30 December 2009

Why are modern scientists so dull?

Why are modern scientists so dull? asks Bruce G Charlton. His conclusion?
[S]cientists are dull mainly because the progressive increase in the requirements for long-term plodding perseverance and social inoffensiveness has the effect of deterring, driving-out and failing to reward too many smart and creative potential scientists before they ever get a chance to engage in independent research.
I think the same could be said of policymakers and public servants and for broadly similar reasons. Any large organization is going to rely more on willingness to conform to the organization's rules and processes than on the contribution an individual makes to a particular outcome. An individual's conformity to procedures is much easier to measure than his or her contribution to a possibly nebulous or undefined outcome.

In my book about Social Policy Bonds I explain how attempts in the 1980s to reform New Zealand's public service faltered over the question of how to measure departmental performance. At the outset of the reform programme, government departments had been envisaged as achieving specific outcomes, but instead outputs became the measure by which departments' performance is judged. Why did that happen?
One reason is said to be the self-interest of ministers and public servants, who are unwilling to be scrutinised. Another is that while the supply of outputs can be directly attributed to departments performance, outcomes can be influenced by factors beyond their control. As one commentator put it: outcomes are externalities in two-party relationships; therefore it is exceedingly difficult to assign responsibility for them. Market solutions for social and environmental problems: Social Policy Bonds
So it looks very much as though the perceived need to assign responsibility in effect hijacked more thoroughgoing reform. The perception of such a need arises because the players - those whose responsibility is to be assigned - are known in advance and are assumed constant. And who are these players? Why, they are the existing government departments, of course. In effect the New Zealand reforms have subordinated results to an assumed need to assign responsibility, which in turn seems to be driven by existing institutional structures and their wish to perpetuate their own existence and degree of control. It's a potentially disastrous failing: leading to a divergence of the objectives of departments in particular and government in general from the people whom they are supposed to serve. The results, throughout the democratic countries, are becoming all too clear: a widespread disenchantment with conventional politics, a growing cynicism and despair over government ever being able to deliver what ordinary people want and need.

24 December 2009

Sterile life-prolongation

Sterile life-prolongation, as against creative destruction. It's what you get when major funding decisions are made on the basis of who you are (or how much you give to political parties) rather than what you achieve. And, increasingly, it's the regime under which we live. It's the way our politicians operate, in conjunction with their friends and paymasters in the large organizations, whether they be government agencies, corporations or trade unions. It's the system that brought the Soviet Union to collapse and it's well on the way to securing the same destiny for the west. (See here for a blog making this comparison.)

Creative destruction means that unsuccessful businesses fail. In social policy it should mean the same for unsuccessful programmes. But it rarely does; government too often acts as a monopoly supplier of social and (increasingly) environmental services. As tax revenues rise, government tends to crowd out alternative ways of doing things. Take scientific research, which is now essentially a nationalised industry. In itself, this need be no bad thing, but the way government typically allocates funding is always going to be determined by politics rather than results. Funding is to institutions, rather than outcomes. This leads to idiocies like the use of citation indices to evaluate research.

What's needed is a more direct relationship between taxpayer funds and those outcomes that are meaningful to ordinary people. Government can -and indeed, should - be the articulator of society's goals, and it has a vital role in raising the revenue needed to achieve them. But like all big organizations, and like monopolies in particular, it doesn't work well when creative destruction is required. It's too big to adapt quickly; it's too slow to terminate failures. It doesn't like diversity, and it doesn't do creative destruction. No single organization can. And we need diversity and adaptiveness in complex, uncertain ventures, especially where our scientific knowledge is growing rapidly. I've written numerous times about the need for a mosaic of different approaches to tackle problems like climate change or war. Such problems just cannot be solved by any single organization, however big and however well intentioned. Sadly, the vast majority of resources aimed at these problems is now allocated by government. Even more sadly, the failure of government to address these challenges threatens our entire species.

Social Policy Bonds would, in contrast, supply the necessary creative destruction. Projects would be appraised continuously by highly motivated actual or would-be investors in the bonds. There motivation would be pecuniary, of course, but through a bond regime it would be channelled to serve the interests of society as a whole. Funding would be allocated entirely according to results, as anticipated by a plurality of interests. Sterile life-prolongation (a la Kyoto, for instance) would surrender to creative destruction.

16 December 2009

Subsidising planetary destruction - the story continues

Subsidyscope researchers found that non-users of the highway system contributed $70 billion for nationwide road construction and maintenance in 2007. Source
That refers to the federal US highway system, and works out at about 35 percent of the total. This amount excludes the costs of accidents, air and noise pollution, and the impacts on wildlife. It appears that state and municipal roads in the US are even more heavily subsidised.

