Targeting human devastation

I've posted before about the flawed nature of what has become, by default, society's de facto indicators of success: Gross Domestic Product (or GDP per capita) and its rate of growth. In the absence of any targets that are actually correlated with societal well-being, GDP has been enshrined as the target, par excellence, by which our governments measure their progress. It's highly misleading at best, for reasons I've outlined previously, so it comes as no great surprise that on 22 May:

Istat, Italy’s statistical body ... will from October ..include drug trafficking, prostitution, and alcohol-and-tobacco smuggling in its economic-output numbers.... In fact, then as now, Italy was merely one of the first countries to announce its compliance with international accounting standards. Reporting illegal economically productive activity in which all parties take part voluntarily is required under EU rules known as the European System of Accounts.... Sex, drugs and GDP, 'the Economist', 31 May

Well why not? It's no more illogical than doing what we have been doing for decades: assuming that economic activity generates societal well-being - an assumption that is increasingly at odds with reality. 

We urgently need to target explicitly things that we actually want to achieve: universal literacy, for instance, world peace, or even the survival of the human race. In the absence of such targets, the vaccuum is filled by that grotesque proxy for success: Gross Domestic Product. It's a shambles.

The moral case for tax avoidance

George Monbiot writes about Scotland's deer-stalking estates and grouse moors:

Though the estates pay next to nothing to the exchequer, and though they practise little that resembles farming, they receive millions in farm subsidies. The new basic payments system the Scottish government is introducing could worsen this injustice. [Andy] Wightman calculates that the ruler of Dubai could receive £439,000 for the estate in Wester Ross he owns; the Duke of Westminster could find himself enriched by £764,000 a year; and the Duke of Roxburgh by £950,000. I'd vote yes to rid Scotland of its feudal landowners, George Monbiot, 'the Guardian', 19 May

It's not so much the wastefulness of such subsidies, nor the environmental devastation they wreak, nor even the lunacy of taking money from ordinary people to subsidise wealthy aristocrats and monarchs. Rather, the issue is the persistence of such stupid, corrupt policies, which have hardly changed in the several decades since they were first exposed and their impacts quantified. We have no systems in place to act on the voluminous evidence of their disastrous (for more than 99 percent of the population) effects. This is one big disadvantage of making policy as if outcomes are irrelevant: nobody has incentives to terminate failed policies. Instead, the beneficiaries of lucrative-but-stupid policies, have every incentive to oppose their withdrawal, and the means by which to do so.

Mr Monbiot goes on to describe the visual impacts:

The hills in many parts look as if they have been camouflaged against military attack, as they have been burned in patches for grouse shooting. It is astonishing, in the 21st century, that people are still allowed to burn mountainsides – destroying their vegetation, roasting their wildlife, vaporising their carbon, creating a telluric eczema of sepia and grey blotches – for any purpose, let alone blasting highland chickens out of the air. Where the hills aren't burnt for grouse they are grazed to the roots by overstocked deer, maintained at vast densities to give the bankers waddling over the moors in tweed pantaloons a chance of shooting one.

Eradicating war without blueprints

Richard English writes:

[T]o pursue the eradication of war would be as naïve as to pursue human or moral perfection; the effective curtailment of particular wars, or specific war-time brutality, almost certainly depends instead on recognizing our appalling capacity for (and even our historical tendency towards) justifying and practising violent atrocity. ...

For the prospect of establishing human behaviour along lines guided too closely by idealized blueprints probably exaggerates human capacity for improvement. Modern War, Richard English, 2013

I don't agree with the first clause; 'naive' implies that eradicating war will be impossible to achieve. I do agree that being 'guided too closely by idealized blueprints' will, in itself, not be sufficient to eradicate war, though it might be one necessary approach. This is where the Social Policy Bond principle enters the picture: we aim to eradicate war; we raise funding to achieve that goal, but we do not ourselves draw up blueprints as to how to achieve our goal, nor do we try identify who might best achieve it. Instead we issue Conflict Reduction Bonds (or Middle East Peace Bonds, or World Peace Bonds). These are no idealized blueprints: they are means by which motivate people to solve mankind's most grievous social problem.

