Panoptics and experiments

Tim Harford writes: 

From steroids to social policy, what works and what doesn't is often surprising. That is why rigorous experiments in real-world settings are invaluable. The risk of harm and the greater good, Tim Harford, Financial Times (subscription), 27 June

Rigorous experiments are, as Mr Harford points out, more complicated and time consuming than just going with solutions that sound right, or seem obvious. With many of our goals requiring long-term research and experimentation, there are few incentives for people to do these things, and only a tenuous relationship between successful approaches and rewards. There are also few bodies of any kind that are motivated to take a panoptic view; looking, for instance, at efforts to reduce conflict worldwide, and adopt and adapt the more promising ones. There are some who do these things; charities, NGOs, United Nations agencies, perhaps. But they suffer from some or all of these deficiencies:

• they are poorly resourced
• they have their own agenda
• their rewards aren't correlated with their success at achieving meaningful outcomes.

This is not to say that these bodies aren't staffed by hard-working, well-meaning people. For the most part they are. But incentives matter. Take wars and civil wars: reducing such conflict is fine as a career option where job security and a steady income can give people a decent standard of living, regardless of what actually happens to the particular conflict within one's remit. But there is a glaring mismatch between the laudable efforts of these employees and the challenges that conflict, say, poses to human well-being. The potential for catastrophe requires that efforts be stepped up. More intellectual and financial resources are essential. We need the sort of brainpower that currently is devoted to lucrative but socially useless questionable activities such as high-frequency trading or advertising dog-food.

We need, therefore, a system that offers the possibility of worthwhile gain to people for whom that is a prime motivation. We need to channel their self-interest into solving our biggest problems. We need them to benefit from taking the panoptic view, investigating alternatives, conducting experiments, and implementing and refining potential solutions to our long-term social and environmental problems.

Social Policy Bonds would do this. A bond regime would address the three bullet points above. First, if there is more money to be made by solving our social problems, then  more resources will be devoted to that end. Second, the agenda of investors in Social Policy Bonds that would be redeemed only when explicitly and transparently defined goals such as reducing conflict' (or similar) are achieved, would be exactly the same as those of society. Third, there would be the opportunity to buy bonds when the prospects for achieving the targeted goal are gloomy, to do something to make the prospects brighter, and to sell the bonds at a higher price, even before the goal has actually been achieved. So we can target remote goals, such as the end of world conflict, and still have investors interested in achieving them.

Underlying the approach that investors in Social Policy Bonds would be motivated follow, and one that isn't being done frequently enough today, is to take that panoptic view, and conduct the sorts of experiments that Mr Harford writes about - and that are essential if we are going to come up with the diverse, adaptive solutions to our urgent, long-range, social and environmental problems.