18 April 2025

Why we should target environmental outcomes

'Don't overlook the many benefits of plastics', writes the Economist:

Plastic packaging prevents perishable foodstuffs from spoiling, making possible global trade in meat, fish, fruit and vegetables. It enables essentials like rice, cooking oil and powdered milk to be stored and distributed safely and cheaply. A one-litre plastic bottle weighs 5% as much as a glass one; plastic packaging thus reduces shipping costs and emissions. ... When properly managed and well monitored, [landfill] is far less environmentally ruinous than often portrayed, and can be simpler and more effective than poorly executed recycling. Don't overlook the many benefits of plastics, the 'Economist', dated 19 April 2025

The sort of life-cycle analysis required to establish the environmental benefits or otherwise of shifts in our behaviour are bedevilled by boundary issues, measurement difficulties and the difficulty of weighting one type of environmental impact against another. They are better than blandly assuming that rail is ‘better’ than air travel, that solar power is better than coal-fired power stations, but for the making of robust policy they would need to be continually reassessed in the light of our ever-expanding knowledge of the environment and our ever-changing environmental priorities. Government policy cannot be so responsive: if government did use life-cycle analysis with the aim of altering our behaviour, it would probably do so on the basis of a one-time, necessarily limited, and (probably) subjective assessment of environmental costs and benefits. It’s not good enough, but even worse would be what we largely have now: government environmental policy based on corporate interests, media stories and the launching of visually appealing initiatives that look good but otherwise achieve nothing.

Social Policy Bonds would take a different approach. They would subordinate environmental policy to society's  desired environmental outcomes. Say we wish to reduce our use of plastics. A Social Policy Bond issue that rewarded achievement of such a reduction would generate incentives for bondholders to bring it about at least cost. They might well carry out life-cycle analyses in their attempt to do so. But there is an important difference between the way do they would conduct their research and the way government would do so: bondholders have incentives to achieve their goal efficiently. This is likely to mean responding to - and stimulating - increased knowledge of scientific relationships and technical advances.

A single environmental goal, such as reduction in use of plastics will necessarily require diverse, adaptive responses. These are precisely the sort of responses that government does very badly. Government can and should articulate society’s environmental goals, and can help pay for their achievement: in the democratic countries it performs these functions quite well. But most of our environmental goals require complete and responsive understanding of complex relationships, and actually achieving such goals requires continuous, well-informed and impartial decisions to be made about the allocation of scarce resources. For that purpose, Social Policy Bonds, with their incentives to achieve targeted outcomes efficiently would, I believe, be far better than the current ways in which environmental policy is formulated.

For more about Social Policy Bonds please see here. For applying the Social Policy Bond idea to environmental problems, see here

13 April 2025

Climate change: I don't need to know

I don't know whether the climate is changing. Most of the essays, books, articles, I read do make me believe that anthropogenic greenhouse gas emissions are causing the climate to break down. But then I see papers like this, and I realise I just don't know:

The anthropogenic CO₂-Global Warming hypothesis, as articulated by the Intergovernmental Panel on Climate Change (IPCC) and supported by researchers such as Mann, Schmidt, and Hausfather, lacks robust empirical support when subjected to rigorous scrutiny. This analysis integrates unadjusted observational data and recent peer-reviewed studies to demonstrate that the assertion of human CO₂ emissions as the primary driver of climate variability since 1750 is not substantiated. Instead, natural processes—including temperature feedbacks, solar variability, and oceanic dynamics—provide a more consistent explanation for observed trends. A Critical Reassessment of the Anthropogenic CO₂-Global Warming Hypothesis, Grok 3 beta1, Jonathan Cohler et al, 'Science of Climate Change, vol 5.1 (2025)

Judging by the absence of any meaningful attempts to reduce greenhouse gas emissions, it seems that governments don't know either, or they regard climate change as a low priority for themselves or their citizens. What, then, is the best approach when confronted with what might turn out to be a hugely important and urgent problem - but might not? Our current policymaking systems require that we have a good idea as to the likely impact of a problem, and that we then take measures to reduce that impact. But climate change isn't like that. We just don't know enough to take actual (as against performative) measures to deal with it. Too many of us are unconvinced of the need to do anything and, for many of us, it's against our interests to believe anything to the contrary. 