Much that is good in this world has come about almost randomly, often as a by-product of some persons' pursuit of short-term financial gain. Or only after calamitous experience and exhaustion. I think we can do better: we can supply incentives for people to achieve social goals and let the market - the best way of allocating resources ever discovered - decide which approaches are best and which should be terminated. Idealized blueprints won't always work and, as Mr English also says, "most of our attempts to set out prophylactic measures and structures against modern war have seemed (and continue to appear) frequently doomed to blood-spattered failure." But sometimes, some of these approaches and institutions do actually work. A bond regime would encourage people to persist in those circumstances, and to explore, and refine other approaches too. I don't think that's naive.

Subsidising planetary destruction: et tu, Australia?

Divabat on metafilter summarises Australia's 2014-15 budget:

Amongst the casualties: television, young people (and the organisations that help them) and old people, tech startups, postgraduate students, people with disabilities and anyone seeking medical care, foreign aid, Indigenous people, the arts, renewable energy, and the environment. However, if you are in defence, mining, or Indonesian immigration, you should be fine.

Yes, the fuel tax credit scheme for heavy diesel vehicles will continue. This is worth about US$2bn in taxpayer subsidy to big mining corporations.

Social goals: neither barmy nor simplistic

Yves Smith does us all a service in exhuming and refuting Milton Friedman's claim that "corporations exist to maximise shareholder value". Friedman wrote, in 1970:

That responsi­bility is to conduct the business in accordance with their desires, which generally will be to make as much money as possible while con­forming to the basic rules of the society, both those embodied in law and those embodied in ethical custom.... The Social Responsibility of Business is to Increase its Profits, 'The New York Times Magazine', 13 September 1970

Perhaps that was believable back in 1970. Since then, it's become clear that the basic rules of society are there to be manipulated or ignored in pursuit of corporate earnings. As Mr Smith reminds us, corporations pursue corporate goals, rather than those of shareholders. Nevertheless, Mr Smith concludes:

Friedman’s simplistic, barmy idea found fertile ground. And it became self-reinforcing as executives learned to use it to line their wallets. The long-lived, difficult to displace but not lavishly paid corporate chieftain was over time supplanted by wildly overpaid straight-from-central-casting CEOs. Why worry overmuch about longevity if you can rake it in a 3 to 5 year tenure? ....  So again, repeat after me: “maximizing shareholder value” is an idea made up and promoted by economists, starting with Milton Friedman and his Chicago School cronies. And like many ideas that came out of the Chicago School, the public as large has suffered from treating a soundbite like a serious policy proposal.

All true and important. But perhaps the deeper and broader problem is the mismatch between metrics that become targets, and the well-being of society.

My hypothesis is this: In an older, less complicated, world the correlation between an accountant's view of a corporation and that corporation's success would be strong. So too would be the correlation between the success of a corporation and its contribution to social well-being. Since those days, as population has grown, as society has become more complex, and as our more basic needs have been more satisfied (largely thanks to the activities of these corporations), the correlations have become weaker. A corporation's success can have negative, non-market, impacts on the environment about which we feel more strongly. Its activities and products or services can contribute very little to social well-being, or even detract from it.

All this is not to deny that there are a lot of positive externalities arising from corporate activity. My point is that we have no systemic means of encouraging corporations to, in Friedman's words, conform to the  basic rules of society. If a corporation creates havoc in the social or physical environment, then we rely on government to put a stop to it: but often this is too little, too late, partly because of inevitable time lags, partly because government relies on corporate taxes, and partly because big business and government are just too close and corporations find it easy to subvert or ignore those basic rules.

Accountants' measures of success are less and less reliable indicators of social well-being. And the single over-arching accountancy-derived metric is that of Gross Domestic Product (or GDP per capita) which is explicitly or implicitly targeted by almost all governments (except, probably, that of Bhutan).

