Peace on Earth; worth paying for

Applying the Social Policy Bond concept to conflict reduction means, in effect, paying people not to kill each other. It doesn't sound very edifying, but I'll make the case for it anyway.

Of course, it is less than ideal that people don't freely choose to live in peace; and frequently invade and kill in pursuit of their goals or those of their leaders. Throughout the centuries, we haven't found ways of ending war. Conflict has so many causes and it's widely believed that war is an inevitable, intractable aspect of humanity. Given the human and resource cost of war and preparing for war, I think it reasonable to allocate funds to eliminating it for a sustained period. A Conflict Reduction Bond regime would aim to do this and, importantly, if it were to fail, no government funds would be lost. 

A misconception of those who disdain the Social Policy Bond principle is that they think paying for results means huge cash prizes for the already wealthy. It's true that, under a bond regime investors in the bonds would benefit if the targeted social goal are achieved quickly but, in the long run, what's more likely is that more people would be attracted to working to achieve achieve the targeted goal. The most efficient of these should see some higher financial rewards but, more importantly, they will have more resources with which to work. It's my impression that, if there were bodies with a proven record of bringing about peace in a wide range of circumstances, they'd enjoy very high levels of funding.

Underlying all this reasoning, though, are two points:

• Incentives matter. Weapons manufacturers, ideologues, military bodies all respond rationally to the incentives on offer. Not all these are financial incentives, but there are sufficient monetary rewards to those who manufacture and use weapons to make sustained periods of world peace unlikely. A Conflict Reduction Bond regime would offset such rewards, to a degree dependent on their backing.
  
• While it would be lovely if people's humanity alone were sufficient to ensure peace on earth and goodwill to all, the Conflict Reduction Bond option of making explicit, taxpayer-funded payments in exchange for world peace would be preferable to the situation we have today.

The benefits of relinquishing power

The problem with philanthropy is that philanthropists and their employees are reluctant to relinquish control over how their goals shall be achieved and who shall be seen to be achieving them. (Politicians are similar in that respect, but we have higher expectations of wealthy individuals with noble intentions spending their own money.) Sadly, this wish not only to be a benefactor to humanity, but to be seen to be such a benefactor means that our biggest, most urgent challenges are being neglected. Philanthropists - and politicians - want to be identified with successful initiatives. It's a natural human tendency, but it's holding us back. Society is too complex for most of our serious social and environmental problems to be to be traced to a discrete set of causes. Insecticide-drenched bed nets might be the best way of dealing with malaria somewhere at some time - but not everywhere, and not always. We need a policy environment that encourages initiatives that are capable of adapting to differing and changing circumstances, and that have a long term focus on achieving outcomes.

Which is where the Social Policy Bond idea can play a role. Under a bond regime the role of philanthropists - or government - would be limited to supplying and raising funds to be used to redeem the bonds, and defining the outcome that they wish to achieve. They would not stipulate how that outcome is to be achieved, nor who will achieve it. By relinquishing those powers, groups of philanthropists or governments could greatly expand the range of goals they could target to include such global goals as sustained periods of world peace or climate stability - goals that have no single, identifiable cause, and that will necessarily take many years to achieve. It would be unfortunate if, solely because of people's wish to be publicly identified with successful initiatives, our most urgent problems depend for their solution on a small number of dedicated people with pitifully inadequate resources.

A sane alternative to MAD

Paying people not to hate each other - or, at least, not to express their hatred militarily: that's a crude, but fairly accurate description of the workings of Peace Bonds, a term that encompasses World Peace Bonds, or more geographically limited applications of the Social Policy Bond concept, such as Middle East Peace Bonds.

Some commenters are reluctant to contemplate the financial transfers implicit in these bonds; shouldn't we be peaceful for more edifying motives? I agree, that would be ideal, but I think humanity is too far gone for that. (Readers unfamiliar with the Social Policy Bond concept should look first at a short overview.)

First, this disdain for paying people to bring about socially and environmentally beneficial outcomes needs some grounding. I am aware of, and agree with, the work of Professor Bruno Frey who found that monetary incentives can undermine our willingness to do the right things for ethical and moral reasons. People perform valuable social or environmental services not only for monetary gain, but also because they enjoy doing them for their own sake, because they believe them to be the morally right things to do, or because they believe that their actions will advance some cause to which they are committed. These ‘intrinsic’ motives are qualitatively different from external, monetary incentives, and offering monetary rewards might ‘crowd out’ or undermine these less mercenary and more civic-minded motivations. Crowding out internal motivation can occur, writes Professor Frey, because, monetary incentives can undermine people’s feelings of self-determination and self-esteem. Also, when external incentives are supplied, the ‘person acting on the basis of his or her intrinsic motivation is deprived of the chance to exhibit this intrinsic motivation to other persons.’

