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This is a short, updated, and so far unpublished, piece on applying the Social Policy Bond principle to conflict in the Middle East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

Barnacles

 From the Economist

Modern governments play a much larger role in the economy than the ancient Greeks or the founding fathers could have imagined. This makes political leaders a huge source of patronage, in the form of business contracts, social benefits, jobs and tax breaks. ...[T]hese goodies are highly valuable to the recipients but the cost to the average voter of any single perk will be small. So beneficiaries will have every incentive to lobby for the retention of their perks and taxpayers will have little reason to campaign against them. Over time the economy will be weighed down by all these costs, like a barnacle-encrusted ship. The Greek economy could be seen as a textbook example of these problems. One answer could be to take fiscal policy out of the hands of elected leaders, just as responsibility for monetary policy has been handed to independent central bankers. Democracies and debt (subscription), 'The Economist', 1 September

And not only the Greek economy. It is not so much the existence, but the persistence of these barnacles that is the biggest indictment of the way we currently run things. In important respects they are self-entrenching: the more favoured are certain interest groups, the more resources they have to lobby against withdrawal of their special privileges. It's true that one reason for their persistence is because 'the cost to the average voter of any single perk will be small'. Another reason is that the cost to the voter of understanding what's going on is large. Current policymaking is incomprehensible to outsiders. It's very difficult to trace the vague statements about policy goals to actual policies, and no easier to identify links between policies and outcomes. Only people who are highly motivated will make the effort to do so. Whether such obscurity is deliberateis not that important. (Though I suspect it largely is where enormous subsidies and tax breaks for wealthy landowners and large corporations are concerned.) More important is: what to do about it?

One answer might be to express policy in terms of goals that are meaningful to ordinary people. Instead of talking about, for example, the institutional structures for health care, for instance, or funding arrangements, we should talk about national (or global) health care outcomes and ensure that whatever agencies are set up, and whatever their activities, they are all aimed at achieving these outcomes. Similarly with education, housing, crime or pollution or whatever. What is important is not who achieves our goals, nor how they do so, but that they have sufficient incentives to do the job.

A Social Policy Bond regime would immediately refocus our attention on our social and environmental goals. Under a bond regime we could target long-term, broad, societal goals, and reward those who are most efficient at achieving them. Because of the way the bonds work, it would be the disinterested market, rather than politicians who would make these decisions. Would people still opt to transfer wealth, as we do now, from the working poor to the ultra-rich? Unlikely, but if we did we'd at least be doing so with our informed consent. That in itself would be an improvement over the current policymaking environment.

The US election: who cares?

Who cares about the US election circus? More from Predator Nation:

[An] effective response to internal industrial decline [in the US] and foreign challengers required major changes in American government as well as industry. It required major improvements in the educational system, aggressive pressure to force incompetent industries to reform, ... and a variety of regulatory changes. But those measures had no focused, powerful, well-financed interest group to lobby for hem. Charles H Ferguson, Predator Nation, May 2012

What did those powerful interest groups decide to do? Mr Ferguson continues:

...to start using money to get what they wanted. But only what they wanted, individually - not what the country as a whole needed. Indeed, what was good for their company's profits was quite often bad for the nation.

Most voters probably know, at some level, that the politicians have not the slightest interest in the long-term well-being of the nation and its citizens or, rather, that they cannot afford to rule as if they have. The problem is self-reinforcing. It cannot reform itself. The people and the politicians live in different worlds and those worlds are moving away from each other. 

Despite recent interest (here for instance), I have no illusions about the likelihood of Social Policy Bonds being issued by national governments, but I will continue to put the idea forward as a possible solution. A bond regime would target outcomes that are meaningful to ordinary people: things like better health, lower pollution, or reduced risk of disasters, however caused. By focusing relentlessly on outcomes, rather than the current array of vague or unspecified targets, the bonds could shame governments into catering to the needs of all their citizens, rather than the wealthy and powerful. That's because governments would have explicitly and publicly to declare the outcomes that the bonds would target. And, because political debate would centre on these outcomes, rather than activities, outputs, funding arrangements, laws, regulations, personalities and hairstyles, it's far more likely that ordinary people would participate in the policymaking process. Under a bond regime we, the non-powerful, general public could still, as we are now doing, acquiesce in our tax payments being used to bail out a corrupt financial sector, or subsidies huge industrial and agricultural conglomerates and fossil fuel extraction and consumption. But, in that unlikely event we'd at least be doing so with our eyes open. Even that would be an improvement over the current system built, as it is, on deception.

