Avoiding catastrophe

 Martin Rees writes about risk and the UK Government's approach:

The Covid-19 pandemic has been a wake-up call. We now have a choice: carry on as before or find a way to ensure we are better prepared for extreme risks. ... The government’s main tool for evaluating risk is the National Risk Register, which rated any pandemic other than influenza as unlikely to cause more than a few hundred deaths. It needs a total overhaul. Astonishingly, the register only has a two-year time horizon. Many threats cannot be neatly anticipated and prepared for within such a narrow window. After Covid, Britain must learn to plan properly for extreme risk, Martin Rees, 'Financial Times', 21 February

Lord Rees goes on to say that the Register, as well as being too short term in its focus, is excessively secretive and highly centralised. I think these deficiencies bedevil any single conventional organisation dealing with complex, long-term social or environmental problems. The optimal mix of solutions, and in this instance, the problems themselves, cannot be anticipated by any such organisation. People working in these organisations are paid for their activity, not their success in achieving what should be their overall objective: reducing the numbers of people killed or suffering as a consequence of an adverse event. 

Disaster Prevention Bonds would use the Social Policy Bond concept to reward the absence of catastrophic risk to national (or global) populations. The UK government, for instance, could raise funds that would be used to redeem the bonds once such an absence had occurred over a sustained period. This period could be several decades. A new type of organisation would probably arise, comprising bondholders, whose every activity would be subordinated to the goal of ensuring the absence of catastrophic adverse events affecting the UK population over that period. It would have a protean composition and structure that would not be determined by government, but would instead be optimised for success. The important point is that everyone charged with anticipating and avoiding potential catastrophe would have incentives  to be efficient and effective in all steps necessary to prevent disaster.

More subsidies for the rich

Madeleine Cuff writes:

A shift to more sustainable farming methods, which would make space for wildlife rich hedgerows, meadows, and peat bogs, could cut greenhouse gas emissions equivalent to taking 900,000 cars off the road, WWF said this week. Farming subsidies: Farmers can double their money by going organic under plans to protect nature, Madeleine Cuff,  9 February

Governments the world over have been engaged with agriculture for many decades. (I was tempted to say 'supported', but I doubt whether governments' involvement has been a net benefit to farmers or farming: it's certainly had many negative effects and not much has changed since I wrote this or this.) This involvement can teach us about governments' intervention in other sectors. One lesson we can learn is that once government entangles itself in a sector, it doesn't go away. Another is that such involvement can be an end in itself - can, indeed, be the whole raison d'être - for the government agencies that shape the regulatory environment or disburse taxpayers' funds.

There's a total lack of transparency. If our aim is to increase the area of hedgerows, meadows and peat bogs and to reduce greenhouse gas emissions, why not reward those who increase the area of hedgerows, meadows and peat bogs and reduce greenhouse gas emissions? If, on the other hand, government wants consumers to pay more for their food and ordinary people to pay more tax so that some of the wealthiest people in the country can become even more wealthy, then government should be open about it. 

There is a third way, and that is to reward those who achieve an improved environment whoever they are and however they do so. It may be that paying wealthy landowners to convert to organic farming is one way of achieving environmental goals. But there might well be more efficient methods, and we can be fairly certain that the ideal mix of such methods will change over time and cannot be anticipated by any government or any single conventional organisation (see here for how a new type of organisation, working in a Social Policy Bond regime, could operate). We need diverse, adapative policies in the service of society's environmental goals, not government employees dreaming up policy iniatives following the 'advice' of vested interests. 

My suggestion is that we issue Environmental Policy Bonds to channel self-interest into the achievement of our goals. Even eschewing the bond approach, however, much can be said in favour of subordinating means to ends in relation to organic farming, and I have written about this in Policy for organic farming.

Visibility versus effectiveness

Just as young children want to work for the fire brigade or become footballers when they grow up, so too are politicians in the developed world as well as daid organisations in poorer countries keen on putting their resources into initiatives that are visible to everyone:

According to Lant Pritchett at Oxford University, aid organisations often define success as creating tangible assets (building schools) as opposed to practical benefits (higher literacy). They can create the impression of helping without actually achieving much. In fact, foreign aid can sometimes make things worse. Foreign aid has done little to help Haiti, the Economist, 5 February

I think the same applies to philanthropic people and organisations, and I find it disappointing that their focus on projects with high visibility crowds out efforts to improve people's wellbeing by means of more effective, though less glamorous, initiatives. 

One advantage of a Social Policy Bond regime is that people would be rewarded for achieving societal goals - such as higher literacy. The bond mechanism would channel resources into where they will achieve the highest societal return per pound or dollar outlay; that, not visibility or kudos, would be the sole criterion underlying the choices made by bondholders and their agents. This would be unpopular with many in aid organisations or governments who would have to relinquish control over where society's scarce resources are spent. But the benefits to society of targeting our social  problems coherently and impartially would far outweigh such costs. 

Society as a whole is unlikely to wish for prestige projects that do little to alleviate underlying, complicated, long-term social or environmental problems. Nevertheless, even under a bond regime, philanthropists and their supporters could continue to fund their foundations and pet projects themselves; they'd probably achieve less for society than if they instead contributed to Social Policy Bonds' redemption funds, but that would  be their choice. There's no need for the more altruistic aid bodies or government agencies to do the same.