23 September 2019

It's too dam complicated

Some things are too complicated to understand, even for experts, let alone policymakers.

Dams have been thought a good way of reducing greenhouse gas emissions while satisfying our ever-increasing demand for electricity. Indeed, dams built in cool, dry places probably do reduce emissions per watt compared to fossil fuel generation. So, in 2012 the Intergovernmental Panel on Climate Change (IPCC) said that, taking into account construction and operation, hydroelectric power produces less than 3 percent of the warming of fossil-fuel power plants that burn coal, oil or natural gas. But, as Daniel Grossman writes:
That is true for some dams, such as those built in relatively cool, dry places with relatively little vegetation, which rots and turns into greenhouse gases. But the IPCC report ignored dams built in lowland tropical forests, where luxuriant jungle produces an unusually large amount of emissions. Daniel Grossman, the Sunken Rainforest, 'New Scientist', 21 September

In tropical dams, microbes digesting submerged trees produce methane as well as CO2. An expert based in Brazil says that "hydroelectric dams in
tropical lowlands are a climate disaster."

Why do we continue to make policy about systems that are too complex for us to understand? Partly it's historical. A century or two ago the link between the cause of a social or environmental problem and its effect would be more obvious. Effective policy could be made accordingly. But today the complexities have grown so profoundly that even the direction of causation isn't always clear. Policymakers, though, still make policy based on hunches or scientific knowledge that necessarily becomes out of date.

My suggestions is that, instead of making policy about complex but important issues as if we know what's going on, we should target outcomes, rather than the ways in which most experts currently think is the best way of achieving them. So, instead of targeting, say, 'proportion of electricity generated by renewable resources', we target for reduction the negative impacts of adverse climatic events. A Climate Stability Bond regime would leave it up to motivated bondholders to work out the most efficient ways of achieving our climate goal; and they would do so in ways that both generate and act on the basis of rapidly expanding scientific knowledge. They would have incentives to look more closely and on a continuing basis at, for example, where dams can help achievement of our goal and where they would hinder it.

The Social Policy Bond principle would stimulate, diverse, adaptive iniatives: projects that would take into account the differing and changing circumstances that any single conventional body, such as government at any level, just cannot.

Overwhelming complexity doesn't just affect big global problems. Here, Dr Malcolm Kendrick writes:
[I]n truth, almost all diets are perfectly healthy. Vegetarian, paleo, keto, vegan (with a few essentially nutrients thrown in, so you don’t die), HFLC [High Fat Low Carb], etc. In fact, the only non-healthy diet would be the one recommended by all the experts around the world.Namely, High carb, low fat (HCLF). The ‘eat well plate’, ‘the food pyramid’ – whatever it is now called. Stay away from that, and you will be fine. What causes heart disease (blog) part 65, Dr Malcolm Kendrick, 23 September
Government and their scientist advisors, would serve us better by showing a bit of humility. Targeting outcomes, rather than the ways they currently think we'll achieve them, would be a good start.

10 September 2019

Government+big business+judges vs. the people

Christopher Caldwell writes:
Once the judiciary rules politics, all politicians are just talkers....The transfer of competences from legislatures to courts is a superb thing for the rich, because of the way the [British] constitution interacts with occupational sociology. Where the judiciary is drawn from the legal profession, and where the legal profession is credentialed by expensive and elite professional schools, judicialization always means a transfer of power from the country at large to the richest sliver of it. Why hasn't Brexit happened?, Christopher Caldwell, claremont.org, 15 August
Mr Caldwell is writing in the context of Brexit, but this insight applies more broadly. I've often railed against the widening gap between politicians and the people they are supposed to represent. The gap between ordinary citizens and the judiciary is at least as wide. We, the public, have even less buy-in when decisions are made by judges rather than politicians. What happens with contentious issues on which ordinary people have no say? Here, the Economist writes about the abortion debate in the US:
Why did the two sides become so polarised? The main reason is the way abortion was legalised. In many countries, abortion laws were voted for by elected politicians or in referendums. In America, a seven-to-two majority of justices declared abortion a constitutional right. Anti-abortionists question the interpretation of the constitution that produced that ruling and are furious their voices were not heard. Abortion advocates remain fired up by the knowledge that Roe could yet be overturned. What explains Donald Trump’s war on late-term abortions?, the 'Economist', 24 August
Buy-in is important and, with big government, complex societies, and our emphasis on how policy is made and who makes it rather than outcomes, there's very little buy-in remaining at the national level. Corporations, politicians and, increasingly, the judiciary define the economic and social environment in which we live.

