16 November 2017

The stability of the septic tank

I often agree with British journalist and military historian Max Hastings. But not with his remarks in this interview with Tobin Harshaw:
MH: One of the things I've learned as a historian is that one should never listen to anybody who uses the word "solution." Most difficult problems in the world are not susceptible to solutions. What they are susceptible to is management. We'd all get along a lot better if we understood there is not the remotest possibility of a "solution" or even multiple solutions to the troubles in the Middle East because they are so fantastically complex. The only way to approach them is to think how we can best manage them. How best can we avoid making things worse?
TH: That goes back to what you said earlier... about peace not being the goal. What did you say - it should be stability?
MH: Yes, stability is the key.
Trump, Brexit and Echoes of World War I, Tobin Harshaw, 'Bloomberg View', 11 November
I think Mr Hastings is too pessimistic. Yes, war and conflict have been a feature of humanity at least since history began, and yes, many conflicts appear intractable. But Mr Hastings is in good company: here is Professor Colin Gray:
War is a part of the human condition, it is not a problem that can be solved. However, it is a condition some of the worst features of which can be alleviated by law, custom, norms and plain self-interest. Another Bloody Century (page 379), Colin S Gray, 2007
I am much more optimistic, and I think we should be aiming for outcomes more edifying than the stability of the septic tank. I think that if war's negative impacts can be satisfactorily defined, then targeted for reduction, then, with sufficient incentives, the suffering imposed by human conflict can be drastically reduced. As Professor Gray explains elsewhere in his book "Warfare is social and cultural, as well as political and strategic, behaviour. As such it must reflect the characteristics of the communities that wage it." (page 385). These characteristics are deep-seated and pervasive, which means that any solution to the problem of human conflict will need to be long term in nature. An array of diverse, adaptive and focused approaches will therefore be required.

Stability: our highest aspiration?

A Conflict Reduction Bond regime could work to stimulate such approaches of the sort that we cannot necessarily foresee. We should, I believe, contract out much of the work needed to find the best approaches to eliminating war. While robust definitions of 'peace' will need to be thought through, we could immediately issue bonds redeemable only when there had been large numbers of people killed, injured or forced to flee their homes for a sustained period.

Bondholders would then have incentives to prevent conflict with maximum efficiency. They would explore and invent new, more diverse options than are currently being undertaken, and they could divert funding into the most promising of these. They would have more latitude for action than government. For example, bondholders could subsidise intermarriage between members of different religious or territorial communities. They could sponsor school exchange visits, sports matches or the broadcasting of peaceful propaganda. They could arrange for the most virulent warlords and preachers of hate to take one-way, first-class journeys to luxurious holidays in remote resorts with limited access to communication facilities. Whatever holders of bonds targeting war and terrorism do, they will have successes and failures. But they will also have incentives to terminate projects that are failing and to refine and replicate their successes - to be efficient, in other words.

Government has no such direct incentive. It cannot offer direct financial rewards for success, and its talent pool is limited, partly for that reason. It would get into trouble if it advocated things like intermarriage, or sponsored sybaritic retirement for warmongers. As in other areas of social policy, its options are limited. They tend to be one-size-fits-all, slow to adapt and advocated mainly because they have been done before, rather than by their efficiency: government will always prefer tried, tested and failed to promising, innovative - and potentially destabilising.

The field of conflict is one area where the private sector can and should be given the chance to operate more freely. Sadly, it is largely private incentives - to arms manufacturers and brokers - that have contributed to human conflict. We need to redress the balance and reward those who strive for peace.

Under a Conflict Reduction Bond regime, government would still have the responsibility of defining our peace goal, and it would be the ultimate source of finance for achievement of that goal. But the actual achievement of peace would be contracted out to the private sector, who would have powerful incentives to achieve it as cost-effectively as possible. Government and the private sector would each do what it does best: respectively, articulating its citizens' wishes, and finding the most efficient ways of achieving its goals. We can, and should, aim for peace, not managing the stability of the septic tank. Peace, after all, is what almost all of us want for ourselves and for future generations.

