I have written about this before. The days of the hospitals taking on patients and sorting them out has long gone. NHS hospitals no longer see patients. They process problems. This is a direct result of government targets. To hit the targets, each hospital contact or “event” has to be concluded as quickly as possible. And so it is. Robert’s contact with the hospital is deemed a successful outcome, and points will have been scored. Meanwhile, his weight loss continues.
29 December 2006
28 December 2006
I have my own preconceptions. For instance, I strongly believe that an excellent use of government funds would be to buy some low-cost law enforcement that could reduce the number of people killed on New Zealand’s roads from its current rate of 400 per annum - along with tens of thousands of serious injuries. We all have our own priorities about where scarce resources should be allocated. But unfortunately we, and policymakers, are very much in the dark as to the costs of our predilections. It’s in few people’s interests to calculate disinterestedly how much return, in terms of welfare, would be saved by more funding on, say, traffic policing as against (for example) funding of women’s refuges or literacy for schoolchildren.
A Social Policy Bond regime would be an improvement over the current system of allocating social funds, but also because it market prices of the bonds would constantly generate information of great value to policymakers about the total costs of their policies.
Take, for example, the objective of lowering some index of water pollution from 50 to 40 units. Assume that a national government issued one million bonds targeting water pollution, each redeemable for $10 once this lower level has been attained. The maximum cost to the government of achieving this objective would then be $10 million. But if the bonds, when issued, fetched $5 each, then the market would be saying that it thought it could achieve this objective for just $5 million. It wouldn’t say when it thought it could achieve that objective, but that could be inferred from market behaviour and the market value of the bonds compared with other financial indicators. But what if the bonds sold for virtually nothing, and the market value of the bonds failed to move from that floor? That would mean that the government had miscalculated: in the market’s view there would be no realistic chance of the objective being achieved for an outlay of $10 million in the foreseeable future. The government could respond in different ways:
- It could wait for new technology to arrive, or for circumstances to change in other ways, such that the market would see the objective as becoming more easily achievable, and the value of the bonds would consequently rise. Or,
- It could issue more bonds, with the same specification, also redeemable for $10. It might do this in stages, gauging the market reaction to each new tranche of bonds, which would tell the government the maximum cost of achieving the objective.
The prices of Social Policy Bonds are even more beneficial in that they would not merely minimise the total cost of achieving a specified objective. They would also indicate the marginal cost of achieving further improvements. But that discussion is more technical, and I will not go into it here.
Instead: two snippets from Harper’s Index (taken from ‘Harper’s’, October 2006):
- Minimum amount of USDA [US Department of Agriculture] farm subsidies since 2000 that have been paid out to people who do not farm: $1.3 billion.
- Minimum value of “small business” contracts given out by the US last year that went to Fortune 500 firms: $1.2 billion.
26 December 2006
A race is on to inform more than a million small businesses that they become responsible for disposing of electrical waste — from dishwashers to calculators – from July next year. EU rules come into force making businesses responsible for taking back the two million tons of waste electrical and electronic equipment…that normally goes to landfill each year. SourceWell I will argue against it. Like much EU regulation it contrives to be both well-meaning – and to miss the point. If the objective is to reduce waste going into landfill, then why not set explicit, verifiable landfill goals and let people other than bureaucrats work out how best to achieve them? Why set up a new bureaucracy – because that is what these rules will do – to play around with activities that may or may not achieve reduce the rate of expansion of landfill?
It’s a typical, top-down, one-size-fits-all, government-mandated, pseudo-solution to what is probably a genuine problem. It’s also gesture politics, because it’s unlikely to achieve much, apart from employment for bureaucrats. Oh, it will probably achieve something: this sort of nonsense imposes proportionately bigger costs on small businesses. As the newspaper report continues:
But business leaders fear that only large retailers have any idea about the new obligation.Precisely so: the main effect of these rules will be to increase still more the concentration in the retail industry that has already made clones out of every main shopping street in the UK.
