Philanthropy and outcomes

The Economist writes, in a review of three recent books about philanthropy:

For Mr Buffett, the main reason why giving is harder to do than making money is that in business “you go after the low-hanging fruit”, whereas in philanthropy you are trying to tackle problems that are inherently difficult, such as how to educate demotivated urban kids or end rural poverty. Giving for results, 'The Economist', 14 May (subscription)

Another of the books argues that:

philanthropists should create systems that force them to hear what may at times be unpleasant truths about the ineffectiveness of their work, and to be constantly challenged to improve.

I think philanthropy could do a lot more if it subordinated all its activity to meaningful outcomes. It's very clear why government has a built-in resistance to doing so: the jobs of public servants at all levels would be at stake. But philanthropists have their own, less pecuniary, incentives to avoid addressing the 'unpleasant truths'. We could speculate about the reasons, but they are less important than the result: philanthropists underachieve, and in doing so they deter philanthropy.

So there's a lot at stake. I think if philanthropists, instead of trying to prejudge the best ways of achieving noble outcomes, were to issue Social Policy Bonds, the efficiency gains would be large enough to make a difference in their own right, and to encourage more outcome-oriented funding, whether by the public or private sector. As another of the books reviewed says:

one of the key lessons is for philanthropists and non-profits to be clear about the outcomes they are trying to achieve— and to measure properly the progress they are making towards those goals.

It sounds an obvious discipline. But neither government nor philanthropists follow it. Social Policy Bonds would change that.