25 February 2009

Losing diversity

George Steiner writes:
I have conjectured, without being able to offer proof, that the generative justification for the 'crazy' number and fragmentation of tongues - more than four hundred in India alone - is analogous to the Darwinian model of adaptive niches. ... It is the seemingly wasteful plethora of languages which allows us to articulate alternatives to reality, to speak freedom within servitude to programme plenty within destitution. ... Hence the truly irreparable loss, the diminution in the chances of man, when a language dies. ... The extinction of languages which we are now witnessing - dozens pass annually into irretrievable silence - is precisely parallel to the ravaging of fauna and flora, but with greater finality. George Steiner, My Unwritten Books (pages 59-60)
I am actually in favour of a monoculture of outcomes: food, clothing, shelter and security for all. What doesn't work, and indeed can be disastrous, is the sort of policy monoculture which insists that, for example, human wellbeing can be achieved only in the form and by the methods conceived by any single organization, well meaning or not. It is this thinking that gave us murderous ideologies, the piling up of nuclear weapons or our dangerously absolute dependence on fossil fuels.

A Social Policy Bond regime would actively stimulate diversity; in the Darwinian sense and with a Darwinian result. It would target broad social and environmental goals and let the private sector, in all its diversity, work out how best to achieve them. Diverse, yes, and also adaptive: unlike government bodies, investors in Social Policy Bonds would have every incentive to abandon failing programmes. Only efficient projects would survive. And, in stark contrast to today's world, under a bond regime private sector goals would be exactly the same as those of society.

23 February 2009

More bio-foolery

The use of crop-based biofuels could speed up rather than slow down global warming by fueling the destruction of rainforests, scientists warned Saturday. Grist News, 18 February

Exactly so. Climate change is one of the many complex, urgent challenges about which scientists don't know everything - and politicians know hardly anything. Does it make sense to invest everything in our current best knowledge, while knowing that we don't know much and that our knowledge is expanding prodigiously? I think not, but that is what we are doing, and one result is bio-foolery; another is Kyoto.

As a society, when it comes to solving complex social and environmental problems, we need more humility. Targeting outcomes, without prejudging which array of solutions will work best, is one way of accepting that our current knowledge is limited, but nevertheless not being content to stand by and do nothing. Issuing Climate Stability Bonds would inject the market's incentives and efficiencies into solving what is probably our most urgent environmental problem, while accepting that we don't yet know what will be the most effective and efficient solutions.

21 February 2009

Incentives to fail...

...well, maybe not, but certainly 'absence of incentives to succeed'. Ross Clark writes:

You think you couldn’t find a more extravagant bonus culture and an even more absurd system for rewarding failure than xists at the banks? Just look at the public sector. In fact, let’s start by looking at the public sector employee who was charged with the task of monitoring the banks to ensure they didn’t get into trouble. That man was Clive Briault, managing director of retail at the Financial Services Authority.

Having failed completely to detect anything wrong at Northern Rock, he resigned last April. That is as it should be, except that far from falling on his sword, Mr Briault appears to have been allowed to run off with it and melt it down and use the silver to augment his pension. The FSA’s annual report reveals that he left with £356,452 of compensation for lost salary and bonuses, £36,000 of pension contributions and £202,500 for ‘compensation for loss of office’.

Hang on, let’s just get this right. An employee resigns because he failed to do the job demanded of him — and he still gets paid a bonus, plus compensation for suffering the ignominy of having to resign. His case is not a one-off. Take Rose Gibb, who left her £150,000-a-year job as chief executive of the Maidstone and Tunbridge Wells NHS Trust just before the publication of a critical report by the Healthcare Commission into an outbreak of Clostridium difficile in which 345 patients died. To see her on her way, the Trust offered her a £250,000 severance package. Only £75,000 of this was pay in lieu of her notice: the other £174,573 was, as with Mr Briault, ‘compensation for loss of office’.

Although, after an outcry, the Health Secretary, Alan Johnson, tried to block the payout, he later backed down and allowed Ms Gibb her £75,000 in lieu of notice. Even so, she has gone to the High Court to claim the full whack.

