31 December 2015

Social Policy Bonds: the past and the future

In the past year there has been a rise in the number of issues of Social Impact Bonds - the non-tradable variant of Social Policy Bonds, about which I have had mixed feelings. They essentially function as performance-related bonuses to service providers. Because they aren't tradable, they favour existing bodies and so, in my view, can be gamed or manipulated more readily than could Social Policy Bonds. However, there are social services that are currently so poorly provisioned that SIBs could well represent an improvement over existing policy. And they might be a first step - perhaps even a necessary first step - to the issuing of Social Policy Bonds. Tradability would greatly expand the range of goals that could be targeted, and I discuss this and other advantages of Social Policy Bonds over SIBs here and here. (You could also search for "SIBs" on this blog.) This wikipedia page summarises where SIBs are being issued and other details.

As far as I know, Social Policy Bonds are not being issued anywhere. I believe, though, that the need for outcome-based policy is becoming increasingly urgent. Society grows ever more complex, and its problems ever less amenable to solution with our existing government machinery. As ever, there is a much broader consensus about the outcomes we wish to see than the possible means of achieving them. The gap between governments and the people they are supposed to represent keeps widening. The recent Paris meeting, which was supposed to address climate change, is the example par excellence of policymaking entirely disconnected from citizens. It will fail for several reasons, foremost of which is the total absence of buy-in from ordinary people - that is, people who aren't involved in policymaking or lobbying. With efforts to address global problems, there would be huge benefits arising from a market-based solution, which in economic theory and on all the evidence would optimise resource allocation.

For reasons of both buy-in and efficiency, then, and because of our increasingly interlinked world, I remain optimistic that Social Policy Bonds will play a role in achieving social and environmental outcomes in the future. Perhaps not in 2016 but, I think, within the next ten years.

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