Torture and the unimportance of outcomes

It shouldn't surprise me by now, but it does, that outcomes have so little bearing on policy. Crucial policy decisions are made for reasons ranging from media attention to ideology or the vested interests of campaign donors, but results hardly seem to feature. The decision makers go ahead anyway. You might think that ethically questionable policies are subject to more scrutiny than routine budgetary appropriations, but you'd be wrong:

President Bush has ...promised to veto a bill that would bar the CIA from using techniques such as sensory deprivation, water-boarding and temperature extremes, arguing they are needed to gain information that protects the public from terrorists. Such an 'end justifies the means' argument might sound persuasive to some, but it is worthless unless such techniques actually work. A report on this subject was released [in 2007] by the Intelligence Science Board.... The message it repeated over and over was that there is virtually no evidence to show the effectiveness of any of the interrogation techniques used by the US. The authors expressed 'surprise and concern over the lack of rigorous scientific examination....' (my emphasis) Modern barbarity, 'New Scientist', 23 February

This is policy as the rationalisation of what people feel like doing, and it's no basis for an efficient bureaucracy, still less an ethical one. I shouldn't be surprised of course. I have quoted before from Why states believe foolish ideas by Steven van Evera:

[G]overnment bureaucracies non-self-evaluate. At a minimum, agencies with evaluative responsibilities are not invited to evaluate - they are kept out of the loop, their opinions unsought. At a maximum, government agencies actively suppress their own internal evaluative units and are discouraged from evaluating the beliefs and policies of other agencies.

Whatever you might think about Social Policy Bonds, it's surely time to look at subordinating policy to transparent, meaningful outcomes, rather than continuing to have critical decisions made for us on the basis of no evidence whatsoever.

Follow the money

A useful site for keeping track of US political donations is http://www.opensecrets.org/, maintained by the Centre for Responsive Politics. Eric Janszen argues that the bubble that looks about to burst in the financial markets has been inflated by a 'credit-financed, asset-price-inflation machine organized around one tenet: that the value of one's assets...now goes in only one direction, up....' The US finance, insurance and real estate industries are the lead players. are the culprits. Government oversight has been weak and, as Mr Janszen puts it, these sectors, according to opensecrets.org:

gave $146 million in political donations for the 2008 election cycle alone, and since 1990 more than $1.9 billion - nearly double what lawyers and lobbyists have donated, and more than triple the donations from organized labor. Harper's February (subscription), summary here

Subsidising environmental destruction in India

Writing about the debate over the Nano, the Rupees 1 lakh (approximately US$ 2500) car launched by the Tata Motor Company, Sunita Narain says:

There is no doubt that any car that is small is better than a big car in terms of fuel economy and emissions. There is also no doubt that affordable cars are better than expensive ones. But the question is in what direction is Nano leading us. The issue is not small, cheap cars or big, expensive cars, but all cars. The issue is whether it is helping mobility and at what price.

Let's take the 'affordability' question first. The fact is that cars — small or big — are heavily subsidized. The problem is that when economists (including those who run the government) fret and fume about mounting subsidy bills, they think of farmers — fertilizer, electricity and food — not our cars. But subsidy is what they unquestionably get.

The subsidy begins with the manufacture of cars. When we read about the Singur farmers' struggle to stop government from acquiring their land for the Tata car factory we don't join the dots. We don't see this as the first big subsidy to motorization. The fact is, in Singur the manufacturer got cheap land, interest-free capital and perhaps other concessions — the Left Front government in West Bengal never made public full details of its attractive package. This brought down the cost of production and allowed the manufacturer to price the Nano at Rs 1 lakh. But this is not only about Tata or Singur. The fact is that, to compete, every manufacturer needs the same, if not better, package of benefits. The fact also is that every state government is competing to offer sweeter deals. We know that in the now contested special economic zones of Goa, the government had agreed to give industry all this and 15 years of electricity free of cost. We also know if West Bengal did not bend to please, Uttarakhand was waiting to entice the Tatas. In other words, we are certainly not paying the cost of manufacture of our cars, not to mention the full cost of running or parking them.

