Bribes for peace

A headline from Mailonline:

Could $175bn pay for the removal of Kim Jong-un? Huge bribes of $30m may be enough to convince North Korea's top officials to abandon their dictator, says expert by Julian Robinson, 12 May

I'm happy to see that the judicious use of financial incentives to achieve a desirable social outcome is at least being considered by one academic. The piece continues:

In his book, Stop North Korea!: A Radical New Approach to Solving the North Korea Standoff, [Professor Shepherd] Iverson imagines a scenario where the top tiers of North Korea's power elite could be bribed to ensure a peaceful transition.

I've made similar suggestions myself: under a Social Policy Bond regime targeting, say, Middle East peace, bribes could be paid to troublemakers, but only if bondholders think that to be one of the most efficient ways of ensuring peace. As I'm sure Professor Iverson would agree, while the fanatics themselves are unlikely to be moved by lavish cash handouts, their enablers and supporters are another story.

This particular type of activity is one that neatly illuminates one of the less obvious advantages of a Social Policy Bond regime: whereas governments would find it politically impossible to pay such bribes, and whereas if they were anyway to offer such payments, there would very likely be a counterproductive reaction, holders of Social Policy Bonds need suffer no such qualms. Even if the bonds were issued and backed by some government or combination of governments, bondholders are not agents of government. It's entirely up to bondholders to decide how best to achieve the targeted goal, and if bribery is the most effective way of doing so, then that's how they'll do it. Notions of justice and fairness may have to be suspended but, in the case of North Korea (and others), avoiding catastrophe should be our highest priority.

How to become a nuclear optimist

Bruce Schneier discusses Steven Pinker's optimism that trends that have brought about a less violent world will continue. Schneier doesn't share this optimism, thinking that 'the damage attackers can cause becomes greater as technology becomes more powerful', and that this trend will overtake Pinker's. it's an interesting discussion.

What do I think? I can't see any reason to doubt Schneier's belief, which is predicated on what 'the most extreme person with the most extreme technology' will be able to do, if trends continue. But I think that, understanding this, we can do something to influence the speed and direction in which 'technology' takes us. It's not only the compactness and falling cost of massive destructive power that threaten us; it's their proliferation. These need not be taken as a given: all can be influenced by the incentives on offer.

Unfortunately, the incentives currently on offer reward people for finding ever cheaper, more concentrated destructive power, and for selling it. The results, which we see now, fully justify Schneier's pessimism. So I think the time has come to offer countervailing incentives: in other words, to reward the sustained non-use of weapons of mass destruction.

Issuing a sufficiently large number of very high-value Nuclear Peace Bonds would, in my opinion, go a long way toward avoiding nuclear catastrophe. Assume that we issue bonds that become redeemable for, say, $10m each only when a period of thirty years of non-use of a nuclear weapon has been achieved. While that long-term goal seems remote, the bond issue would have an immediate effect on current investment programmes. Incentives would cascade down from the expected redemption value of a large bond holding, to finance an array of approaches aimed at reaching our goal. People or organizations would benefit by doing what they can to reduce the possibility of a fatal nuclear detonation: it would be up to them to decide the most effective ways of doing that. Such ways could entail bribing politicians or 'religious' leaders to tone down their rhetoric, the investigation into technical ways of detecting nuclear materials, giving nuclear scientists now working for belligerent regimes one-way, first class air tickets to the tropical resort of their choice, or any of a vast array of other possible initiatives. The important point is that we don't have to know in advance which will be the most efficient ways of achieving our nuclear peace goal. That will be up to bondholders to decide, continuously, as our political, scientific and psychological environments evolve.

I fully accept that even the most dangerous demagogues in human affairs are unlikely themselves to be amenable to financial incentives. But their capacity to unleash destruction can be realized only by dealing with others - who will be. Social Policy Bonds can re-jig the incentives, giving a more credible voice to the vast majority of humanity who don't want to see nuclear catastrophe.

For a short piece on Nuclear Peace Bonds see here. For a longer article about Conflict Reduction see here. For a 5800-word essay about how we can use the Social Policy Bond principle to bring about World Peace see here.

World Peace: the quick and efficient way

Keith Ward writes: 

There is any number of ways in which the Darwinian process of slow, gradual, cumulative adaptation could fail. This is not an argument for God. But it shows that reliance on the predictability of nature, and on its tendency to produce increasingly complex and adapted organic life-forms, is dependent on a very specific adjustment of physical laws that is itself hugely improbable. Why there almost certainly is a God: doubting Dawkins, Keith Ward, April 2009

Mr Ward is well aware that evolution - even if the human species represents its crowning achievement  - depends on very specific circumstances. We don't know (though we might believe) that there was a plan. Nor do we know whether the evolutionary path will continue to produce more complex life-forms.

There's a similarity here with the downward trend in violence that Stephen Pinker has identified: Professor Pinker tells us that over human history most forms of violence have steadily and steeply declined, and that we live in one of the most peaceful ages in history. This seems right to me looking, as Pinker does, at relative, rather than absolute levels of violence in human society.

Just as with the evolution of life-forms, we cannot know whether this decline was inevitable, nor whether it will continue. What we can be sure of is that both trends have been have been extremely inefficient. Millions of species have no doubt been created and become extinct as complex life-forms developed. It's been a slow and wasteful process, if we are to take today's ecosystem as an end point. Similarly, and even more tragically, countless millions of human beings have been killed or maimed in deadly conflicts in our history - and it's still happening.

And we have no reason to assume that either our history as a species or as social animals will continue to play out favourably. Professor Pinker is writing descriptively rather than prescriptively and he does not say the trend will continue. Some would argue (see here, scroll down to "...Taleb's major complaints...") that the risk of catastrophic violence has risen, even as the actual level of physical violence has fallen.

