30 November 2007
One way of resolving this problem would be for policymakers to stay out of complex areas. The difficulty with this is that government has already moved in to such a degree that it has crowded out society's other ways of dealing with problems. We can actually see this process happening today when government, for reasons that appear compelling, becomes involved in such issues as disciplining children. Nothing necessarily wrong with this sort of encroachment but the danger is that they substitute for society's own coping mechanisms, which then disappear permanently - and that these evolved customs and taboos might have been more efficient than the policies that replaced them. We begin to depend on government intervention, even when such intervention defies all commonsense: take a look at the long and lamentable history of farm support policies for the best-documented example.
If withdrawal of government is no help, might not the answer lie in the replacement of a handful of experts by a diverse, adaptive group of motivated people? Very often, in matters of complex policy like, say, heart disease or climate change, we know exactly what we want: longer, healthier lives or climate stability. But we have no clear idea of how to get there, and probably the best approaches vary unforseeably with time, geographical area and a host of other variables. By targeting our desired outcomes, and rewarding people for achieving it, we could replicate, accelerate and even improve on the evolution of sensible, diverse, adaptive approaches that in natural societies, as in the individual organism, make for long-term well-being in ways that are socially and environmentally sustainable. This is the essence of the Social Policy Bond approach.
27 November 2007
If you had asked the average gloomy economist back then what would be the implications of such a steep fall in the dollar, the answer would have included a good deal of pessimistic conventional wisdom. Such a sharp drop in the value of the currency would, it was generally assumed, spell real trouble for the value of US assets. Demand for US Treasury bonds would surely fall sharply. In fact, the decline in the dollar’s value would be both cause and effect of a flight from dollar-denominated assets. Interest rates, which move inversely to bond prices, would, therefore, surge, presumably prompting a serious retrenchment. Foreigners would surely offload many of their US equities, too, and Americans would not be far behind them.But what has actually happened? Mr Baker continues:
Then there would be an inflationary surge. A 40 per cent decline in the dollar’s value, would, other things being equal, push up import prices by a similar amount and the feed-through to the broader economy would be swift and painful. The Times, 27 November
In the past 5½ years, US Treasury prices actually have soared. In early 2002 the yield on the benchmark ten-year Treasury was about 5.5 per cent. It is now about 4 per cent. Equities, on a broad measure, are up by about 50 per cent in the past five years. Inflation? It has gone up, but hardly enough to notice. In December 2002, the core consumer price index ...was up 1.9 per cent from a year earlier. Last month it was up to 2.2 per cent.Remarkable, yes, and unforeseen, even by the experts. It reminds me of work done by Eban Goodstein, which shows that not only interest groups, but disinterested commenatators routinely overstate the costs of pollution control. The link doesn't seem to be working right now, but here is one example Goodstein gives:
Now there are lots of specific reasons that explain these unexpectedly benign outcomes: foreign central banks still buying US Treasuries; global savings keeping demand strong for all US assets; prices held low by international competition. And it is still true that we face serious challenges. But when you think of all the factors that could have produced disaster in the past five years – not just a dollar collapse but soaring oil prices and an overextended housing market – you have to conclude that something quite fundamental has changed. The US and global economies continue to demonstrate a remarkable structural resilience and flexibility unseen in modern history.
Asbestos. When the Occupational Safety and Health Administration (OSHA) instituted regulations covering exposure to asbestos in the early 1970s, they hired a consulting firm to estimate the cost of compliance. Two later studies found that the original prediction for the cost of compliance was more than double the actual cost, because of overly static assumptions.The common factor between the poor performance of experts at prediction is probably complexity rather than self-interest. From the point of view of a Social Policy Bond advocate, the implication is that subordinating policies to outcomes can work: if there are sufficient incentives, then large numbers of motivated people can defy the doomsters. Costs of implementing valuable social and environmental policies cannot be predicted by experts, so why not target desirable outcomes - however seemingly unrealistic or idealistic - and let the market worry about the cost? We may well be pleasantly surprised.
25 November 2007
There may be no more eloquent statement about the erosion of our [ie, the United States'] civic connectedness than the news that public libraries around the country are starting to outsource their daily operations. Yes, public libraries are being privatized. This should not be entirely surprising, given how jails, highways and even military operations are being privatized these days. Yet it does raise the distressing question – If libraries are vulnerable, where will this momentum for dismantling our civic institutions end? David Bollier
I can't add much to Mr Bollier's piece. I do recommend you read his and other posts that appear in OnTheCommons. Privatized libraries are one aspect of the deterioration of our commons. If asked, I am sure most of us would decry environmental pollution, unsafe streets, and other symptoms of an eroding public life. There are trade-offs of course: less pollution means (often) a lower material standard of living; lower crime can mean a more intrusive police force, and privitized libraries could mean lower property taxes. These trade-offs are made via the political process. The problem is that this process is weighted heavily in favour of sectoral interests, which tend to favour big business at the expense of small businesses and individuals, and numbers (as in GDP per capita) at the expense of things that cannot easily be quantified, like the state of the commons. The process, in short, is unrepresentative.
