Political triage

Social Policy Bonds would, I believe, minimise the cost of achieving goals, and they would cap the maximum cost of achieving them, but they don't tell us what we should target. Not directly. Right now, the prioritising of social and environmental goals seems to take place at a not fully conscious level, driven by concerns other than maximising returns on spending: media appeal, vested interests etc. Perhaps too, we are reluctant to acknowledge that resources are limited and we cannot solve all the world's problems. One organization that does look at such 'political triage' is Copenhagen Consensus. It does good work in questioning existing political the priorities, on the basis that though we'd like to solve all the world's problems, resources are limited and we have to prioritise. For instance, it estimates the existing cost of the Kyoto Protocol $180 billion a year and says it will make a minuscule difference to the world's climate, 'delaying temperature rises by just seven days by 2100'. But it calculates that

A tenth of the annual cost of the Kyoto Protocol - or a tenth of the US budget this year for the wars in Iraq and Afghanistan - would prevent nearly 30 million new infections of HIV/AIDS. The same sum could similarly be used to help the four million people who will die from malnutrition this year, the 2.5 million killed by indoor and outdoor air pollution, the two million who will die because they lack micronutrients (iron, zinc, and vitamin A), or the two million whose deaths will be caused by a lack of clean drinking water. A time for clarity

Assuming the figures are correct, it would seem clear that we ought to divert funds away from Kyoto towards AIDS and malnutrition prevention but that is to some extent a subjective view, because we are comparing the supposed week's delay with human lives saved. Taking the same quote, though, assume that the decision lies between saving the lives of the four million who would otherwise die of malnutrition this year or the 2.5 million killed by air pollution. Then, we'd be comparing like with like, and the choice should lie with saving the four million. There are a lot of assumptions necessary, but that is how an impartial reckoning at a global level, would go. The problem is that, even with all the caveats, such easily compared, objective criteria are rarely to hand.

Cost benefit analysis can help a bit, but the weighting problems are huge. How much, for instance, is biodiversity worth and, as we asked earlier, how can say, the interests of wildlife and biodiversity be weighed against people's wish for biofuels?

Social Policy Bonds may be an improvement on one-off cost-benefit analyses or the other ways in which costs are estimated. The market prices of the bonds at flotation and thereafter generate estimates of the total and marginal costs of achieving targeted goals. The total cost estimates would probably be better estimates than those calculated from cost-benefit analysis, while the marginal costs derived from bond prices would represent a big improvement over the information currently available to decision makers once they have decided which projects to support. But those decisions, ultimately, will have to be made on a political basis. The bonds would make it easier, I think, for people to participate in making them by generate better cost estimates but they will not remove the need to take difficult decisions about the relative weighting of different goals.