Should teachers be paid?

Charles Ferguson, discussing the activities of people gaming the US financial system, writes:

we seem to have reached an unhappy position in which a substantial fraction of our most intelligent and articulate citizens either sit at Bloomberg terminals or jet around the world in very expensive tailor-made suits “ding deals” that, judging by the recent record, have no purpose except to put more money in their own pockets, and that on a net basis are economically detrimental to the rest of the population.  Charles H Ferguson, Predator Nation, May 2012

Surely we can do better than that? People sometimes argue that Social Policy Bonds are a means by which investors make money out by doing what they should be doing anyway. It is true that some wealthy bondholders could become even more wealthy by first buying Social Policy Bonds, then doing something to achieve the targeted objective, then selling the bonds. If that seems reprehensible, it is far better than the reality that Mr Ferguson describes above. 

It might not even be that individuals will amass huge fortunes under a bond regime, even if they do successfully achieve society’s goals and profit from their bondholding. The way the market for Social Policy Bonds works would mean that excess profits could be bid away by competitive would-be investors. The market would convey a huge amount of information, openly, that will indicate the constantly varying estimated costs of moving towards a targeted goal. 

The sums of money at stake might be huge, particularly for Social Policy Bonds that target apparently remote, national or global goals, but there’s no particular reason to assume that, in the long run, it would be shared out any less equitably than, say, teachers’ salaries. Those are other examples of people making money by undertaking a socially useful activity. There are perfectly logical arguments against paying for teaching or nursing services but they don’t sound very convincing these days.

Campbell's Law

The more any quantitative social 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. Campbell's Law

I've blogged before about Mickey Mouse micro-targets. Such targets are in common use today, and they obey Campbell's Law because they are so narrow that people can fulfil them in ways that conflict with society's best interests. Broader objectives, a feature of Social Policy Bonds, would help, because then people would have fewer opportunities to withdraw resources from the fulfilment of untargeted social goals to goals that are targeted. Broader goals also reduce the relative costs of monitoring compliance. But even so, it is best to think of metrics that actually are, or are inextricably correlated with, what we actually want to achieve. There are some things you can do to minimise the risk of gaming the system. For example: if our target is universal literacy in a country, we could take reading tests at a random sample of 50 out of a possible 1000 locations in that country. Similarly for pollution or crime, for examples. There might be other ways of targeting metrics without specifying in advance exactly what they are, so that people have to do the job, rather than game the system, in order to profit from holding Social Policy Bonds. But there will probably always be a need to see that people are complying with the spirit, not just the letter, of any target. That said, some targets would be pretty difficult to game: for instance, the goal of having no people killed by a military nuclear explosion over the next thirty years.

Who needs political parties?

Given that keeping your seat means spending a fortune on television advertising and other forms of campaigning, changing your views on a matter of great interest to your sponsors is likely to be political suicide. Stop this culture of paying politicians to deny climate change, George Monbiot, 2 August

Mr Monbiot is referring to seats in the US Senate, but the principle applies to all the democratic countries and to issues other than climate change:

 [A] political system which imposes no effective cap on campaign finance leads inexorably to plutocracy: governance on behalf of the richest people and corporations. 

Perhaps our system of representative democracy can be fixed, and perhaps reforming the way political parties are financed is one way of doing it. But, just as likely, the problem is intrinsic to politics in which parties dominate. Every institution, whether it is a political party, government agency, religious body, university or whatever, has as its over-arching goal that of self-perpetuation. It can easily be persuaded to evade or subvert its stated objectives for the cash necessary to stay in existence. We could try tinkering with the way political parties are financed, or we could try something different:

Under a Social Policy Bond regime organizational structures, and the people within them, would be entirely subordinated to outcomes. And people would decide directly on the outcomes they wanted to achieve. Consider our current system: people vote for individual politicians who say they will do certain things that may or may not achieve certain outcomes - usually safely in the long term. (But who monitors progress?) These people's careers usually depend, individually or as members of a political party, on some source of external funding. The scope for manipulation of these would-be politicians is obvious. So why not have people vote directly for outcomes, rather than people who, if they are made to justify their actions at all, can get away with vague promises that their decisions will at some indefinite point achieve some unquantified and uncosted goal?