The car owner (and I am one as well) pays a one-time road tax, which is between 0.5-5 percent of the cost of the vehicle in most states. The bus pays an annual road tax and it also pays a passenger tax based on the number of people it carries — call it a penalty for efficiency as it moves more people, takes less road space and so emits less and consumes less fuel per passenger.

But this is only one part of the subsidies to car owners. There is also the cost of regulating traffic; of installing traffic signals; the cost of building flyovers, overbridges and subways; the cost of pollution control measures; the cost of pollution to our health. Since cars take up over 75 percent of the road space, even though they move less than 20 percent of the people, it is obvious whom this expenditure benefits the most. ...

The subsidy bill does not end here. There is also the cost of parking, which we refuse to pay any or full cost for, and which the government refuses to impose. But we forget or do not see that in our cities the largest number of people take the bus or cycle or walk to work or shop. The bus has not been replaced by the car, it has only been marginalized. In simple terms, this means that buses have no space to move — in all cities they crawl, commuters cannot reach destinations in time, and accidents keep getting worse as space constraints grow.

The question is should we discount the price of motorization so that some (and maybe a few more) can drive a car or a two-wheeler? Or should we pay the real cost of our commute so that the government can invest in mobility for all? The fact is that the government cannot afford to subsidize cars for all. Nor can it afford to invest in both cars and buses. Ultimately, it is not about economics. It is about politics and the imagination needed to build cities in which mobility does not mean cars. Flyovers can be built, but only if we know where they will lead. Source

My thoughts exactly.

Post 500

My 500th post on this blog and time for a free and frank appraisal of where Social Policy Bonds are going. The honest verdict has to be: not very far. At least not that I'm aware of. I don't know of anyone other than me who's working on them, nor any organizations that are thinking about issuing them. I get very few comments on this blog, which together with the main Social Policy Bonds web site get about 15 views daily (excluding RSS feeds and perhaps other views that my hitcounter doesn't register).

There is increasing interest in the value of markets for generating information in prediction markets, or information markets. More catastrophe bonds are being issued. But all these markets differ from Social Policy Bonds in that, while making use the dynamic information of markets to anticipate or insure against events, they don't attempt to modify behaviour. Participants in these markets are active only in the sense that they invest in them. Social Policy Bonds are in contrast designed to reward people for helping achieve society's goals.

The lack of interest is disheartening, but I am currently working on another book about Social Policy Bonds, and hope to have a first draft done in about three months. I intend to continue posting on this blog and maintaining the Social Policy Bonds website.

Motoring ourselves to death

Policy is often made without realising its implications. The result can be disastrous. Governments, realising that building roads was necessary at first, have gone overboard, subsidising road transport, oil extraction, storage of cars on public highways (parking). The massive social costs rarely enter the calculus. The 1.2 million deaths from road accidents every year are obvious and visible, but there is more:

Noise from rail and road transport is linked to 50,000 fatal heart attacks every year and 200,000 cases of cardio-vascular disease in the EU according to the new research published today by T&E. .... "[T]he lack of decent regulation combined with increased traffic and a trend towards bigger, more powerful and noisier vehicles is literally proving to be a lethal combination for Europeans. Unlike air pollution, which most major European cities are now starting to tackle, noise has been ignored for decades as the problem has worsened and the negative impacts on society have increased" ....