The sort of outcomes that Social Policy Bonds would best target - broad social and environmental goals - would most probably not directly mention the ownership of libraries. But a bond regime would, because it does target outcomes, draw more people into the policymaking process. Once involved, people would be more aware of the trade-offs and more concerned about our deterioriating commons. We might make choices that result in the commons' continued erosion - though I doubt that - but at least we'd be doing so with our eyes open.
23 November 2007
[N]atural selection proceeds via a narrow point-to-point pathway, not a wide all-encompassing one. in solving any given problem it can make use of only what happens to be available at that particular time.Black leaves might be superior to green, but no new structure will appear...
unless it is immediately adaptive.... Thus green leaves dominate beacause they happen to have come along before black ones, and also because chance uncovered no route from green to black that was adaptive at every new step. NYRB, 11 October, page 49Is there something analogous to our societies here? Perhaps so. I don't think we can assume, for instance, that left to their own devices our vast number of decision-making bodies, including not only corporations, individuals, interest groups and non-governmental organizations but government agencies as well, will somehow generate solutions to such universally recognised problems as climate change, famine or war.
What's missing, in my view, is the focus in both evolution and society, on the immediate. Bodies like the United Nations refect our own limitations: they do genuinely want to see an end to (say) climate change, but as an institution its focus is on the immediate: it looks at what it thinks is the next step forward. But the direction of such a step is limited by its imagination, which means that policy evolution will be overly based on what is current. Rather than stipulate a desirable end point (climate stability, for instance), our decision-makers are prepared to delegate only the next step of policy implementation to the wider population. So we get a huge political and financial effort directed at reducing anthropogenic emissions of greenhouse gases. (And even this will be done at less than maximum efficiency.) There will, as a result be incremental change - better fuel efficiency here, more expensive power there - but larger adaptations, which might be dramatically more efficient, are not envisaged nor encouraged by our current political process.
The Social Policy Bond principle is different. It contracts out the achievement of broad social and environmental goals, like climate stability or world peace, to entire populations of would-be investors. So a broader, more highly motivated coalition would decide on the direction and magnitude of the most efficient ways of achieving society's goals. I think that would be an improvement.
21 November 2007
This seems to me to typify a trend seen in most of the western countries: a degredation of the commons at a time of rising private affluence. This theme is explored in more depth in the same issue of Harper's, in an article by Naomi Klein: Disaster Capitalism (subscription):
- Average grade for US infrastructure given by the American Society of Civil Engineers in 2005: D
- Percentage change since 1990 in the average size of an American Master bathroom: +50
[D]isasters have become the preferred moments for advancing a vision of a ruthlessly divided world, one in which the very idea of a public sphere has no place at all. ... [Katrina] was created and deepened by public infrastructure that was on its last legs; in the years since, the disaster itself has been used as an excuse to finish the job. ... Not so long ago, disasters were periods of social leveling, rare moments when atomized communities put divisions aside and pullted together. Today they are moments when we are hurled further apart, when we lurch into a radically segregated future whre some of us will fall off the map and others will ascend to a parallel privatized state, one equipped with well paved highways and skyways, safe bridges, boutique charter schools ....Importantly, if Ms Klein's thesis is accurate, there's no self-correcting mechanism, as she is well aware:
The disaster-capitalism complex does not deliberately scheme to create the cataclysms on which it fees...but there is plenty of evidence that its component industries work very hard indeed to make sure that current disastrous trends continue unchallenged. Large oil companies have bankrolled the climate-change-denial movement for years....My impression is that something similar seems to be happening in both the UK and New Zealand. Whether this is a product of right-wing think tanks, ethnic diversity (or rapidly changing ethnic diversity), the welfare state, or the discredited economics of socialist alternatives, I don't know and in a sense it doesn't matter. If there's widely agreed to be a problem, then the Social Policy Bond principle is about motivating people to solve it, rather than channelling resources into identifying its cause.
By its nature, the commons is a difficult thing to define and quantify. For instance, random crimes of violence might rise, but that could deter people from exposing themselves to them; they stay at home or drive everywhere, and crime rates fall. But we can try to get a handle on the non-subjective aspects and we can try to encourage the people who generate solutions. A thriving economy does generate more material wealth, but governments that are beholden to large corporations are unlikely to do a good job of alleviating our social and environmental problems. The sort of questions that a Social Policy Bond regime would stimulate - along the lines of: what do we want as a society? - could go a long way to avoiding the disaster capitalism that Ms Klein writes about.
