27 June 2007

Things that do move

Daniel Finkelstein, writing in today's London Times, talks about Nassim Taleb's new book Black Swans:

[Taleb] identifies fields in which experts are useful – livestock judges, test pilots, brain surgeons, accountants – and those where, as he puts it “experts tend not to be expert” – stockbrokers, personnel selectors, intelligence analysts. Simply, he argues that “things that move”, requiring anticipation and prediction, do not usually have experts, while “things that don’t move” seem to have some experts. Politics is very definitely in the former category.
This confirms my thinking that, when it comes to finding solutions to problems in a fast-changing, diverse society, the market is going to do better than any panel of bureaucrats or experts. We need adaptive, diverse responses to our social and environmental problems, rather than top-down, one-size-fits-all government-mandated pseudo-solutions. Politicians do have their uses of course. Social and environmental goals don't change very frequently, and politicians can represent us quite well in articulating these goals, and helping make us aware of necessary trade-offs. Politicians are also good at raising the necessary public funds to help achieve these goals. These are "things that don't move", and politicians and their attendant officials do them well enough.

A Social Policy Bond regime would split up the required processes quite neatly. Whoever issues the bonds, whether government or a private organization, would specify the targeted social or environmental goal and allocate funds for the ultimate redemption of the bonds. But they would then contract out the achievement of the goal to the private sector, a field in which "things move" and in which their expertise would count for little against the pluralist adaptability of highly-motivated investors in the bonds.

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