Social Policy Bonds would mean contracting out the achievement of social goals to the private sector. Two crucial points relevant to roading are: (1) clarifying whether cheap, easy transport is an end in itself or a means to ends that would be better targeted more direction, and (2) transparency, which in this context is about making it clear to people where there taxes are going. In short, it's quite possible that people are willing to pay for cheap roading, even if many of us are nonusers. We might even be willing to shore up reckless banking behaviour, or massive agribusiness corporations, car and truck manufacturers and all the rest. But we should be given the option. The current system doesn't allow that: by emphasising process, institutional structures and spending, regulations and legalisms, it tends to exclude ordinary people from policymaking. In contrast, Social Policy Bonds would have transparency built in. A more ethical, as well as more efficient, way of achieving social goals, I think.

13 December 2009

We need explicit, meaningful, policy goals

Society's size and complexity mean that numbers are going to have to be used to help determine policy. Numbers inevitably distort, but if things aren't measured they tend to be ignored at the policy level. We want numbers, ideally, to represent human wellbeing - which immediately raises the question of whether or how animal and plant life are to be weighted when it comes to setting policy goals. There are many other questions, but where numbers correlate strongly with what we want to achieve, there's no objection to targeting them, a la Social Policy Bonds, as part of a wider political process. The key is to ensure that the correlation remains strong over the target range. For instance, the correlations between, say, educational level, household income, or longevity, and wellbeing are strong at the lowest levels of all these variables, but become much more tenuous as we move into tertiary education, higher incomes or age ranges.

If Social Policy Bonds were ever to be issued, they would benefit from the work already being done to quantify even such complicated things as human wellbeing - see, for instance, the Human Development Index. Now it appears that people are trying to aggregate and quantify climate change. A group called the International Geosphere-Biosphere programme has launched the 'IGBP Climate-Change Index'. This and the HDI would need refinement before they could be explicitly targeted, and there would always be debate about what they should include and relative weightings.

Even then, they might not be perfect as policy instruments. But what is the alternative? In the absence of explicit targets that are meaningful to ordinary people we are seeing the good intentions of politicians being almost entirely hi-jacked by the short-term financial interests of rich corporations. If that sounds far-fetched, you have only to look at the levels and persistence of government (taxpayer) support for the banks.

We the paying public can't do anything much except admit defeat and settle back for the next set of bills. In the meantime, perhaps we should try and think of a name for the new economic system, which certainly isn't capitalism: that, remember, is all about 'creative destruction', and the freedom to fail. That's exactly what we don't have. The most accurate term would probably be 'bankocracy'. Bankocracy, John Lanchester, 'London Review of Books', 5 November

12 December 2009

Heading for disaster

This post summarises my position on climate change

There is overwhelming, but not quite conclusive, evidence that the global climate is changing. That said, scientists and policymakers are divided as to (a) how fast climate is changing, (b) what is causing it to change, (c) the likely effects of climate change, (d) how much we can do about it, and (e) how much we should do about it. Despite these uncertainties, climate change has the potential to inflict serious harm on large populations, so there is a strong argument for doing what we can to prevent it or minimise its adverse effects. The December 1997 Kyoto treaty required developed countries to bind themselves internationally to numerical targets. If there is any universal consensus about Kyoto it is that, for all the bluster and bureaucracy, its impact on the climate will be so small as to be unnoticeable.

Gaming the system

The forthcoming climate change summit in Copenhagen, if deemed successful, will be more of the same. At best we can look forward to minimal reductions in emissions; undetectable effects on the climate; and the squandering of billions of dollars on wasteful, corrupt schemes all over the world. The big beneficiaries will be third-world dictators, Swiss bankers, and the burgeoning bureaucracies at national and supra-national level who will be charged with administering and ensuring compliance with whatever emission reduction regime is agreed. This is not cynicism, it’s realism. The manoeuvrings of the various interest - fossil fuel extractors and users, as well as farmers, forest owners, the auto industry, politicians and officials - tell us all we need to know about where human ingenuity is going: in bickering, lobbying in defence of vested interests, and competing with other interest groups for subsidies. Gaming the system in other words. One example: US companies and interest groups involved with climate change hired 2430 lobbyists just last year, while 50 of the biggest US electric utilities spent $51 million on lobbyists in just six months.

