Resources for health

Today's Financial Times has a feature on antimicrobial resistance, pointing out that resistant pathogens are thought to have killed 1.26 million people in 2019, and that the problem is getting worse. 

Few venture capitalists or large drugmakers want to fund the costly clinical trials required by regulators.... As with climate change and future pandemics, no one is taking enough responsibility for the ever-present global threat of antimicrobial resistance.... Why it's so hard to stop the 'silent pandemic', Hannah Kuchler, 'Financial Times', 29 August

The article does talk about philanthropic investment aimed at launching two to four new antimicrobials in the next decade, but this is thought to be insufficient, and:

attention is turning to changing how health systems buy antibiotics. This year, the UK has proposed expanding its novel subscription model, so drugmakers would receive up to £20 million a year for selling innovative antibiotics, no matter how many - or how few - are prescribed.

...nor indeed how effective or ineffective they are - which is the problem: we shouldn't be targeting how many new antibiotics are marketed; that's, at best, a surrogate endpoint. It's not a meaningful outcome to people who want to optimise their health nor, therefore, for policymakers who represent those people. What we need to be doing is targeting broad, meaningful indicators of national health and reward improvements in these indicators however they are achieved. Funding should be dictated by its expected benefits to people, rather than to drugmakers; and it should be directed to where it will achieve the maximum improvement in health per pound spent. Such improvement could be measured using such indicators as Quality Adjusted Life Years, longevity and an array of other measures. It may be that these investments in producing new antimicrobials are appropriate on that basis  - or there may be other priorities that would generate a higher return. My concern is that there is little to suggest an analysis of expected benefits per pound spent has been carried out.

My suggestion, therefore, is that national governments issue Tradeable Health Outcome Bonds, which would provide incentives to research, develop and refine all approaches to improving our health, including measures that are currently thought to be beyond the remit of health authorities, but that could have large positive health improvements. Such measure could include providing better public transport for low-income households, or subsidised apprenticeships. There are many other possibilities, but there are few incentives to consider their health impacts. The linked essay is long, at 9500 words. A shorter version is here.

Targeting environmental outcomes: thirty wasted years

What sort of environmental policy are we seeking? What are our goals? What should be our goals? Such questions arise when we read that, for instance, operating carbon capture and storage would increase direct emissions of NOx [nitrous oxides] and particulate matter by nearly a half and a third, respectively, because of additional fuel burned, and increase direct NH3 emissions significantly because of the assumed degradation of the amine-based solvent. From Air pollution impacts from carbon capture and storage (CCS) [pdf], EEA Technical report No 14/2011

...or when we reading about road vehicles, we realize that:

their tyres  brakes and wear and tear on the road also produce dangerous pollutants, which get worse the heavier vehicles are. How green is your electric vehicle, really?, the Economist, 10 August

...and that electric vehicles are heavier than their internal combustion equivalents. Clearly, there are significant environmental trade-offs here: we can reduce emissions of greenhouse gases, but at the cost of increased emissions of other air pollutants. Currently, policy is made without much consideration of these trade-offs: an apparent emergency, such as climate change, dominates policymakers' thinking so much that the impacts of addressing it are neglected. So, for another example, the environmental costs of generating electricity using wind turbines (with non-biodegradable blades) or solar energy (with loses to biodiversity) are ignored. 

It's quite possible that, in the long run, the policymakers have chosen correctly and that climate change is a real emergency that merits increased pollution of the atmosphere with nitrous oxides,, particulates from tyres, etc and the loss of biodiversity. There are very few instances where one human activity, whether it produces energy or anything else, does not have a negative environmental impact. So, mining and using the filthiest coal to generate electricity has, and still does, bring heat and light to poor people at low cost, while polluting the air and costing the lives of miners. Once the negative impacts become impossible to ignore, and society becomes wealthier, we make efforts to regulate or price the negative impacts.

How is this policymaking approach working? I think the consensus would be: not very well. As well as climate change with all its attendant dangers, we are facing biodiversity loss, overfishing, water and air pollution, and other depredations at all scales. But we can't  expect policymakers to weigh up all the impacts of our activities and price or regulate them accordingly, and to do so on a continuous basis to ensure that policy keeps up with scientific advances (just one current possibility here) and the growth of our knowledge about scientific relationships.

So I propose a different method. The current system reacts to problems when they become politically unavoidable, and then tries to identify and address their causes. My method would be instead to specify acceptable ranges of indicators of environmental health, including human, animal and plant health, and supply incentives for people to ensure that the targeted indicators remain within those ranges for a sustained period. In short, to target environmental goals and reward those who achieve them.

My suggested way of doing this at the national level would be for the government to issue Environmental Policy Bonds. These bonds would not bear interest, but would be redeemable once the specified environmental targets had been achieved and sustained. The bonds would be tradeable and, could have a very long-term focus, encouraging people to research, refine and undertake activities directed toward one or all of the targeted goals. In this, and in other ways, they would have several advantages over current policymaking:

• We'd be targeting outcomes, for which there is more consensus than for the means to achieve them.  

• People can identify more readily with explicit environmental goals than with the means to achieve them, which means that there would be more engagement with the public when developing environmental policy, which in turns means more buy-in, which I consider to be essential.

• The target outcomes would be stable and have a very long-term focus: essential if we are to encourage new ways of achieving our environmental goals.
  

