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.