28 April 2010

Transparency and trade-offs

Notions of trade-off rarely make it into the public discourse. In the abstract, we know that taking resources from, for example, people who buy food to some of the wealthiest people in the land, means that ordinary people will have less to spend. But we find it very difficult actually to make some people worse off. Our policymaking system doesn't encourage us to limit expenditure on individual programmes, however ludicrous they might be, and even when it's rising insanely. The aggregate result is simply not sustainable. Joel Achenbach, says that the US national debt "which totaled $8,370,635,856,604.98 as of a few days ago, not even counting the trillions owed by the government to Social Security and other pilfered trust funds" and points out that:
In addition to running a budget deficit, Washington for years has had a massive deficit of political will. Over the past decade, lawmakers have avoided the kind of unpopular decisions -- tax increases, spending cuts or some combination -- needed to keep the debt under control. Federal Reserve Chairman Ben Bernanke testified recently that, for investors, the underlying problem with the debt isn't economic. "At some point, the markets will make a judgment about, really, not our economic capacity but our political ability, our political will, to achieve longer-term sustainability," he said. Joel Achenbach, The national debt and Washington's deficit of will, 'Washington Post', 25 April
One advantage of a Social Policy Bond regime would be its transparency, not only about what would be our social goals, but about their cost. When meaningful outcomes are targeted, people can enter into meaningful debate about which ones they value most. A bond regime would mean people choosing between outcomes, sensibly and rationally. It would be clear to everyone that choices are limited by available resources and that trade-offs are inevitable. Funding of outcomes means that any organizations that came about to achieve these outcomes would be entirely subordinated to society's goals rather than, as now, to the perceived need of every public sector organization to perpetuate itself. To see this, consider what would happen if government were pressured into setting an unrealistic objective under a Social Policy Bond regime: the market value of the bonds would be so low on flotation that the cost to society of achievement would be very high but, more importantly, it would be seen to be very high, well in advance of any government spending actually being incurred.

There are many other advantages of Social Policy Bonds over the current system, about which I have written at length in my book, which can be downloaded free of charge.

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