Not mentioned by Professor Frey, but also plausible is that financial incentives can undermine the cognitive outlook that sees socially and environmentally beneficial services as worthwhile in their own right, rather than as a cost for which compensation and payments must be paid by taxpayers.

When it comes to war and peace, though, I think there are valid arguments on the other side. First, is that fact that there is no moral reason not to pay people for pursuing goals that have society's well-being as their goal. We pay teachers and nurses a salary; we pay many people who work for charities a salary; and we pay people who work for peace organisations, including the United Nations, a salary. There is nothing inherently immoral about paying people to do things that have an idealistic underpinning. Peace Bonds would certainly see more funds going to people involved in anti-war activities. They'd probably benefit from higher salaries, at least in the short term. But not only would their renumeration rise; so too would their numbers: anti-war bodies would have more resources, including more personnel, with which to pursue their activities. 

Second is that much conflict is driven by monetary incentives. There would, for instance, be much less availability of destructive power if corporations didn't generate revenue by manufacturing it. Monetary incentives play a similar, though indirect, role in financing the spread of hatred and pro-war propaganda. Holders of Peace Bonds could, therefore, achieve results simply by paying corporations to cease production of weapons, or fomenters of conflict to change their rhetoric. It wouldn't, of course, be as simple as that, and bondholders would probably also have to follow more sophisticated approaches, but we should not underestimate what even unsubtle monetary payments could achieve. Even if bondholders did little more than match the monetary incentives of the pro-war complex, that would be an improvement on the current situation. This need not conflict with Professor Frey's findings: achieving world (or regional) peace is already the goal of many hard-working low-paid workers and volunteers, and the enhanced likelihood of achieving peace that a bond regime would confer would increase their intrinsic motivation - and encourage more people to join them.

And third: what is the alternative? War between the big nuclear powers has been unthinkable in recent decades only because of Mutually Assured Destruction. Are Peace Bonds any more outlandish than MAD? And while the number of nuclear warheads appears to have fallen, the number of nuclear powers has risen. In the future it's likely that more rogue powers, including non-state actors, will possess nuclear or biological weapons whose use, or threats of use, would have calamitous consequences. There are well-meaning hard-working organisations trying to restrain our capacity to destroy ourselves and our environment, but they don't have large budgets and, crucially, their financial rewards are independent of their success or otherwise in achieving peace.

Actually, Peace Bonds need not be an alternative: they can be issued in parallel with current efforts. Holders of Peace Bonds would probably increase the funding those bodies they deem to be most efficient at achieving and sustaining peace. 

In summary: Peace Bonds could complement and strengthen the most promising current approaches to securing and sustaining peace. As with all Social Policy Bonds, they'd encourage diverse, adaptive solutions to what now appears to be our species' most urgent, most dangerous problem.

Why organisations fail to work for the public good

The Economist reviews For Profit by William Magnuson: 

[Mr Magnuson]draws sensible conclusions .... Corporations cannot hope to put public interest above all else for long; what the public wants is far too complicated for them to fathom. When businesses wade into politics, they play an outsize role in shaping it. Yet the belief that the pursuit of profit will always benefit society as a whole is also sadly erroneous, the author says.“For Profit” offers thrilling tales of commercial endeavour:Corporations often start out with the public good in mind. It doesn’t last, the 'Economist', 10 November

The same, in my view, applies to organisations whose mission statements explicitly say they will put aspects of the public interest first, including charities, universities, religious bodies, trade unions and government agencies. At some point their original purpose becomes subordinated to the goal of self-perpetuation. As organisations grow in size, ownership or governance becomes more diffuse, and society becomes more complex, there are fewer incentives for managers to stick to their organisation's founding remit. 

Which is why I believe that, when it comes to social and environmental policy, the way forward is to reward only the actual achievement of explicit, verifiable and meaningful social outcomes. Issuing Social Policy Bonds would do that and would be likely to lead to the creation of a new type of organisation: ones whose structure, composition and every activity would be subordinated to achieving society's targeted social goals as cost-effectively as possible.

How broad?

Though this discussion is unlikely to have practical application in the next few years (or decades), I will pose the question anyway: should a single Social Policy Bond issue target one social ill, or more than one? Say that we are aiming to reduce climate change and its impacts. Doing so, we could issue Climate Stability Bonds that target a range a physical, biological, social and financial indicators. Because targeting climate change makes sense only at a global level, and because of the wide range of indicator variables necessarily targeted, I am inclined to think that, yes, it would be better to issue Climate Stability Bonds independently of measures to target other disasters. By this I mean that Disaster Prevention Bonds, which could encompass a range of natural or man-made disasters, could or should be issued separately from Climate Stability Bonds. 

