19 February 2016

Society as a dynamic system

James Lovelock writes:
Cause-and-effect thinking, so often the basis of teaching, fails to provide understandable explanations of real dynamic systems. It fails in physiology, quantum physics and engineering. A rough ride to the future, James Lovelock, 2014
And, I'd say, in policymaking. This links in to my previous post about root causes. Our society and environment are too complex for linear, cause-and-effect thinking to work. That doesn't mean we should give up when faced with supposedly intractable national or global problems as crime, terrorism, war, or poor health. Within each of these problems there will be occasions when cause-and-effect thinking will work well: for instance, improving basic sanitation will probably greatly improve the health of people living in urban slums. But the over-arching policy environment within which decisions such as whether to improve basic sanitation or allocate health funding elsewhere must be one that takes account of the dynamic nature of human society. In other words, it must be adaptive.

A Social Policy Bond regime targeting an array of broad health goals for a population would be adaptive. Under a bond regime government (most probably) would still do what it does best; indeed, what only government can do: articulate society's health goals and raise the revenue for their achievement. But rather than dictate how those goals shall be achieved it would, by issuing (say) Health Bonds, contract out the achievement of those goals to a motivated coalition of bondholders (or people paid by bondholders). The structure and composition of this coalition would probably change over the time period during which the goal are to be achieved - which could be several decades. But at every point in time, bondholders or their agents will have incentives to look for the most efficient ways of raising the population's health. To maximise their returns they will have to respond to changing circumstances, including our rapidly expanding scientific and technical knowledge, and the effects their own activities have on the social and physical environment. By maximising their returns, of course, they would also be maximising society's return on our limited resources.

In short, Social Policy Bonds would take account of the complexities inherent in the dynamic systems that characterise our large societies. They would encourage diverse, adaptive solutions to our social and environmental problems, as articulated by society itself through government. The would inject the market's incentives into the allocation of society's scarce resources at every stage necessary to achieve our goals. By so doing they would maximise the returns on society's investment in our future.

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