19 November 2007
The New Britain is philistine to the core. It is one of the cruellist paradoxes of my time in Britain that its onece fruitful broadcasting system now reinforces the stupidities it was brought into being to ameliorate. ... [W]hen Margaret Thatcher removed the quality requirement from the ITV [Independent TV] franchise bids, she blew the whistle for the rush to triviality. It was a crime bred from the capital error of thinking that an ideology can be a view of life. The free market has an unrivalled capacity to harness brains. But the free market does not have a mind, and its bastard child, managerialism, is not a thing of the spirit: just a toy for the untalented. The Meaning of Recognition (page 169)I agree with Mr James here. The key, I think, is to harness the brains not solely to the performance of corporations, but to the social good. That is the Social Policy Bond principle: to channel the free market's incentives and efficiencies into achieving social and environmental goals.
16 November 2007
[W]e tend to believe that there is some natural state of justice to which political life would revert if only the conflicts between interest groups could be resolved. but whatever justice we enjoy arose from the conflicts between interest groups, and no such natural state of justice has ever existed. The only natural state is unjust.... The Meaning of Recognition, page 4Indeed, the unplanned effects of the things our species sets out to do can be beneficial as well as disastrous. Adam Smith's Invisible Hand generates material benefits, as does government planning. But they also create social and environmental problems, and only partly because of market failure. In my view, the world is too small now for the solution of social and environmental problems to be left to chance. But on the other hand, government usually does a terrible job in actually achieving our social goals. There is a middle way, between the happenstance of a free market approach to solving our problems, and the coercive, and (often) ham-fisted, inefficient way of central planning. Let government do what it does best: articulating society's goals and raising the revenue to achieve them. And let the market do what it does best: allocating that revenue to the most efficient achievers of the goals that government targets.
This is what Social Policy Bonds attempt to do. They would, I believe, achieve our social and environmental goals more efficiently and less randomly than the current system. The planet as a whole cannot afford either the time for the conflict between interest groups to be resolved or the collateral damage that such a conflict is inflicting on our ever smaller planet.
14 November 2007
The Court again gives an adverse opinion on the legality and regularity of the majority of EU expenditure: primarily the part of agricultural spending not covered by IACS, structural policies, internal policies and a significant proportion of external actions. In these areas there is still a material level of errors found in the payments to final beneficiaries, albeit to different levels. Source: farmsubsidy.orgIn the chapter on farm subsidies, the report says:
As farmsubsidy.org says:
the Single Payment Scheme has led to a substantial increase in the number of hectares in respect of which direct aid is paid and beneficiaries. The Court has also noted among them railway companies (England), horse riding/breeding clubs (Germany and Sweden) and golf/leisure clubs and city councils (Denmark and England).
Little of this is any surprise to the farmsubsidy.org network, whose members have been finding unexpected recipients of farm subsidies alongside the many royal recipients (Queen Elizabeth, Prince Albert of Monaco, the Duchess of Alba etc) and corporate beneficiaries Arla, Campina, Nestle, Philip Morris, Tate and Lyle etc). Who would have thought that Lufthansa and Gate Gourmet are getting six figure payouts in farm aid every year? This has been hidden from the public for decades, but transparency is finally bringing it all out into the open.
12 November 2007
One can but admire the energy that Simon Jenkins displays rowing strongly as he does when deciding on the treatment best calculated to cure our ailing democracy (LRB, 20 September). But that energy rather goes to waste once you appreciate just how regressive Jenkins’s basic proposal is: that the political parties in this country set about ‘re-engaging with the public’. How they’re to do this he doesn’t so far as I can see tell us. More important, why on earth should they want to re-engage with the public when they are doing very nicely thank you without making any such noble attempt?The discussion is about how political parties (in the UK) should be funded at a time when party memberships are vanishingly low. I'm not an enthusiastic supporter of political parties, or any institution that selects on the basis of ideology. Society is too complex and fast-changing for ideologues to keep up, and that's one reason for the universally acknowledged widening gap between politicians and the people they are supposed to represent. Perhaps new sorts of political organization are needed.
Mr Forster continues:
'A party in receipt of state money loses its incentive to build its base,’ according to Jenkins. Unable as I am to perceive any such incentive as existing in our current circumstances, we might as well cut our losses and accept that state funding would be a whole lot more predictable and transparent than the haphazard system we at present live under, with all its murky opportunities for corruption.His suggestion does sound like an improvement over the current system. But the 're-engagement with the public' that Mr Jenkins talks about could actually occur if political parties, as I suggest, orientate their ideas, language and manifestoes towards outcomes, rather than sell their image, make meaningless gestures, or discuss structures, activities or funding arrangements.
