23 November 2019

It's worth investing in nuclear peace

There's very little to cheer about here:
As China makes its nuclear forces more credible—less vulnerable to pre-emption, and more likely to get through missile defences—America grows nervous, argues Caitlin Talmadge of Georgetown University. If America cannot hope to destroy most of China’s missiles, then it cannot easily threaten China with a nuclear strike without putting its own cities at risk. American policymakers worry this will embolden China and unnerve American allies like Taiwan and Japan.... Chinese officials are overconfident about their ability to prevent a conventional war from turning nuclear, they argue, while American ones are overconfident about their subsequent ability to keep a nuclear war limited in scope. Making things worse, the two countries lack a dedicated nuclear dialogue, largely because China is wary of giving away too much information. China’s nuclear arsenal was strikingly modest, but that is changing, the 'Economist', 23 November
The stakes here are enormous, but we are proceeding haphazardly toward an unknown, perhaps catastrophic, destination. There are people and resources aimed at minimising the risk of nuclear conflict but I think there are too few, given the potential for calamity. Unfortunately, we have no way, under our current national and supranational political systems, to channel more resources - more effective resources, that is - into minimising the risk of nuclear conflict.

Actually, the goal of sustained nuclear peace makes an ideal target for the Social Policy Bond idea. One, because it's a complex, long-term goal that will require diverse, adaptive solutions. Two, it's an easy goal to verify. And lastly, it's a goal that, on all the evidence, including that of the Economist article, is unlikely to be reached under current policy.

My proposal would be to issue bonds that reward a sustained period of nuclear peace. This could be defined, as, say the non-detonation of a nuclear device that kills more than 50 people for 30 years. They could be backed by a combination of governments, non-governmental organisations, philanthropists and members of the public. With sufficient backing the bonds would help offset and (one hopes) outweigh the the incentives currently on offer, which essentially are those of the military and weapons manufacturers to maintain a nuclear posture.

Those billions of us who would benefit from nuclear peace are presumably a massive numerical majority, but we have few means of channel our wishes effectively. The tendency is to assume that governments will do what's necessary, with the support of hard-working, well-intentioned people in the private sector. But the rewards to all these people are not linked to their success. This is unhelpful in itself but, more importantly, it discourages investors who, seeing little opportunity to benefit from working to reduce nuclear conflict, will focus instead of less edifying enterprises. Most important of all is that our current strategy is just not working.

We need to reward those who achieve nuclear peace at least as much as those working to undermine it. We don't know exactly how to reduce the chances of a nuclear exchange, nor who will be best placed to do so, over the long period during which our goal is to be achieved, but we have no excuse for not encouraging people to find out. Nuclear Peace Bonds would apply the Social Policy Bond principle to this goal. Investors in the bonds would form a protean coalition of people dedicated to achieving it as efficiently as possible. Their goal would be exactly the same as society's. Human ingenuity knows no limits. Currently, too much of it is devoted to relatively unimportant or socially questionable goals. Nuclear Peace Bonds would channel our ingenuity, and stimulate more of it, into minimising the risk of a global catastrophe.

My short piece on Nuclear Peace Bonds is here. The links in the right-hand column of that page point to papers on similar themes: Conflict Reduction, Disaster Prevention, and Middle East Peace

09 November 2019

Effective policy needs experiments

Long-term, remote goals, such as universal literacy, the ending of war, or the elimination of poverty in developing countries, will require a range of solutions, varying over time and space, for their achievement. Conventional approaches to large-scale, complex problems rarely rely on hard evidence. Too often we read about the supposed 'root causes' of, for instance, violence being poverty and violence, with little supporting evidence. Sure, in some circumstances, tackling such alleged root causes might be the most efficient way of solving a problem. But in others such faith might be misplaced, or even counterproductive. Even Social Impact Bonds are limited when it comes to large-scale, remote goals, because they are inherently short term in nature, and don't allow for new entrants into the problem-solving services. (See here and here for why I am ambivalent about SIBs.)
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.

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
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.

06 November 2019

It's all about outcomes

From Harper's Magazine

Percentage of [US] Democratic voters who cite a personal characteristic as the most important factor in selecting a president : 28 
Who cite a policy consideration : 27

Harper's Index, Harper's Magazine, November, derived from Pew Research Center (Washington).
What could we expect? Policymaking is so removed from ordinary people that we have little else to go on, other than what can be seen in the media. We choose our politicians according to their perceived personality. Promises, rhetoric come into it but outcomes? Not at all. This isn't specific to the US. The gap between policymakers and the public grows ever wider. We focus on crises in the same way as we choose our politicians: according to their profile in the media. Slow-moving, complex crises, like climate change or the ballooning of public and private debt, deteriorate over the years, until they manifest themselves unequivocally forms that can be covered in a short news bulletin. There's an inevitability about this, and it's perfectly explicable in a world in which we are bombarded by information. But it is not efficient, because resources are devoted to avoiding images of failure, rather than actual failure. Serious but non-visual crises, as we have seen in finance and the environment, slowly and undramatically gather pace until their effects become unavoidable. By that time, of course, it might be too late to do much about them, even with enormous quantities of spending.

A Social Policy Bond regime could be different. It would target society's social and environmental goals, such as dealing with climate change, extending nuclear peace, the mitigation of any sort of human catastrophe, however caused. We need to be given the chance to express our political views in the form of desirable outcomes, rather than in terms of personality.