Social Policy Bonds - the panoptic view

The stunning indifference of the publishing world (so far) to my draft book on Social Policy Bonds makes me wonder whether the concept has a future. If there were enough diversity in the policymaking world, Darwinian adaptation would see the survival of only the fittest political systems. Social Policy Bonds, or something like them, would have to prove themselves against the alternatives - regardless of whether my ideas ever convince an influential audience or not. There are a couple of flaws in this idea. First, is that I doubt that there is sufficient diversity of political systems - not given the limited time (I think) we have to avoid catastrophe, whether environmental, social or whatever. Evolution of systems has little chance to play a major role.

This contrasts with the role that evolution can play within the Social Policy Bond paradigm: when bonds are issued, people have incentives to explore, refine and try out new ways of doing things, and to exploit only the most successful approaches. There is greater diversity of, for example, different potential solutions to climate change, than there is of different political systems. The combination of diversity and adaptability works within the bond paradigm, but is unlikely to select the paradigm itself against the entrenched existing policymaking systems.

The second reason why I am a little pessimistic about evolution leading to the selection of Social Policy Bonds or any greatly improved policymaking system concerns the definition of 'fittest'. As I understand it, in biological evolution, the fitness that Darwinism favours is reproductive fitness. Someone who leads a miserable, diseased life, has plenty of children, and dies at age 20 is more fit, in this sense, than a healthy, happy but childless person who lives to be 100. Fitness in the policymaking world may have a similarly narrow meaning: a system that is fit in evolutionary terms need not be the one that maximises the well-being of its people, especially in a world where any group of moderately well-off misanthropes can increasingly access technology that can threaten anybody else. (Present-day North Korea for instance.) It so happens that in recent decades, by and large the societies (or coalitions of societies) that were militarily most successful were also the ones that delivered the largest economic surpluses to their population, and that such surpluses were correlated with well-being as well as military success. But there is no inevitability about such correlations. The relationship between economic and military might breaks down if you have a regime as nasty as, say, North Korea. And the link between economic wealth and the power to threaten also breaks down, if you have regimes sufficiently misanthropic, deranged or suicidal.

So, overall, a pessimistic picture. But a very speculative one, and I shall persist for a while in trying to get my ideas at least considered by those with influence.

The case against a referendum...

... is also the case for more referendums. An interesting article by Steve Richards in the [UK] Independent on 17 June: writing about the Irish referendum result and one UK politician's resigning to call a by-election on the single issue of civil liberties, Mr Richards writes:

a referendum is a device proposed by leaders only when they are certain they can win. Conversely it is used by voters to cast their verdict on a variety of subjects often unrelated to the single issue they are supposed to be voting on. ... Similarly, single-issue by-elections are a distortion, the crusading candidate implying that one policy can be plucked out of the air and made the subject of excessive and simplistic attention, when any national leader must address the subtleties of the relevant single issue and give more prominence to other policy areas.

All this is true. But would it be true if there were more referendums? Politics, as Mr Richards also says, is 'about the resolution of disagreement through debate, manoeuvring , winning votes in parliament, persuading voters and the media to come on board.' Ordinary people are too far removed from this business, I think, so when we are given the chance we often adopt the 'plague on both your houses' approach that Mr Richards (rightly) derides. One answer could be to express policy goals more in terms of outcomes than process; more in terms of ends than the means of reaching them. Notions of trade-off and opportunity cost seem to be remarkably absent from most of the media discussion about policymaking, at least in the UK. But having to choose between different outcomes could refocus the debate, and give us more realistic expectations of what our politicians can deliver. They are, after all, our representatives. We should be given such choices more often: we'd then identify more closely with out politicians, who have to make policy decisions all the time; and give us less incentive to let off steam when, as now, the opportunity to do so is a rare event.

Dooh Nibor

..or Robin Hood in reverse. In today's [London] Independent, Dominic Lawson writes about how China subsidises oil consumption:

While crude oil prices have doubled, the price of a tank full of petrol on the forecourts of the Middle Kingdom has not increased by a single renminbi – and is not likely to do so this side of the Olympic Games. In this context, the article by the vice-premier of China's state council in [the 16 June issue of the London] Financial Times was almost comical. Wang Qishan argued that his government "gives high priority to energy and resources conservation and the protection of the environment". No one can doubt the pressures the Chinese Politburo is under to meet the aspirations of its people and neither should we in the West criticise their desire to enjoy the opportunities which industrialisation bestowed on us. But still, how can the representative of a government which pays its industries to burn more fuel expect to be taken seriously as a proponent of "energy conservation"?

This seems, on the surface, to be one of the greatest paradoxes of the modern world: while democracies such as those in the European Union have been sufficiently insensitive to the wishes of their consumers as to have provoked disturbances over the price of petrol and diesel – augmented as they have been by very high taxes – totalitarian states such as China have pre-empted the possible political consequences of high domestic gasoline prices. Perhaps it is because the rulers of such countries know their people do not have the safety valve of elections to let off steam; so if things get ugly they could get very violent indeed. There is a less charitable explanation. In China, only the wealthiest two per cent own a motor car; the proportion is not much more in many of the other developing countries with high petrol subsidies: so we are seeing the subsidisation of the richest in the Third World at the expense of all. ...It is exactly the same as the global food market, in which subsidies ostensibly designed for the benefit of everyone are in fact disproportionately directed at the richest, paid for by national exchequers which supposedly represent the interests of nations as a whole.