What's all this got to do with Social Policy Bonds? Simple: whether or not initial circumstances are God-given, I think we could use the bonds consciously and deliberately to guide our progress toward a world of peace, and to speed it up.

Instead of relying on centuries of history, during which numberless millions of innocent people's lives have been destroyed, to bring about the tentative and incomplete peace that most of us enjoy today, my suggestion is that we issue World Peace Bonds. These bonds would be redeemable for a fixed sum only when a targeted array of indicators of peace had been achieved and sustained for a long period. They would reward people who do what they can to end violence. Backed by a combination of governments, non-governmental organizations, philanthropists and ordinary people, they would encourage a vast number of peace-generating approaches. Some would inevitably fail; the way the market for the bonds would work means that these efforts would be terminated and resources diverted into more promising initiatives.

The effect of World Peace Bonds would be to give incentives to accelerate and guide our progress toward a less violent world more efficiently than has happened so far: a protracted, haphazard and bloody path that has, true, given us a less violent world, but also one that has left us fearful of self-induced catastrophe. We can do better than that. By acknowledging that not all approaches are going to work, and supplying incentives for those that do, we can guide and accelerate evolutionary processes to bring about, quickly and efficiently, what is surely our most urgent goal: world peace

New world disorder

Walter Russel Mead writes about the world we actually live in:

The problem isn’t that the goals of the liberal internationalists are bad goals. They are excellent goals: no war, the spread of democracy and human rights, limits on weapons of mass destruction, strong institutions. The world they dream of is a much better world than the one we have now. And the liberal internationalists are also right that the world can’t afford to go on in the old way. Given 21st century technology and the vulnerability of our large urban populations to anything that disrupts the intricate networks on which we all depend, old-fashioned great-power politics with its precarious balance of power shored up by recurring wars is a recipe for utter disaster and, maybe, the annihilation of the human race. But the difficulty that over and over sinks hopeful efforts by liberal internationalists is this: Liberal internationalist methods won’t achieve liberal internationalist goals. It’s Kim Jong-un’s World; We’re Just Living In It, Walter Russell Mead, 'The American interest', 9 September (my emphasis)

It's not an optimistic view, but it's one that I mostly share. A world in which North Korea and other small, poor countries acquire nuclear weapons is not going to be safe for the liberal values under which most of us, mainly in the west, are lucky enough to live. We can see the pessimistic scenarios as a clash of civilizations, or a clash of values, or shifts in geopolitical power, but I choose to see it as a problem of perverse incentives.

To be simplistic, but not wholly inaccurate: for most of the people in politics, more power is an end in itself. Solution of social problems can be a means to that end but, for example, whipping up nationalistic fervour at the expense of improving your citizens' well being can work just as well, with Kim Jong-un being today's exemplar par excellence. Our political systems reward the acquisition of power and on the international stage as currently set up is strongly correlated with the acquisition of nuclear weapons.

Social Policy Bonds can drastically re-orientate the operating incentives and reward the proliferation not of nuclear weapons but of what Mr Russell Mead calls liberal internationalist values. I would assign a high priority to ensuring sustained nuclear peace, but we could also strive for 'the spread of democracy and human rights'. Social Policy Bonds with sufficient backing and a long-term focus could give incentives for people to focus on achieving these goals. The current system will always be vulnerable to people like Kim Jong-un (or worse) because it does not encourage people to find ways of stopping those who are psychopathically hungry for power from ascending into influential positions. There's very little upside to seeking to depose Mr Kim. We need to change that. Nuclear Peace Bonds could help to do this. Mr Russell Mead continues his article saying that '[p]ower, not communiqués, is what makes the world go round.' But money correlates strongly with power. And while it's nice that our cats and dogs have a huge range of foods to choose from, I'd like to think that, given the choice, they'd rather see some of that human ingenuity channelled into making the world safe from nuclear apocalypse. 
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The first cross-border Social Impact Bond has been issued. I have no involvement in this project, and I have written about my reservations about SIBs here and here. However, I have always hoped that the bonds would be used on a level higher than the national level, as in my post above. It might be that these first cross-border SIBs are a necessary first step toward internationally-backed tradeable Social Policy Bonds. 

Impediments to a radical transformation

My 27 August post pointed out the advantages of making Social Impact Bonds tradeable. In other words, of issuing Social Policy Bonds rather than SIBs. Why then have Social Policy Bonds, to my knowledge, not yet been issued?

One reason is that Social Policy Bonds work best on a large scale and over long time periods during which resources can most readily find their optimal deployment. I've pointed out the necessarily narrow scope of Social Impact Bonds here and here. Because SIBs cannot be traded, their ownership is restricted to a specified (small) number of service providers with an inescapably short time horizon as compared with the long time usually needed to solve important social and environmental problems. But SIBs' restricted scope acts as reassurance to policymakers in general, and the bonds' issuers in particular: it gives them control over who shall undertake the activities that help achieve the targeted goal. Yes, the bonds do reward more efficient performance, but only for specified service providers.

Social Policy Bonds, in contrast, work best when service providers are subject to creative destruction: the impetus that rewards successful firms and winnows out failures. It's a discipline rarely seen in the provision of social services which, being very often government agencies, are immune from penalty for poor performance (and often, if too successful, will face a reduction in funding, or even dissolution). The time period required for the solution of most major social problems will necessarily be long; longer in most cases than the planning horizon of existing service providers and probably, in the case of very remote goals (world peace, for instance) longer than most people's life expectancy. The creative destruction that will be a necessary byproduct of efforts to solve these large-scale problems discourages existing service providers, be they government or non-governmental organisations of any type, from advocating for, or themselves issuing Social Policy Bonds. Existing bodies, in this view, are impeding the achievement of some of humanity's most urgent goals, not so much through any active lobbying on their part, but because of an understandable wish not to jeopardise their survival.