25 December 2006
A third approach is that of Social Policy Bonds. Charge the private sector with tackling these problems. Admit that we don’t yet know how to solve them, but encourage people to research, investigate and implement diverse, adaptive solutions. Inject the market’s incentives and efficiencies into the whole process; so expanding the pool of human ingenuity devoted to solving these real problems. We don’t even have to wait for government to do it. We could issue our own (pdf) Nuclear Peace Bonds (here’s a similar idea) or Climate Stability Bonds. All it would take would be for some interested philanthropist to put up the funds, and let the market for the bonds do the rest. Of course, once the ball got rolling, contribution from members of the public could be solicited, which would swell the total redemption rewards.
The first hurdle is the one that looms largest, to me anyway. I have tried and tried to contact philanthropists and publications for philanthropists. With not a single exception my emails have not even been auto-acknowledged. No doubt these organisations have devised effective filters to screen out unsolicited messages. Are any readers of this blog philanthropists? Do you know any philanthropists? Do you know how to get in touch with philanthropists? I fear the current alternative, waiting for government to do something helpful, is just not going to be good enough.
22 December 2006
- Their over-arching objective is self-perpetuation; and
- When monitoring their performance, they rely heavily on easily quantifiable data.
Self-perpetuation for most of us, most of the time, is a goal with which we can identify as individuals. Some organisations, brought into being to address genuine grievances can, knowlingly or not, perpetuate or entrench the causes of their grievances: they see the entire world through the prism of the cause that validates their raison d'etre; and that can be problematic.
But the reliance on quantifiable data is, I think, equally dispiriting. A benevolent welfare state cannot discriminate between the deserving poor, and those who would benefit more from being refused (say) unemployment assistance and so more motivated to find work. The criteria for receiving such assistance will be numerical data, mainly wealth and income.
Given that we have big government, one way of solving the sort of mismatch between numerical aggregate measures of wellbeing, and actual wellbeing, would be to have sensible numerical targets. Take the unemployment example: instead of detailed, legalistic criteria for the process of applying for unemployment benefit, a truly benign government could set a broad target for total unemployment, and contract out the achievement of that lower target to the private sector. (Click here for one suggestion.) The private sector would be motivated to encourage those unemployed at the margin - those least unwilling or unable to go to work - to find jobs. This is in contrast to a bureaucracy, which has no such clear motivation. The proliferation if meaningless micro-targets, and the bureaucratic need for self-perpetuation, combine in this and many other instances, to form a vicious circle, or a downward spiral, which cannot respond sensibly to cases of individual human need.
19 December 2006
All very worthy and, as I say, entirely consistent with the premises underlying Kyoto.
Unfortunately these premises are flawed. Kyoto is not, ultimately, concerned with climate change. Its sole focus is to reduce net anthropogenic greenhouse gas emissions. They are not at all the same thing:
- Reducing anthropogenic greenhouse gases might not be the best way of reducing the concentration of greenhouse gases in the atmosphere;
- Reducing the concentration of greenhouse gases in the atmosphere might not be the best way of preventing or mitigating climate change; and
- Preventing climate change might not be the best way of preventing the worst effects of climate-induced catastrophe.
How would Climate Stability Bonds be better? First, they wouldn’t assume that cutting greenhouse gas emissions is the best way of tackling climate change. But even if it were found that doing so is the best way, holders of Climate Reduction Bonds would have strong incentives to do be more efficient. They would want and would have wider scope for action. For example, they wouldn't be bound by political correctness or realpolitik of the sort that exempts some countries that emit huge quantities of greenhouse gases from any disciplines at all. They would simply buy these regimes off or otherwise undermine opposition to the necessary disciplines.
There is an important presentational aspect too. Kyoto doesn't focus on a desirable outcome: it's focused on processes and activities. So it is now so politicized, and its money flows so unpalatable, that it is seen as an imposition; in the rich countries it's seen as an imposition by the greenies on everyone else, and in the poor countries it's seen as an imposition by the rich countries on them. And to industries, such as the forestry industry, it’s seen as a government-imposed threat to their wealth, or an opportunity to seek subsidies from that same government. Either way, it diverts the attention of some clever people away from managing their business efficiently, and into lobbying the government for special treatment.
