SocialGoals.com

I have updated the design and underlying software of the Social Policy Bonds website, and have aimed to modify or eliminate dead links. Any comments on the upgrade would be gratefully received.

'Sustainability' is a meaningless goal

 The New Scientist, in a feature about fishing, quotes an expert:

The word 'sustainability' doesn't mean anything. You can actually overfish sustainably - you can reduce the stock to a tiny fraction of is original abundance and fish the rest sustainably. It's like cutting an immense forest, but leaving a few trees standing, which you harvest sustainably. Daniel Pauly, quoted in Plenty more fish in the sea? by Graham Lawton, 'New Scientist', 13 February

One advantage of the Social Policy Bond concept is that it obliges policymakers to come up with clear, unambiguous, verifiable goals. 'Sustainability' just isn't good enough. You might almost think its elasticity and prevalence are designed to ensure that business can continue continue as usual, not only in fisheries but in forestry, climate change, or indeed any aspect of the environment. Unfortunately, setting verifiable goals is difficult for governments. There are genuine as well as spurious reasons at to why this should be. One is that there are too many unforeseeable variables that could affect movement towards targeted goals and that have little to do with government performance. We can hardly expect, therefore, government to do otherwise than promulgate vague, meaningless goals that have little to do with social well-being. 

I advocate, instead, that government relinquish some of its goal setting role, and instead seek to articulate and refine society's goals. Such goals, I believe, would extend beyond the time horizons of particular government administrations. They would be broad and verifiable but, most importantly, they would be meaningful to ordinary people, in a way that such goals as 'sustainability' - or proportion of youngsters going to university, or waiting times in hospitals etc - are not. 

Discussing Social Policy Bonds I often emphasise the gains that could be made by injecting the market's incentives and efficiencies into the achievement of social and environmental outcomes. But perhaps even more important would be the bonds' role in obliging society as a whole to define clearly what those outcomes actually are. In such a policymaking environment goals as devoid of meaning as sustainability would not clear the first hurdle.

Nuclear peace: no time to lose

The Economist recognises the threat posed by nuclear proliferation:

If the nuclear order starts to unravel, it will be almost impossible to stop. ...Stopping proliferation also requires spotting it. ...The International Atomic Energy Agency, the world’s nuclear watchdog ... is overburdened and under-funded, and needs to keep up with technological change. The world ... cannot afford to downplay the dangers of nuclear proliferation. Today’s nuclear diplomacy may seem a slog, but it is as nothing compared with the lethal instabilities that arise whenever regional nuclear-armed rivals confront each other. There is no time to lose. Who will go nuclear next?, The 'Economist', 30 January (emphasis added)

My contention is that too much human ingenuity and attendant funding are channelled into activities of little, no, or negative social utility, such as advertising dog-food, hedge funds or high-frequency trading. People react rationally to the incentives on offer, and such activities, unfortunately attract some of the brightest minds on the planet.

The under-funding of the IAEA is not the only reason for the Economist's (and my) alarm at the nuclear threat. The Agency is like any other organisation. Though its employees are no doubt hard working and well meaning they are not rewarded in ways that are linked to their success or otherwise in carrying out the Agency's ostensible goal. Like every organisation, it has its own incentives, and one of its most important is likely to be self-perpetuation. 

I think that the nuclear threat is too significant to be left to one under-funded organisation. I suggest instead that : 

• We clearly define what we want to achieve: most obviously the continuation of nuclear peace, but we could also encompass other goals, such as reductions in the number of nuclear warheads, and the number of nuclear powers.
• We reward the sustained, simultaneous, achievement of all these objectives.
• We supply adequate funding that encourage such achievement - and are prepared to increase those rewards if necessary.
• We then contract out the achievement of this array of objectives  by means of Nuclear Bonds, made available to everyone - public- or private-sector - on the open market. 