They are all reacting perfectly rationally to the incentives on offer, and those incentives are perverse. They have little to do with actually solving meaningful problems, and far more to do with the prime, over-arching goal of all institutions: that of self-perpetuation – even if the rest of the world has to undergo catastrophic climate change. Under Kyoto-Copenhagen that’s where humanity’s boundless energy and ingenuity will be diverted and that’s why it’s not going to work.

Rewarding achievers

Here’s a different approach: agree on the outcome we want to achieve, and reward people for achieving it. The outcome we should be targeting is some agreed, meaningful definition of climate stability, which should include indicators of human, animal and plant wellbeing as well as climatic variables and the rate of change of those variables. Targeting climate stability means that we don’t prejudge the best way of achieving it. This is, in my view, the most glaring flaw of the Kyoto-Copenhagen approach: it assumes that the best way of tackling climate change is to reduce anthropogenic greenhouse gas emissions. There is no evidence for this, even though the evidence that links such emissions to climate change appears convincing – with our current knowledge.

But our knowledge is rapidly expanding. We are constantly discovering more about the links between greenhouse gas emissions and the climate, and about ways in which we can prevent or minimise the impacts of climate change. Kyoto is a single, one-size-fits-all, top down, supposed solution to the climate change problem, and it’s based on science fossilised in the last 20 years. But the climate change problem may be so huge and so urgent that we need instead a mosaic of diverse approaches that can adapt to our rapidly changing knowledge and rapidly changing circumstances.

We also need to enlarge and motivate the pool of people prepared to do something to tackle climate change. Currently there is probably more human ingenuity devoted to marketing new brands of dog food or securing the bonuses of failed bankers than to finding ways of preventing or mitigating climate change. The fact is that the rewards to a successful pet food campaign manager or a reckless banker can be in the millions of dollars, while someone trying to generate new ideas for tackling climate change that don’t fit in with the Kyoto paradigm will have difficulty getting attention, let alone adequate funding.

We need to target a stable climate however that goal is to be achieved. We cannot afford to let the bureaucrats who run the Kyoto-Copenhagen industry dictate the pattern of the world climate: we cannot afford the waste and inefficiency of brainpower that people will expend on gaming the current system.

Climate Stability Bonds

It is for all these reasons that I believe Climate Stability Bonds would be an improvement over Kyoto. Climate Stability Bonds would be backed by the world’s governments. They would be redeemable once a specified climate stability goal had been achieved and sustained. They would be freely tradable and their value would rise or fall as the targeted goal become more or less likely to be achieved. The goal could be specified as a combination of climate and other indicators. And crucially, Climate Stability Bonds would not prejudge the best ways of achieving our goal. They would reward the achievement of a sustained period of climate stability, however it is achieved. Investors in the bonds would have incentives to respond quickly, appropriately and with maximum efficiency to new knowledge about what is causing climate change and to new ways of dealing with it. Governments would be the ultimate source of finance for achieving climate stability, but the private sector would allocate society’s scarce resources. Investors in Climate Stability Bonds would have exactly the same interest as society: achieving climate stability and the lowest cost.

A Climate Stability Bond regime would express its aims in terms that people can understand. Its explicit goal would be climate stability. If people understand what a policy is all about, they can participate more in its development, refinement and implementation. This matters hugely when, as with climate change, government will probably have to encourage us to rein in activities to which we have become accustomed. Kyoto discourages buy-in because it is focused entirely on one single policy: the cutting back of net anthropogenic greenhouse gas emissions which, at best, will do little to prevent climate change and despite being ineffectual will impose heavy, and up-front, financial costs.

There is still some legitimate doubt about just how big a threat climate change represents. Here Climate Stability Bonds have another huge advantage: because they would be auctioned on the open market, it would be bidders for the bonds, rather than governments, who would have to take a position on just how much will have to be spent to achieve climate stability.

To summarise: Climate Stability Bonds have a comprehensible, meaningful goal: the achievement of climate stability. They would channel the market’s incentives and efficiencies into the solution of our most urgent environmental problem, at least cost to society. And with their focus on a targeted outcome, rather than a supposed means of getting there, they would also encourage greater public participation and buy-in to the solutions they generate. We need a widely supported, coherent, and efficient response to climate change. Climate Stability Bonds have all those features. Kyoto, and whatever will be agreed at Copenhagen, have none.

