04 May 2009

Swine flu and Social Policy Bonds

The response to swine flu suggests that a decentralized approach is best. This crisis is only days old, yet we’ve already seen a bottom-up, highly aggressive response. In the first place, the decentralized approach is much faster. Mexico responded unilaterally and aggressively to close schools and cancel events. The U.S. has responded with astonishing speed, considering there are still few illnesses and just one hospitalization. ... Second, the decentralized approach is more credible. ... Finally, the decentralized approach has coped reasonably well with uncertainty. .... David Brooks, Globalism goes viral, 'New York Times', 28 April
We probably have a more centralised policymaking process than we should have if we were used to expressing policy in terms of outcomes rather than activities or institutional funding. There are benefits to centralisation, certainly when it comes to articulating society's goals and raising the revenue to achieve them. But the penalties of too much centralisation are ever more apparent, and Mr Brooks alludes to some of them. It is the efficiency of the decentralised approach to policy achievement that is most convincing. This efficiency derives from the combination of its adaptability and its diversity. Decentralised, bottom-up, decisionmaking, as Mr Brooks says, is faster. It terminates failed initiatives and encourages the exploration and implementation of successes.

A Social Policy Bond regime would entail centralised direction-setting, but decentralised, bottom-up, project initiatives. Social Policy Bonds, whether issued by government or the private sector, would guide investors towards society's common social and environmental goals. But the actual projects would be done - and done efficiently - by a decentralised body of highly motivated bondholders. Swine flu, like other diseases, is adaptive and highly goal-oriented. Social Policy Bond regimes, would deploy the same qualities in favour of our species.

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