Social Policy Bonds, by targeting outcomes with which people can identify could bring about more public participation in the policymaking process. That is an end in itself (see here (pdf) for example), as well as a means by which decisions become acceptable even to those who opposed them. Importantly too, there's more consensus about outcomes than about the supposed means of achieving them. A bond regime would focus policy debate on our social and environmental goals, and which ones shall be prioritised. The process itself would generate more mutual understanding and less of the anger and contempt that are such a feature of today's policymaking.

As well, a bond regime would encourage us to think long term: our goals are far more stable than the ways in which we think we can best achieve them. They are also more transparent as, with Social Policy Bonds, would be their funding. Corporations, their lobbyists and the people in power whom they influence all have an interest in obscuring how funds are allocated, and in failing to monitor whether policies succeed or fail (see Why States Believe Foolish Ideas: Non-Self Evaluation by States and Societies, by Stephen Van Evera (pdf)). It's even more difficult to believe that our new policymakers - the judiciary - will be any more responsive to the needs and wishes of ordinary citizens. With government, big business and now the judiciary determining our economic and social environment, what hope is there for the rest of us? The gap between ruler and ruled is becoming ever wider. Social Policy Bonds could help close it.

For general information about Social Policy Bonds see here. For more about Social Policy Bonds and buy-in see here.

02 September 2019

It's not just dog-food

There is probably more human ingenuity going into devising new ways of selling dog-food than avoiding nuclear war or eradicating poverty or achieving universal literacy. But it's not just dog-food:
For decades, increasingly large numbers of America’s smartest and hardest-​working businesspeople have toiled in extractive pursuits, and the result is an economy that benefits an increasingly smaller percentage of its participants. Many structural reforms are necessary to change this. With regard to education, it is time to reform the top MBA programs. These schools shape our business culture, and, in so doing, exert an outsized influence on the business practices and the career pursuits of some of our most talented young people. The schools should begin with an explicit renunciation of shareholder capitalism. The Financialization of the American Elite, Sam Long, 'American Affairs', Fall 2019
By 'extractive pursuits' Mr Long means 'value extraction and short-term financial speculation'. There's nothing wrong with people choosing to make a career of financial shenanigans (see here for another example) or advertising dog-food. They're not greedy. They have children to bring up, elderly parents to look after.... These intellectual giants are simply reacting rationally to the incentives on offer. But it's a shame for the society that a high proportion of the smartest people on the planet their goals cannot meet their individual goals by helping to solve our huge, urgent social and environmental problems.

Social Policy Bonds are a way of aligning the incentives smart individuals face with those of society. They work by channelling our self-interest into the solution of our social problems. They do so by injecting market incentives into the solution of these problems. In economic theory, and on all the evidence, markets are the best way of allocating society’s scarce resources. So it is unfortunate that, largely for historical reasons, we leave the achievement of national and global social and environmental goals to a command-and-control mechanism that is often inefficient and open to abuse.

Sure, a Social Policy Bond regime would probably see some enrichment of wealthy corporations or individuals, but only as a side-effect of their achieving society's agreed social and environmental goals. The incentives of the people owning Social Policy Bonds and the people they employ would exactly align with those of society. All their activities would be aimed at achieving society's goals as efficiently as possible.
A Social Policy Bond regime represents a new departure. It would not reward people merely for undertaking activities that sound worthy, nor for belonging to organisations whose ostensible aims are to help people but are, in reality, less edifying. Rather, a bond regime would reward the achievement of society's goals. Yes, it would divert some of society's scarce resources, including brainpower, away from marketing pet-food or maximising short-term share prices or other super-sophisticated, zero-sum financial manipulation. But we are talking about the potential solution to some of mankind's biggest and most urgent problems: poverty, climate change; even the ending of war. I think it's a worthwhile trade-off.