What would happen? Most likely a new sort of organisation would arise: one whose goals are exactly congruent with society's goals. Its structure and composition could vary over time, but at every point would be those that would best achieve and sustain nuclear peace. As project-initiators and implementers, they will do what they can to achieve nuclear peace, see the value of the bondholdings rise, realise their gains from holding the bonds (or receiving payments from bondholders), and sell their bonds to others who can better carry out the next steps towards achieving and sustaining the specified goal.

For more about applying the Social Policy Bond concept to nuclear peace see here.

We need to direct ends, not means

John Kay, reviewing Mission Economy, discusses the author, Mariana Mazzucato's, contention that 'we need a “solutions based economy”, driven and co-ordinated by more powerful governments engaged in every stage of the process of innovation' in order to solve urgent global problems as effectively as the Apollo space programme achieved its goal of landing men on the moon and returning them to Earth. But, Mr Kay writes:

Apollo was a success because the objective was specific and limited; the basic science was well understood, even if many subsidiary technological developments were needed to make the mission feasible; and the political commitment to the project was sufficiently strong to make budget overruns almost irrelevant. Centrally directed missions have sometimes succeeded when these conditions are in place; Apollo was a response to the Soviet Union’s pioneering launch of a human into space, and the greatest achievement of the USSR was the mobilisation of resources to defeat Nazi Germany. Nixon’s war on cancer, explicitly modelled on the Apollo programme, was a failure because cancer is not a single illness and too little was then — or now — understood about the science of cell mutation. Mao’s Great Leap Forward, a vain bid to create an industrial society within five years, proved to be one of the greatest economic and humanitarian disasters in human history. At least 30m people died.

With political direction of innovation we regularly encounter grandiosity of ambition and scale; the belief that strength of commitment overcomes practical problems; an absence of honest feedback; the suppression of sceptical comment and marginalisation of sceptical commentators. Mission Economy by Mariana Mazzucato — could moonshot thinking help fix the planet?, John Kay, 15 January (emphasis added)

I agree: political direction of innovation doesn't work. But political direction of the outcome, I believe, can work, if the necessary innovation is contracted out to motivated bodies, be they in the public or private sector. Governments are good at specifying goals, and democratic governments are good at specifying society's goals. They are also efficient at raising the revenue necessary for their achievement. Where they are not so effective is in dictating how that revenue shall be spent and who will do the spending. As Mr Kay continues: 

All these were seen in Britain’s experience with Concorde, the Channel Tunnel and the AGR nuclear reactor programme, some of the worst commercial projects in history. More recently, there is the £12bn wasted on the NHS computerisation programme ....

This is why I continue to advocate the Social Policy Bonds concept, which allows governments to do what they are best at: specifying a desirable outcomes, while letting motivated bodies compete for the right to join a protean coalition that will co-operate, continuously, until the outcome has been achieved. In that way, goals can be long term in nature - see my piece on global goals, for example. The composition and structure of that coalition can and, most likely, will change, but at every point in time, its attributes will be subordinated to the over-arching goals specified by government, in consultation with the public. Whoever issues Social Policy Bonds - and it needn't be government - cannot specify the diverse, adaptive policies that will be necessary to solve our most urgent, big, complex problems. But they can specify the outcome, and in so doing ensure that the most efficient problem solvers are rewarded in ways that directly correlate with their contribution.

How better to solve our global problems?

At the very outset (pdf), I envisaged that Social Policy Bonds could be used to solve global problems, because that is where their advantages over other policy mixes would be most marked. These advantages arise because:

• Current global solutions are lacking. Take climate change, or the possibility of nuclear war. There are many initiatives being undertaken by well-meaning, hard-working people in many institutions worldwide. But measured in terms of outcomes - reduced probability of adverse climatic events, or nuclear war - the results of all this endeavour are unimpressive.


• Under a bond regime, resources can readily shift to where they will do most good. 'Good' being measured as objectively as possible, with such tools as Quality Adjusted Life Years. Consider just two areas into which huge quantities of human ingenuity are concentrated: financial trading and marketing. The financial rewards from excelling in these activities far outweigh those who that accrue to people involved in efforts to diminish the prospects of, say, violent political conflict. The mismatch between what could be done, and what is being done can be seen by considering the co-existence of both neglected tropical diseases and high-frequency trading.
  