Then again, should political violence (wars and civil wars) be targeted by Disaster Prevention Bonds, or should they be the subject of a more narrowly targeted bond issue, such as Conflict Reduction Bonds?

The answers depend partly, as I've suggested, on the range of indicators to be targeted. It would be simpler to keep track of a smaller number of variables, which makes monitoring and verification easier and would focus the minds of bondholders and their agents more effectively. Much would also depend on who would be paying for the bonds' redemption: a global problem like climate change is more likely attract funds from a wider range of governments than a more general bond issue that folds climate change in with other disasters to which some countries are less prone. Since taxpayers would supply the public-sector funding, popular support is relevant here too. 

Against this argument, is that it could be more efficient to target the broadest possible goal, so that bondholders would have incentives, depending on events, say, to shift resources away from targeting climate change and towards conflict reduction, if they believe that doing so would minimise human suffering at least cost. They would be more likely to do this if there were no mismatch between the time horizon of the bond issues; for example, if Climate Stability Bonds required an array of indicators to fall within approved ranges for thirty years, and Conflict Reduction Bonds likewise stipulated a thirty-year period of sustained peace before they could be redeemed. My thinking, though, is that any such efficiency gains would be outweighed by the lack of focus that a very broad targeting implies, and the enhanced difficulty of monitoring a very wide range of targeted indicators. 

For these reasons, and for the funding reason, even Conflict Reduction Bonds might be too broad to attract much interest, which is why I have also written about Middle East Peace Bonds, though any region could of course be the subject of bonds aimed at conflict reduction. 

To summarise, I would think that at a national level, broader is generally better when considering the targets of a Social Policy Bond issue. At the global level, I think that the broadest possible bond issue might be suboptimal. However, I'm open to discussion. 

Not so outlandish

I'm aware that Social Policy Bonds can seem outlandish - at least at first reading. They imply the outsourcing of the achievement of our social goals to anybody, public- or private-sector, with no directive as to how they shall achieve our goals, except that they comply with legislation. That said, many social and environmental problems have resisted all attempts at solution. You are immediately dismissed as an idealist for suggesting, for instance, that war can be abolished, or that poverty or crime can be drastically reduced. In response, I might say Could a Social Policy Bond regime do worse than our current efforts? It's true that a bond regime could be completely ineffectual: people could simply refuse to buy the bonds on flotation, or they could buy them, then do nothing to help solve the targeted problem. If nobody buys the bonds, then that tells the issuers that they have allocated insufficient funds for redemption. If bondholders do nothing, then the value of their bonds would fall until either they have a powerful incentive to do something, or to sell their bonds to people who would do something. In all such cases, however, there would be no cost to taxpayers, even if the bonds had been issued by government, unless the targeted social problem is solved.

As important is that Social Policy Bonds can be issued in parallel with existing efforts to solve social problems. Bondholders could undertake their own initiatives, but would also have incentives to look at current approaches and boost the finances of the more promising ones.

Below is an excerpt from my book showing how this transition could work when addressing UK health problems. The excerpt is from Chapter 4. That chapter, and the complete book can be downloaded free of charge from here. Simpler, shorter explanations of the Social Policy Bond concept can be found via my homepage.

"Take health, for example. In the UK, central government provides funding for regional health authorities (for spending on doctors, hospitals and prescriptions) according mainly to population level, age and need. Government also supplies funds directly to medical research organizations and academic institutions. A transition to a Social Policy Bond-based, rather than institution- or activity- based, funding programme would see the direct funding government gradually decline, while expenditure allocated by bondholders to the outcomes that all these institutions are collectively trying to achieve — longer life spans and a better quality of life, say — would gradually rise.
On introducing such a bond regime a government could decide to reduce its funding of health authorities and research institutes by 1 percent a year, in real terms. (The government could allocate the saved funding to the future redemption of the health bonds it has issued.) So after five years, each health authority would be receiving directly from central government only 95 percent of the funding that it formerly received. But bondholders could choose to supplement the income of some of these health bodies. They may judge a particular group of health authorities to be especially effective at converting the funds they receive into measurable health benefits, as defined by their bonds’ redemption terms. Particularly effective health authorities might be working in deprived areas, where small outlays typically bring about larger improvements in health. Or bondholders might judge a particular research body to be
worthy of additional funding, because it was conducting excellent research into a condition that would be likely to respond especially effectively, in terms of health outcomes, to additional expenditure. In such cases, bondholders would supplement their selected health authorities’ or research institutes’ funding. It may well be that these favoured bodies end up receiving a large boost in income throughout the lifetime of a bond regime.

