27 August 2014

Who cares about outcomes?

Politicians are skilled at doing the exact opposite of what they make us think they're doing. The policymaking process in the public mind is a tedious discussion of organizational structures, organizational funding, and regulation. The tedium is so ingrained that few of us take a deep interest unless we're being paid to. It's probably deliberate, at some level. So when politicians say they want to cut back on subsidies paid for fossil fuel consumption, it shouldn't really shock us that not only are such subsidies still being paid, they're actually increasing. The International Energy Agency tells us that:
The IEA’s latest estimates indicate that fossil-fuel consumption subsidies worldwide amounted to $544 billion in 2012, up from $523 billion in 2011, with subsidies to oil products representing over half of the total.World Energy Investment Outlook 2014, IEA, June 2014
As pointed out here, this is four times the level of aid given by the OECD's Development Assistance Committee ($134 billion in 2013). 

24 August 2014


I've long argued that social policy needs institutions that must be subordinated entirely to broad, meaningful outcomes. Instead, we have institutions whose over-arching purpose is self-perpetuation. Francis Fukuyama writes, wisely in my view:
The very stability of institutions, however, is also the source of political decay. Institutions are created to meet the demands of specific circumstances, but then circumstances change and institutions fail to adapt. One reason is cognitive: people develop mental models of how the world works and tend to stick to them, even in the face of contradictory evidence. Another reason is group interest: institutions create favored classes of insiders who develop a stake in the status quo and resist pressures to reform. America in DecayThe Sources of Political Dysfunction, Francis Fukuyama, 'Foreign Affairs', September/October
The current regime takes existing organizations as a given. Debate centres around their funding, composition, remit and structure. A Social Policy Bond regime would instead fund outcomes, and let bondholders decide on the optimal organizational form; one that, especially for remote social goals, would - or just as importantly - could change shape, size, and the projects it supports, constantly, in response to changing circumstances and our expanding knowledge.
[M]any [of the US's] political institutions have become increasingly dysfunctional. A combination of intellectual rigidity and the power of entrenched political actors is preventing those institutions from being reformed. And there is no guarantee that the situation will change much without a major shock to the political order.
Exactly. Social Policy Bonds would target outcomes directly, and let motivated bondholders and would-be bondholders compete continuously  to decide how best to achieve them. Intellectual rigidity under a bond regime would be penalised. Efficiency would be rewarded. All in stark contrast to the system not only in the US, but in much of the rest of the world. 

07 August 2014

Public service reform

The Economist talks about public service reform:
But voters, and thus politicians, are especially intolerant of civil-service inefficiency nowadays. One prompt is austerity. Another is technology, which is changing not only how public services are delivered—think of “massively open online courses” in education—but also the way they can be measured. Social networks enable users to grumble about hospital waiting-times and mathematics results. Perhaps the biggest pressure is the passing of time: private-sector workers are incredulous as to why civil servants should escape the creative destruction that has changed other offices around the world. Mandarin Lessons, 'the Economist', 9 August 2014
Quite. Why is it that the achievement of social goals remains (largely) a government monopoly? No good reason, other than vested interests and highly successful patch protection.

The Economist goes on to talk about pay and the need for long-term, strategic thinking. Politicians love to restructure and re-prioritize, to tinker with funding, and to appoint placemen in powerful positions. The remedies the journal suggests include better pay, reduced security for top public service positions and, perhaps, appointing some overlord who takes an exceptionally long-term view.

I have another suggestion: target broad, meaningful outcomes, and let a motivated market decide on organizational structures, composition and the projects they undertake. Under a Social Policy Bond regime there might or might not be 'destruction' of such organizations, as envisaged by the Economist and as occurs in a well-functioning private sector, but such destruction is a means not an end. Social Policy Bonds would ensure that any such destruction would occur only if it were truly 'creative' in the sense of better achieving society's goals, as defined in the redemption terms of the Bonds.

It's likely that a new type of organization would result: one subordinated to the efficient achievement of meaningful social and environmental outcomes rather than, as now, the caprice of powerful interests, be they government or private sector.