In the proverbial battle between elephants, it’s the grass that gets crushed. With governments and the other Kyoto lobbyists, success is defined bureaucratically. As the New Scientist in its editorial of 25 November put it: “Some at the heart of the [UN climate] negotiations claim that the [recent meeting] in Nairobi has been a success. That’s baloney. The conference persuaded itself that a review of the [Kyoto] protocol in 2008 is a major outcome, but to an objective outsider it looks more like an excuse for inaction.” And for corporate interests, success is measured in terms of how much they will gain or lose as a result of whatever schemes, allegedly to mitigate climate change, are put in place by governments. While these games are being played, the losers, as so often, are we, the people.
16 December 2006
Mr Brown has little to say about the quality of people's lives; tellingly, he seeks to boost growth in GDP rather than GDP per person. Stripped of the verbiage, much of his speech could be seen as opening the way to more development in the crowded south-east, whose residents would be less able to object under the proposed planning reforms.While you can increase GDP per capita by substituting paid childcare for unpaid, you can increase GDP merely by letting more people into your country. Et voila! A visionless politician's problems solved! A high GDP means influence, power; a seat at G8 summits. Quality of life? Who cares?
15 December 2006
Perhaps the most worrying revelation about Mr
Brown’s approach to politics has been his
obsession with institutions and processes,
rather than results. Everyone knows that Mr
Brown’s proudest achievement has been the
restructuring of the Bank of England, but is it
possible that restructuring other government
departments is Mr Brown’s “big idea” for the
next decade? Following the merger of the Inland
Revenue with the Customs and Excise, Brown
allies hint at reorganising the Department of
Trade and Industry, revamping the Cabinet Office
and maybe even abolishing the Treasury itself.
Even more depressing is Mr Brown’s apparent
addiction to commissions and quangos run by
former businessmen, financiers, civil servants
and newspaper editors. It is as if the mere
appointment of these commissions is enough to
satisfy Mr Brown’s insatiable desire for
information and the appearance of governmental
Unfortunately, on this record Mr Brown is exactly in tune with current policymaking priorities. For political purposes, results hardly count. It’s cheaper and less effort to get Public Relations people to spin the facts, rather than to change them.* The parties tacitly conspire in this shell game, stressing in their election campaigns rhetoric and image, under an electoral system that allows voters a choice between Tweedledum and Tweedledee once every four or five years. Voters are seen as taxpayers or beneficiaries with Attention Deficit Disorder – a self-fulfilling belief system given that (as Kaletsky continues) educational policy itself is subordinated to meaningless spending targets:
On the substance of policy, meanwhile, Mr Brown
seems to have nothing of interest to say — or
do. Education, for example, is supposedly Mr
Brown’s top priority for the “next Labour
decade”. Yet his only positive idea in this
sphere is to keep spending more money on school
buildings and renovations, without any apparent
regard to what these schools teach or how, until
he achieves his newly proclaimed target — that
the average cost of educating state school
pupils should reach the amount now spent in
This is gesture politics at its worst. Spending is not a legitimate policy goal. It is a means to ends, not an end in itself….unless, of course, Mr Brown’s real educational objective has more to do with placating the teaching unions than with actually educating the electorate of the future. The solution of course is to express policy goals in terms of results that are meaningful to real people. Meaningful goals for education, oddly enough, are educational goals: things like numeracy, literacy and the physical and intellectual well being of young people. Trickier to measure, to be sure, but far more relevant to real people than the lazy (or corrupt) pseudo-goal of ‘higher spending per pupil’.