The World Health Organisation's threshold for 'serious annoyance' and onset of negative health effects from environmental noise is 55 decibels. The study found that around 210 million citizens of the European Union are regularly exposed to 55 decibels or more of road noise.... 50,000 heart deaths a year caused by traffic noise, T&E, 28 February

Conventional policymaking can't handle such adverse side-effects (negative externalities, in economists' jargon). It's difficult to measure the effects of noise on physical and mental wellbeing, but it's easy to measure the benefits of a new road in terms of time saved, and to put a monetary value on that time by multiplying it by road users' earning rates. The bias, which we see in so many other policy areas, is against crucial but unquantifiable components of our wellbeing and in favour of those impacts that can be quantified, monetised, and aggregated into something that sounds good, like economic growth. Memo to policymakers: a magnificent transport infrastruture is not an end in itself: it's a means to certain ends. You would do us all a favour if you targeted those ends directly rather than poured taxpayer funds into those schemes that you (and your buddies in big business) think are the best ways of achieving them.

Growth at all costs

James Fallows, discussing the Chinese economy and in particular its high savings rate:

Better schools, more-abundant parks, better health care, cleaner air and water, better sewers in the cities - you nake it, and it it isn't in some way connected to the factory-export economy, China hasn't got it, or not enough. ... [S]aying that China has a high savings rate describes the situation without explaining it. Why should the Communist Party of China countenance a policy that takes so much wealth from the world's poor, in their own country, and gives it to the United States? The $1.4 trillion question, 'The Atlantic', January/February

Growth at all costs seems to be the answer, in the hope that more jobs will reduce China's social tensions and generate jobs for the rural poor. It's hard to blame the Chinese government for this. Economic growth is the de facto target for most governments and, arguably, it tracks increases in wellbeing more accurately in China than in richer countries. But that's not to say very much. In China and the densely populated industrial countries the downsides of economic growth - environmental pollution and loss of social cohesion, for instance - may be uncertain, difficult to quantify but they are also very large. They might well outweigh the similarly incalculable positive-but-unmeasured effects of economic growth; including the alleviation of poverty. There's no way of knowing, and the results of governments' getting it wrong could be disastrous.

Another way might be to recognize that economic growth - even if it could be measured accurately - is not an end in itself. It's a means to various ends, many of them private, and best decided by individuals and households. Encouraging, and subsidising mothers to join the work force and send their children to childcare centres might boost GDP figures, but it should hardly be a matter for government policy. Perhaps government can best intervene by specifying public goals in terms of minimum levels: of poverty, pollution, health, educational achievement, employment, etc, and then to let people make their own decisions as to the necessary trade-offs. Social Policy Bonds lend themselves to this: government could issue bonds that would reward people only if minimum levels of (say) literacy or physical health were maintained.

In such a regime, government would be doing what it does best: articulating and paying for the supply of legitimate, measurable, public goods and services that correlate well with social wellbeing. Beyond those minima, people would make their own decisions about whether, for example, to subsidise profligate US consumers or big-box retailers.

Broad indicators are essential

Focusing on narrow indicators is easy, but rarely of great value. I've blogged before about the Mickey Mouse micro-targets (the length of hospital waiting lists for example). Similarly, if a government were to target accidents to cyclists, the evidence appears to be that risk compensation would occur:

In one experiment, a British psychologist, Ian Walker of Bath University, simply got on his bicycle and monitored the behaviour of 2,300 vehicles that overtook him. When he wore a helmet, drivers were much more likely to zoom past him with little room to spare; when he was bare-headed (and indeed when he wore a female wig) the amount of space that motorists left would increase. A hazardous comparison, The Economist, 28 February

But even targeting road deaths in general wouldn't necessarily improve things:

An experiment in Munich found that the drivers of taxicabs fitted with anti-lock braking systems were involved in no fewer accidents than those without. That is because the former used those superior brakes not to practise prudence but to drive more aggressively. ... John Adams, a transport expert at University College London, has compiled data from all over the world to show that laws making drivers wear seatbelts do not make roads safer; they move deaths from inside cars to outside them because they encourage bad driving.

What about aiming to reduce the number of children killed on the roads? John Adams points out that this:

has fallen in recent years ... but mainly because they are rarely allowed out alone, so today's teenagers have less skill at navigating hazardous roads; and as a result, the number of teenagers killed in car accidents has jumped.