Social Policy Bonds wouldn't distract ordinary people by issues such as personalities or short-term activities: they would focus our attention exclusively on outcomes and their costs. We could target such goals as the avoidance of disasters caused by climate change (or anything else) without having to try to keep up to date with our rapidly expanding scientific knowledge. We should not even have to decide on which institutions would best be able to achieve our goal: the way the bonds work would reward only the most efficient projects, or combination of projects, whatever they are and whoever initiates them. And perhaps just as importantly, wealthy individuals or corporations would find that the way to become even wealthier would be to direct their resources into achieving society's broad, long-term goals, rather than their own narrow, short-term interests.

It's all about control

Tony Blair admits Labour didn't fully understand complex financial sector source

Quite. Unfortunately his Government behaved as though it did understand the financial sector. Even more unfortunately, governments everywhere behave as though they understand everything: climate change, agriculture, education, housing, health, transport, crime, war and all the rest. Government so often doles out subsidies, regulates or deregulates, or otherwise tries to control complex systems that it does not, and cannot, understand. Some relationships between cause and effect are easy to understand and manage: that between paying for primary education and literacy, for example, or between organising rubbish collection and human health. But in so many other areas government is well out of its depth.

Social Policy Bonds would remove the need for government to identify in advance the extremely obscure relationships between cause and effect that are ever more a feature of our complex society. Instead of "picking winners" such as the financial sector and lavishing implicit subsidies on it, government could instead target outcomes that are meaningful to ordinary citizens - basic health, literacy, housing and health outcomes, say - and let others do the endless, and endlessly difficult, task of identifying the important links between activities and outcomes. A Social Policy Bond regime would enable government to do something that it's actually quite good at: articulating society's wishes and raising the revenue to achieve them. But the actual achievement is something that, as is becoming clearer, is best left to people who are paid according to their effectiveness and efficiency, rather than how well they can convince the politicians that they are doing something useful.

An alternative to doing nothing

Bill McKibben summarises progress on reducing greenhouse gas emissions: 

Last month the world's nations, meeting in Rio for the 20th-anniversary reprise of a massive 1992 environmental summit, accomplished nothing. Global warming's terrifying new math, Bill McKibben, 'Rolling Stone', dated 2 August

 And again: 

everyone at the Rio conference renewed their ritual calls for serious international action .... The charade will continue in November, when the next Conference of the Parties (COP) of the U.N. Framework Convention on Climate Change convenes in Qatar. This will be COP 18 – COP 1 was held in Berlin in 1995, and since then the process has accomplished essentially nothing.

No surprises here. Mr McKibben writes eloquently of the financial disincentives for governments and energy companies to do anything to cut greenhouse gas emissions. It's one policy area where there's insufficient scientific proof to persuade political parties to take actions that adversely affect the people who make contributions to their election campaigns. More precisely: the relationship between imposing a carbon tax (say) and benefiting human, animal and plant life is too indirect to persuade policymakers that it's in their interests to do anything beyond paying thousands of bureaucrats to fly round the world drafting meaningless documents. Our current policymaking system lets governments off the hook if they can point to uncertainties in the scientific relationship between cause and effect: in this case, between cutting greenhouse gas emissions and an improved environment. Sure, politicians might privately be quite convinced by the evidence but, if it's not obvious to everyone, they are unlikely to take action that brings long-term benefits to society while imposing upfront costs on themselves and their supporters.

Here's another suggestion. If we want to do something about cleaning up the environment, let's pay people to clean up the environment. If we want to tackle climate change, let's (after defining exactly what we want to achieve) tackle climate change. We need to target outcomes, rather than wait decades for government to agree on what's required and then make policy that might, or might not, do something to achieve it. What is important is not how our urgent social and environmental problems are solved, but that they are solved. Social Policy Bonds are one way of getting government to focus on what we as a society actually want to achieve and out of the business of identifying genuinely (or not) difficult scientific and social relationships. The first is something that democratic governments can actually do quite well. The second is something that they do badly, whether because coming to a consensus about most scientific and social relationships is unachievable, or because of their incompetence or self interest.

