Forget grand ideologies

Haonan Li and Victor Yaw write:

If there is a lesson from Singapore’s development it is this: forget grand ideologies and others’ models. There is no replacement for experimentation, independent thought, and ruthless pragmatism. Haonan Li and Victor Yaw, The True Story of Lee Kuan Yew’s Singapore, 'Palladium', 13 August

Social Policy Bonds have been in the public arena for something like 32 years now and their non-tradeable variant, Social Impact Bonds, are now being issued in about 25 countries. In my naivety,  I thought in the early years that my original concept, which, simplistically is a right wing method (markets) aimed at achieving left-wing (social) goals, would appeal to everyone, rather than...not many people. 

Unsurprisingly, perhaps, it's been the ideologues on the left that are most opposed to the concept. Often implicit, sometimes explicit, is their feeling, or argument, that Social Policy Bonds are a means by which investors make money out of doing what they should be doing anyway. It is true that some wealthy bondholders, whether they be individuals, corporations of government or non-government bodies,  could become even more wealthy by first buying Social Policy Bonds, then doing something to achieve the outcome that they target, then selling their bonds for a higher price. This is what some call "profiting from others' misery" and it offends their sensibilities.

But it can also be called "working for a living while doing something socially useful". In the long run it's quite probable that only a few people or organisations would amass huge fortunes under a bond regime, even if they do successfully achieve society’s goals and profit from their bondholding. The way the market for Social Policy Bonds works would mean that excess profits could be bid away by would-be investors in a competitive market for the bonds. The market would openly transmit a huge amount of information about the constantly varying estimated costs of moving towards a targeted goal (see Chapter 5 of my book for a full explanation). Barriers to entry into joining the coalition of bondholders and helping achieve the target could be low, especially if most bonds are held by investment companies who would contract out the many diverse approaches necessary to achieve most social and environmental goals.

The absolute sums of money at stake might be huge, particularly for Social Policy Bonds that target apparently remote, national or global goals, but there’s no particular reason to assume that, in the long run, it would be shared out any less equitably than, say, teachers’ salaries. Teachers? Yes, and nurses, doctors, nurses, and social workers, all of whom perform socially valuable services for which nobody begrudges payment—--not even those on the left

Buy-in, and that other global threat

From the current New Scientist:

The world has now already warmed about 1⁰C since the pre-industrial age... "Even at 1⁰C warming, climate change is bringing us to the edge, or even over the edge, of what we are able to cope with." says Friederike Otto at the University of Oxford. Climate's make or break year, Adam Vaughan, 'New Scientist', 17 October

As the political caste all over the world floats ever higher away from the concerns of ordinary people, it's perhaps time to look at its consequences for the long-running, not very televisual, slow-moving disaster that is climate change. I've written many times here and on the SocialGoals.com website about the importance of buy-in. For dealing with climate change, which is going to require the expenditure of massive resources, upfront, for an uncertain and inherently long-term benefit, buy-in is as elusive as it is crucial, but there certainly isn't enough of it at the moment. There are many worthwhile efforts going on, mostly aimed at reducing greenhouse gas emissions, but they are clearly not enough. I think the reason for this is that the objectives that are cited by climate scientists and activists are too abstract to generate much buy-in. I suggest that, instead of targeting degrees Celsius, or greenhouse gas emissions, or the composition of the atmosphere, we target climate goals that are meaningful to ordinary people. By this I mean broad goals, such as reductions in the numbers of people killed or made homeless by adverse climatic events, wherever in the world they occur. 

The Climate Stability Bond approach might also have presentational advantages and more palatable money flows than such elegant solutions as a carbon tax. Any presentational advantages would be due to people's more readily identifying with the direct targeting for reduction of the impacts of adverse climatic events, whether they be short term - and televisual - such as hurricanes, or long term and drawn out, such as desertification. The money flows would be more palatable because, essentially, payment would be for results: Climate Stability Bonds would not be redeemed until all targeted goals had been achieved.

Goals that are meaningful to ordinary people, and more palatable money flows: with these two advantages, Climate Stability Bonds, would, I think, be better than the current, failing, approach.

Philanthropists: step forward!

One reason why Social Policy Bonds haven't been implemented, in contrast to their non-tradable variant, is that it's difficult to experiment with them. To stand a chance of being implemented in preference to more-conventional policies, Social Policy bonds have to be shown to have been successful where other policies have failed. But the criteria for bonds' being an improvement over policy alternatives militate against small-scale trials. Social Policy Bonds will work best when:

• We have no real idea how to solve the problem;
• One or a combination of diverse methods need to be tried, refined and implemented, with resources being transferred from failed or inefficient approaches to more promising ones;
• The bonds must not simply transfer problem from one area (geographic or otherwise) to another;
• Goals must be robustly and verifiably quantifiable at low cost; and
• The time-scale must be long enough to enable objective-achievers to enter and leave the coalition of bondholders.

Social Policy Bonds can work s for things like climate change, improving health, reducing crime (in a country or large region: we don't want crims simply to travel a few miles). But none of these objectives lends itself to experiment. Nevertheless, there is a class of projects that the bonds could target at no risk: achieving those goals that have eluded policymakers, or indeed anyone and that, partly for that reason, receives resources that are minute in comparison to the benefits that achievement would bring. Such goals could include the ending of all violent political conflict, nuclear peace, and disaster prevention - which would include adequate protection against disasters that are foreseeable (like the current pandemic), and unforseeable. These are goals that humanity as a whole would like to see reached, but that do not attract the funding that their achievement requires. Apart from the inescapable inability to conduct trials, the benefits of achieving these goals are too diffuse and long term to influence politicians or corporations. We need sources of funds that are wealthy, willing to take a chance on a new financial instrument, and willing to relinquish the power to dictate exactly who benefits from their largesse. Step forward, public-spirited philanthropists: humanity is waiting for you.