We need new targets; targets that correlate strongly with society's real aspirations. Targets that reinforce conformity with existing and enhanced basic rules; that countervail current incentives to subvert or ignore them.

That's where Social Policy Bonds could enter the arena. The bonds would act as a meta-system, into which corporate activity would fall. They would target broad social and environmental goals and reward people for achieving them. They would reduce the incentives for corporations, and their friends in government, to aim for goals that satisfy accountants as distinct from, or against, society and the environment. It's time we moved on from identifying the narrow, short-term goals of big business with those of ordinary members of society. They aren't identical; they can conflict, and they might even be diverging.

Democracy in danger

Multivariate analysis indicates that economic elites and organized groups representing business interests have substantial independent impacts on U.S. government policy, while average citizens and mass-based interest groups have little or no independent influence. Testing Theories of American Politics: Elites, Interest Groups, and Average Citizens (pdf), Martin Gilens and Benjamin I Page, 9 April

The authors came to this conclusion after reviewing answers to 1779 survey questions asked between 1981 and 2002 on public policy issues. They broke the responses down by income level, and then determined how often certain income levels and organised interest groups saw their policy preferences enacted.

There's little prospect of this changing so long as policymaking is conducted in terms of things that alienate ordinary people. Sometimes our politicians speak eloquently of lofty, high-minded goals whose time lines stretch so far into the future that they can be sure they will not be held accountable for their failure to realize them or that are otherwise unverifiable because they are just too vague. More often, though the stated goals of policy have to do with dollars spent, institutional structures and composition, legalisms, regulations or outputs - all of which are too arcane, complex and obscure for anyone other than lawyers, lobbyists and ideologues to follow closely. The only people who understand policymaking today are those who are paid to do so, and the only people  who influence it are those who have the millions of dollars necessary to pay them. These are Gilens' and Page's 'economic elites and ... business interests'. They continue:

When a majority of citizens disagrees with economic elites and/or with organised interests, they generally lose. Moreover, because of the strong status quo bias built into the US political system, even when fairly large majorities of Americans favour policy change, they generally do not get it.

Yes, our societies are complex and highly aggregated. But people's goals are far more easily articulated than the alleged means of reaching them. One solution to the problem described by Gilens and Page, and felt by almost everyone, could be to express policy goals in terms of outcomes that are meaningful to ordinary people. Things like pollution levels, crime rates, poverty rates, literacy standards. There wouldn't be universal agreement about target levels and priorities, but there would be engagement by the public in the policymaking process. With such engagement, there would be influence and buy-in.

A Social Policy Bond regime would start by expressing our social and environmental goals in terms that people can understand and influence. Government, instead of trying to guess how best to achieve our goals (which it is not good at doing) would instead concentrate on articulating society's goals and raising the revenue for their achievement (both of which democratic governments can actually do quite well). The other essential element of a Social Policy Bond regime is to inject the market's incentives and efficiencies into the achievement of our social goals - something that rarely happens nowadays. (For more, see my SocialGoals.com website.)

The alternative? Gilens and Page conclude:

Americans do enjoy many features central to democratic governance, such as regular elections, freedom of speech and association and a widespread (if still contested) franchise. But we believe that if policymaking is dominated by powerful business organisations and a small number of affluent Americans, then America's claims to being a democratic society are seriously threatened.

Mickey Mouse targets: gargantuan impact

From The Economist:

Like almost every other local government in China, Xianghe’s has an urbanisation target: 60% by 2017, up from around 50% today and ahead of the national target of 60% by 2020. Since the global financial crisis in 2008, governments have been hardening such objectives as a way of stimulating growth, and have been borrowing heavily to meet them. Emerging from the shadows, 'The Economist', 19 April

Targets such as these, including especially the universal (apart from perhaps in Bhutan) and much-revered de facto target of governments everywhere, Gross Domestic Product, are Mickey Mouse in conception and in their relationship to ordinary people's well-being, but not, unfortunately, in the impact they have on us all. They are top-down targets, favoured by the political caste and their functionaries. They become the sole focus of bureaucrats' attention to the exclusion of anything else. When it comes to urbanisation in China, the impacts are socially and environmentally disastrous: local governments scramble to meet the targets by throwing peasants off the land they and their families have been farming for generations. One result, The Economist continues, is...