One of the reasons I advocate applying the Social Policy Bond concept to the climate is that we can confront this lack of certainty by, in effect, contracting out the risk to those prepared to take it on. Let's assume that governments collectively decide to back Climate Stability Bonds; that is, to put up funds for redemption of the bonds once our climate goals have been achieved and sustained for a period, of, say 40 years. If the consensus of the market for the bonds is that the climate is unlikely to change very much, then the bonds would sell for a quite high price. The governments would not lose much by redeeming the bonds, as the bonds would not appreciate very much. But if the market believes climate change is happening and that therefore climate stability will be difficult to achieve, investors will attach a low value to the bonds when they are issued. Bond purchasers would stand to make large sums if they help bring about climate stability.

The crucial point is that under a Climate Stability Bond regime it would not be up to governments, the United Nations, or any panel of experts to make a one-time only assessment of the seriousness of climate change. Under a bond regime it would be the market that would be highly motivated to inform itself about all aspects of climate change, because it stands to gain most if they get it right. And investors in the bonds would be so motivated on a continuous basis, as the market for the bonds would be constantly generating opportunities for gain to successful gatherers and interpreters of the flow of data about climate change.

A Climate Stability Bond regime would thereby bring onside the skeptics, or those who are just reluctant to pay large upfront costs for an uncertain gain. It would contract out not only the achievement of climate stability, but also the assessment of how serious a problem it is. The costs of a poor assessment would be borne by investors in the bonds, rather than taxpayers. Action to bring about climate stability – significant action rather than what we've seen so far – would, I believe, therefore be more forthcoming.

I've written in depth about Climate Stability Bonds on this blog and on my main site there there are links to other essays here. The same reasoning applies to other potentially devastating events to which we just cannot assign a probability; nuclear war for example, and I propose a similar application of the Social Policy Bond idea to address that and conflict in general: links are here.


06 April 2025

Going beyond root causes

One strength of the Social Policy Bond idea is that it doesn't try to, nor need to identify relationships between cause and effect, between policy and outcome. It's not always efficient necessary to look for root causes. Indeed the perceived need to look for them can be an excuse to delay or ignore the social problem. Take war: it can have multiple causes, ranging from the childhood experiences of political leaders to ethnic rivalry, or the real or imagined need of a country for more resources, the insecurities of military commanders....

Rather than seek to identify, weight and address any of its myriad possible causes, a Social Policy Bond regime would instead target war itself. Holders of World Peace Bonds could choose to look for root causes, but only if they think that approach is worthwhile compared to alternatives. When the goal is peace sustained for, say, four decades, then alternative approaches could include: making the educational materials of schoolchildren less belligerent; encouraging student exchanges; influencing media outlets to tone down inflammatory propaganda; distracting, deposing or otherwise undermining leaders who foment violence and hatred. 

Policymakers, if they choose to, can do a good job of solving simple social and environmental problems, whose causes are obvious. But our complex society, with its multitude of variables, feedback loops and time lags makes it difficult for any single, conventional organisation - even ones as powerful as national governments - to deal with problems such as war, violence, crime, air pollution or poverty. Even if the causes of these problems were unchanging and invariate over geographic region, such a task would be difficult and contentious. But they aren't static nor uniform: they change over time and vary from one locality to the next. We need diverse, adaptive approaches, that no single conventional organisation, however rich and powerful, can possibly address: such organisations and the people working for them have their own agendas which often deviate from, or even conflict with, their ostensible goals.

Social Policy Bonds would lead to the creation of a new sort of organisation: ones whose sole remit is to solve targeted problems as efficiently as possible, and whose every activity would be in the service of society's targeted goal. Having a protean structure and composition, it would be motivated to respond rapidly to changing circumstances. Importantly too, it would not subscribe to any ideology that would limit the range of approaches it could explore.

01 April 2025

Incentives for peace

The good people at antiwar.com took just a few hours to reject this brief essay, so I'm free to post it here. For followers of my work there's little new. Readers who wish to know more about applying the Social Policy Bond concept to war should please see this page and the links thereon.

Incentives for peace

We are, understandably, not quite rational about war. We regard its opposite, peace, as an ideal: as unattainable as it is desirable; something to aspire to from afar - something that will never actually happen. War appears to many of us, as it did to the ancient Greeks, to be part of the natural order of things. I think we can do better. What I am suggesting is that we put in place incentives for people to end war; to bring about permanent world peace through diverse, adaptive and efficient approaches.

We have to focus on our ultimate goal: sustained world peace. ‘Sustained’, because ceasefires, truces and other short-term measures often just postpone conflict. Our goal is peace that lasts for generations. We need to reward the successful achievement of this goal, rather than activities that are supposedly aimed at achieving it. There are too many people with a vested interest in keeping conflict going. While almost everyone would like to see a permanent end to war, there are too many in positions of power or influence who are half-hearted about peace, who feel threatened by it or who, for whatever reason, actively promote violence.

