Methane and supervolcanoes

This recent headline from ScienceNews says it all:

Methane may not warm the Earth quite as much as previously thought

There is much about the environment - and society - that we just do not know. Yet our policies are formulated as if we do know. We think climate change is mostly a result of our pumping greenhouse gases into the atmosphere. That may well be the true but, even now, we find that we don't know as much as we thought about the relative contribution of each greenhouse gas. In this instance, the original estimate was 30 percent off the latest estimate. But we are making policy as if the role of each greenhouse gas in climate change is certain and fixed. 

Not only is the science about each gas's relative contribution uncertain; so too is our knowledge about other determinants of climate change. Yet we enact policy as if we know everything. It's risky; especially as not only is our knowledge of the physics of climate change incomplete, so too is our ability to forecast the future. Eruption of a supervolcano is unlikely but:

[T]his gigantic eruption sent the world into a decade-long volcanic winter and caused the climate to be cold and dry for thousands of years after that. The resulting famine is theorised to have reduced the ancient human population down to just a few thousand individuals. Source

Lesser events, as well as surprises in the physics, could invalidate some or all of our efforts to deal with climate change. Policy should account for such gaps in our knowledge, and not only in environmental matters. Society is also too complicated for a policy approach that assumes that relationships are known and fixed. So, for example, reducing crime rates or increasing literacy is not simply a question of more funding for already-existing bodies. In my view, it's more a matter of putting in place incentives that reward people for achieving our goals, whoever they are, and however they do so. The risks of unanticipated events and failed approaches should be borne by those taking on the task.

Social Policy Bonds are one way of addressing the complexity of society and the environment. They reward the achievement of desirable outcomes, rather than the supposed means of achieving them. They set up incentives to reward promising approaches and - importantly - to terminate failing approaches. They transfer the risk of failure from the bonds' issuers (usually government) to investors in the bonds. They encourage investors to keep an eye on events as they unfold, and to respond to them appropriately. So, for example, investors in bonds targeting climate change would react to the research referenced above (if they did not carry it out themselves) by refining their attempts to deal with methane emissions. Under the current regime, nobody has incentives to change the assumptions on which existing models are based.

What happens if nobody does anything?

In my book I speculated that, if a goal targeted by a Social Policy Bond issue remains remote, the bonds' backers could issue more bonds, or swell the redemption funds and, by doing so, increase the incentive for bondholders to work to achieve the goal. I now see that this was probably naive, and that there would be a perverse incentive for investors to acquire as many bonds as they could, do nothing, and watch the value of their holding rise if the backers did as I speculated. 

So I have modified the original text of the relevant paragraph in chapter 3 of the book to read:

Note that the issuing body could add to the number of bonds in circulation after floating at any time, if it wanted to boost the efforts going into achieving a particular social goal, but this could encourage people to buy the bonds, and do nothing to achieve the targeted goal so that, when more bonds were issued, the value of their holding would rise. A better approach might be to declare the initial bond issue invalid, which would act as a spur to encourage would-be passive investors to become active, or to sell to active investors. If the issuers wanted, for whatever reason, to reduce such efforts, the situation would be a little more complicated. It could buy bonds back from holders, but doing so would reduce the total funds to be spent on achieving the targeted objective, and so would lower the value of all bonds in circulation. People might therefore be unwilling to buy bonds in the first place if they thought there were a high probability of the issuing body's buying some of them back in this way. They would demand some sort of premium for taking that risk. Alternatively, the issuing body could undertake either that it would never buy Social Policy Bonds back or that, if it did, it would pay the market price ruling before it announced its purchase intentions.

The intention is to deal with the criticism presented on this page; that is, the sixth criticism (beginning 'Expectations...'). Chapter 5 of the book is also slightly modified to reflect the same concern.
 

Taking advantage of complexity

Powerful interests use complexity to hide their anti-social behaviour:

Since 2013, ProPublica has exposed how Intuit, the maker of TurboTax, and other companies have resisted efforts to make tax preparation easier and less costly, including lobbying to ban the IRS from offering free, simple tax filing and deceiving customers who should qualify for the Free File product. Source

The evidence indicates that low-income Americans are not taking full advantage of government programs for a much more banal reason: we’ve made it hard and confusing. People very simply often don’t know about aid designated for them or are burdened by the application process. When it comes to increasing enrollment in social programs, the most successful behavioral adjustments have been those that simply raised awareness and cut through red tape and hassle. The High Cost of Being Poor, Matthew Desmond, New York Review of Books, 20 April

One of the advantages of the Social Policy Bond concept is its transparency. Policymakers would have to explicit about their intentions. So, for example, if they want to shovel billions of dollars from taxpayers and consumers to a small group of wealthy landowners who have devastated the environment, and helped impoverish developing countries, they would have to say so openly, instead of, as at present, waving their arms and mumbling about 'food security', 'saving the family farm', 'looking after the countryside', and relying on people's inevitably limited attention span. Likewise, as with poverty alleviation, it's not enough to put in place a few programmes with impressive-sounding titles that might be well meaning, but access to which is difficult for those without an abundance of time and energy; which is to say: those who need them most. Lack of transparency also allows politicians and bureaucrats to avoid accountability: if there are no explicit, verifiable goals, then success or failure are a matter of spin.