 ...the rampant urban sprawl encouraged by local governments’ ability to seize rural land at will. Such unrestrained expansion may work in parts of America where there is plenty of empty land (albeit at a cost to the environment and often to the quality of life). In China, where urbanisation has forced around 40m farmers off their land over the past three decades, usually with little or no compensation, it will not.

There's a stark contrast between the ad hoc, spurious, almost random nature of targets like urbanisation rates, and the serious negative impacts they have on everyone other than the people who dream them up. 

People who make policy for large societies need to rely on some sorts of numerical indicators of society's goals and how quickly we are reaching them. But indicators and targets should be well thought out and as consensual as possible. They should be in themselves, or be inextricably linked to, things that we actually want to achieve. In other words, they should not merely have (perhaps) been associated with social well-being in the past. They should be outcomes that are meaningful to ordinary people, because that's what matters most and that is what will encourage people's engagement with policymaking and hence buy-in to policies that affect us. Mickey Mouse indicators like urbanisation, or GDP are just not good enough. They speak of a growing and dangerous alienation of rulers from ruled.

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.

Metrics for peace

Social Policy Bonds have their most marked advantage over conventional policy when trying to solve complex solutions for which there is no single, knowable, solution. Climate change (or some of its impacts), crime, or infant mortality in the poorest countries are examples of such problems, as too is violent political conflict: war or civil war.

For issuers of World Peace Bonds, or Middle East Peace Bonds the challenge is not how to achieve peace - that will be left to bondholders - but how to define it in such a way that its achievement will robustly and verifiably have brought about societies in which most of us would be happy to live.

A start would be to issue bonds that would become redeemable when there has been no nuclear explosion that kills more than, say 100 people before 1 January 2050. We could of course issue bonds targeting nuclear peace for decades beyond that date. Similarly, we could target sustained periods of peace relative to today's world: bonds that would become redeemable if the annual numbers of people killed in conflict fall below 50 percent of the average levels from 2007-2012, say, for a period of 10 years.

But a ruthless and powerful dictator could impose those sorts of peace by simple blackmail. We could perhaps therefore combine our main peace goal with other conditions that will have to be satisfied for the bonds to be redeemed. These could include broad quality of life indicators, including the well-being of all communities in a population. It might also be worthwhile to classify as outcomes such essentials for war as weapons, or the sums spent on them, or the number of men and women under arms, and target these for reduction too. We might also want to target attitudes of people towards people of different countries, ethnicities or religions, in ways that will discourage politicians and others from provoking conflict.

Feeding into such attitudes, or possibly as another target to be considered by bond issuers might be to encourage intermarriage between communities that are currently antogonistic. For most governments, advocating or even discussing such an idea would be political suicide. But for holders of Middle East Peace Bonds, for example, it would merely be another tool that can choose to use or not, depending on their view of how effective it will be. Under a bond regime targeting the end of violence between communities in conflict, no official programme of sponsored intermarriage need be contemplated. Bondholders, though, could do, or cause to be done, things that governments cannot do. There would be no sinister motives underlying their actions; their motive, clear and comprehensible to all, would be explicitly mercenary with no sinister overtones: to raise the value of their bond holdings. As human beings, most of us agree that anything that resolves conflict peacefully and at a bearable cost should be encouraged. Apart from fanatics, even the devout on both sides of most conflicts, away from public fora and in their cooler moments, would put human survival above ethnic purity or identity politics. Even a little intermarriage between two warring factions could go a long way.

Most likely, under an enlightened Peace Bond regime, intermarriage, rather than being directly encouraged, would be the happy outcome of a range of projects aimed at increasing informal contacts between two sides of a conflict, including such trustbuilding measures as lower barriers to trade, school exchange visits, or mixed sports teams. One of the benefits of the Social Policy Bond concept is that it can stimulate actions like these including, if necessary, the direct sponsoring of intermarriage, or the birth of mixed-ethnicity children which, if governments were to undertake them directly, would be met by near universal disdain and opposition.