Sometimes the difficulty of picking appropriate indicators for targeting under a Social Policy Bond regime is pointed out to me. But exactly the same problems apply to policymaking under the current regime - except that there is rarely any transparency about what is being targeted. And that leaves the way open for expensive (and mostly futile) responses to the relatively small number of deaths caused by terrorism, while an estimated 1.2 million people are killed on the world's roads every year.

The Martindale approach to policy

Monoculture in agriculture is like the Martindale system in roulette: your near-certain, small, steady gains are balanced by the tiny chance of disaster. In agriculture the disaster could take the form of a pest against which an entire region's single variety crop has no resistance. In policy it could take the form of high oil prices, which threaten the road transport system. In both cases government played its part in favouring uniform, global models at the expense of diversity. Most of the ludicrously high levels of subsidy paid to agriculture in the rich countries (US$268 billion in 2006) end up with the largest landowners and large agribusiness corporates. They bid up farmland values, making it necessary to maximise yields per hectare, encouraging the use (and raising the price) of purchased inputs. The result is the dreary and fragile monoculture of field after field planted with oilseed rape or (coming soon) biofuel-yielding crops, in response to the current consensus of Brussels bureaucrats. As the level at which critical decisions gets higher and higher, it's not only the distance between the decision-makers and those affected that increases: it's also the seriousness of the disaster that could strike if the decision-makers get it wrong.

I'm thinking also of policies like Kyoto, which put much of the world's environmentalist resources into one supposed climate-stabilising idea: cutting back anthropogenic greenhouse gas emissions. If that turns out not to be a viable way of solving the problem, then the consequences for all of us could be catastrophic. The Social Policy Bond principle understands that governments can have good, popular intentions, and are often the only bodies that can pay for their achievement. Something like climate change demands action at the very highest level. But a uniform and static approach to a social problem is rarely optimal.

Military blunders and policy

Victor Davis Hanson, writing for the Claremont Institute, takes us on a quick canter through some American military blunders, both tactical and strategic and right up to present-day Iraq. Intelligence failures, huge battlefield miscalculations, inferior materiel, poor leadership: all have been features of US military campaigns throughout history. Just one example:

We often read of the tragedy of the September 1944 Arnheim campaign. Impossible logistics, bad weather, lousy intelligence, tactical imbecility, and much more doomed the "Market Garden" operation and led to the infamous "A Bridge Too Far" catastrophe. Thousands of Anglo-American troops were needlessly killed or wounded—after the Allies had recently crushed an entire German army group in the west (though they let 100,000 Wehrmacht troops escape at Falaise). The foolery of Market Garden also ate up scarce resources, manpower, and gasoline at precisely the time the American Third Army was nearing the Rhine without much major opposition. Once Allied armies stalled for want of supplies, they would be unable to cross the border of the Reich for another half year. The Germans used the breathing space after their victory in Holland to rush defenders to the so-called Siegfried Line, which had been theretofore mostly undefended.

The picture is not entirely bleak. We 'live and learn, learn and live'. At least until Vietnam, there was 'a sort of tragic acceptance of military error as inherent in war.' Mistakes are bound to occur 'in the context of human imperfection, emotion, and fear.'

Though Presidents Lincoln and Truman were both reviled, Americans still felt that ultimately the American system of transparency and self-criticism would correct wartime mistakes.

And there lies the hope. Transparency about what is happening and freedom to criticise. But also the capacity to adapt to fast-changing circumstances. Mechanisms that terminate failed ventures. I'm sometimes disturbed by the every increasing level of aggregation at which decisions are made. Big business and government between them determine to an increasing extent, how we live (see here and here, for examples). This is not only a matter of the large corporates' growing dominance over the world's economic activity; it's also about governments' effects on our behaviour, through regulation and intrusion, and their tight links with big business. Big government tends to mean remote and unwieldy government. It best understands and does deals with big business, and tends to favour the big and global at the expense of the small and local.

