Social Policy Bonds are different. Because they're tradeable, they can target long-term goals whose achievement might take years beyond the planning horizon of investors. This allows bondholders to benefit from copious research aimed at finding, and funding, only the most efficient initiatives.
This sort of research and experimentation in matters of policy is rarely encouraged or rewarded, so I'm pleased that this year's Nobel prize for economics was awarded to three economists, Abhijit Banerjee, Esther Duflo and Michael Kremer, who used experiments to look at approaches to health care, education and entrepreneurship.
Right: they can work if the incentives are there to conduct them. The governments of all too many countries seldom think of offering such incentives. Philanthropists sometimes do, though (see here for example). They could take the lead in issuing Social Policy Bonds for the big, urgent goals that existing bodies are too small, too selfish or too incompetent to target effectively. See here for my piece on Social Policy Bonds published by a journal for philanthropists.
In the mid-1990s Mr Kremer ...began studying poverty with methods more commonly associated with chemists and biologists: randomised trials. If human capital—health, education, skills and so forth—is essential for development, then economists had better make sure they understand where it comes from. In Kenya he conducted field experiments in which schools were randomly divided into groups, some subject to a policy intervention and others not. He tested, among other things, additional textbooks, deworming treatments and financial incentives for teachers linked to their pupils’ progress. .... Educational resources—textbooks, say—turned out to do little for learning outcomes. Making pupils healthier improved their attendance, but did not necessarily mean they learned more. The experiments had a larger result, however: they taught the economics profession that randomised trials could work in the field. A Nobel economics prize goes to pioneers in understanding poverty, the 'Economist', 17 October