• A mix of diverse solutions are required. No single solutions, of the type favoured by governments or supra-national bodies, are going to solve humanity's global problems. We need a mix of diverse, adaptive solutions, which vary continually with both space and time - always with the aim of being maximally efficient. Governments can specify, and raise funds for, the ends of such solutions, not their means.
  


• Most global problems require long-term solutions; they extend beyond the lifetime of individuals, corporations or government bodies. But people today receive their income from such organisations, and organisations have goals that differ from those of humanity. Their prime goal, after their idealistic beginnings, often becomes self-perpetuation, which can not only be inconsistent with humanity's goals - it can even conflict with them.
  

For all these reasons, I believe Social Policy Bonds offer the best hope for humanity. Our goals are more stable than those means of achieving them currently thought to be optimal. Our governments are good at raising revenue, and they can articulate society's goals, but they are not very good at solving complex problems or thinking for the long term good of society, even when that is their goal. There is no shortage of human ingenuity or other resources, but we do need incentives to divert such resources into areas where they can do most good. Social Policy Bonds, backed by national governments and issued by a global body (it could even be an private-sector organisation) are, in my view, the best way forward. I cannot think of a better alternative.

Centrally planned goals are fine

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.

While we're content to let the market's efficiencies work in the private sector, 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 such centrally planned goals 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 does 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 about which 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.

Make them tradeable

This is a brief article, unpublished, about making Social Impact Bonds tradeable.

Make Social Impact Bonds tradeable

It’s fair to say that Social Impact Bonds have failed to live up to expectations. I think this is because they are not tradeable. This sounds like a minor technical issue, but it is a crucial flaw. It means that, if people are going to profit from investing in the bonds, the goals they target must be achievable within the time horizons of the people who buy them—a few years, perhaps. So SIBs inevitably target narrow, short-term objectives. But our social and environmental problems are complex, difficult to solve, and require long-term investment. They require a range of diverse, adaptive approaches to be tried, with the most promising ones refined and implemented, and the ones that don’t work terminated (something that governments are reluctant to do). Creative destruction, allowed to operate in the private sector, has vastly improved the quality of life of a burgeoning world population. Making the bonds tradeable would allow it to work in the service of public goals too.

Because SIBs aren't tradeable, we'd expect to see what we do see: a lack of innovative approaches, the favouring of existing service providers, high transaction costs and not much in the way of increased efficiency. Yes, there has been some transfer of risk from taxpayers to the private sector, but the overall benefits are hardly enough to justify the high hopes they raised when they were first issued. And, as in other areas of the economy, the persistence of our social and environmental problems while the rich get richer is leading to increased cynicism about markets – the best way of allocating society’s scarce resources.

A market for the bonds would mean people could buy bonds, do what they can to help achieve a targeted goal, see the market value of their bonds rise as a result, and sell their bonds at a profit to people who can take the next steps towards the achievement of the goal. Investors in the bonds would form a protean coalition, all interested in one thing: maximising the value of their bonds. With carefully specified social goals, investors’ goals would be exactly the same as those of society. As with the owners of a company’s shares, the membership of this coalition will change over time but, importantly, the way the market works will mean that bonds are always owned by those who bid most for the bonds: these would be investors who think they will be the most efficient at solving the targeted social or environmental problem.

One big benefit of making the bonds tradeable is that we can target goals that currently we have no idea how to achieve, and let bondholders and the market work out who is best placed to achieve them, and which are the most efficient ways of doing so. When I first developed the original bond concept, their tradeability was integral, and I had goals such as reducing national crime levels in mind. Without tradeability, we see SIBs targeting such short-term, narrow goals as reduced local levels of recidivism. Tradeable SIBs wouldn’t be so limited: they could target national, or even global problems, such as natural or human-made disasters, or climate change.

There is more consensus over these goals than the ways of achieving them. They are more stable, and being broad, are comprehensible to ordinary people, who could participate in their prioritisation, and thereby help close the ever-widening gap between our political caste and the rest of us.