It could also happen that investors in bonds targeting health look at completely new ways of achieving health objectives; ways that currently receive no, or very little, funding. To give a plausible example, they may be convinced that one of the best ways of achieving society’s longevity objectives is to deter teenage drinkers from driving. Following this logic, they may find that one of the most efficient ways of doing so would be to lay on subsidised taxis for teenagers attending parties on Friday and Saturday nights – but only in certain parts of the country. It is difficult to imagine how our current centralised government fund allocation mechanisms could go about implementing such a programme. A Social Policy Bond regime would quickly eliminate some of the less rational distortions in other health care matters, amongst them the British National Health Service’s terminal-care budget, 95 percent of which was allocated to the 25 percent of the UK’s population who die from cancer, and just 5
percent to the 75 percent who die from all other causes. 

It is also likely that holders of bonds targeting health outcomes would greatly expand funding in areas such as health education or preventive medicine that rely on expertise outside those bodies traditionally devoted to health care. 

Could bonds targeting remote objectives, such as a large rise in longevity, or a halving of the crime rate, be compatible with a gradual transition of the type described above, where funding to existing health institutions reduces by 1 percent annually? At first sight there would seem to be an apparent mismatch between such incremental reductions in government spending and the time scale needed to reach long-range objectives. The critical point here is that bondholders would be investing not on the basis of the annual reductions in government expenditure on existing health institutions, but on the basis of the redemption value of all the bonds issued. To be more precise, it would be this total redemption value, minus the bonds’ existing market value, that would inform bondholders’ investment decisions. This sum could be many times each year’s incremental reduction in government’s institution-based spending. One of the virtues of a Social Policy Bond regime is that bondholders could expect capital gains in the short run from investments that will begin to impact on the targeted goal only in the long run. By doing the initial groundwork efficiently and speedily – not usually a very lucrative proposition in the current regime – they could see short term rises in the bond price
and early capital appreciation. The accumulated reductions in spending to existing institutions would be one, but not the only, factor influencing how much government decides to spend on achieving a specified social goal. Also important would be the financial savings (if any) that achieving the objective would bring about, and the value society would place on any nonfinancial benefits. Similarly gradual transitions would be warranted in other areas, such as education and crime, where schools and police forces, some of which are bound to be much more effective than others, are well entrenched. These institutions would receive slowly diminishing absolute levels of funding directly from government, while bondholders would again focus their spending on especially rewarding, in terms of specified education and crime outcomes, projects and institutions. As with health, it is likely that those areas that are initially most disadvantaged would again provide bondholders with the greatest return per unit outlay. In newer policy areas, particularly the environment, it may be possible to expand spending allocated via the bonds at a faster rate: expertise in the environment is still relatively mobile, and it would be easier to quickly establish new outcome-based institutions or to reorientate existing ones."

Give learned associations a chance!

Justin Gregg compares diagnostic inference, whereby animals learn to associate a cause with an effect, to causal understanding, whereby humans reason as to why something happens:

If causal understanding is such an obvious advantage over other ways of thinking, why did it take our species 200,000 years before we began using this ability to begin the spread of modern civilization? The answer is that sometimes, being a why specialist leads our species toward unexpected ludicrousness that is so bad for our species (evolutionarily speaking) that it makes you wonder if we’d actually be better off relying solely on learned associations. Justin Gregg, If Nietzsche Were a Narwhal, September 2022

I will agree that, when policymakers attempt to understand why something is happening by looking for 'root causes', this can be a waste of time or an excuse for inaction. There are too many causes of social problems, and they are too various and too variable to be identified - at least by conventional public- or private-sector organisations, with their fixed structures and limited remits. Crime, poverty, war: these have many causes that vary markedly over time and space. It is politically acceptable for governments either address the symptoms of these problems, or to spuriously reduce the number of causes to one and target that: so crime is often attributed to poverty, and climate change to greenhouse gas emissions. But these problems may have no single, fixed cause, and we need to offer incentives that encourage people continuously to explore the many, varying causes of our social and environmental problems. Often, there are suggestive associations between cause and effect, but insufficient evidence for governments to use taxpayer funds to act on those associations. So, unless effect can unambiguously attributed to causes upon which we can act, our problems remain.