If national governments successfully implemented Environmental Policy Bonds, they could conceivably collectively issue bonds targeting global environmental objectives, encompassing, for example, the health of the seas and atmospheric pollution as well as climate change and biodiversity loss. I have to admit that that looks extremely unlikely, especially as the concept has been in the public arena now for more than thirty years, and only a non-tradeable variant (Social Impact Bonds) has so far been tried. As I explain here and here tradeability is absolutely necessary if we want to achieve broad, long-term goals. Perhaps, rather than wait for government to change the way it does things, we should try to engage with philanthropists. I've tried and had no luck, but perhaps my readers will be more successful.

Using reason to make policy

The Economist writes:

...Americans need to recognise just how many of their compatriots’ lives are being squandered. Too often politicians have been slow to do so and, as a result, America has come to tolerate an obscene level of early deaths. Only after the shock and shame of yet another mass shooting, at an elementary school in Uvalde, Texas, last year, did Congress muster the will to pass modest new gun controls. A proper sense of alarm at other kinds of needless loss may help bring about measures to keep more Americans alive for longer. That way the country could start to curb the carnage. How to reduce American carnage, the Economist, 31 July

It's unfortunate that it takes dramatic events that have immediate visual impact before our current policymakers think about addressing many of our social problems. Ideally, we should aim for policies that minimise adverse impacts on all people's well-being, regardless of who they are, where they happen to live, or whether their plight is dramatic enough to make people watch news bulletins.

One way of doing this would be for government to consult with citizens to discover their priorities for policymakers, specified in terms of broad goals, at times of relative calmness and over a sustained period. Examples of such goals could be: cut violent crime by 50 percent; raise literacy to 99.5%; improve life expectancy by three years. The exact formulation of these goals would be decided by experts and confirmed by government. 

The next step would be to reward people for achieving these goals, whoever they are and however they do so, provided the act within the law - though as part of their goal-achieving activities they can lobby for changes in the law. 

I would go further: my Social Policy Bond concept would aim to inject the market's incentives and efficiencies into the achievement of our specified social and environmental goals. It's a simple idea but one that represents a complete change in the ways government currently runs things. Essentially, it would allow government to concentrate on articulating society's wishes and raising the revenue to achieve them: things that democratic governments are actually quite good at. But the bonds would, in effect, contract out the achievement of these goals to whoever thinks they are best placed to do so. These investors in the bonds would be prepared to pay more for them than they are worth to current holders, so that the bonds would always flow into the hands of those who can best advance progress towards the targeted goal. Because they would be tradeable, investors wouldn't have to hold them for long: they could buy them, advance progress toward the targeted goal, so seeing the value of the bonds rise, then sell them to those best placed to to take the next steps towards the goal's achievement, at which point the bonds would be redeemed. 

In such a way, government would be doing what it's best at, while the market for the bonds would do what - in economic theory and on all the evidence - markets do best: allocate society'e scarce resources optimally.

Uncosted goals are platitudes

Janan Ganesh writes:

Let us dispose of the idea that net zero is popular. Yes, in Ipsos surveys, voters endorse various green policies by supermajorities. But when a financial cost is attached to them, most are rejected. ...Last month, a YouGov poll found that around 70 per cent of [UK] adults support net zero. If this entailed “some additional costs for ordinary people”, however, that share falls to just over a quarter. The beginning of the end of Britain’s net zero consensus, Janan Ganesh, Financial Times, 2 August (archived here)

Government, unfortunately, rarely sets out transparent, explicit, verifiable goals. One such is the 2 percent annual inflation rate, targeted by the UK Government: currently the rate exceeds 8 percent. The same Government's goal of 'net zero' by 2050 is even less credible. Perhaps, like most others, knows that nobody takes its goals seriously, and that nobody will be held accountable for its failure to achieve them.

A Social Policy Bond regime would be different. Under a bond regime a government would spend more time setting explicit, clear and meaningful goals than trying to achieve them, or hiding or explaining away its failure to do so. Democratic governments could be effective at articulating society's wishes and raising the revenue to fulfil them. They are not so effective at actually achieving them. Still less do they correctly estimate or explain the inevitable trade-offs that their policies entail. They can get away with such irresponsible behaviour because society is complex, and people too preoccupied with more day-to-day matters. 

As I explain in more detail in my book, under a government-backed Social Policy Bond regime, costs of achievement of goals need not be accurately estimated. Government would put funds for the ultimate redemption of the bonds into an escrow account; the bonds would be redeemed only when the specified social or environmental goal had been achieved. If the funds are deemed by the market to be insufficient, then investors will show no interest in the bonds. If the funds are roughly equal to, or even much, much greater than, the market's view of how much achievement will cost, then investors would buy the bonds, bidding for them against each other, so that the net cost to the government of achieving the goal will be minimised. The market for the bonds would ensure that this would happen continuously, with investors having powerful incentives to assess the effects of new knowledge and events quickly. Tradeability, which I discuss here and here, greatly expands the range of goals that the bonds can achieve: government could target very long-term outcomes, such as universal literacy or greater life expectancy and then disengage from any attempt to achieve them, which would become the responsibility of investors in the bonds. 

Sadly, governments today, knowing that they are rarely held accountable, are prone to preach such uncosted goals as 'net zero' that function as little more than self-satisfied advertising slogans.