And so it goes on, at great cost to the environment and ordinary people. Though we do have elections in the west the agricultural subsidies to which Mr Lawson refers also continue - decades after it was realised how wasteful, socially unjust and environmentally diastrous they are. We cannot foresee all the ramifications of our policies, but we should at least be able to stop the ones that are failing. That, our current policymaking system seems incapable of doing, no less in the west than in the ..er.. People's Republic of China.

Government is not the solution - or the problem

It's unfortunate that so much of politics takes the form of arguing about the size of government. For me, it's not that government is big that is the problem; it's that big government tends to be remote government - but that is an observation rather than an inevitability. We owe a lot to big government:

[W]e prefer to take our chance of cholera and the rest than be bullied into health...

So the [London] Times said, in an editorial protest against government-imposed basic sanitation schemes aimed at reducing cholera levels in London. The date: 1 August 1854. In those days identifying solutions was relatively easy: we needed sewerage systems, the provision of basic health, education and infrastructure, as well as the public services of law, order and defence against invasion. There's still a case to be made for government intervention now to maintain and improve these services, but there is less of a case for government provision of them.

Under a Social Policy Bond regime government could still prescribe such universally desired goals as basic sanitation, or very low levels of infectious diseases. But it would not have to get involved with trying to identify and provide efficient ways of achieving them. It could concentrate on what it does best: articulating society's goals, and raising funds to pay for their achievement. The actual work would be done by those who can do it efficiently: they would be bondholders, or people financed by bondholders. In this way, market forces would be given free rein over the area in which they perform best: the allocation of resrouces to achieve the ends prescribed by government; with government acting in its proper role as people's representative, rather than as an investment company.

Diverse approaches are essential

Perhaps the most alarming sentence in Mark Lynas' article in the (UK) Guardian is this:

[C]onventional wisdom from governments and environmental groups alike insists that "Kyoto is the only game in town", and that proposing any alternative is dangerous heresy. Climate chaos is inevitable

One of the advantages of a Social Policy Bond regime is that it allows multiple approaches. The stakes could hardly be higher than with climate change, yet we are attempting to deal with it with a single approach; one which is a product of 1990s science and all sorts of political compromises. Kyoto is divisive, and imposes upfront costs for a very uncertain, remote return. No wonder then that it lacks any real support except from those who are so involved in process that they see it as an end in itself. At OECD, when talking about environmental applications of the Social Policy Bond principle several years ago, I encountered similar opposition from employees of OECD governments who were committed to Kyoto.

Climate Stability Bonds are compatible with cutting greenhouse gas emissions, Kyoto style. But they would also encourage other policies and projects, provided they were more efficient. They would also make application of the Kyoto approach more efficient, by rewarding people commensurately with their efficiency, rather than for the degree to which they comply with the Kyoto process. Sadly, I think there's a chance that we're too late even to avert the oblivion to which Mr Lynas occurs; if so, our single-minded focus on Kyoto should bear much of the blame.

Social Policy Bonds - latest news

I'm finishing off a book on Social Policy Bonds. It will be about 72000 words in length. It will have all my latest thinking on the bonds idea, with quite a few anecdotes, mostly ones about which I have blogged on this site. I have begun the arduous task of looking for a publisher or literary agent to handle the book. If any readers know of someone who might be interested in publishing or representing it would please let me know, I'd be grateful.

Social Policy Bonds for counterintuitive solutions

It's the counterintuitive nature of solutions to complex problems that makes me think Social Policy Bonds have a lot to offer. A US study found that transportation accounted for only 11 percent of the total greenhouse gas emissions generated as a result of a typical household's food consumption. Growing and harvesting the food accounted for 83 percent of the total. Focusing on 'food miles' can therefore give a misleading impression of a food's environmental impact. So often, our first impressions of how to solve social and environmental problems go awry. These problems are often not amenable to the top-down, centralised, one-size-fits-all approach that government follows. Preventing climate change may not be most efficiently done by restricting food imports, or even by cutting back on greenhouse gas emissions. Reducing crime rates may mean a lot more than increasing funding for the police, or putting up more CCTV cameras. Increased expenditure for health services or schooling might not be the best way of improving wealth or education....



A Social Policy Bond regime would reward people for achieving our social and environmental goals, however they do so. Bondholders have incentives to seek optimal solutions - which might not be the obvious ones. Typically, for complex problems, the best approach will be a mosaic of different, adaptive projects, initiatives and policies. No single, centralised body can follow that approach, and especially not one steeped in a bureaucratic culture. Social Policy Bonds for complex, long-term problems, will probably lead to the creation of a new type of organisation: one whose every activity is subordinated to the solution of the targeted problem. Such organisations might well perform some of the same activities as government nowadays - but it would have incentives to do so efficiently, and to pursue other activities whether they are 'obvious' or not, so long as they are also efficient.

Seen at passport control

Queuing at passport control on entry to the UK you see two signs: one saying that if you try to assault a member of the Immigration or Customs staff you will be liable to arrest and punishment. A second goes something like this 'Please remove your passport from its holder. This will save time at the counter.' To me this is quite sad. It reflects the low expectations that the British governing class has for the public, the contempt the public has for the government (and the justice system), and the wide gap between the two.

Society is too complex for most ordinary people to have anything much to say about how particular social and environmental goals should be achieved. But where we can contribute is in coming to agreement on the outcomes that we want to see. If we had policy whose goals were expressed in terms of meaningful outcomes then public participation in formulating it would be greater. We could all be part of the policymaking process. The actual achievement of our goals would, under a Social Policy Bond regime, be contracted out to the market. But there would be buy-in to public policy, and a closing of the gap between government and the people.