What I suggest we do instead is reward the outcomes we want to achieve, regardless of how they are achieved. Provide incentives for people to investigate some or all possible causes or simply to learn by association - as in the animal kingdom - and react accordingly, even without the evidence required to draft a policy. And to bear in mind that doing nothing, in some rare circumstances, might be the optimal approach.

Social Policy Bonds would encourage this type of behaviour, rooted in a humility that recognises that we cannot always identify the causes of our problems, but that we might not need to in order to solve them. How would they do so? They would reward all approaches, however indirect or nebulous, that help solve a targeted problem. Evidence in favour of an approach could be anecdotal, associative or putatively causal: governments cannot act on all such evidence, but holders of Social Policy Bonds can; their sole criterion for backing an approach is whether it promises to be a cost effective way of achieving the goal they target. 

What do I mean when I say that doing nothing might be the optimal approach? Take climate change: the evidence that it's actually happening convinces me (currently). The evidence that we can or need to do something about it is a little more contentious. We need a framework in which, if circumstances change, incentives are in place for an appropriate, nimble response. Such circumstances might include, say, a dramatic increase in adverse climatic events (more rapid response required), or in our scientific knowledge, or a supervolcano that threatens to freeze the planet, or an unforseeable (and, admittedly unlikely) reduction in adverse climatic events. In theses latter two events a bond regime would see climate mitigation activities could be attenuated or suspended. The conventional approach would find it difficult to adapt appropriately. 

My point, ultimately, is a simple one: if we target outcomes, we do not need to identify root causes to solve our complex social and environmental problems.

Where are the incentives to take the long-term view?

Where are the incentives to take a long-term view? I mean not only for policymakers, but for corporations, philanthropists, and the rest of us. Rewards are there for turning up to work, for attracting attention, for doing things; even sometimes for solving problems, though rarely for preventing them arising in the first place. But, increasingly, we are more concerned with short-term goals. There are several possible explanations. In the private sector, industry concentration means that managers, rather than family members, control corporations. But what about the public sector? 

[Government bureaucracies non-self-evaluate. At a minimum, agencies with evaluative responsibilities are not invited to evaluate - they are kept out of the loop, their opinions unsought. At a maximum, government agencies actively suppress their own internal evaluative units and are discouraged from evaluating the beliefs and policies of other agencies. Why States Believe Foolish Ideas, Steven van Evera, 2004

There are, then, few rewards for being successful, and fewer still penalties for failure. As well, government's role is changing. The current Economist writes about its growing role in bailing out corporations:

Politicians have long sought to provide safety nets or stimulus in bad times. But over the past 15 years, they have become far more willing to shore up vast swathes of the economy. When industries, companies or people get into trouble, fiscal help is never far away. Gains are privatised, but a growing share of losses or even potential losses are socialised. To appreciate this role for the state, discard much of the conventional wisdom, which says that in the “neoliberal” era governments have let free markets run riot. Instead, this is an era of “bail-outs for everyone”. The world enters a new era: Bail-outs for everyone!, Economist, 1 October

The long-term view is the inevitable loser.

Social Policy Bonds aim to inject the market's incentives into the achievement of our social goals. But perhaps their greater benefit is that they enable the targetting of goals that can be achieved only after decades, such as reduced crime rates, a cleaner environment or world peace. Nobody knows how to achieve these goals, and existing organisations have little incentive to investigate the wide range of diverse, adaptive approaches necessary to do so. But a Social Policy Bond regime would put in place incentives for people to take the long-term view: to research, investigate, experiment, refine and implement the most promising potential solutions to our social and environmental problems, even if, as is likely, total success will take decades.

Are electric vehicles better for the environment? It's not clear

Social and environmental problems are complex: they are bedevilled by many variables and pathways with feedback loops and time lags, all of which change constantly and vary with geography. They are simply not amenable to conventional policymaking, which tries to identify causes of our problems and then deal with them. Social Policy Bonds take a more humble approach. A bond regime wouldn't assume knowledge of all the causes of a problem, nor which private- or public-sector agency is best placed to solve it. Rather, it would reward the people who take steps that solve the problem. By doing so, the bonds greatly enlarge the range of problems we can target, to encompass even those thought to be intractable, such as war.

One example of the sort of complexity that our current policymakers think they grasp, but don't, concerns electric vehicles (EVs). The Economist, quoting Socrates Economou, discusses the nickel used in EV batteries:

Indonesian nickel is not the high-grade sort usable in batteries. It can be made into battery-compatible stuff, but that means smelting it twice, which emits three times more carbon than refining higher-grade ores from places like Canada, New Caledonia or Russia. Those additional emissions defeat the purpose of making EVs..... Carmakers, particularly European ones, may shun the stuff. Could the EV boom run out of juice before it really gets going? The 'Economist', 14 August

No conventional organisation, with its fixed structure and a sclerotic inability to adapt to changing circumstances, can keep track of all the important variables and relationships necessary even to answer such a relatively simple question as 'are EVs better for the environment than vehicles powered by internal combustion engines?' We need organisations that don't presuppose answers with fossilised science; ones that can try many diverse, adaptive approaches, and take a long-term view.