Much human ingenuity, and their attendant resources, naturally go into activities in which people have the best chance of making a good living, but whose value to society is (to be polite) questionable, such as the financial services sector. There is no correlation between where our best talents go, and the value to society of the activities they undertake when they get there.

Making SIBs tradeable would change that. Instead of the purely coincidental relationship between activity and social utility that we see nowadays, a bond regime would channel resources into society's goals. These goals would be long-term, broad and meaningful to ordinary people, who could therefore participate in their prioritisation. Tradeability would extend the range of the goals we target to encompass those we now regard as unsolvable. It would attract resources into completely new areas, currently the responsibility of underpaid hard-working people who have few resources to play with, and are rewarded in ways that have nothing to do with their efficiency or success.

These elusive, yet urgent, goals have long been considered unrealistic or idealistic not, I contend, because they are unattainable, but because they are not rewarded in ways that attract sufficient human and material resources. With tradeable SIBs we could target such noble and, in my view, quite achievable goals, such as minimising the impact of all kinds of disaster, and the ending of war.

© Ronnie Horesh 2020

Power and patronage

Elang Adhyaksa, in a letter to the editor of the 'Economist' was writing about one particular country but, in truth, this could apply almost everywhere:

In such a fractured country as [*see end of this post], leaders must contend with entrenched power bases, then cultivate patronage networks of their own if they are to govern at all. Elang Adhyaksa, the 'Economist', 31 October

That's how things work. The power bases could be corporations or they could lie within government or the public service. I don't actually think things are drastically worse today in that respect than any other time. I do think, though, that we can do better. Power bases don't always share the same goals as ordinary people. The gap between power bases and the public may be widening. Often, the goals of the elite that constitute the power base (or are the people the power base has to listen to) and ordinary people are in conflict. Overall, trust in government is declining; it's not a hopeful trend.

 There might have been good reasons for why the our current political systems are weighted in favor of interest groups. Reasons to do with an uneducated population with not much free time to spend considering policy issues; the logistical difficulties of informing many people, and finding out what they think. The result is that government's goals depend on the bargaining power of special interests, whose influence is largely a function of how wealthy they are, but also such attributes as the personality of their spokespeople, and the emotions that can be generated from selective video footage. 

I think we need policymaking systems now that prioritise the goals of ordinary citizens. These goals would be based not on emotion, but on the actual wishes and needs of the public. 

Social Policy Bonds could be the way forward. They target outcomes that are  meaningful to ordinary people; outcomes such as better health, reduced crime rates, a cleaner environment and, at a global level, absence of war. There is more agreement about such outcomes than there is about how they shall be achieved, and which political party is best placed to achieve them. As well, these goals are more stable over time, so it is realistic to target them. A bond regime is well placed to target long-term goals, especially those that require research, experimentation, and refinement before they can be implemented. It would reward those who best advance these goals. Instead of self-entrenching power bases whose time, I believe, has passed, we'd have coalitions of bondholders; coalitions whose composition and structure would be subject to change, but that would always have as their goal, the maximising of their wealth. In that one respect, they would be similar to existing power bases. The crucial difference is that, under a Social Policy Bond regime, these new types of organisation would become wealthy only by achieving society's goals as efficiently as possible. Their goals, in short, would be exactly the same as those of ordinary citizens. 

*Which country was Elang Adhyaksa writing about? Indonesia.

How to minimise the risk of catastrophe

One typical manifestation of the 'New Optimism', is Steven Pinker's book The Better Angels of Our Nature. According to the New Optimists, most of the indicators of human health, freedom, and educational achievement are improving. This is undeniably good news, but as Adam Salisbury writes:

[W]e should not be complacent about our past trajectory, and not indulge in the New Optimist’s flawed fixation on observed outcomes. Second, we should develop more holistic measures of human progress: ones that take into account our exposure to catastrophe. New Optimism Ignores Our Potential for Catastrophe, Adam Salisbury, 'Paladium', 13 November

I agree that we underestimate the risk of catastrophe. There are many people working hard to find vaccines, cures and treatments for disease, for example, or to prevent natural disasters or deal with their aftermath. There are peacekeepers, arms control talks, and other efforts to avoid human-made conflicts and disasters. But, in my view, this is not enough. The potential for catastrophe—the probability of a disaster of any sort, multiplied by its impact—is high enough to warrant more resources devoted to reducing its likelihood. Efforts to contain nuclear weapons proliferation, for example, are minimal in relation to their potential for calamity. 