* And if you think I am being overly cynical about the role of image-making in politics, check out this Mail on Sunday report that the British Government has agreed on a multi-million pound PR campaign to make British citizens feel better about the European Union. The plans, entitled Reframing the Debate, suggest promoting the ‘EU brand’ by linking it to popular or ‘warm’ European themes, like the Eurovision song contest, or the Cannes Film Festival - even though these have nothing to do with the EU. It also suggests banning Ministers and officials from referring to unpopular EU institutions like the European Commission, places such as Brussels and Strasbourg, the euro, terms like 'Eurocrat' and 'EU directive' and controversial policies such as the Common Agricultural Policy and the EU Constitution.
14 December 2006
Take this example, from a 2005 statement by the New Zealand Prime Minister, Helen Clark:
Treasury estimates that our GDP per capita would rise by 5.1 per cent if we lifted our participation rates overall to the average of the top five OECD nations. That’s a worthwhile objective and at this time of labour shortage, it’s a good time to be pursuing it. In last year’s Statement I highlighted the need to increase women’s participation in the workforce, and a number of steps have been taken to do that.In other words, an increase in GDP per capita has become an objective in itself. Anybody who has always lived and breathed politics is going to think like that: the things that matter to such a person are aggregated quantifiable data. The flaw is that such data do not accurately measure the well being of society. Devised primarily to measure the output of manufacturing economies, GDP does not take into account changes in the quality of the physical environment, nor the distribution of income, nor social problems such as crime and homelessness. It ignores human capital (the education and skills that are embodied in the work force) and it fails to account for leisure time or the unpaid work of parents or family members. It cannot account for these things because they do not generate a flow of money. When GDP becomes a target these failings become more important than a measurement error. They underlie policymakers’ favouring of the big and measurable.
Statistics like GDP should never have assumed the authority they have nowadays, but they have done so by default, because we have failed explicitly to target outcomes that are actually meaningful, whose quantifiable measures are correlated with societal well being, at least at the lower ends of their ranges. We should, for instance, be targeting such measures as infant mortality, basic numeracy and literacy, basic levels of education and housing, employment levels. At a global level meaningful targets would be the spread of nuclear weapons, violent political conflict, and critical environmental indicators, such as climate stability.
But politicians, especially career politicians, find it hard to think in this way. They are not ordinary people. Their identification of success with GDP per capita is exactly analogous to a corporation’s appetite for profits: an end in itself. Nothing else matters. So Ms Clark for all her ambition may well see a small tick upwards in the New Zealand GDP. It’s the children whose mothers join the workforce who will bear the consequences.
11 December 2006
“A maverick dairyman named Hein Hettinga started bottling his own milk and selling it for as much as 20 cents a gallon less than the competition, exercising his right to work outside the rigid system that has controlled U.S. milk production for almost 70 years. Soon the effects were rippling through the state, helping to hold down retail prices at supermarkets and warehouse stores.
For three years, starting in 2003, a coalition of milk companies and dairies lobbied to crush an initiative by a maverick Arizona dairyman. Hein Hettinga chose to work outside the rigid system that has controlled U.S. milk production for almost 70 years. The milk lobby said he presented unfair competition because he chose to operate without federal price control. Hettinga fought back but was outgunned on the Hill. In March, Congress passed a bill that effectively ended his experiment….” Source: Washingtonpost.com:
09 December 2006
- The city of Guangzhou has banned battery-powered bicycles to make more room for the 870,000 cars on the streets. This will negatively affect the almost 100,000 residents who drive these bicycles, but will make space for automobiles, which are appearing on Guangzhou's streets at a rate of 150,000 per year [Reuters].
- On average, 3450 people die on the world's roads every day [RoadPeace].
Some years ago when the Chinese Government was bundling Falun Gong meditators into trucks for torture and worse, the British people mounted a remarkably successful demonstration…against a small rise in petrol prices.