It is the interests of existing organisations, public- and private-sector, and their wish either to control who shall achieve social goals or to survive that, I think, are impediments to the radical transformation of humanity's prospects to which Social Policy Bonds could give rise.

Policy for the Middle East

Philippe Sands discusses the recently released Chilcot report into the UK's role in the Iraq conflict:

There’s nothing really new, since the material emerged when the hearings took place, but these 169 pages of tightly woven narrative and assessment nonetheless offer a unique insight into the place of legal advice within government: how law is made to fit around policy, rather than the other way round. ....  [T]he decision to remove Saddam Hussein and wage war in Iraq was taken early, and ...  intelligence and law were then fixed to facilitate the desired outcome.  A grand and disastrous deceit, Philippe Sands, 'London Review of Books', 28 July. (My emphasis.)

The Iraq debacle is a tragic story of how policy is made without regard not only for the law, or the truth, but also for the well-being of people in Iraq. It's a typical conceit of those in power. Here's a problem: Saddam's regime is nasty. And here's our solution: remove Saddam and wage war in Iraq.

I can't offer a better solution. But what I can offer is a way of generating better solutions. The first step is to be clear about our goals. I'd say our over-arching goal should have been to improve the well-being of all the Iraqi people. A second goals would be to remove any threats to non-Iraqis arising from weapons of mass destruction. For each of these two goals we need reliable indicators that we could then target by issuing Social Policy Bonds. A quantifiable indicator of well-being could target for improvement a combination of such measures as the human development index, the numbers of political prisoners, the numbers killed in sectarian violence, numbers of emigrants and refugees, and some measures of media incitement to hatred and violence. Importantly, such Iraq Peace Bonds would not assume that, for instance, Saddam must be removed and his regime dismantled. It would be up to bondholders, motivated by financial incentives, to calculate how best to achieve peace in Iraq. Financial incentives - not emotion - would dictate their decisions.

What about the second goal: the elimination of the threat arising from real or imagined weapons of mass destruction? This goal could have been targeted by a second bond issue, which would reward bondholders for achieving the non-use of such weapons over a sustained period of, say, several decades.

In both bond issues, bondholders would have incentives to generate diverse, adaptive approaches to meeting their goals. This means that they would not impose top-down solutions on the basis of how they feel at one point in time, and that they would have a continued strong interest in the long-term success of their approaches. I've written about bonds targeting peace in the Middle East here, and about bonds targeting sustained nuclear peace here.

Compassionate woman, compassionate policy, cruel outcome

Compassionate woman, compassionate policy, cruel outcome:

IOM [International Organization for Migration] reports an estimated 222,291 migrants and refugees entered Europe by sea in 2016 through 26 June, arriving in Italy, Greece, Cyprus and Spain. Deaths in the Mediterranean so far this year are 2,888, compared with 1,838 through the first six months of 2015. Source

Nobody, least of all, Chancellor Merkel, wanted this. Compassion works in everyday life, with people whom we know, or with people whose need is desperate and urgent. As a policy, though, it fails. I think we should do better to target outcomes, rather than the supposed means of achieving them. If our goal is to reduce drownings in the Mediterranean, then reward people for achieving that outcome. If our goal is to improve the quality of life for ordinary Africans, then we should reward people for achieving that outcome. And if our goal is to reduce or eliminate conflict in the Middle East, then why not put in place a system of incentives that motivates people to achieve that?

Social Policy Bonds allow us to set these long-term objectives and to reward the people who achieve them. They don't sound compassionate relying, as they do, on monetary incentives, and many on the left disdain or despise the idea (and their originator!) for that reason. But monetary incentives - often known as salaries or wages as well as prizes or bonuses or profits - are the very basis of whatever prosperity there is on this planet. The wish to acquire more cash can be directed into social and environmental causes, as well as frivolous or destructive ones. The world would be better served if we all got over our hang-ups about money and with our wish to appear compassionate, and actually worked towards more compassionate outcomes. Or, as a line from the 1981 movie, Southern Comfort has it: "Comes a time when you have to abandon principles and do what's right."

Metrics for World Peace Bonds

Metrics for World Peace Bonds, or: Why Long-term Goals are Best

Pondering the best metrics for peace, I came to think that with a goal for peace sustained over fifty or more years, metrics that target for elimination the use of deadly violence become more closely aligned with what we actually want to achieve. By this I mean that, with a decades-long goal, bondholders would have incentives not merely to prevent the outbreak of violence, but also to prevent the precursors to violence. From the point of view of the backers and issuers of World Peace Bonds this makes the metric of deadly violence more robust.

For example: the Cold War ended peacefully, but if World Peace Bonds issued in the year 1950 had targeted a period of sustained peace of just ten years then bondholders would have profited, despite the accumulation of ever more horrific atomic and nuclear weapons, during the period that preceded the Cuban Missile Crisis of October 1962. If the same bonds had been issued with a target of fifty years of sustained peace, then bondholders would have been motivated to reduce tensions, including by such means as reducing the weapons pile-up, or fostering better relations between the US and USSR. A ten-year goal would see the original bondholders making profits while the prospects for peace looked ever darker. A fifty-year goal would have seen the value of their holdings collapse before and during the Crisis.

The point is not only that peace sustained for a decades-long period encourages longer-term thinking. It is also that by choosing the longer-term goal, our targeting of a relatively easy-to-measure metric like deadly violence and its consequences, we shall inevitably do much to eliminate the much less quantifiable - but hugely important - precursors of violence. 

