13 March 2008

Targeting broad outcomes

One of the advantages of a Social Policy Bond regime is that it allows backers of the bonds, be they private or public sector, to target things that are beyond or beneath the radar of policymakers. Things like war and violence, in general rather than in particular, or a nuclear exchange, or the spread of infectious diseases. More broadly, Social Policy Bonds could reward maintenance of the sorts of stability that we value: a stable physical climate, the absence of man-made or adverse impacts of natural catastrophes. For the most part, these problems are dealth with piecemeal, as they arise, and with a lot of guesswork about uncertain and ever-changing relationships. For instance, a huge task for governments around the world would be to agree that climate change is a problem worth spending resources to solve, but governments are supposed to articulate society's concerns and to produce legislation, and raise the funds necessary to achieve them. But for governments to go further and say they know how best to solve the problem is, in my view a mistake. With climate change they have focused on a single remedy - restraining anthropogenic emissions of greenhouse gases. But governments have no expertise in this matter; their scientific advice is necessarily fossilised and their approach necessarily top-down, one-size-fits-all and unresponsive to different and changing circumstances and our rapidly expanding scientific knowledge.

Far better to reward the achievement of a stable climate by issuing Climate Stability Bonds of sufficient value to motivate people to bring about the goal in ways they think will be most efficient. I don't think it's too far-fetched that governments will eventually target very broad goals for which their current approaches are manifestly inadequate. But, I have to admit, it doesn't seem to be happening right now.

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