Bad Policymaking

Ben Goldacre writes in Bad Pharma (2013):

[I]t’s possible for good people, in perversely designed systems, to casually perpetrate acts of great harm on strangers, sometimes without ever realising it. The current regulations – for companies, doctors and researchers – create perverse incentives; and we’ll have better luck fixing those broken systems than we will ever have trying to rid the world of avarice.

Dr Goldacre is discussing the medical profession, but his point applies to any regulatory system. In medicine, as in so many other policy areas, the complexity and obscurity of relationships between cause and effect make it easy to generate outcomes that are suboptimal at best and murderous at worst. Where large sums of money are at stake, the manipulation of a regulatory environment creates the means by which the minor tendency towards avarice (or, more politely, self-interest) of the few can be leveraged against the well-being of the many. Systems are put in place to deal with the problem when it becomes to obvious too ignore. But they themselves are subject to hijacking and gaming by the beneficiaries of the current regulatory environment. In short, we have no mechanisms to terminate failed policies, especially those that create or enrich powerful interest groups, including those who genuinely believe they are acting for the good of wider society.

We need to subordinate policymaking to society's needs, not those of interest groups whose over-arching goal, despite all their good intentions, vision statements and lofty idealism, is self-perpetuation. If one doubts this, one need only continue reading Bad Pharma, to see that universities and ethics committees deny doctors the opportunity to see crucial data from the many medical trials that result in unfavourable outcomes for the pharmaceutical industry. Even worse:

So universities and ethics committees may have failed us, but there is one group of people we might expect to step up, to try to show some leadership on missing trial data. These are the medical and academic professional bodies, the Royal Colleges of General Practice, Surgery and Physicians, the General Medical Council, the British Medical Association, the pharmacists’ organisations, the bodies representing each sub-specialty of academia, the respiratory physiologists, the pharmacologists, the Academy of Medical Sciences, and so on. These organisations have the opportunity to set the tone of academic and clinical medicine, in their codes of conduct, their aspirations, and in some cases their rules, since some have the ability to impose sanctions, and all have the ability to exclude those who fail to meet basic ethical standards. We have established, I hope, beyond any doubt, that non-publication of trials in humans is research misconduct, that it misleads doctors and harms patients around the world. Have these organisations used their powers, stood up and announced, prominently and fiercely, that this must stop, and that they will take action? One has: the Faculty of Pharmaceutical Medicine, a small organisation with 1,400 members. And none of the others have bothered. Not one.

Dr Goldacre speaks about the British environment, but there's nothing unique to the UK about his analysis.

So what can Social Policy Bonds do about this systemic failure to put the interests of ordinary people against those of powerful corporations and regulatory bodies?

Continuing with the example of medicine, Social Policy Bonds would target directly and explicitly that which the pharmaceutical industry, the professional bodies and the policymakers who create the regulatory environment all say they are trying to improve: the health of society. Government would continue to raise funds for the improvement of society's health, but instead of dispensing these funds in ways that benefit organizations that are supposed to put society's interests first would only those who achieve society's health goals. It would issue Health Bonds, redeemable only when these goals have been achieved and sustained. The goals would be broad and transparent, comprehensible to ordinary people and so not subject to the smoke-and-mirrors manipulation that features so prominently within our current framework. The bond mechanism would ensure that only activities that actually help achieve our health goals would be rewarded.

A Health Bond regime would be a drastic change from any existing health care system. In my book, which is freely downloadable from my website, I describe how we could move gradually from current systems to such a regime. Health Bonds would lead to a new type of organization: ones whose interests are entirely congruent with those of society. The current system, as Dr Goldacre makes inescapably clear, is broken to the extent that it kills many of the people it's supposed to beneft. I propose instead that we revolutionise health policy by putting the interests of ordinary citizens above those of vested interests.