The 'root causes' fallacy

The 'root causes' fallacy is my explanation for why we don't really do much to solve such seemingly intractable problems as violent political conflict (war and civil war) or other complex social and environmental problems, such as crime or drug abuse. For historical reasons, policymaking is almost entirely a top-down activity. Politicians and public servants see a problem, then decide what needs to be done about it. If they aren't certain what needs to be done, either they guess at the root causes, or they ignore the problem. What they are not comfortable doing (yet) is to contract out the finding of solutions to the private sector. And finding solutions to a problem does not necessarily mean that we have to find its root causes - which can take decades or, indeed, be impossible. This, from the Economist, writing about data-based models:

Too many things tend to happen at once to isolate cause and effect: liberalised trade might boost growth, or liberalisation might be the sort of thing that governments do when growth is rising, or both liberalisation and growth might follow from some third factor. And there are too many potential influences on growth for economists to know whether a seemingly strong relationship between variables is real or would disappear if they factored in some other relevant titbit, such as the wages of Canadian lumberjacks. A mean feat, 'The Economist', 9 January

When it doesn't supply an easy excuse for inaction, this supposed need to identify root causes before doing anything can be catastrophically costly when mistakes are made: policies are put in place that cannot easily be reversed. Take climate change: our governments have decided that they know the cause of climate change is anthropogenic greenhouse gas emissions. They know, or act as if they know, exactly the relative contributions of each of these gases to climate change. But there are at least as many variables affecting the climate as there are 'potential influences on growth', and that makes a nonsense of trying to implement policies whose success depends entirely on their correct identification. But the juggernaut has begun its downhill movement: climate change policy has led to the creation of organizations powerful enough to oppose removal of their funding and even to distort facts that might threaten their existence.

My solution: target outcomes, rather than the alleged means of achieving them. Instead of targeting climate change, target for reduction the negative impacts of adverse climate events on human, animal and plant life. Instead of trying (or pretending to try) to stop the civil war in Syria, target for reduction the numbers of people killed and made homeless in that country. Complex social and environnmental problems require diverse, adaptive approaches for their solution. They don't require that we identify their real or mythical 'root causes' before doing anything. By contracting out the achievement of solutions to a motivated coalition of holders of Social Policy Bonds, we could bypass the supposed need to identify root causes and instead concentrate on finding solutions to the problems they create.

For more about my approach to climate change see other posts on this blog, or this essay. For more about my approach to achieving peace, follow this link. 

The root causes of war: don't bother

A Social Policy Bond regime makes inescapable the need to think about what we want to achieve. This should be an essential discipline, but in some instances it's never followed. There's much obfuscation - deliberate or not - and far too much attention given to identifying supposed 'root causes' at the expense of effective policy.

Take violent political conflict. It's still going on, killing, maiming and making homeless millions of people every year. The numbers so affected might be falling, but that says nothing (short pdf) about possible major violent future events. We could spend years analysing past outbreaks of war, but still never get close to identifying root causes in ways that forestall future outbreaks. Society is just too complex, diverse and fast-changing. Policymakers should begin by specifying society's desired outcomes, rather than distracting or indulging ourselves by trying to identify root causes - except perhaps for simple, relatively static, policy environments.

A bond regime wouldn't try to identify the root causes of war, which are a moving target anyway. Instead it would start by specifying exactly the outcomes we want to achieve, and then injecting market incentives into achieving those outcomes. Conflict Reduction Bonds are the means by which I propose we begin to end all war for all time. It's not idealism. It's giving incentives to motivated people to find solutions, rather than simply to turn up to work for a bureaucracy, corrupt or not.

Hidden metrics

Hidden metrics, not to be confused with the hidden variables of quantum mechanics, are one possible way of preventing the gaming that could otherwise result from targeting specific quantitative outcomes.

Let me explain. Say we are targeting female literacy in Pakistan. We issue bonds that will be redeemed when the literacy level of 15-year old girls in Pakistan exceeds 95 percent each year over a ten-year period. Campbell's Law tells us, rightly I think, that:

The more any quantitative social indicator (or even some qualitative indicator) is used for social decision-making, the more subject it will be to corruption pressures and the more apt it will be to distort and corrupt the social processes it is intended to monitor. Source

What metrics could we deploy that measure, accurately and inevitably, that which we want to achieve: namely, near-universal literacy for 15-year old Pakistani girls?  We could subject every girl of that age to a standard reading test, but we know that academic tests and their results, even in developed countries, are manipulated. Girls could be taught to the test (by, for instance, being given the test in advance and taught to memorise it by rote). Or anyone up the ladder from the administrators of the test to the collators of the results could be bribed to alter the data at any stage.

So instead we could take a random sample of, say, 100 schoolgirls from 100 districts around Pakistan at ten yearly intervals, and test them in non-standard ways for their literacy. We don't reveal which districts, let alone which girls, will be chosen; nor do we release exact details of the test. That makes it much harder to game the outcome.

More complex is the goal of peace. Now, nuclear peace is relatively easy to target: we can issue bonds that will not be redeemed, say, until a thirty-year period has elapsed during which there has been no detonation (accidental or not) of a nuclear weapon that kills more than 100 people. But what about peace more generally? Hot wars are fairly easy to recognise and define and so would be correspondingly easy to deter using a bond regime. But there are more nebulous ways of fomenting conflict between states (Ukraine), or of ratcheting up tension to levels that severly curtail quality of life.  In these instances we could use an array of metrics such as: trans-border movement of weapons, numbers of people killed or fleeing their homes. Even the lack of information could also be an indicator of conflict that could find its way into our calculations. We could also use survey data, such as attitudes about potential enemies, or expressions of fear. Other potential indicators are disruptions to food, water or electricity supplies and other results of damage to infrastructure. 
 