08 December 2006
The current issue of the ‘Economist’ has published a letter questioning the environmental advantages of solar panels over fossil fuels:
Silicon fabrication factories are energy and water intensive and the manufacture of silicon wafers uses energy from traditional fossil-fuel power generators, with the same old pollution. Add the potential problems of disposal towards the end of a panel's life—they are frequently doped with toxic materials like arsenic—and solar power hardly seems like the environmentally benign solution it is often touted to be. Peijing The, ‘The Economist’, 9 December.The sort of life-cycle analysis required to establish the environmental benefits or otherwise of shifts in our behaviour are bedevilled by boundary issues, measurement difficulties and the difficulty of weighting one type of environmental impact against another. They are better than blandly assuming that rail is ‘better’ than air travel, that solar power is better than coal-fired power stations, but for the making of robust policy they would need to be continually reassessed in the light of our ever-expanding knowledge of the environment and our ever-changing environmental priorities. Government policy cannot be so responsive: if government did use life-cycle analysis with the aim of altering our behaviour, it would probably do so on the basis of a one-time, necessarily limited, and possibly quite subjective assessment of environmental costs and benefits. It’s not good enough, but even worse would be what we largely have now: government environmental policy based on corporate interests, media stories and the launching of visually appealing initiatives that attract air time but otherwise achieve nothing.
Social Policy Bonds would take a different approach. They would subordinate environmental policy to targeted environmental outcomes. It might be, for instance, that society wishes to reduce its use of fossil fuels. A Social Policy Bond issue that rewarded achievement of such a reduction would generate incentives for bondholders to bring it about at least cost. They might well carry out life-cycle analyses in their attempt to do so. But there is an important difference between the way do they would conduct their research and the way government would do so: bondholders have incentives to achieve their goal efficiently. This is likely to mean responding to and stimulating: increased knowledge of scientific relationships, and technical advances.
A single environmental goal, such as reduction in fossil fuel use, entails diverse, adaptive responses. These are precisely the sort of responses that government does very badly. Government can and should articulate society’s environmental goals, and can help pay for their achievement: in the democratic countries it performs these functions quite well. But actually achieving these goals requires continuous, well-informed and impartial decisions to be made about the allocation of scarce resources. For that purpose, Social Policy Bonds, with their incentives to achieve targeted outcomes efficiently would, I believe, be far better than the current ways in which environmental policy is formulated.
05 December 2006
Last month the United Nations General Assembly discussed banning high-seas bottom trawling, which scrapes the sea-floor bare, devastating habitat and coral. But strip mining of the high seas for fish in this way is not only continuing: it is being subsidised.
The villains – or lunatics – in this particular policy area include Japan, Russia, South Korea, and Spain. And how are their destructive fishing operations subsidised? Mainly by the provision of low-cost fossil fuel! The Fisheries Economics Research Unit at the University of British Columbia’s Fisheries Centre estimates (pdf) that bottom trawl fleets operating in the high seas receive an average of US$152 million per year, which constitutes around 15 per cent of the total landed value of the fleet.
03 December 2006
This sort of thing is typical. Image is more important than reality; and who’s going to keep the politicians honest? Between policymaking and policy delivery there are manifold labyrinthine paths, obscured by the fog of committees, agencies, and the glossy outpourings of PR professionals. The goal is not to deliver outcomes, but to remain in power, and for that, in the ADD era, grandiose but vapid promises suffice. Unveil new well-intentioned initiatives, and you will look good on the tv news. And under the current regime there’s no need to bother about outcomes. All the good news can be ascribed to your policies; all the bad news to the confounding effects of unexpected events or the long-term fallout from the previous ruling party’s activities.
This randomized or – frankly – deceptive approach is just not good enough. It never was, but given the challenges face as a planet and a species, it could bring us to extinction. Kyoto, for instance, is typical: high-sounding principles; top-level agreements; elegant trading mechanisms…and the outcome? A possible negligible reduction in anthropogenic greenhouse gas emissions. Pitiful: the triumph of process over substance.
Policy and political careers should be subordinated to outcomes. Real, meaningful goals should be made explicit, then targeted. People should be rewarded for how efficiently they achieve societal goals. We can no longer afford the smoke and mirrors of the current political process. It’s not a matter of who gets elected any more: it’s a matter of survival.