07 January 2009

Incentives to be responsible

In the course of a long article about Italy's woes, Alexander Stille writes:
Italy has half a million people who have been retired for more than forty years. The cost of paying for much of this was deferred, creating Italy's huge debt. It takes about 10 percent of GDP just to service it. Italy Against Itself, 'New York Review of Books', 4 December 2008 (subscription)
Sometimes you wonder whether our complex social and economic organization is just a device for obscuring our irresponsibility. The costs of our behaviour - on future generations, past generations, our the environment - might even outweigh the benefits of specialisation. I'm not convinced, either, that the benefits to this generation are that compelling. At college we learned that alienation and interdependence were the disadvantages of specialisation; nowadays much these are supplemented by extreme uncertainty.

I think it's time to rein in the influence of so-called 'market' forces - those manipulations and distortions of real markets that work against the interests of ordinary people. A Social Policy Bond regime would be one way of inextricably linking rewards to socially desirable outcomes: something that we do not have at present when, for instance, it's claimed that 'a rising tide lifts all boats', or that wealth 'trickles down' from the super-rich to society as a whole. Social Policy Bonds targeting social and environmental outcomes couldn't be manipulated or used to obscure baser motives. They would subordinate all activities and institutional funding to the actual achievement of targeted goals. Opportunities to game the system would disappear - in stark contrast to the corrupt politics that seems to bedevil even the richer, developed countries.

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