The important point is that in this as in other goals, we need not and indeed should not specify in advance exactly which combination of metrics and indicators will be used to determine whether or not the bonds' redemption terms shall be deemed satisfied. In general, we try, as far as possible, to target metrics that are, or that are inextricably linked to, exactly what we want to achieve. Where that is difficult, we try to prevent gaming by not specifying too far in advance the exact redemption terms of the bonds. The aim, at all times, is for bondholders to comply with the spirit as well as the letter of the goals set by the backers of the bonds.

War and peace, and GDP

Readers interested in a meta-solution to the conflicts in the Middle East could do worse than read my short piece on Peace Bonds. Defining peace in terms robust enough for our purposes might not be easy, but the necessary thinking will help clarify exactly what we want to achieve. As in many other policy areas, there are plenty of statistics already being gathered and with some verification and supplementation a combination of them could be targeted by a Peace Bond regime. See, for instance, this site, for some indicators that we could target. 

On another note, David Pilling asks: has GDP outgrown its use? As I have repeatedly posted (here, for instance), the answer is an unqualified yes.

Non-random incentives for world peace

The average person is now roughly 20 times less likely to die violently than the average person was in the Stone Age. The Slaughter Bench of History  Ian Morris, 'The Atlantic', 11 April

How did this come about?  According to Professor Morris:

For most of our time on earth, we have been aggressive, violent animals, because aggression and violence have paid off. But in the 10,000 years since we invented productive war, we have evolved culturally to become less violent—because that pays off even better.

I can't argue with Professor Morris. Human beings are rational, and respond rationally to the incentives on offer. It's tragic, though, that the incentives not to prosecute war seem to have come about quite randomly; through experimentation over millennia with every sort of conflict, fought with ever-improving technology, at calamitous human cost.

I think we can do better - and we should. Instead of relying on the slow, random and painful process of learning through direct experience, we could actively create or magnify the incentives for peace. We could, simply, make a conscious, deliberate decision to increase the incentives for people to avoid war.

How? We could apply the Social Policy Bond principle to violent political conflict. We could issue World Peace Bonds or, say, Middle East Peace Bonds. We don't have to know how people who invest in these bonds will use their expected returns from bondholding to reduce the chances of conflict breaking out. Nor do we need to know who, exactly, will buy the bonds and undertake peace-building activities. What we would do, by issuing Peace Bonds, is motivate people who are currently pre-occupied with other, probably less socially beneficial, concerns, to get involved in peace-building and explore, refine and implement the most efficient ways of ending war. 

War has been a curse for generations and remains an existential threat: the full title of Professor Morris's piece excerpted above is: How war created civilization over the past 10,000 years—and threatens to destroy it in the next 40. Peace Bonds could generate bigger incentives to end war far less randomly and at lesser human cost, than through the the current process of random blundering accompanied by painfully slow, fitful, learning; a process that may yet culminate in unrestrained nuclear conflict with the deaths of millions.

GDP and war

Theordore Dalrymple puts it succinctly:

An increased GDP, however distributed, is perfectly compatible with a deteriorated, even much deteriorated, way of life: and, presumably, a lowering of GDP is compatible with an improved, even a much improved, way of life. Of GDP and happiness, 'Library of Law and Liberty', 2 January

Unfortunately, in the absence of any coherent other targets, increasing Gross Domestic Product (or GDP per capita) become the de facto objective of most democratic governments.  But, as an end in itself, GDP has numerous flaws. Its targeting institutionalises our confusion between ends and means. Economic growth should not be end in itself. At best, it is a means towards certain ends. Growth in GDP implies only a growth in economic activity. It does not distinguish between helpful and harmful economic activity. It puts no value on any activity that bypasses the monetary economy. So it ignores leisure time, the environment, crime, health, and other contributors to well-being that are meaningful, or even essential, to natural persons.

We urgently need goals that are far less randomly tied to human and environmental well-being. I make some tentative suggestions in my book and on SocialGoals.com. Hand-in-hand with meaningful targets goes a sensible way of achieving them. Our current systems are failing in both respects, and the failures are becoming too spectacular to ignore for much longer. In these increasingly dire circumstances, Social Policy Bonds could be an answer. Under a bond regime, policymaking would be something with which ordinary people could engage. The bonds would target meaningful goals, with which we could all identify. These goals would be ends - targets inextricably linked to well-being - rather than real or supposed means towards achieving them. The bonds would inject the market's incentives and efficiencies into the achievement of our goals. And because they reward the achievement of our goals, rather than activities, they do not rely on our knowing how our ends are to be achieved or who will achieve them. This means that we can target problems, like war, that we have no idea (yet) how to solve.

One thing seems certain: however remote a World Peace Bond regime seems now, a world without war within our current, corrupt, haphazard system, is even less likely.

Peace in the Middle East

Don't laugh!

Here is a short and, despite my best efforts, as yet unpublished, article on applying the Social Policy Bond principle to conflict in the Middle East.

Peace in the Middle East: giving self-interest a chance

 Cards on the table: I have no solution to the anxieties and potential catastrophes facing Israel, nor to the wider problems facing the citizens of all the Middle Eastern countries. What I offer instead is a way of encouraging people to find effective and efficient solutions.

Decades of negotiations and initiatives have failed. Rockets are daily fired into Israel, we might well be on the brink of a nuclear calamity, and the entire region is a seething cauldron of every sort of hatred: ethnic, confessional, sectarian and gender.