Social Policy Bonds could help. They would stipulate the required outcome; one that would be meaningful and comprehensible to everyone, such as an improved environment, or world peace. At every stage along the path toward achievement of the targeted goal, they would provide incentives in such a way as to subordinate all activities and approaches to that achievement. It's likely that a new sort of organisation would evolve; one with a protean structure and composition, with all its activities dedicated to solving the targeted social or environmental problem. 

I will admit that all this sounds far fetched, and that despite my floating of the Social Policy Bond concept into the public arena more than 30 years ago, they have been issued only in a non-tradeable form and so stripped of much of their value - in my view. The likelihood of their ever being issued in accordance with my wishes is slim. But the relevant question to ask a time when we may well be poised on the brink of environmental or nuclear catastrophe is: what is the alternative?

The Nobel Prize

No, Social Policy Bonds are unlikely to win a Nobel Prize nor any major prize, despite the anonymous comment in this newspaper article (pdf), and their mention in Robert Shiller's 2013 Nobel Prize lecture (pdf, page 489). Why not? There may be other reasons but the two that come to mind are:

• Social Policy Bonds do not originate in a member of an esteemed institution; and
• Only the non-tradeable variant has actually been issued. 

The non-tradeable variant, also known as Social Impact Bond, pay-for-success bond, or social benefit bond, with which I've had no direct involvement, is currently deployed in about 25 countries, with varying levels of success. As I explain here and here, I'm ambivalent about them, and I still hope that one day my original conception will become manifest and help solve our long-term, seemingly intractable, large-scale social and environmental problems. 

In the meantime, I've added a Donate link in the right-hand column, in an effort to keep my SocialGoals.com site online, and to help pay my other expenses.

Below is a short article suggesting that Nuclear Peace Bonds be issued to reward a sustained absence of nuclear conflict. Nuclear Peace Bonds are an application of the Social Policy Bond concept:

Rewarding nuclear peace

It’s possible that Russia will have to confront comprehensive defeat in Ukraine, maybe even facing the prospect of losing Crimea. How likely is Putin going to say ‘OK, it’s a fair cop, we lost fairly and squarely, it’s all over.’ and refrain from launching ‘tactical’ nuclear devices to change the course of his war? It could happen; we might get lucky, and we might also get lucky when other nuclear-armed powers throw their weight around. But do we really want to gamble on it? Once any one of these countries breaks that taboo, how long will it be before governments begin to see nuclear weapons as just like any other weapon, despite the likelihood that they will devastate an already parlous planet? There’s little or nothing that the international community can do to lower that probability. National policymaking systems can work well when the relationships between cause and effect are readily identifiable. But for large-scale, complex, global problems like the risk of nuclear catastrophe we need to encourage investigation of a wide range of possible solutions.

Nuclear Peace Bonds

You may be familiar with Social Impact Bonds (also known as Pay for Success Bonds), designed to reward investors who achieve socially beneficial goals. Bondholders who achieve an improved outcome receive higher returns. They are limited by their lack of tradeability, whereas the Nuclear Peace Bonds that I propose would be tradeable, which greatly enhances their potential. It allows for bondholders to do what they can to achieve the targeted nuclear peace goal, see the market value of their bonds rise, and then sell their bonds to those best able to take the next steps towards the goal. To make a profit, they do not have to hold the bonds for the decades that such a long-term goal would take to achieve.

Nuclear Peace Bonds would be backed by funds be raised from the public or private sector, or both. These bonds would be floated on the open market for whatever price they fetch. They would be redeemable for a fixed sum only when there has been nuclear peace for a sustained period of, say 30 years. This goal, being remote, would mean that the bonds would sell for very little when first offered to the market. So any activity that increases the likelihood of sustained nuclear peace would see an improvement in the bonds' value. Nuclear Peace Bonds would create a protean coalition of bondholders that would have a powerful incentive to co-operate with each other and to research, refine and implement those measures thought to be, at any given time, those most likely to bring about nuclear peace. With such a big, remote objective, no single approach will work. A Nuclear Peace Bond regime would stimulate a wide range of diverse, adaptive approaches to the threat of nuclear catastrophe. All bondholders’ initiatives would be in service of the one over-arching goal: a sustained period of nuclear peace. The secondary market for the bonds would ensure that, at all times, the bonds would be in the hands of those who believe they can help achieve the goal most efficiently. Inefficient operators, or those who had done their bit, would sell their bonds to more efficient operators, to whom they would be worth more. Unlike some other global problems, the Nuclear Peace Bonds would have a clear and verifiable metric, such as avoidance for 30 years of a military nuclear explosion that kills more than 100 people within 24 hours.

