24 May 2013

Yes, outcomes are relevant, aren't they?

The current Economist writes:
More than perhaps any government in the world, America’s pays doctors to do stuff, rather than keep people well. That has to change.
Yes, quite. Outcomes matter. It's a shame it's taken so long for people to realize that. For a short piece on how the Social Policy Bond principle can be applied to health, see here.

18 May 2013

Think: meaningful outcomes

In our large and complex societies policymakers are, inevitably, using numerical indicators in an effort to target well-being. But these indicators are often deeply flawed. My previous post pointed out some of the flaws in the use of GDP per capita as a measure of social well-being. But there is also a proliferation of useless micro-targets, as this excerpt from the UK's Daily Mail makes clear: 

How offences can vanish 

High-profile and politically sensitive crimes, such as robbery and burglary, are reclassified. For example, a robbery may be transformed into ‘other theft’ or a burglary called criminal damage. Shockingly [sic], some offences are recorded as ‘no crime’ because there is no direct evidence. A mobile phone owner may not be able to prove it was stolen so it is written down as ‘lost’. Frontline police representatives suspect many victims do not bother to report crimes because their local police station is closed. Others no longer insure household goods and therefore do not report losses. Daily Mail, 16 May
A Social Policy Bond regime would require us to be clear about what we actually want to achieve. We would formulate policy in terms of meaningful, verifiable outcomes, rather than vague, vapid sentiment, or, as in this example, targets that can easily be gamed or manipulated. This would be inherent in the way the bond regime operates. The benefits of expressing policy goals in such terms would be equally clear: more transparency, stability, efficiency, public participation and, therefore, public buy-in.

15 May 2013

Economic growth is not a valid goal

In April the British Government's new Chief Scientific Adviser, Sir Mark Walport, set out his priorities his first major public speech since taking office. His 'five key themes' for scientific advice in government are:
1. Ensuring that scientific knowledge translates to economic growth;
2. Strengthening infrastructure resilience for the engineered world of transport, energy, the built environment and telecommunications and also the natural world;
3. Underpinning policy with evidence;
4. Harnessing science for emergencies; and
5. Providing advocacy and leadership for science. Source
It's the first that causes me most concern (as it does George Monbiot). It reflects and amplifies the widespread view that economic growth is an end in itself. But economic growth, especially as measured by Gross Domestic Product (or GDP per capita), is not an end in itself. It is an indicator of economic activity. As a measure of well-being it is deeply flawed. It does not distinguish between helpful and harmful economic activity. It puts no value on any activity that bypasses the monetary economy. So it ignores leisure time, the environment, crime, health, and other things that are meaningful to natural persons. Crucially too, it ignores how the economic output it purports to measure is distributed within society.

The more than minimal fraud is in measuring social progress all but exclusively by the volume of producer-influenced production, the increase in GDP. J K Galbraith, 'The Economics of Innocent Fraud', Penguin Books, 2004.
This identification of societal well-being has permeated the thinking of our politicians, officials and now, it seems, our top scientists. We are just not in the habit of formulating policy goals in terms of outcomes that are meaningful to ordinary people. So, by default (or by conscious fraud), GDP per capita has become the de facto indicator of social well-being. We need to think urgently about changing this.
 

13 May 2013

The dog's breakfast that is Kyoto

George Monbiot laments our failure to cut back greenhouse gas emissions:
The European Emissions Trading Scheme, which was supposed to have capped our consumption, is now, for practical purposes, dead. International climate talks have stalled; governments such as ours now seem quietly to be unpicking their domestic commitments. Practical measures to prevent the growth of global emissions are, by comparison to the scale of the challenge, almost non-existent. Via dolorosa, George Monbiot, 10 May
Attempts to cut back greenhouse gas emissions were always doomed to fail. And, in the form that they have taken, they deserve to. Why? Several reasons:

The causal relationship between emissions and climate is too obscure, scientifically and (largely) hence politically. Nobody's going to take serious action when the relationship between cause and effect is so difficult to pin down. All the costs of emission cutbacks are upfront. All the supposed benefits are uncertain and, if they ever do arise, it won't be until decades into future. At a time when our scientific knowledge of the existence, causes and effects of climate change is expanding rapidly, Kyoto and the attendant nonsensical emission trading schemes rely on science that was fossilized in the 1990s. Perhaps it was all an elaborate conspiracy designed specifically to do distract us while allowing the continued exploration for and exploitation of fossil fuels. A few windmills and higher electricity bills notwithstanding, that's basically the sum achievement of Kyoto and the millions bureaucrat-days that have been spent on the climate change issue.

A Climate Stability Bond regime would have been different. For a start, it would not assume that climate change is happening; it would not assume that if it is happening it's caused my man; and it would not have as its goal the cutting back greenhouse gas emissions. Instead it would start by specifying what exactly are our climate-related goals, all of which would have to be achieved before taxpayers lose a penny. Our climate goals would include physical, biological and financial measures of the world's climate and its impacts, all of which would have to fit into specified ranges in, say, the years 2030, 2040 and 2075, before the bonds would be redeemed. The bonds would stimulate diverse, adaptive approaches, that would stimulate and continuously respond to our rapidly growing knowledge of the climate. Despite the very long term goals of a bond regime, people would still be rewarded along the way, by doing what they can to achieve our climate goals and so benefiting from the consequent increase in the market value of their bonds.

Incentives matter. The incentives under the current system are, as Mr Monbiot has discovered, to misdirect the public and scour the planet for fossil fuels. Climate Stability Bonds would instead reward people for doing whatever we can to prevent climate change and its depredations. Because the targeted outcomes of a bond regime would be meaningful to ordinary people, they would generate participation in, and buy-in to, the approaches adopted by investors in the bonds.

The contrast with the current dog's breakfast of failed regimes is total.

08 May 2013

Cyprus


James Meek reporting, from Cyprus, quotes Panikos Demetriou, holder of an account at a Cypriot Bank:


'We have 56 MPs,’ he said. ‘Forty of them are solicitors. Everything that goes on in Cyprus is with their consent. If they didn’t want the tax dodgers and the laundered money, they would have done something about it years ago. I’ve been here seven years and I’ve yet to see a tax dodger or anyone from the stock exchange come up before a judge so we can say: “This is the man, he’s behind bars.” Not one person. Nobody gets punished in Cyprus. Nobody gets punished and the same thing is going to happen this time round. At the end of the day they punish the ordinary person.’James Meek, the Depositor Haircut, 'London Review of Books', 9 May
It's for the best that lawyers engaged in legal proceedings should be pre-occupied with process, rather than outcomes. But making policy is - or should be - different from conducting legal cases or making laws. Perhaps because outcomes play only a rhetorical role in our policymaking, lawyers typically make up a large proportion of policymakers, and debate about policy revolves around things that matter to lawyers: process, structures, funding arrangements.

...Or precedent; a process that was satirised by Francis Cornford in Cambridge a century ago in Microcosmographia Academica: 
The Principle of the Dangerous Precedent is that you should not now do an admittedly right action for fear you, or your equally timid successors, should not have the courage to do right in some future case, which, ex hypothesi, is essentially different, but superficially resembles the present one.  Every public action which is not customary, either is wrong, or, if it is right, is a dangerous precedent. It follows that nothing should ever be done for the first time. (Quoted here, in relation to Oxford University, by John Kay.)
Tried, tested and failed will win every time under these circumstances. Ticking boxes becomes a substitute for innovation, adaptation and diverse approaches.

Social Policy Bonds could re-orientate policymaking so that outcomes would play the central role: outcomes that are meaningful to ordinary people, so that we could, if we wished, participate in the policymaking process. Or, at least, we could understand it, so that it could not be hijacked, Cyprus-style, to serve the interests of a corruptible elite.