But perhaps most dangerous is the tendency of big government - or any large monopolistic organization - to continue doing things with diminishing attention given to whether they are effective and efficient. The military blunders that Mr Hanson describes could not be allowed to run their course indefinitely. The costs of allowing failed approaches to continue were huge and obvious. Most of our social and environmental problems are slower-moving and not as immediately compelling. Nuclear proliferation, for example (the subject of my previous post), or climate change, or loss of social cohesion: decisions are made at such high levels of aggregation that there is little room for alternative approaches, and little incentive for people to try them.

Social Policy Bonds could possibly turn that disadvantage into a plus. Instead of dictating that the way we shall deal with climate change, for example, is to cut back on greenhouse gas emissions, a collection of world governments could define a global climate stability target, and reward those who who successfully achieve it, however they do so. The size of the targeting body serves to define the problem, and raise revenue for its achievement; things that a large authoritative body can do very well. But such a body cannot adapt to changing events or expanding knowledge rapidly enough, and that's where the multitude of holders of Climate Stability Bonds could help: they would have powerful incentives to terminate failed ventures, and choose only the most efficient solutions to the climate change problem.

Nuclear peace or exotic cat food? It's up to us.

So what progress are we making with avoiding a nuclear conflict? In addition to the dangerous fragility of nuclear Pakistan, Joseph Cirincione tells us that the US (and the rest of the world) now face:

(1) a nuclear-armed North Korea; (2) the possibility of a Middle East with several nuclear states, Egypt, Turkey, and Saudi Arabia among them; (3) the increasing danger of weapons from other countries falling into the hands of terrorist groups, while American-led programs to secure nuclear bomb materials around the world are being neglected; (4) an upsurge in the pursuit of civilian nuclear power by many countries that could put them within reach of nuclear weapons capacity; and (5) the possibility that flaws in US and other command and control systems—including those exposed last August by the unauthorized flight from North Dakota to Louisiana of a B-52 bomber armed with six nuclear bombs —could result in the accidental or unauthorized use of nuclear weapons. The greatest threat to us all, 'New York Review of Books', 6 March 2008

I think this crisis is caused by the absence of any clear means of dealing with it. Nuclear proliferation demands a multiplicity of approaches. It cannot command the imagination of, for instance, climate change which, policymakers are convinced, can be addressed by cutting back on our greenhouse gas emissions. That may or may not work, but it is a coherent policy; one that thousands of government officials can work on, and one that all of us can understand whether or not we agree that it's worthwhile. Nuclear proliferation is different. It's probably at least as great a threat to our survival as climate change, but there's no single, over-arching way of dealing with it. Government is especially bad at dealing with issues like this, where solutions are unlikely to come from the limited repertoire of command and control bureaucracy. Unless Government identifies solutions that it can implement, it's discouraged and tends not to follow through. It lacks the imagination to conceive of non-bureaucratic solutions, and it's not keen on relinquishing control. The result is our current perilous position.

But government could deal with the problem. It could recognise that, while it doesn't have all the answers, it can at least mobilise the private sector to come up with solutions. The ingenuity and resources that go into pet food advertising campaigns, for instance, is phenomenal. (See here for cat food 'inspired by the tastes of Tuscany'.) To divert some of them into reducing the probability of a nuclear conflict would surely be a worthwhile initiative. Government could do this by issuing something along the lines of Conflict Resolution Bonds. It would define a set of nuclear peace targets, and back the bonds with rewards to be paid after specified periods during which a nuclear exchange does not occur. Bondholders would be motivated to bring about nuclear peace by whatever means they see as being efficient. They would not be limited to the solutions or activities that only government can implement. With a decent monetary incentive they could bring in our undoubted, boundless ingenuity to remove what is probably one of the greatest threats to our survival.