13 February 2019

Humanity versus vested interests

A correspondent asks me why the Social Policy Bond concept hasn't yet been implemented. A good question, especially as the non-tradeable version (Social Impact Bonds, also known as Pay for Success Bonds, etc) is becoming more widely deployed and much discussed. So...why not Social Policy Bonds?

I suspect part of the answer is that Social Policy Bonds are a threat to existing institutions: politicians, because they would have to relinquish their control over who shall achieve social goals and how they shall be achieved; and government agencies, such as education, police, health departments, because investors in the bonds would subordinate all their funding decisions to efficiency and, in many cases, new organisations and new techniques will be more efficient than existing bodies with their entrenched ways of doing things and fairly limited remits. Just one example: the best way of reducing crime rates in a disadvantaged area might be to subsidise employment there, rather than increase funding for the local police force. Or a cost-effective way of reducing the numbers of people killed or injured in car accidents might be to lay on free mini-cabs or taxis or have teams of dedicated, paid drivers whose sole job would be to ferry people from pubs, bars, nightclubs, home at night. That might be really cost effective but, under our current system, there's nobody to speak up for such a policy, and it would be opposed by vested interests. More dramatically: nobody really want to live under threat of nuclear war, but currently there are no bodies with sufficient influence and motivation to ensure that won't happen. Sure, there are teams of dedicated people in international bodies striving valiantly to reduce conflict but, the resources, including brainpower, just aren't there. Big money has less interest in avoiding nuclear catastrophe than it does in devising imaginative ways of selling dog-food. And why not? It's reacting rationally to the incentives on offer - which (I think) are perverse in that they prioritise the narrow short-term interests of a few corporations (and, arguably, a few dogs) over the survival of millions of human beings.

Another reason for the absence of Social Policy Bonds from the scene could be the hysterical nature of today's politics, where shrieking abuse at the opposition has supplanted making policy to improve society's well-being as the prime activity. So solving social problems is seen as a 'left-wing' goal, and using markets is seen as 'right-wing'. In more enlightened times, you'd think a policy that uses markets to improve social well-being would unite both left and right; but that's not happening. So while I'm partly encouraged by the slow spread of Social Impact Bonds, I'm also concerned that - especially if they become so common as to escape public scrutiny - they will end up serving vested interests at the expense of society as a whole.

For more about Social Policy Bonds see my home page. For my concerns about SIBs see here and here, as well as some previous blog posts.

05 February 2019

Perceptions and reality: no easy answers

A retired MD writes to the American journal Consumer Reports:
AS A RETIRED M.D. (30 years in emergency medicine), I agreed with most of your article about too many tests. However, you forgot to point out one of the big reasons for overtesting: hospital, clinic, and provider “scorecards.” Medicare providers are still being ranked by “patient satisfaction,” which is often driven by whether patients get all the tests they want— even after you explain why they aren’t necessary. Doing an X-ray on every sprained ankle is a classic example in emergency medicine. —Emma K Ledbetter, MD, 'Consumer Reports', March
There's s a genuine problem for policymakers: should we target for improvement only those goals that can be objectively measured, or should we also aim to improve something far more subjective: people's happiness or satisfaction? Ideally there wouldn't be a conflict, but in matters of health there is often a discrepancy between what's actually happening, and what people think or fear is happening. Crime too:
One would imagine that if crime was high, fear of crime would be as well, and alternatively, if crime was low, fear of crime would follow this pattern. What has been found over the years, however, is that crime and fear of crime rarely match up. Fear of crime, Nicole Rader, Oxford Research Encyclopedia, March 2017
In both health and crime, perception and reality aren't easily disentangled. In health, we all know about the placebo effect,whereby an objectively useless pill or procedure does actually improve a patient's condition and his or her perception of that condition. Crime rates might be low, but perceived crime high for a valid reason: people are afraid of, for instance, venturing onto the streets after dark. To add to the confusion: people's perceptions are difficult to measure accurately.

How to deal with perceptions when they might conflict with reality is crucial when trying to formulate policy for anything other than a very small number of people. Take, for example, the question of whether we should incorporate perceptions of crime into an overall crime index that we target for reduction? I'm minded to say no because perceptions can easily be gamed at the expense of objective reality. In today's political climate, it's all too easy to imagine an interested body to work on perceptions - via a massive advertising campaign, perhaps - and doing nothing to reduce crime rates. Similarly with health: we could weight the physically verifiable results of testing, or a placebo, say, more highly than their psychological impacts. (The latter could perhaps be given zero weight, as over-testing and other unnecessary procedures can have negative physiological impacts.) In general, then, perhaps the best approach is to target objectively verifiable indicators and hope that perceptions begin to match them more closely. When it comes to something like our crime example, where people are afraid to walk in the streets because of the fear of being mugged then we'd need to be more creative in coming up with objective targets in addition to goals such as 'reduced number of assaults'.

No easy answers then, to this question that's relevant not only to a Social Policy Bond regime, which relies on targeting explicit, verifiable and meaningful goals, but to any body implementing social policy that uses aggregated data to help formulate policy.