What kind of an employment contract is it that ends up paying you more for being booted out for failing than it would have done had you worked out your notice? The sort of employment contract which is all too common in the public sector, that’s what. The government no longer offers jobs for life; it now just offers payment for life, whether you manage to hold on to your job or not. Want a big bonus? Get yourself a public sector job, Ross Clark, 'the Spectator' [London], 21 February

19 February 2009

Policy monoculture

Writing about stem rust, a devastating disease which threatens to wipe out much of the wheat crop in Africa, Sharon Schmickle writes:
In the biological churning that constantly endows old pests with new genetic combinations, stem rust had acquired a frightening ability to punch through the resistance that had guarded wheat for decades. Eighty percent of Asian and African wheat varieties are now susceptible, and so is barley.... In the Wheat Fields of Kenya, a Budding Epidemic, 'Washington Post', 18 February
I've written before about the dangers of a policy monoculture, most fully in my book. While it's a laudable aim to have broad overall goals for a large society, it's not at all helpful to prejudge the best way of achieving a goal and then to prescribe it to the exclusion of all others. The danger is analogous to that in agriculture: lack of diversity and a heightened risk of catastrophic failure. Diversity, responsiveness and the swift termination of inefficient projects are essential when it comes to solving social or environmental problems, which typically arise from a multiplicity of complex causes and are not amenable to command and control. It would be a shame if, as seems possible, government's tendency to assume it knows everything about, for instance, climate change or a healthy economy, causes it to invest all its - rather, 'our' - efforts in the solutions it currently prefers.

The Social Policy Bond principle could combine (1) government's expertise in defining social goals and raising the funds for their achievement, with (2) the market's efficiency in exploring different initiatives and terminating failures. For the example of climate change see here.

14 February 2009

Unlikely relationships

[I]n houses with at least one smoker, a mobile-phone purchase led to a 32.6 percent drop in tobacco consumption for each adult - the equivalent of an entire pack each month. 'The Lesser Evil', the Atlantic, October 2008 (page 24)
Exploring unlikely relationships is something that bureaucracies don't do very well. Who would have thought that one way of making people healthier would be to encourage the purchase of cellphones? More to the point, who has the incentives to investigate and exploit such relationships? Certainly nobody working for a large organization in the public sector, and probably nobody in a large private sector organization either. Why rock the boat? Under a Social Policy Bond regime targeting broad indicators of societal health people would be motivated to explore all sorts of new relationships. They might, for instance, find that the most cost-effective ways of increasing longevity include subsidising taxis for youths emerging from nightclubs after 2am; or diverting subsidies away from industrial agriculture and into organic farming; or dishing out cellphones to smokers.... The point is that under the current system there are too few incentives to initiate projects with potentially high rewards that might fail; it's difficult to terminate failed projects under the current system. But this year, the 200th anniversary, we ought to remember that the evolutionary fitness of a species requires diversity and adaptation. It's the same with policies.

10 February 2009

Peak everything

If this nation [ie the US] wants to survive without an intense political convulsion, there's a lot we can do, but none of it is being voiced in any corner of Washington at this time. We have to get off of petro-agriculture and grow our food locally, at a smaller scale, with more people working on it and fewer machines. This is an enormous project, which implies change in everything from property allocation to farming methods to new social relations. But if we don't focus on it right away, a lot of Americans will end up starving, and rather soon. Jim Kunstler
You don't have to accept the entire Kunstler thesis to believe that huge adjustments in the way we organize ourselves are going to be necessary in a world of climate change, peak oil and peak many other things that we take for granted. I'm not at all sure that western governments can anticipate any necessary changes and guide us toward them. There are flaws in our political systems, to which I have alluded many times: notably their favouring of large, global corporates at the expense of ordinary people and the environment; and the incentives they face to concentrate on visual, fast-moving crises at the expense of deeper, more urgent problems. But there are also the daunting complexities in our social organization that make the effects of any large policy action impossible to identify.

This is where Social Policy Bonds could play a useful role. If we want to avoid widespread starvation - or nuclear catastrophe or calamitous climate change - then we can admit that we don't know how best to do so, but issue bonds that will motivate people to explore and implement policies that will avoid disastrous outcomes. The complexity of our society and the many huge challenges we face, in my view, point toward an outcome-based approach: one, such as Social Policy Bonds, that subordinates all our current vested interests and dysfunctional institutions to targeted social and environmental outcomes. Successful policy at this juncture is about encouraging diverse, adaptive initiatives, rather than continuing with the tried, tested and failed policies that have led us into this impasse.

05 February 2009

How did it happen?