12 November 2017

Society as an interest group

Clive James writes:
[W]e tend to believe that there is some natural state of justice to which political life would revert if only the conflicts between interest groups could be resolved. but whatever justice we enjoy arose from the conflicts between interest groups, and no such natural state of justice has ever existed. The only natural state is unjust.... The Meaning of Recognition, 2005, page 4
I'm not so gloomy. When it comes to how things shall be done, and who shall do them then, yes, interest groups - those motivated to follow the policymaking process and so to benefit from it - are the only protaganists that really matter. But it doesn't have to be that way. Or rather, by targeting outcomes rather than the alleged means of achieving them, we can enlarge the interest group such that it includes all citizens.

Targeting broad outcomes, such as better health or reduced adverse environmental impacts, that are meaningful to all of us can bring about greater public engagement in the policymaking process. Yes, there will be disagreements over priorities, but we shall have been able to follow the process and contribute to it - unlike under today's regime, where policymaking is strictly for devotees or their paid employees.

The world is too small now for the solution of social and environmental problems to be left to exclusive interest groups to sort out. Social Policy Bonds could represent a middle way between the happenstance of a free market approach to solving our problems, and the coercive, and (often) ham-fisted, inefficient way of central planning. Government, influenced as it is by interest groups, usually does a terrible job in actually achieving our complex social goals. A Social Policy Bond regime, on the other hand, would play to government's strengths: articulating society's goals and raising the revenue to achieve them. But then it would, in effect, contract out the achievement of those goals, letting market forces do what they are best at: ensuring the optimum allocation of society's scarce resources in order to achieve society's goals - not those of interest groups, be they private- or public-sector.


Social Policy Bonds would, I believe, achieve our social and environmental goals more efficiently and less randomly than the current system. The planet as a whole cannot afford either the time for conflicts between interest groups to be resolved or the collateral damage that such conflicts are inflicting on our ever smaller planet.

04 November 2017

Who cares about efficiency?

The title of an article in last week's Economist itself gives cause for concern:

Counties that voted for the president get more in disaster relief

The article is referring to the federal aid that United States dispenses following natural disasters. It's a bit more nuanced than the title suggests. Research found that:
[G]iven two natural disasters that inflict the same amount of damage, presidents have been twice as likely to declare a disaster when one occurs in a swing state like Ohio or Florida, with a roughly equal number of Republican and Democratic voters, as when one happens in a politically uncompetitive place. Economist, 20 October
 Another study quoted in the article says that: 
[I]t takes about $27,000 of relief spending to “buy” just one extra vote for an incumbent party. It would be far more efficient to invest that money in disaster preparation, since each dollar governments spend on preventing harm from nature’s wrath is thought to yield some $15 in savings on future relief costs. Unfortunately, the electorate seems to reward only politicians who open up the public purse after damage is done.
The problem, then, is not solely one of cynical politicians: we citizens are culpable to the degree that we react emotionally in times of crisis, especially when that such crises have impacts that can be filmed. Which is why I advocate targeting outcomes, including the impacts of national or global disasters, ahead of time, so that we can channel our scarce resources into the areas where it will relieve most suffering. Disaster Prevention Bonds could do this. Issuers of these bonds would target for reduction the numbers of people killed, injured or made homeless by natural or manmade disasters. The nature of the disaster need not be specified in advance and the bonds could aim to target for reduction national or global catastrophes.

Disaster Prevention Bonds targeting global disasters could be backed by some or all of the world’s governments and issued by an international body like the United Nations or World Bank. These bonds need not bear interest, and would redeemable for a fixed sum once a sustained period of absence of a humanitarian disaster had passed. The bonds would be floated on the open market and be tradeable at any time thereafter. Because they are tradeable, they would give people incentives to look for solutions to problems that might arise years beyond the planning horizon of today's policymakers. The bonds' redemption terms would stipulate that they would become worthless the moment an unspecified calamity killed, say, 100 000 of the world’s citizens by a single catastrophic event in any 48-hour period. So bondholders would have powerful incentives to anticipate such an event, and minimise the chance of its occurring. Nationally backed Disaster Prevention Bonds would work in similar fashion, on the national scale.

Disaster Prevention Bonds would entail our making decisions about funding before catastrophes arise, when efficiency, in terms of the reduction of suffering per dollar spent, will be our key driver. They would not stop the misallocation of resources once a disaster has occurred, but the second piece of research quoted above would suggest that disaster prevention is currently underfunded. A bond regime would make such funding levels transparent, in ways that ordinary people can comprehend, and it's likely that, as a result, it would work to minimise the suffering inflicted by future disasters.