People nevertheless use the stockmarket as a barometer of economic health. So a rise in equity markets can be (and has been) seen by governments and central bankers as evidence that the economy is headed in the right direction. That can lead to policy mistakes, such as a lax monetary stance, and further irrational exuberance. The nature of wealth, 'The Economist', 8 OctoberOur economies and societies are almost too big to govern in any way other than targeting highly aggregated data. Sadly, today that is being done opaquely, unsystematically, and almost unconsciously. In sum: badly. Social Policy Bonds are not utopian, but they would be better than the current system, under which appallingly inadequate indicators (not only stockmarket indices, but things like Gross Domestic Product or house prices) are implicitly or explicitly targeted because nobody's bothered to ask: what exactly do we want?
You couldn't get away with such ineptitude - bumbling at best, corrupt at worst - under a Social Policy Bond regime, because when issuing bonds you would have to be clear right at the start about desired outcomes. Nobody would target house prices, or GDP or share prices under a Social Policy Bond regime, because these are not ends in themselves. Indeed, the confusion between ends and means at the highest levels of policymaking probably explains much about why we may well be heading for social, environmental and economic disaster.