10 November 2007
The existence of lots of competing affiliations which pull people in different ways is the best hope of silencing gloomy talk of a “clash of civilisations” (with religion, and Islam in particular, often seen as the defining characteristic for giant global blocks). Such thinking is “deeply flawed on a conceptual level and deeply divisive in practice,” the report says. Don't dare put me in a box, 'The Economist', 8 November (subscription, probably)There is a lot in this. The putting in boxes can be a self-reinforcing process, a vicious circle. Some fanatics of (say) a religious or ethnic group pull some sort of stunt that alienates everybody else. The people in the group begin to feel shunned or victimized. That reinforces their sense of identity and, not coincidentally, the power of their fanatical leaders. One can see this happening, perhaps almost as disastrously, with environmental groups. Debate about matters such as climate change is almost as politicized and polarized as is discussion about the Middle East. One result is the democracies' identity politics or gesture politics. Meaningful solutions to complex social and environmental problems is often postponed until either attitudes have hardened irrreparably, or it's too late to do much about the underlying issues anyway.
A Social Policy Bond regime that targeted conflict (by, for instance, issuing World Peace Bonds) would probably defuse tensions between groups before they arise. Investors probably wouldn't even take the identities of these groups as a given. They might decide that the most efficient way of reducing violent political conflict would be to subsidize intermarriage between people of different race or religion, or perhaps to encourage mixed schooling, exchange visits between schoolchildren of different culture.
The authors, continues the Economist, say that:
At a minimum...the authorities who are trying to keep inter-communal peace should not empower people whose authority depends on keeping divisions sharp.Exactly. One thing is certain: currently there are too few incentives for people who want to tackle such issues, and too many to those who foment violent conflict. World Peace Bonds could do something to redress the balance.
08 November 2007
Before he became Prime Minister I devoted a page in The Times to the detailed story of just one of Gordon Brown's barking mad ideas. Small in itself, it provided ...a useful vignette on what is wrong with his brain. Mr Brown had proposed and forced through a plan for troublemaking teenagers to be paid — in vouchers usable at municipal leisure centres — £20 for every week in which they didn't make trouble. Of course you or I can see at once that this one's a turkey too; but a pilot scheme was duly required, and duly failed, and the whole thing was called off. Gobble, gobble! Another turkey from Farmer Brown, Matthew Paris, 'The Times', 8 November [My emphasis]It's the failed policies that aren't stopped that are the problem. I think, we need to encourage more potential turkeys, provided people have incentives to terminate them when they don't work.
05 November 2007
For myself, I think that if we are serious about eradicating poverty, then we should reward people for eradicating poverty. Simple, yes? Much simpler and less prone to corruption or breakdown than the current system, which regards the ending of poverty as an inevitable byproduct of economic growth and state intervention. Recently I have been working on an essay about applying the Social Policy Bond principle to poverty in the developing world. The issuing of bonds that would appreciate in value with the reduction of poverty is made much simpler by work already done to calculate the Human Development Index. This measure, though limited, could be refined not solely as a measure of poverty, but to be a target in a bond regime that would indicate where in the world our limited resources for poverty alleviation would do most good.
04 November 2007
But complexity manifests itself in social systems as well, and again the Social Policy Bond approach, which subordinates process to targeted outcomes, could be preferable. In an excellent article about the US educational system, Peter Schrag writing about America's apparently poor performance despite higher spending and smaller class sizes:
In fact, a lot of such international comparisons lack context and are therefore debatable, because of the relative paucity of social services in this country - as opposed to the universal preschool, health care, and similar generous children's services provided in other developed nations - our schools are forced to serve as a fallback social-service system for milions of American children. Schoolhouse Crock (subscription), 'Harper's Magazine', September 2007It's difficult to see how the current policy approach can address the inherent complexities. Instead of targeting educational outcomes explicitly, it is more inclined to increase funding for schools. The answer might lie in (say) better pre-school or healthcare or counselling for single parents or whatever, but the current system offers no incentives to explore these possibilities. And the individuals embedded in the system - teachers, bureaucrats - are almost certain to see more funding for their particular element of the system as the solution.
A Social Policy Bond regime would be different. It would target the outcomes and, essentially, contract out the achievement of these outcomes to the market: a much wider, more motivated pool of people, who need not be afraid of offending existing interest groups or terminating failed experiments in their search for answers. My most recent essay about applying the Social Policy Bond approach to education, in this case to raising the literacy rate in Bangladesh, can be found here (pdf). Others can be found via the SocialGoals.com website.