16 June 2018

The environment: it's complicated

 From the current New Scientist
It turns out that vegan-friendly alternatives to fur and leather, as seen on display at Australia’s recent Fashion Week (above), can harm sea creatures, because they are made of that other pervasive ecovillain: plastic (see Vegan-friendly fashion is actually bad for the environment). The evidence is not yet clear, but some animal fabrics may be the least harmful choice overall. Such unintuitive outcomes crop up again and again when we try to make ethical lifestyle choices. As New Scientist has reported, ditching disposable plastic bags for a fetching cotton tote only pays off after you have used it 131 times, due to the large environmental burden of cotton – which is also an issue for clothes. Beware the bandwagon, 'New Scientist', 13 June
The sort of life-cycle analyses (LCAs) required to establish the environmental benefits or otherwise of shifts in our behaviour are bedevilled by boundary issues, measurement difficulties and the difficulty of weighting one type of environmental impact against another. They might be better than blandly assuming that vegan clothes are 'better' than animal fabrics, rail is better than air travel, solar power is better than coal-fired power stations, etc, but for the making of robust policy LCAs would need to be continually reassessed in the light of our ever-expanding knowledge of the environment and our ever-changing environmental priorities.

Government policy cannot be so responsive nor, probably, can any single organisation - at least not as currently structured. If government did use life-cycle analysis with the aim of altering our behaviour, it would necessarily do so on the basis of a one-time, limited, and possibly subjective assessment of environmental costs and benefits. It’s not good enough, but even worse would be what we largely have now: environmental policy based on corporate interests, 'what feels right', media stories and the launching of visually appealing initiatives that attract air time but are otherwise useless.

Social Policy Bonds would take a different approach. They would subordinate environmental policy to targeted environmental outcomes, which could be national or global. Say, for instance, that we wish to preserve the Earth's marine environment. A Social Policy Bond issue that rewarded the sustained achievement of such a goal would generate incentives for bondholders to bring it about at least cost. They might well carry out life-cycle analyses in their attempt to do so. But there is an important difference between the way do they would conduct their research and the way government, or any supra-government body would do so: bondholders have continuous long-term incentives to achieve our goal efficiently. This is likely to mean responding to and stimulating increased knowledge of scientific relationships, and technical advances. Investors might conduct LCAs, but they would do so in ways that optimise the benefit to the marine environment per dollar spent.

Effective environmental policy must take a long-term view and for national or global goals, will need to encourage diverse, adaptive approaches. The environment and our knowledge about it are just too complex for an 'it feels good', command-and-control approach that, for instance, brands animal-derived clothing, or plastic shopping bags as bad. Diverse, adaptive approaches to addressing complex problems are precisely the sort of responses that government does very badly. However, government does have crucial roles in articulating society’s environmental goals and in raising the revenue to
pay for their achievement: in the democratic countries government performs these functions quite well. But actually achieving society's social and environmental goals is a different matter. Such achievement requires continuous, well-informed and impartial decisions to be made about the allocation of scarce resources. For that purpose, Social Policy Bonds, with their incentives to achieve targeted outcomes efficiently would, I believe, be far better than the current ways in which environmental policy is formulated.

For more about application of the Social Policy Bond principle to the environment see here

13 June 2018

Superbugs: disastrously misaligned incentives:

William Hall and others write: 
When asked what she would do with a useful new antibiotic, the chief medical officer for England, Sally Davis, said that the drug “would need a stewardship program”—that is, that systems would have to be in place to make sure that the antibiotic was only prescribed when absolutely necessary. Indeed, limiting unnecessary use is essential to keep bacteria from becoming resistant to new antibiotics, and thus essential for our continued health.
While this is a cogent strategy, it doesn’t coincide with the marketing goals of the drug industry: “When a really useful new antibiotic is found, the company that invests in it cannot rely on high sales for return on investment.”  William Hall et al, Superbugs: an arms race against bacteria, quoted by Jerome Groopman, The bugs are winning, 'New York Review of Books', dated 28 June
The interests of the drug companies - and of those who target, implictly or explicitly GDP - don't merely fail to coincide: they are in conflict with each other. Discovering and manufacturing a new antibiotic is expensive so, when a pharmaceutical company succeeds, it has every incentive to maximise sales in the relatively short period before its patent runs out. With such misaligned objectives, you'd hope government would take the long view and give the health of its citizens (and, incidentally, the welfare of farm animals fed prodigious quantities of antibiotics so that they'll grow more rapidly) a higher priority than the short-term interests of pharmaceutical companies. But no: it's the farmers and the pharmas who override the interests of ordinary people. You know, those of us who can't afford to follow and manipulate an absurdly complex policymaking process, nor pay others to do so.

The authors of Superbugs estimate that the total number of people dying annually from resistant microbes is at least 1.5 million and, extrapolating from US estimates, they estimate the costs to health services at about $57 billion and the loss in world productivity at $174 billion. There are currently no financial incentives for anyone to take the long-term view, though it's in almost everybody's interests for somebody - most likely government - actually to do so. As individuals, we know what needs to be done: ensure that doses of antibiotics are carefully regulated and that research into new antibiotics continues. Developing effective antibiotics, Hall et al write, should be recognised as a public good, which would justify government intervention. They blame short-term thinking for the absence of such intervention.

Applying the Social Policy Bond principle to the health field could be one way of meeting the challenge, and might be easier and less contentious for government to do than more direct intervention. Government could issue Health Bonds aiming for improvements in the general health of the population over a period of decades. One necessary approach would then be to optimise the use of, and research into antibiotics. Doing this would generate rises in the value of the bonds, and so reward investors. Government would have to do little more than raise the funds for the bonds' redemption and articulate, with the help of experts and input from the public, health goals for the population. After that, it would be up to bondholders to pursue these goals. The overarching objective of investors in the bonds would then coincide with those broad, long-term goals. The investors, and the people they contract, would have incentives to bring about society's health goals as efficiently as possible - a stark contrast with the current system.

10 June 2018

Outcome-based policy and buy-in

In my efforts to promulgate Social Policy Bonds I’ve usually emphasised their efficiency, which arises from a number of sources, including their harnessing of market forces, their encouragement of diverse, long-term approaches, and their capacity to adapt to changing circumstances. I’ve also stressed their transparency: because the bonds target broad, meaningful outcomes, ordinary people will understand them more.

This, in turn, means another hugely important benefit: buy-in. When we understand what a policy is all about, we can participate more in its development, refinement and implementation. This would apply even if our views are over-ridden by others: at least, we'd have been consulted. A Social Policy Bond regime would express its goals as outcomes that are meaningful to real people. Such outcomes would be more comprehensible to more people than the current unstated or unconsidered, vague, or platitudinous goals that characterise current policymaking all over the western democracies. Discussion about outcomes, rather than the alleged means of achieving them, would be more accessible than current policymakers' emphasis on legal pathways, funding arrangements, institutional structures and composition, and other arcana. You might even think the system has been specifically designed to keep ordinary citizens out of it.

If people have the chance of participating in such discussion, we shall come to understand the limitations and trade-offs that are intrinsic to public policymaking. This means quite a few things, but to my mind buy-in is the most important. It's likely this would reconnect citizens with our policymakers; it would entail the sharing of responsibility and concern for policy initiatives.

This matters hugely when government has to do things that hurt people's narrow, short- or medium-term interests. Dealing with environmental depredations for instance; or raising taxes for a multitude of purposes. The current system discourages buy-in because it's difficult to follow. As such, it's easily influenced by the wealthy or powerful, be they in the private- or public sector. This does much to widen the gap between politicians and the people they are supposed to represent. Social Policy Bonds, because of their focus on outcomes, would help close that gap.