regime we’d be forced to be upfront and explicit about it. Transparency in policymaking is an end in itself, as well as a means to greater rationality and efficiency. Under a bond regime we could still over-react to high-profile media events and throw money at fast-moving, highly visual problems, at the expense of slower-moving and less dramatic tragedies – such as malaria. But Social Policy Bonds mean we’d have at least have to be honest about it.