Climate change is quite possibly such a huge and urgent challenge that we can't wait for politicians to be persuaded that they have more to gain by dealing with it than by pretending to deal with it. If the world's governments collectively issued Climate Stability Bonds it would be motivated bondholders, not motley interest groups, who would decide what needs doing and how best to go about doing it. Governments - and taxpayers - could relax in the knowledge that if, in fact, the doubters are right, and there's no climate change problem, then the way the market works would ensure that costs to society are minimised. And, if there is a problem, investors in the bonds would have incentives to explore and implement the most cost-effective ways of solving it. They would do all this in ways that take account of our rapidly expanding scientific knowledge - something that no government can do. By targeting outcomes, rather than the supposed ways of achieving it, a bond regime would be more efficient than any other policy mix. Perhaps even more important, a bond regime would compel government to do its duty and address big, urgent problems, rather than, as now, get away with pleading uncertainty and doing nothing.

The state doing what it does best

Tony Judt:

We have freed ourselves of the mid-twentieth century assumption—never universal but certainly widespread—that the state is likely to be the best solution to any given problem. We now need to liberate ourselves from the opposite notion: that the state is—by definition and always—the worst possible option. quoted by Zadie Smith in The North West London Blues, 'New York Review of Books', June 2012

The state does do some things very well. Democratic states are good at articulating society's social and environmental goals, and at raising the revenue necessary to achieve them. Where it often fails is in achieving these goals efficiently. Partly this is because government employees are rarely paid according to how successful or efficient they are in achieving social outcomes. Social Policy Bonds could transcend this limitation. They would allow government to contract out the achievement of society's goals to the private sector, while still defining these goals, targeting them, and paying for them. The state would be relinquishing some of its power, particularly its often-abused power of patronage, in issuing Social Policy Bonds, but it would be doing so in the service of better outcomes for all. 

A bond regime could also encourage the efficient targeting of global problems; something that is rarely done effectively under the current system. We could look to governments or supra-national bodies to target such universally desired goals as an end to war, the mitigation of natural or man-made disasters, including climate change. It is probably governments - and only governments - that could raise the funds necessary to solve such huge and urgent problems. They are trying, but largely failing, to achieve our goals deploying the tools currently available. But, if they collectively backed Social Policy Bonds targeting our global problems, they might be much more successful.

"Seeing Like a State"

I haven't read Seeing Like a State: How Certain Schemes to Improve the Human Condition Have Failed, by James C Scott, published in 1999. (There is a good review of it here.) The description on the Amazon page sums it up: 

Centrally managed social plans misfire, Scott argues, when they impose schematic visions that do violence to complex interdependencies that are not -- and cannot -- be fully understood. Further, the success of designs for social organization depends upon the recognition that local, practical knowledge is as important as formal, epistemic knowledge. The author builds a persuasive case against "development theory" and imperialistic state planning that disregards the values, desires, and objections of its subjects. He identifies and discusses four conditions common to all planning disasters: administrative ordering of nature and society by the state; a "high-modernist ideology" that places confidence in the ability of science to improve every aspect of human life; a willingness to use authoritarian state power to effect large-scale interventions; and a prostrate civil society that cannot effectively resist such plans.

I've argued similarly in the past. Our current way of solving social and environmental problems is, in essence, centrally managed. The result is something like a policy monoculture, and the results are predictably lamentable. But the important distinction to make is that between centrally planned outcomes and centrally managed ways of achieving them. We all want to see reduced poverty, the ending of violent political conflict, and universal literacy, for examples. Government does a good job at articulating our wishes in these and other areas. But centrally planning the ways of achieving these goals just will not work. We need diverse, adaptive solutions; ones that take into account circumstances that vary with time and space. Central planning can't do that and the results of its failure are widespread and tragic. 

Which is why I advocate Social Policy Bonds. Under a bond regime we would set goals and contract out their achievement to people motivated to investigate and implement the only the most efficient projects. These projects would adapt to changing circumstances, and be sensitive to local conditions. Under a bond regime, the complex interdependencies that Scott writes, which cannot be understood by government, need not be understood by government. Instead, via an automatic system of cascading incentives, Social Policy Bonds would encourage diverse, adaptive initiatives that would contribute to achieving our large-scale - even global - goals.