Most ordinary people in the region, given time to reflect and the freedom to express their opinions would like nothing more than to see an end to the violence in the region. But there are enough powerful people with a vested interest in keeping conflict going. They include men of religion, ideologues, politicians and bureaucrats. There are also, of course, the weapons merchants and their corrupt beneficiaries in government. Well-meaning idealists on all sides do what they can, but their efforts are overwhelmed and relentlessly undermined by the powerful people and institutions that want them to fail. 

Peace above all

We need to give people and organizations of all kinds the incentives to create and sustain peace, rather than conflict.  We also need a verifiable definition of peace, which will consist of a combination of conditions that have to be satisfied and sustained. These could include:

·         a much-reduced number of people killed in conflict;

·         a much-reduced level of terrorist events, or military incursions;

·         no use of nuclear weapons;

•    mass media incitements to violence.

We also need to focus exclusively on our goal of peace, which might mean putting aside feelings of fairness and justice, except insofar as they help our cause.

And we need ways of promoting peace that can modify or circumvent people's uncooperative or obstructive behaviour; ways that can co-opt or subsidise those people in positions of authority and power who want to help, and at the same time bypass, distract, or otherwise undermine those opposed to our goal.

Ideally too, we would deploy market forces. Markets are the most efficient means yet discovered of allocating society's scarce resources, but many believe that market forces inevitably conflict with social goals: accentuating extremes of wealth and poverty, for example, or accelerating the degradation of the environment. So it is important to remind ourselves that market forces can serve public, as well as private, goals.

Middle East Peace Bonds

My suggestion is that philanthropists perhaps with governments and other interested organisations and individuals, collectively raise a large amount of money, put it into an escrow account, and use these funds to redeem at some future time a new financial instrument: Middle East Peace Bonds. These would be sold by auction for whatever they would fetch. They would be redeemed for, say, £100 000 each only when all the conditions for peace, as defined by the issuers, had been satisfied and sustained.

Importantly, the issuers of the bonds would make no assumptions as to how to bring about greater peace. The circumstances that fan the flames of conflict vary radically from place to place and over time. No one solution, nor even an array of solutions will work all the time. The bonds instead will stimulate diverse, adaptive solutions.

Nor do we need to know who would hold the bonds or carry out peace-creating projects. Those decisions would be made by would-be investors in the market for the bonds. Unlike normal bonds, Middle East Peace Bonds would not bear interest and their redemption date would be uncertain. Bondholders would gain most by ensuring that peace is achieved quickly. As the prospects for peace brighten, the value of the bonds will rise.

Trading the bonds

Middle East Peace Bonds, once floated, must be readily tradable at any time until redemption. Many bond purchasers would want or need to sell their bonds before redemption, which might be a long time in the future. With tradability,  these holders would be able to realise any capital appreciation experienced by their holdings of Middle East Peace Bonds whenever they choose to do so.

The bonds will be worth more to those who believe they can do most to help reduce the violence, who will then own most of the bonds. Large bondholders might decide to subcontract out peace-building projects to many different agents, while they themselves held the bonds from issue to redemption. The important point is that the bond mechanism will ensure that the people who allocate funds have incentives to do so efficiently and to reward successful outcomes, rather than merely pay people for undertaking activities.

Too large a number of small bondholders could probably do little to help achieve peace by themselves. If there were many small holders, it is likely that the value of their bonds would fall until there were aggregation of holdings by people or institutions large enough to initiate effective peace-building projects. As with shares in newly privatised companies the world over, Middle East Peace Bonds would mainly end up in the hands of large holders, be they individuals or institutions. Between them, these large holders would probably account for the majority of the bonds. Even these bodies might not be big enough, on their own, to achieve much without the co-operation of other bondholders. They might also resist initiating projects until they were assured that other holders would not be free riders. So there would be a powerful incentive for all bondholders to co-operate with each other to help bring about peace in the Middle East. They would share information, trade bonds with each other and collaborate on conflict-quelling projects. They would also set up payment systems to ensure that people, bondholders or not, were mobilised to help build peace. Large bondholders, in co-operation with each other, would be able to set up such systems cost-effectively.

Regardless of who actually owns the bonds, aggregation of holdings, and the co-operation of large bondholders, would ensure that those who invest in the bonds are rewarded in ways that maximise their effectiveness in bringing about peace.

So, in contrast to today’s short-term, tried, tested and failed approaches, a Middle East Peace Bond regime would stimulate research into finding the  most cost-effective ways of achieving peace. Indeed, bondholders would be in a better position than governments to undertake a range of peace-building initiatives, having more freedom to try innovative approaches. They might, for example, finance sports matches between opposing sides, promote anti-war programmes on TV, set up exchange schemes for students of the opposing sides. They might try to influence the financial supporters of conflict outside the region to redirect their funding into more positive ways. They could offer the Palestinians and the citizens of neighbouring Arab countries different forms of aid, including education and scientific aid, and measures aimed at providing a secular education for all Arab citizens.

By appealing to people's self-interest, Middle East Peace Bonds would be more
effective than conventional efforts aimed at reducing violence. In channelling market forces into the achievement of this objective the bonds could bypass or even co-opt the corrupt or malicious people in government and elsewhere who currently benefit from conflict.

Middle East Peace Bonds would focus on an identifiable peace outcome and channel market efficiencies into diverse, adaptive ways of achieving it. They might sound implausible and radical but - let’s be frank - the alternatives are leading us into the abyss.

© Ronnie Horesh, November 2012.