06 December 2009

Soviet Earth; or Government doesn't do diversity

Mick Hume writes:
The top bankers and businessmen of the UK might have proved themselves worse than useless. But an economy managed by state bureaucrats will be no better. ... We are left with the prospect of the worst of all worlds – a state-subsidised capitalist economy, but one denuded of the dynamic side of capitalism that Karl Marx long ago identified alongside the system’s destructive aspects, and which has driven economic growth through the modern age. What happens if the state turns off the ‘life support’?, 25 November
All the evidence bears out Mr Hume. Government intervention has generally started out with the best of intentions: to maintain employment, to prop up allegedly strategic industries (like car assembly or industrial agriculture), and before long it becomes indispensable to its favoured sectors. Taxpayer support is capitalised into asset values, making its withdrawal problematic. Sectors use their status and subsidies to bias the international trading and domestic regulatory environments in their favour, and to finance lobbyists whose job is to maintain their vested interest. State supoprt, like a drug habit, is easy to start, difficult to stop. And now it's propping up not just individual sectors, but our entire financial system. The result will be ossification, the Sovietization of our economies and, inevitably, collapse. If that sounds far-fetched, consider that, government accounted for two-thirds of the Welsh economy - before the financial crisis. (And read about some of the social implications here.)

Difficult to imagine, but it gets worse. We are now looking to manage our global environment in the same manner: that is, by setting irrelevant targets, imposing them heavy-handedly, pre-supposing that government knows what's best, and suppressing alternative solutions. I refer of course to Kyoto-Copenhagen, where government is using fossilised science to tackle one of the alleged causes of climate change. Spectacularly expensive, politically divisive, bureaucratically intrusive - Kyoto-Copenhagen will Sovietize the entire planet. The end result is absolutely foreseeable: runaway climate change, widespread poverty and an ever more entrenched and brutal bureaucracy telling the rest of us us what to do.

The debate is so debased and politicised that anybody reading the above will think I don't believe anthropogenic climate change is happening, or that government should just sit back and do nothing. But it's just the opposite: I think climate change is far too serious to be left to the same government mentality that has given us, for example, an agriculture sector absolutely dependent on imported oil, with its denuded landscape, devastated wildlife, and polluted waterways. Government does have an indispensable role to play in ensuring climate stability: it can define our climate goals, articulating society's wishes. It can raise revenue to reward the people to help achieve that goal. But, crucially, it must stand back from dictating how that goal shall be achieved (see here for my suggestion).

We need diverse, adaptive approaches, and we need them urgently. Unfortunately - tragically - government doesn't do diversity nor does it have the ability to adapt quickly to changing circumstances.

03 December 2009


Robert Murphy quotes from one of the emails leaked the Climate Research Unit at the University of East Anglia:
The fact that we can not account for what is happening in the climate system makes any consideration of geoengineering quite hopeless as we will never be able to tell if it is successful or not! It is a travesty! Apologist Responses to Climategate Misconstrue the Real Debate (Quantitative, not Qualitative)
Mr Murphy goes on to say:
....the above email is simply jaw-dropping. If the climate scientists cannot tell if a particular remedy is working, it means that they aren’t exactly sure how the climate would have evolved in the absence of such a remedy. In other words, Trenberth at least is admitting that he is not at all confident in the precise, quantitative predictions that the alarmists are citing as proof of the need for immediate government intervention. And this expression of doubt wasn’t from the distant past: Trenberth sent the above email in October of this year!
Precisely so: there's little point on embarking on policies if we cannot, or don't bother to, measure how effective they are. Sadly, such fecklessness is typical of most government interventions (see this paper by Stephen van Evera). It's irresponsible, wasteful, and often corrupt. It's also quite normal and generally accepted, and Kyoto-Copenhagen is simply an extrapolation of it onto a global scale.

Which is why I advocate Climate Stability Bonds, which would inextricably bind all policies, activities and projects to objectively verifiable targets and indicators. Governments would not have to accept models of climate sensitivity - or indeed any other climate data - from scientists as true or false: under a bond regime assessment of that information would be done by would-be investors in the bonds. These people, or institutions, would have incentives to respond rapidly to our rapidly expanding scientific knowledge - unlike the Kyoto-Copenhagen approach, which assumes that we already know all the important causes and consequences of climate change.

Quantitative targets would be built into the Climate Stability Bond approach; but the beauty of the bonds is that they don't assume fixed relationships between interventions (cutting greenhouse gas emissions, for instance) and how climate will respond. That would be up to bondholders to work out themselves; at their own risk, and in ways that respond continually to new information. I think that's far preferable to whatever agreement will come out of Copenhagen. You can be sure that if there is such an agreement, the single impact that will be monitored assiduously and unambigously will not be that on climate, but rather the money flows from rich to poor countries.