Incentives

Currently, there's a jarring mismatch between on the one hand the fears of, and risks to, almost everyone on Earth from nuclear conflict and on the other, the efforts devoted to mitigating them. A shift in resources away from, for example, ingenious ways of exploiting financial markets or selling dog-food, would benefit all of us. But our current policymaking system doesn't encourage such a re-orientation of priorities. Incentives now are for those few who have acquired power – including psychopaths - to do whatever they can to retain it. The wish of the billions of people who don’t want to live in a world of nuclear conflict is too diffuse to prevail. Of course, there are many hard-working employees of existing organisations who are trying to achieve peace. But – let’s be frank – they are paid for turning up at the office and putting in the hours, rather than success.

A Nuclear Peace Bond regime would reward those who achieve peace, whoever they are and however they do so. It’s an admittedly unconventional approach. But the conventional approach has brought us to the brink of nuclear catastrophe. The taboo against threatening the use of nuclear weapons has been broken. It now appears inevitable that, unless we rebalance the incentives, the taboo against their use will also be broken. It’s now time to encourage and reward diverse, adaptive and successful ways of dealing with the looming nuclear threat.

© Ronnie Horesh

Time to reward health outcomes

Given the widespread, and justifiable, distrust of pharmaceutical companies, it would seem that this is the time to move towards rewarding those who achieve favourable health outcomes, rather than those who merely engage in activities purporting to deliver those outcomes. Those currently employed in healthcare are reacting rationally to the incentives on offer, to the detriment of our physical and mental health. And those incentives encourage over-screening and over-treatment, and the neglect of commercially nonnviable preventive interventions. As the British Medical Association put it:

Despite the clear acknowledgement across the UK of the need to prioritise ill-health prevention and public health activities, the data analysed in this briefing show this is not matched by funding commitments. Funding for ill-health prevention and public health in the UK (pdf), British Medical Association, 2017

It's the same, or worse, in the US:

Almost 1.3 million people went to U.S. emergency rooms due to adverse drug effects in 2014, and about 124,000 people died from those events. [R]research suggests that up to half of those events were preventable. ... An estimated $200 billion per year is spent in the U.S. on the unnecessary and improper use of medication, for the drugs themselves and related medical costs.... Too many meds?, Teresa Carr, 'Consumers Reports', dated September 2017

It's time for a new approach. My suggestion is that rather than policymakers' focusing on the means by which they think good health can be achieved, they instead focus on targets for good physical and mental health, and provide incentives for people to achieve those targets. The Social Policy Bond concept, applied to health, would do this, and more: it would inject the market's incentives and efficiencies into all the processes necessary to improve a nation's health. Health Bonds would channel our scarce resources into the most efficient means of improving our health, including those currently neglected or not even considered by our current healthcare bodies, most of which have little incentive or capacity to consider broad health outcomes that fall outside their increasingly specialised remit.

Health Bonds wouldn't stipulate how our health goals shall be achieved, nor who shall achieve them. This allows a broader approach. For example: our current compartmentalised accountancy-driven policy approach would not take into consideration the adverse health impacts of subsidising advanced courses for young drivers of motorbikes or cars. But holders of Health Bonds would look at such measures, investigate their possible health impacts, and make an informed decision as to whether any improvement they might bring to the nation's health is worthwhile, compared to other possible interventions.

There's no need to quantify everything

ESG stands for Environmental, Social, and Governance, and investors are increasingly considering these non-financial factors when identifying companies' risks and growth opportunities.  

About ESG, the Economist writes:

[M]uch of ESG is deeply flawed. The concept’s popularity has been partly fuelled by real-world concerns, especially climate change. Yet it has had a negligible impact on carbon emissions, especially by the biggest polluters. Its attempt to address social issues such as workplace diversity is hard to measure. As for governance, the esg industry does a lousy job of holding itself to account, let alone the companies it is supposed to be stewarding. It makes outsize claims to investors. It puts unmanageable demands on companies. ESG investing: A broken system needs urgent repairs, Economist, 23 July

I share the Economist's scepticism; I dislike the over-formalising and quantification of things that are best left to people's discretion. When certain ESG concerns, or such matters as affirmative action become over-formalised, then politics steps in, the debate becomes polarised and meaningful discussion becomes impossible. 