Ending war

Contrary to the common perception, political alliances during civil wars are not formed along immutable religious, ethnic or linguistic lines.... How civil wars evolve, Peter Dizikes, MIT News Office, reviewing 'Alliance Formation in Civil Wars', by Fotini Christia

In other words, there's nothing intractable about these, or any other conflicts. Solutions are possible. The challenge is to put in place incentives to solve conflict, rather than create it. We can't expect the United Nations, NATO or any other government-backed initiative to help us here. We need diverse, adaptive approaches; ones that cannot be corrupted or undermined by interest groups of any kind. We need, in short, to issue Conflict Reduction Bonds.

Metrics for peace

Middle East Peace Bonds, or Conflict Reduction Bonds, are all very well, but how are we to define what we mean by 'peace'? The conventional definition  doesn't necessarily mean human well-being, or the absence of the threat of war. There was no open conflict during the Cold War, for instance, but it wasn't exactly a stable, beneficial state of existence.

Fortunately, Social Policy Bonds are versatile, in that they can target an array of goals, each of which has to be satisfied if the bonds are to be achieved. Furthermore of these goals can take the form of a range of values, within which an outcome must fall for the bonds to be redeemed. Moreover, since our goal is for a sustained period of peace, that condition can also be embedded in the targeted outcome.

Experts and the public could come up with the necessary and sufficient conditions for a benign peace. Here are some suggested starting points:

• Numbers of people killed in armed conflict

• Spending and military strength

Military strength is an estimate of both military personnel and military equipment. The rationale for including this measure is similar to that for including military expenditure: it represents both the opportunity cost of resources lost to the life-enhancing parts of the world economy, and it is an indicator also of the potential for violence, and so an indicator of human insecurity or anxiety. While estimates of materiel could be subject to the same imprecision as spending on armaments, numbers of military personnel might be easier to quantify for targeting purposes in some regions of actual or potential conflict.

• Mass media indicators of impending conflict

Social Policy Bonds aiming at peace could also target events that are likely to lead to war, such as efforts to gain public support. There appears to be strong evidence (see Getting to war: predicting international conflict with mass media indicators, W. Ben Hunt, University of Michigan Press, 1997) that the underlying intentions of governments can be accurately gauged by a systematic analysis of opinion-leading articles in the mass media, regardless of the relative openness of the media in question. Such analysis allows the prediction of both the likelihood of conflict and what form of conflict - military, diplomatic or economic - will occur.  This sort of indicator could be useful as a target where military conflict has not begun, but appears possible, and where other data are scarce.

There are going to be problems with accurate assessment of all these measures, but they are unlikely to be insurmountable. 

Middle East Peace Bonds

This is a short, updated, and so far unpublished, piece on applying the Social Policy Bond principle to conflict in the Middle East

Peace in the Middle East: giving self-interest a chance

I have no solution to the anxieties and potential catastrophes facing Israel, nor to the wider problems facing the citizens of all the Middle Eastern countries. What I offer instead is a means to encourage people to find solutions. Everybody has their own ideas about what should be done. I offer a way of channelling resources into those ideas - but only if they are effective and efficient.

Incentives

Where we are now: rockets are daily fired into Israel; we might well be on the brink of a nuclear calamity; and the entire region is a seething cauldron of every sort of hatred: ethnic, confessional, sectarian and gender.

Most ordinary people in the region, given time to reflect and the freedom to express their opinions would like nothing more than to see an end to the violence in the region. But there are too many people with a vested interest in keeping conflict going. They include the men of religion, the ideologues, and many of the politicians and bureaucrats. The international agencies and the military, whatever their intentions, aren’t exactly helping either. There are also, of course, the more nakedly financial incentives on the ‘defence’ industries and their beneficiaries in government, to fuel the fear of conflict. Well-meaning idealists on all sides do what they can, but their efforts are relentlessly undermined by the powerful people and institutions that want them to fail.

Peace above all

Perhaps it’s now to time to give people incentives to create and sustain peace, rather than conflict.  For my proposal to work we need a verifiable definition of peace, which will probably consist of an array of conditions that have to be satisfied and sustained. These could include:

·         a much-reduced number of people killed in conflict;

·         a much-reduced level of terrorist events, or military incursions;

·         no use of nuclear weapons.

Under my proposal, investors in the bonds would be rewarded once these, and other agreed conditions had been satisfied and sustained for, say, 30 years.

We need to be just as single-minded as the arms merchants and fanatics in wanting peace to the exclusion of everything, which might mean putting aside feelings of fairness, justice and history, except insofar as they help our cause. Being single-minded about our goal doesn’t mean that we simply pick the one project that we think will work and go for that. The circumstances that fan the flames of conflict vary radically from place to place and over time. No one solution, nor even an array of solutions will work all the time. We need a system that will encourage those projects that are most efficient for their time and place, and that will terminate projects when they become inefficient. In short, we need diverse, adaptive solutions.

And we need a way of promoting peace that can modify or circumvent people's uncooperative or obstructive behaviour. We need to mobilise the interests of the far greater number of people who want peace. We need to find a way that can co-opt or subsidise those people in positions of authority and power who want to help, and at the same time bypass, distract, or otherwise undermine, those opposed to our goal.

Ideally too, we would use market forces. Markets are the most efficient means yet discovered of allocating society's scarce resources, but many believe that market forces inevitably conflict with social goals: accentuating extremes of wealth and poverty, for example, or accelerating the degradation of the environment. So it is important to remind ourselves that market forces can serve public, as well as private, goals.