Social Policy Bonds: a sonnet

 I asked ChatRPG to write a sonnet about Social Policy Bonds:

In policy circles, talk of Social Bonds
Has grown in strength and scope in recent days
A tool to tackle ills that have prolonged
By focusing on outcomes, not just ways

And in this field, one name stands apart
Ronnie Horesh, a pioneer so bright
His insights help policymakers chart
New paths to achieve the social right

The bond's concept, to put it simply, shows
That we can make a market for progress
And fund the goals that society chose
By issuing bonds that we can all invest

So here's to Horesh and his vision bold
A brighter future for us all he'll hold.

Why poverty persists in rich countries

Without even mentioning corporate welfare and subsidies to agriculture, Matthew Desmond writes about the tragedy of US poverty. Longish excerpts, because it's paywalled:

The evidence indicates that low-income Americans are not taking full advantage of government programs for a much more banal reason: we’ve made it hard and confusing. People very simply often don’t know about aid designated for them or are burdened by the application process.

 In 2020 the federal government spent more than $193 billion on homeowner subsidies, a figure that far exceeded the $53 billion allocated to housing assistance for low-income families.

I can’t tell you how many times someone has informed me that we should reduce military spending and redirect the savings to the poor. I’ve met far fewer people who have suggested we boost aid to the poor by reducing tax breaks that mostly benefit the upper class, even though we spend over twice as much on them as on the military and national defense. According to recent data compiling spending on social insurance, means-tested programs, tax benefits, and financial aid for higher education, the average household in the bottom 20 percent of the income distribution receives roughly $25,733 in government benefits a year, while the average household in the top 20 percent receives about $35,363. The High Cost of Being Poor, Matthew Desmond, New York Review of Books dated 20 April

If we allow that programmes ostensibly designed to relieve poverty are actually intended to relieve poverty, then these facts point to a tragic failure of policy. Perhaps the system isn't wholly cynical, in that policymakers find the programmes just as confusing as do the intended beneficiaries. Assuming good intentions, then, my solution would be to:

1. recognise that poverty is a complex problem, requiring long-term, diverse, adaptive approaches;
   
2. decide exactly the goals we want to achieve, in quantitative, robust, verifiable terms;
3. reward people for achieving those goals.

Sadly, policymakers do not work like this. When it comes to poverty alleviation, as with climate change, water pollution, housing and the rest, if there are stated goals at all, they will be vague and incoherent sound bites. There will be changes in the funding of established bodies, or the creation of new bodies and, perhaps, some Mickey Mouse micro-targets set in the sure knowledge that nobody will actually check on whether their achievement or otherwise has done anything useful. 

Politicians can escape blame for absurd, destructive and corrupt programmes such as their supposed policy alleviation efforts because they are not expected to express society's goals in terms of outcomes. One of the advantages of a Social Policy Bond regime is that policymakers would have to express policy goals in explicit, transparent and verifiable terms. These would be expressed in ways that ordinary people can understand. Few would argue for programmes that favour wealthy corporations, farmers and individuals, but those are the policies in place now. Making poverty goals transparent would go a long way to solving the poverty problem. A bond regime would generate further gains by providing incentives for those working to relieve poverty to do so cost-effectively.

It's not uncommon to hear the wealthier beneficiaries of government largesse bemoaning the cost of supporting single mothers, the homeless and other unfortunate and genuinely struggling individuals. The politicians deceive the people, and the rich welfare beneficiaries deceive themselves.

Tax breaks are nice if you can get them. In 2020 the mortgage interest deduction allowed more than 13 million Americans to keep $24.7 billion. Homeowners with annual family incomes below $20,000 enjoyed $4 million in savings, and those with annual incomes above $200,000 enjoyed $15.5 billion. Also in 2020, more than 11 million taxpayers deducted interest on their student loans, saving low-income borrowers $12 million and those with incomes between $100,000 and $200,000 $432 million. In all, the top 20 percent of income earners receives six times what the bottom 20 percent receives in tax breaks. We have chosen to prioritize the subsidization of affluence over the alleviation of poverty. And then we have the gall—the shamelessness, really—to fabricate stories about poor people’s dependence on government aid and shoot down proposals to reduce poverty because they would cost too much.

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I have finished adding several pages to SocialGoals.com under the Criticism header