From a letter to the editor of the Economist:
There was little to argue with in your appraisal of the [GW] Bush years and the man himself. What is so deeply troubling is that you couldn’t see this coming in 2000. Mr Bush came to that election with one of the most disturbing biographies of any candidate this past century—a man who incurred the wrath of his college professors as lazy and arrogant, a frat boy for sure, simplistic and indifferent to complex ideas. He went on to become an alcoholic, business failure, a military no-show during the Vietnam war, a legacy candidate for state office, and a governor whose term in office was little more than a stage-managed prelude to running for president. Jack Luft, Letter to the Editor of 'the Economist', 31 January
Even less excusable was the re-election of GWB in 2004, when his administration's small-minded incompetence was clear for all to see. How could it happen? I have blogged before on environmental stunts and I think the public reaction they elicit explains much. To put it briefly, we are turned off, mightily, by being told what to do by people who think they know better than us what's good for us. Now in lots of instances they do know what's better for us, and this is the tragedy. Too often the rational, well-intended argument is - in the minds of those of us who are neutral or even faintly in favour of the argument - negated by the apparent smugness of those making it. So to spite the self-satisfied we puckishly vote against them. It's unjust, silly, irrational and destructive; but it is something that, perhaps, the US Democratic Party has learned. Leadership, at least of reasonably well-educated people in democracies, is not (just) about having the right arguments and doing the right things: it's also about engaging with ordinary people and winning them over.

Disastrous as it was, the re-election of GWB was perhaps not the worst outcome of our childish tendency to act against our best instincts in order to take the 'do-gooders' down a peg or two. In conversations I have with highly intelligent people about climate change I detect the same reaction. In this instance, it's irrational to the point of suicidal, but no less real for that.

So do I have any positive suggestions? This could be a case where humility plays a role. Not only in presenting our arguments - though that is crucial - but also in recognising that while we can clearly see social and environmental problems, the best ways of solving them are not always known. Better then to advocate climate stability, say, than to demonstrate against coal-fired power stations or additional airport runways. The advantages are two-fold. First, it's more difficult to antagonise the public, and easier to win them onside, when discussing outcomes that are universally desired, rather than to make judgements on their behaviour. Second, it's more efficient not to prejudge the best ways of solving our complex social and environmental problems and to let people decide them for themselves on the necessary trade-offs.

And this is where Social Policy Bonds enter the picture. Under a Climate Stability Bond regime (for instance), a motivated market would constantly assess the necessity to do something about climate change, and it would constantly be working out the optimal mix of solutions to the climate change problem. In my view the setting up of such a regime, being focussed on a universally desired set of outcomes rather than the supposed means of reaching them, could involve the participation and hence the support of a far wider public than the alternatives that are currently being discussed. Without that support on this and other urgent challenges, I am afraid we are headed for catastrophe.

01 February 2009

Refocusing government

Take away the expectation that we or our children will enjoy a higher standard of living, and all bets are off. From riots in Greece, strikes in France, protests in China and demonstrations in the UK (against EU workers), I am quite pessimistic about the future of liberal democracy. Yet we read about government, which is supposedly there for our benefit, spending ever larger proportions of the incomes of the wealthiest societies that have ever existed in history. With all that public sector spending, and all the high technology and human ingenuity available to the public sector, why are our prospects so dim? There are many answers, and quite a few point to the failure of government. From, corporate welfare schemes and scams, subsidies to the rich or to environmental destruction (pdf), or to the creation of a legislative and regulatory environment that is heavily biased in favour of the large and global at the expense of the small and local, government's failings have implications for us all. My sense is that government as a whole has become too specialised, too big, and hence too remote from the people it is supposed to serve. Writing in the UK, Minette Marrin says
...public servants are distinguished by three facts, unique (when united) to them: first, the taxpayer pays for them, second, their jobs and their pensions are protected (by the rest of us) and third, it’s extremely difficult, if not impossible, to sack them. Some of them do crucially important things, and some of them do those important things well; but many of them do important things badly, and a lot of them do things that do not need to be done at all, least of all at public expense, and with impunity. Watch out quangocrats, [London] 'Sunday Times', 1 February
A Social Policy Bond regime, I think, would be one way by which we could refocus government spending on what is important. Democratic governments could potentially be extremely effective at articulating society's social and environmental goals, and pretty efficient at raising revenue for their achievement. But they are not so good at achieving those goals themselves. Indeed, they appear to have lost sight of any explicit broad long-term goals, being distracted as they are by the day-to-day running of the government machine. But if instead they concentrated on what they are good at - defining desirable outcomes and funding them- while contracting out their achievement to a motivated private sector via Social Policy Bonds, then our societies would have the best of both worlds: optimal social and environmental outcomes achieved at minimum cost.