Middle East Peace Bonds

My suggestion is that philanthropists perhaps with governments and other interested organisations and individuals, collectively raise a large amount of money, put it into an escrow account, and use these funds to redeem a new financial instrument: Middle East Peace Bonds. These would be sold by auction for whatever they would fetch. They would be redeemed for, say, £100 000 each only when all the conditions for peace, as defined by the issuers, had been satisfied and sustained. Importantly, the bonds would make no assumptions as to how to bring about greater peace. Nor would they make any assumptions as to who would hold the bonds or carry out peace-creating projects. Those decisions would be made by investors in the bonds. Unlike normal bonds, Middle East Peace Bonds would not bear interest and their redemption date would be uncertain. Bondholders would gain most by ensuring that peace is achieved quickly.

Trading the bonds

Middle East Peace Bonds, once floated, must be readily tradable at any time until redemption. The operation of such a ‘secondary market’ would be critical to the working of the bond mechanism. Many bond purchasers would want, or need, to sell their bonds before redemption, which might be a long time in the future. With tradability,  these holders would be able to realise any capital appreciation experienced by their holdings of Middle East Peace Bonds whenever they choose to do so. Tradability would make the bonds a more attractive investment in the first place, and allow us to target an outcome as remote as peace in the Middle East, that will probably take longer to achieve than any bondholder’s investment horizon.

As the bonds are traded, they will tend to flow towards those who can do most to help reduce the violence. In fact, though, an actual flow of bonds would not be necessary. Large bondholders might simply decide to subcontract out the required work to many different agents, while they themselves held the bonds from issue to redemption. The important point is that the bond mechanism would ensure that the people who allocate the finance had an incentive to do so efficiently and to reward successful outcomes, rather than merely to pay people for undertaking activities. At the limit we can conceive of just one single buyer of all the bonds. If this buyer were determined to hold on to the bonds until redemption, then the bonds would function as a sort of performance-related contract, with the backers paying only when the objective had been achieved. The buyer could contract out most, or all, of the work required to achieve the objective, with the incentives given by the bonds for speedy accomplishment cascading down from the bondholder to those subcontracted to do the work of reducing the violence.

Too large a number of small bondholders could probably do little to help achieve peace by themselves. If there were many small holders, it is likely that the value of their bonds would fall until there were aggregation of holdings by people or institutions large enough to initiate effective peace-building projects. As with shares in newly privatised companies the world over, Middle East Peace Bonds would mainly end up in the hands of large holders, be they individuals or institutions. Between them, these large holders would probably account for the majority of the bonds. Even these bodies might not be big enough, on their own, to achieve much without the co-operation of other bondholders. They might also resist initiating projects until they were assured that other holders would not be free riders. So there would be a powerful incentive for all bondholders to co-operate with each other to help bring about peace in the Middle East. They would share the same interest in seeing targeted objectives achieved quickly. So they would share information, trade bonds with each other and collaborate on conflict-quelling projects. They would also set up payment systems to ensure that people, bondholders or not, were mobilised to help build peace. Bondholders would either trade bonds, or make incentive payments to ensure that any proceeds from higher bond prices, or from redemption, would be channelled in ways most likely to end the violence. Large bondholders, in co-operation with each other, would be able to set up such systems cost-effectively.

Regardless of who actually owned the bonds, aggregation of holdings, and the co-operation of large bondholders, would ensure that those who helped build peace were rewarded in ways that maximise the reduction in violence per unit outlay.

So, in contrast to today’s anaemic, short-term, tried, tested and failed approaches, a Middle East Peace Bond regime would stimulate research into finding ever more cost-effective ways of achieving peace. Indeed, bondholders would be in a better position than governments to undertake a range of peace-building initiatives. They have the freedom as well as the incentive to try innovative approaches. They might, for example, finance sports matches between opposing sides, promote anti-war programmes on TV, set up exchange schemes for students of the opposing sides. They might even facilitate intermarriage between members of the opposing communities, or try to influence the financial supporters of conflict outside the region to redirect their funding into more positive ways. They could offer the Palestinians and the citizens of neighbouring Arab countries different forms of aid, including education and scientific aid, and measures aimed at providing a secular education for all Arab citizens.

Bondholders could lobby, or work with, the Israeli and Arab governments to, say, give a higher priority to peace studies in schools, but they could also develop peace-teaching projects of their own. While immediate peace might not result, much more could be done to enhance the prospect of peace in the future. Bondholders could, for instance, make strenuous efforts in Israel and the neighbouring countries to have some mixed classes of Jewish and Palestinian children at kindergarten and school. Both groups could be given the chance of spending time with each other. At the very least, bondholders might think, there should be opportunities for the younger people from both sides of the conflict to meet, discuss, argue and form friendships.

Some powerful people in governments, religious institutions or militant organisations would resent the targeting of such objectives by external agencies in this way. But, while under the current system they can oppose peace in ways that attract support, under a Peace Bond regime, they would have openly to declare their opposition to peace itself. It is precisely this focus on the outcome of peace –  rather than activities or institutions – that would help strengthen the coalition working to achieve it. We could broaden the definition of peace to include not only numbers killed or injured, but other quantifiable goals, such as the amount spent on defence in the region, the results of surveys of people’s fears and anxieties, or net migration rates. For the bonds to be redeemed, all goals shall have to be achieved and sustained.

By appealing to people's self-interest, Middle East Peace Bonds are likely to be more effective than conventional efforts aimed at reducing violence. In channelling market forces into the achievement of this objective the bonds could bypass or even co-opt the corrupt or malicious people in government or elsewhere who stand in the way of peace.

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. Governments can evade or deflect censure on grounds of communal affiliation or patriotism, because the adverse effects of their policies are difficult to relate to their cause. Middle East Peace Bonds would focus on an identifiable outcome and channel market efficiencies into exploring the ways of achieving it. They could be the most effective means of achieving the peace that the people of the Middle East yearn for and deserve.

© Ronnie Horesh, September 2012.