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?