However, a Social Policy Bond regime would revolve around the targeting of broad, meaningful outcomes, and just about any measure of such outcomes can be gamed and manipulated. (There are workarounds, though. For example, when targeting for improvement the literacy rate of teenage girls in Bangladesh, participants in random surveys would not be specified in advance. so that they couldn't be given more attention than other girls.) As well, there is Campbell's Law to consider: 'The more any quantitative social indicator is used for social decision-making, the more subject it will be to corruption pressures and the more apt it will be to distort and corrupt the social processes it is intended to monitor.'  I'd like, therefore, to see a panel of trusted, impartial experts confirm that any recorded improvements are genuine. Because Social Policy Bonds work best at a large scale - national or global, say - the costs of monitoring and verification would be relatively low.

I don't need to know about electric vehicles

Rich Barnett writes to the editor of the Spectator: 

Martin Vander Weyer might continue to bang the drum for electric cars and their ‘green’ credentials but the problem is that in the drive for such cars we have effectively seen a cessation in development of petrol and diesel engines....[Y]our correspondent swerves the issue of just how clean these [electric] cars are, especially when we follow the production process back to the raw materials. In reality, the cleanest cars are those already built and maintained. Rich Barnett, the Spectator, 9 July

Mr Rich may be right or wrong. I don't know. But, as an advocate of policy that targets meaningful environmental outcomes, I don't need to know. It might be true that the environmental costs of electric vehicles is higher than that of petrol and diesel vehicles now; but that could change. What is the probability that legislation made today can correctly calculate even today's relative environmental costs, let alone those of any future time period?

My suggestion is that instead of trying to work out the best ways of improving the enviroment when our knowledge of ever-changing relationships between cause and effect is inescapably scanty, we target those environmental goals we want to achieve and reward people for achieving them. This makes better sense for two main reasons: 

• There is far more consensus about what those goals should be than the supposed means by which they can be achieved.  
• Technology, and our knowledge of the relationships between cause and effect are changing constantly in ways that nobody and, in particular, no regulatory body, can anticipate. 

When governments favour, whether by subsidy or other means, what they believe to be the most efficient way of achieving certain ends they are often looking only at current technology and short-term goals. Our environmental problems, though, require a long-term approach. Environmental Policy Bonds aim not only to re-focus policy on long-term goals but to inject the market's incentives into their achievement.

Philanthropists want to be in control. Just like governments.

Emma Saunders-Hastings, in her recent book about philanthopy, asks an important question:

Before Parisian firefighters had fully extinguished the blaze that ravaged Notre- Dame in April 2019, lavish pledges rolled in from philanthropists eager to support the cathedral’s reconstruction: €100 million from Bernard Arnault, France’s richest person; ... commitments in the millions and tens of millions of euros from individual and corporate donors in France and abroad. The pledges were greeted with a mixed reception: conventional expressions of gratitude in some quarters but swift criticism from others. Why, some skeptics asked, were private funds so readily available to repair a building
but not to address rising inequality in French society? Emma Saunders-Hastings, Private Virtues, Public Vices: Philanthropy and Democratic Equality, March 2022

Or, indeed, other social and environmental problems such as unemployment, crime, or global concerns, such as war?

Later, Ms Saunders-Hastings grants that 'some donors have a better grasp of the measures that would best promote people’s substantive interests than the elected officials whom they are seeking to influence or bypass'. She concludes: 

Democratic societies need different ways of promoting reciprocity and long-
term attention to the public good— ones that do not require reliance on the
competence and goodwill of hereditary or economic elites. Contemporary philanthropy has not yet solved this problem.  

It seems to me that Ms Saunders-Hastings' first question is relatively easy to answer: philanthopists are unlikely to want to undermine the system that allows them to accumulate and maintain their vast wealth; including by influencing government policy. Also important, I believe, is that philanthropists are biased in favour of projects that are highly visible, where their contributions can be easily identified. In this, it is not very different from governments, which also favour the glamorous and photogenic over more mundane goals that require multiple approaches and much experimentation and refinement before they can be achieved: hence the persistence of some of our most grievous social problems. 

I have tried, with no success, to interest philanthropists in the Social Policy Bond concept. It seems to me that they are reluctant to relinquish control over the destination of their funds. In this respect, also, they are similar to governments. It's an understandable bias - though regrettable. My wish is that all funding bodies, private or public sector, would reward those who solve our most persistent, long-term problems, rather than insist on dictating who shall receive their funding and how they shall allocate it.