Ideally, then, we need a way of promoting peace that can modify or circumvent these people's uncooperative or obstructive behaviour. We need to mobilise the interests of the vast majority of people who want peace. We need to find ways of converting, bypassing, distracting, or undermining those opposed to our goal.

Ideally too, we would use market forces. In economic theory, and on all the evidence, markets are the most efficient means yet discovered of allocating society's scarce resources. But markets have been undermined, corrupted and abused such that they are nowadays mainly invoked only to defend extremes of wealth and poverty, or to further degrade the environment. So it is important to remind ourselves that competitive markets can serve society, rather than billionaires and large corporations.

World Peace Bonds

World Peace Bonds are a new way of channelling the market's incentives and efficiencies into what must be our highest priority: the permanent end of violent political conflict.

My suggestion is that a combination of NGOs, philanthropists, governments and ordinary citizens put up initial funding for a new type of financial instrument: World Peace Bonds. Funds for the redemption of the bonds could be further swelled by non-governmental bodies, and the wider public. The bonds would be floated by auction and redeemed for a fixed sum only when the number of people killed by violent political conflict fell to, say, 50 000 a year, for a sustained period. Importantly, the bonds would make no assumptions as to how to bring about peace, nor who would do so: these decisions would be made by bondholders. Unlike normal bonds, World Peace Bonds would not bear interest and their redemption date would be uncertain. Bondholders would gain most by ensuring that peace is achieved quickly.

Some years ago I envisaged a tradeable version of the now widely deployed Social Impact Bonds, which are increasingly accepted as a way of stimulating suppliers of social services to do better. World Peace Bonds, because they would be tradeable on the open market, would be closer to my original idea. People would buy bonds only if they expect to make a profit on them. If they're tradeable, they wouldn’t have to hold them to redemption to make a profit. The bond issuers could therefore target very long-term goals, such as our world peace goal, sustained for several decades.

Buyers of the bonds would work together, tacitly or otherwise, to improve the prospects for peace in the long term. As they did so, the market price of their bonds would rise, and they could realise a gain in value of their assets. This is the key: as the level of violence falls, so the bond price would rise. Bondholders would have incentives to do what they could to achieve peace, then to sell their bonds at a higher price to those who will take the next steps to our ultimate goal.

The bond’s backers, who supply the bonds’ redemption funds, need decide only on the definition of peace to be targeted - not on how to achieve it. That would be left up to investors in the bonds, who would have every incentive to maximise their, and the backers’, reduction in violence per unit outlay. So a sufficiently-funded World Peace Bond regime would stimulate research into, and implementation of, ever more cost-effective ways of achieving peace.

Bondholders would be in a better position than governments to undertake a range of peace-building initiatives. They could lobby or work with governments to, say, change and enforce laws that make wars at home or overseas a less likely prospect. They could finance sports matches between potential protagonists, promote anti-war programmes on TV, or set up exchange schemes for students and schoolchildren. They could try to cajole the financial supporters of conflict into redirecting their funds along more edifying lines. They could offer poor countries innovative forms of aid, including education and scientific aid, and measures aimed at enlightening populations. They might even subsidise intermarriage between members of different ethnic or religious groups. The crucial point is that bondholders have more freedom and incentive to explore and carry out such diverse, adaptive and long-term initiatives than governments or other international bodies.

In today's emotional climate decision-making is too often reactive. It is too easily swayed by those with a propensity for violence or those who benefit from it, whether financially or emotionally. There are enlightened, hard-working, people and organisations currently working for peace, but their ability to deploy resources effectively is constrained. The funding of the United Nations and other publicly-financed conflict-reduction bodies is conditional on their carrying out a range of activities limited by the bureaucracy and insecurities of their sponsoring governments. Private peace-building bodies work in admirable and diverse ways, but their efforts are small-scale and uncoordinated. For neither type of organisation are the financial rewards from building peace correlated with their effectiveness in actually doing so. Some of their approaches will be more effective than others but in the current environment nobody has incentives to find out which. World Peace Bonds, in contrast, would explicitly reward movement toward a sustained peace outcome, however it is done, and whoever does it. They would focus on an identifiable outcome and channel market efficiencies into exploring ways of achieving it. They could be the most effective means of achieving the peace that people all over the world yearn for and deserve.