Why is this? I think it's partly because the incentives aren't there for people to get involved. Much human ingenuity, and their attendant resources, go where people have the best chance of making a good living. Advertising dog-food for instance, or the useless (at best) financial services sector.  It's only natural. But there is no correlation between where our best talents go, and the value to society of the activities they undertake when they get there. 

Social Policy Bonds would change that. Instead of the purely coincidental relationship between activity and social utility that we have nowadays, a bond regime would channel resources into society's goals. These goals would be long-term, broad and meaningful to ordinary people, who could then participate in allocating them a priority. One such goal that would, in my view, receive far more funding under a bond regime than at present would be disaster prevention. You can read more about how the Social Policy Bond concept could address the minimisation of the risk of disaster here. The bonds could even bring into our purview those goals long considered to be unrealistic or idealistic; not because they are unattainable, but because they are not rewarded in ways that attract sufficient human and material resources. I am thinking now of that most noble but, in my view quite achievable, goal of world peace.

Defining peace, so that we can achieve it

They keep coming: Ethiopia, Azerbaijan/Armenia, Mali/Nigeria/Benin, etc. 

It's too late to do anything much to stop the current conflicts or to avoid the imminent ones, but we can at least set in place mechanisms to prevent those wars and civil wars that are not yet inevitable. There are links here to my work on applying the Social Policy Bond concept to the elimination of war. An important question though, is what constitutes peace? This is not just an abstract point. A Social Policy Bond regime targeting peace would differ radically from the conventional, and not always successful, approaches. Most markedly it would not directly try to address war's alleged causes; or rather, it would not prejudge what those causes are. Such an approach has (in my view) great merit. War is so complex that it is not always obvious, even after a long conflict has ended, what its supposed ‘root causes’ are, and perhaps the very notion of a ‘root cause’ needs questioning. It implies that factors such as ‘poverty’ or ‘ethnicity’ can be removed from their social context, and somehow dealt with, and that then a desired result will follow. But human societies are complex. Poverty can feed grievance, but grievance can be a result of poverty. No single formula, no single set of parameters will always lead to conflict, and guarantee freedom from conflict. Indeed, even the notion of ‘causation’ in this context is questionable. Perhaps Tolstoy summed it up best:

The deeper we delve in search of these causes the more of them we discover, and each single cause or series of causes appears to us equally valid in itself, and equally false by its insignificance compared to the magnitude of the event.

If we are going to issue Social Policy Bonds that target the elimination of violent conflict, how exactly would we define our goals? Peace - the absence of open war, the minimising of numerical casualties - would probably not suffice. Regimes can pile up armaments and blackmail neighbouring countries into making concessions or suffer the consequences. Under such circumstances, the open outbreak of military conflict would be unlikely, but it's hardly the sort of peace that we'd like to target. I have no definitive answers, but I think that apart from the numbers of soldiers and civilians killed in armed conflicts, we could include elements such as the expenditure on armaments, numbers of full-time equivalents in the military, and mass media indicators of impending conflict. This last is interesting: there appears to be strong evidence 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. (See Getting to war: predicting international conflict with mass media indicators, W. Ben Hunt, University of Michigan Press, 1997.) 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. Once we have a set of indicators for peace, we could set about issuing Conflict Reduction Bonds, with national, regional or global objectives. We'd most probably have to refine the indicators over time, but the important point is that we'd be building a strong and highly motivated coalition for peace - in contrast to the current mess, under which the most dedicated individuals and groups seeking peace are the least rewarded, and the most highly rewarded are those who sell weapons of war.