The Social Policy Bond idea materialised when I thought about how, when betting big money on an uncertain outcome you could use some proportion of your expected winnings to make that outcome more likely. Fixing horse or greyhound races that way would be illegal, but could the same principle be used legitimately for society's good? Perhaps new betting markets are a way in which we could effectively issue Social Policy Bonds.
Let's take a look at Polymarket, 'the World's Largest Prediction Market'.
Today (27 February 2025) we see that you can bet on whether Timothee Chalamet will take his mother to the Oscars ceremony. This is a simple one-off event that's easy to verify. It's not difficult to imagine that, having placed a sufficiently large bet, a group of punters could persuade Mr Chalamet to bring about the outcome they desire, if necessary with the promise of a significant proportion of their expected winnings. One of the difficulties of the Social Policy Bond principle is that of setting up an experiment. The bonds have their biggest advantage over conventional policymaking when the desired social or environmental outcome is likely to be complex, long-term in nature and require the investigation of a range of diverse, adaptive approaches for its solution. Such socially desirable outcomes could include the slashing of crime rates, significant improvements in the physical and mental health of a country's citizens or, at the global level, a reduction in the adverse impacts of natural disasters. We can't test the efficacy of Social Policy Bonds against current policymaking aimed at achieving such outcomes.
But what some high-minded philanthropists could conceivably do is to take out a large bet against a readily verifiable one-off outcome like, say, the detonation of a nuclear device that kills more than, say, 500 people within 30 years? They could then use their influence and funds, predicated on their winning the bet, to make such a detonation less likely. At first sight, this sounds tempting: indirectly channelling resources into the achievement of an unambiguously positive social goal. In net terms: yes; nuclear peace is hugely and unambiguously positive. But Polymarket is merely a platform that facilitates peer-to-peer trading, so that people are betting against each other. So for every $1 million bet on achieving nuclear peace, there would be people on the opposing side of that bet who would lose that much. If governments collectively decided to supply the funds that would be paid out on redemption of Nuclear Peace Bonds, then millions of taxpayers would, in effect, be paying for that outcome: a diffuse set of people, none of whom would benefit in any discernible way from a nuclear detonation. The Polymarket is different: it's likely there would be few people on the opposing sides of the bet of our philanthropists, and they could lose substantial amounts if sustained nuclear peace were achieved. They would be well placed and highly motivated, then, to co-ordinate efforts to foil any attempts to achieve that goal.
Social Policy Bonds would be best issued to encourage goals that are not only almost universally desired, but that also do not create a small group of highly-motivated people who would oppose those goals. The goals I discuss are all like that, but it's also important that they be issued in such a way that any losses from successful achievement of the targeted goals would be spread so thinly that nobody would be motivated to take action to frustrate the targeted goal. So, for instance, halving crime rates could reduce the prospects for lawyers, jailors and nurses, but I don't think that would motivate them actively to oppose that goal.
The quest for a way of experimenting with Social Policy Bond continues...
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