SPBs, SIBs and SOBs

It's probably too early to say whether the doubts being expressed about Social Investment Bonds (SIBs) are fatal or not, but one thing is clear: at best the bonds will function like performance related contracts. An improvement on most current government approaches, perhaps, but in terms of ambition and potential for real change SIBs fall far short of Social Policy Bonds. They aren't tradeable, which sounds like a mere technical detail but in fact severely limits how useful they can be. I've outlined why here, so in this post I'll just concede that Social Impact Bonds is a better name than Social Policy Bonds.

I'm reminded about why I chose the name Social Policy Bonds by the website linked to in the first link, above. It's a long pdf, which documented the meeting at which I first pubicly presented the bond concept, in 1988. I'd originally used the name Social Objective Bonds, until a colleague read my draft paper and told me exactly what the acronym meant and how widespread it was.

Metrics must be broad

Social Policy Bonds rely heavily on targeting measures of social and environmental well-being. That's a potential problem. Sue Halpern is writing about algorithms and metrics in a different context, but what she says applies to policymaking on behalf of any but the smallest population:

But the real bias inherent in algorithms is that they are, by nature, reductive. They are intended to sift through complicated, seemingly discrete information and make some sort of sense of it, which is the definition of reductive. But it goes further: the infiltration of algorithms into everyday life has brought us to a place where metrics tend to rule. This is true for education, medicine, finance, retailing, employment, and the creative arts. Are we puppets in a wired world, Sue Halpern, 'New York Review of Books', dated 7 November

The potential problem is that the metrics we use in policymaking might not correlate with societal well-being. Unfortunately, the alternative to a coherent, explicit, considered use of metrics in national policymaking is our current system, which features the unsystematic and de facto use of incoherent metrics that are too narrow and short term in their scope to bring about a rational allocation of resources. Applying broad, meaningful metrics to the health sector, say, is going to be far more efficient and welfare-enhancing than targeting a particular disease, just because the scope for efficiency gains is far bigger when resources can shift between different activities according to where they will be most cost effective.

The other problem with narrow metrics, however well meaning, is that they can easily be gamed. Thus:

 Yet indicators of maternal health [in Laos] are worse than in Cambodia ... and levels of malnutrition are atrociously high. To make things look not quite as bad, NGO types say, the government deliberately went around feeding children in villages monitored by the UN for the Millennium Development Goals—until it was found out. The future of Laos: a bleak landscape, 'The Economist', 26 October

Congratulations

Congratulations to Robert Shiller of Yale University, one of the three winners of the 2013 Nobel Prize in Economics. Professor Shiller has over many years encouraged my work on Social Policy Bonds. Back in 1997 I received this letter from him, and more recently he mentioned the bond concept in his 2011 book Finance and the Good Society, and in a brief article about the book.

Mental health

Spiked's Tim Black asks lecturer and psychiatrist Joanna Moncrieff  "'Why are there so many more people being given a diagnosis that demands the prescription of powerful antipsychotics?' Moncrieff is quick to answer: ‘That’s an easy one - it’s the pharmaceutical industry.'"

That's probably part of the answer. But as the discussion continues it's clear that societal changes are another, possibly more significant, reason.

The withering of old forms of informal social life, the corrosion of the traditional mechanisms of support and struggle, be they based in politics or faith, [have] left the individual in a potentially more helpless position.

Dr Moncrieff sums it up: 'We’ve become a much more atomised society ... one in which suffering and difficulties are located increasingly not in the social world but in the individual. So previously, if someone was depressed, not happy, not coping with life, that was a social or a family problem. But now it’s the individual that needs to be rectified rather than the system around them.’

I know a lot less than Dr Moncrieff or Mr Black about psychiatry and mental health. But my concern is, I think, relevant. It is that we do not have the institutional structures in place that will identify major causes of suffering as they change over time and then do something to alleviate it. Instead we have institutions whose sole concerns are, essentially, self-perpetuation and self-enrichment; any overlap between achievement of their goals and solution of society's problems is coincidental.

Yes, we have drug companies, whose motives and methods are increasingly at odds with society, but who are powerful lobbyists and capable of influencing the regulatory environment in their favour.

But social atomisation involves more than drug companies: it probably has much to do with town planning, transport policy, immigration policy, government welfare schemes and much else besides. The point is that we do not have incentives in place that will encourage people to investigate these - and other possible - causes and do something about them. The reverse, in fact: our de facto and default targeting of GDP as the greatest social goal, and the short-term interests of corporations and politicians, mean that social atomisation is hardly seen as a problem. Big pharma benefits from depression, after all, and it's certainly not in the interests of powerful corporations to question things like the apotheosis of the car or coercive multiculturalism.

In today's policymaking environment it's more profitable to treat depression, however ineffectually, with pills than to look for long-term, possibly more edifying solutions, that could threaten the narrow interests of corporations and their clients in government. It's highly likely that those corporate interests are doing much to create depression in the first place, and it's even more likely that it's in nobody's interest to find out for sure.

A Social Policy Bond regime would work differently. It would certainly not take today's intitutional structure as a given. It would take a serious look at mental health, depression and social atomisation and construct reliable metrics that could be targeted for reduction. Investors in Mental Health Bonds would themselves benefit by looking at all potential causes of and solutions to problems like depression and doing whatever is required to alleviate them. In doing so, their interests and those of wider society would merge - in stark contrast to today's policymaking world.

Nobody asked us

John Lanchester, having seen the UK's GCHQ files, writes about the UK:

...we're moving towards a new kind of society. Britain is already the most spied on, monitored and surveilled democratic society there has ever been. This doesn't seem to have been discussed or debated, and I don't remember ever being asked to vote for it. The Snowden files: why the British public should be worried about GCHQ, John Lanchester, 'The Guardian', 3 October

This is just one critical decision about how we live that is made without reference to voters. Politicians can get away with almost anything they want under the guise of  'national security', just as they can by citing 'economic growth'. Nobody questions these claims, because the relationships between them, the policies they generate, and the outcomes of these policies are too complex, and too bedevilled by time lags, to identify clearly. Once started, the policies create institutions that have sufficient lobbying power to resist reform and grow endlessly.

How would a Social Policy Bond regime deal with 'terrorism'? Most probably, we'd get some perspective on the matter. As Mr Lanchester points out:

Since 9/11, 53 people have been killed by terrorists in the UK. Every one of those deaths is tragic. So is every one of the 26,805 deaths to have occurred on Britain's roads between 2002 and 2012 inclusive, an average of 6.67 deaths a day. ... This means that 12 years of terrorism has killed as many people in the UK as eight days on our roads.

It's not for me to try to divine society's preferences about how we die. But suppose that, away from the aftermath of a terrorist incident, when cool heads prevail, we value a life lost in a road accident - or any other cause - as highly as a life lost to a terrorist incident. We might then decide that instead of creating a vast, expensive, intrusive bureaucracy to reduce premature deaths by a trivial amount, we'd want to channel society's limited resources more efficiently. In that case, we'd issue Social Policy Bonds that target something like 'the avoidance of premature deaths', or an aggregated measure of longevity, perhaps expressed in terms of Quality Adjust Life Years.

Regardless of how much we weight a death due to road accidents against a death due to terrorism, a Social Policy Bond regime would ensure that our preferences are made explicit and transparent, and that our resources would be allocated according to our preferences. Something that obviously, and ominously, is not happening today.