Whole Environment Bonds

 George Monbiot writes:

The living world is being hit by everything at once: the only way to stop our full-spectrum assault on Earth systems is to reduce our economic activity. Level down, George Monbiot, 4 October

David Allen said is quoted as saying ‘You can do anything, but not everything’. In much the same way, we can solve any environmental problem, but not every environmental problem. The linkages are too tight and too complex; the time lags too obscure. Mitigating one problem is likely to worsen another. So, as Mr Monbiot writes:

[I]f we were to build sufficient direct air capture machines to make a major difference to atmospheric carbon concentrations, this would demand a massive new wave of mining and processing, to make the steel and concrete.

Mr Monbiot’s solutions to this broad environmental crisis are to ‘ramp down economic activity’ and to redistribute wealth. He indicates how unlikely this is to happen by calling it secular blasphemy. I agree with his assessment of the likelihood of its occurring. So I try here to offer a more positive vision.

The first thing to emphasise is that Mr Monbiot coyly (and, from the point of view of his own well-being, wisely) avoids the question of population. Yet this need not be contentious. At the 1994 Cairo Summit, more than 180 countries promised ‘access to reproductive and sexual health services including family planning’ to all their citizens. That should be done for ethical reasons; it would also alleviate future environmental pressures. I do not see a reduced population as a goal in itself; rather it is one way in which environmental depredations could be reduced.

I now believe that targeting even such broad problems as climate change or atmospheric pollution is inadequate. Current environmental depredations are too complex, linked and pervasive so that, as Mr Monbiot implies, any attempt at solving one problem could well worsen others.

What I propose here is a possible way in which we can provide incentives for people to tackle all environmental problems, simultaneously, over a very long time period.

It is essentially a more panoptic variant of my Environmental Policy Bonds and Climate Stability Bonds ideas. However, rather than target a single group of metrics such as those encompassing climate change and its impacts, the aim here is to improve all aspects of the environment over the entire planet Earth.

I suggest that we take an inventory of a random sample of the Earth’s sea and land resources. We could take, say, 5000 areas of 1km squared over the entire globe and thoroughly inventory them for biodiversity, degree of air or water pollution (at different heights and depths). Every ten years thereafter we could take a random sample of, say, 100 of these areas, conduct exactly the same environmental inventory and note the direction of the environmental indicators for each area. As a starting point, we could target every metric for improvement in every sampled area. If every metric in every sampled area shows a sustained improvement, then the bonds would be redeemed. It would take many decades before such a widespread improvement had been achieved. Nevertheless, because such Whole Environment Bonds would be tradeable, people could make improvements and expect to be rewarded for doing so.

There would need to be intense, informed discussion as to which metrics to include. There would, for instance, be the question of whether we take temperature (air or sea) as a metric for targeting, or whether the concerns we have about the climate would be fully subsumed within the other indicators (biodiversity, for example), being targeted. (Are we concerned about climate change, or the impacts of climate change on plant, animal and human life?) Much work is being done on environmental indicators: see, for example, this pdf document.

More those unfamiliar with the Social Policy Bond concept, the basic idea is that a group of people (governments, non-governmental organisations, philanthropists, the public) contribute to a fund that will be used to redeem non-interest bearing bonds only when a specified goal has been achieved and sustained.

I don’t think I’m quite as pessimistic as Monbiot and other environmental commentators, but I recognise that the chances of Whole Environment Bonds ever being issued as I envisage are remote. After more than thirty of years, very little in the way of outcome-based incentives is being offered in a way that encourages broad, long-term solutions to our social and environmental problems. (See here and here for why I think the non-tradeable version of my idea, which is being implemented, has little to offer.) The relevant question though is: what is the alternative?

Decentralized Impact Organizations for the Climate

'Olliten' has writen an essay proposing that a pilot Decentralized Impact Organization be formed to test the Social Policy Bond concept as applied to climate change:

Crypto has transformed grassroots-level organizing. For the first time in history, it is possible to economically align networks of strangers into working together by using programmable incentives and by providing them with tools to make decisions and govern shared resources in a decentralized manner. These new organisms are called by many “DAOs”, Decentralized Autonomous Organizations.

[A Social Policy Bond]and its bondholders together form an entity very similar to a DAO: the bondholders form a grassroots level organization and share an economic fate via the bonds they own. What is special about this type of "DAO" is that its token (the bond) derives its value from the quality of a public good. To distinguish them from generic DAOs, we’ll call these organizations "DIOs", Decentralized Impact Organizations.

The technology for creating crypto-native DIOs already exists. Six months ago, UMA Protocol launched a new crypto-derivatives product called "Key Performance Indicator Options". KPI options were originally created so that crypto protocols could trustlessly guarantee that their community receives rewards for hitting milestones such as increasing Total Value Locked (TVL). However, their design allows them to be used for SPBs, too.

KPI options are synthetic (ERC-20) tokens that will pay out rewards if a KPI reaches predetermined targets before the given expiry date. Every KPI option holder has an incentive to improve that KPI because then their option will be worth more.

The complete essay can be found here.

Paying people not to shoot

 Charles Fain Lehman writes:

San Francisco has a new plan to stem a recent surge in deadly shootings: pay potential shooters. That’s the principle behind the city’s new Dream Keeper Fellowship, which will enroll 30 individuals deemed at high risk of shooting or being shot and pay them a $300 monthly stipend. They can collect an additional $200 per month for completing such milestones as taking job interviews, complying with probation, or meeting with the life coach assigned to them. We'll pay you not to shoot, Charles Fain Lehman, City Journal, 17 September

 Mr Lehman is unenthusiastic: 

[W]e shouldn’t pay people specifically for their willingness to refrain from deadly violence—any more than we should pay them for not selling drugs or abusing their children.

My position? I don't have one. Social Policy Bonds reward outcomes, whoever achieves them and, so long as the means are within the law, however they are achieved. If paying a small number of people not to inflict casualties on others is more cost-effective than heavy policing, and interventions by the justice and corrections departments, then why not do so? Careful crafting of Crime Prevention Bonds' redemption terms could minimise some of the risks, and allow resources to be diverted into preventing or punishing activities that currently seem to receive little attention, such as white-collar crime.

However, Social Policy Bonds are versatile. If the ethical or moral arguments against paying people not to commit crime are thought to outweigh those in favour, then the bonds' redemption terms could stipulate that such payments would invalidate the bonds. 

More likely, in my view, is that Crime Prevention Bonds targeting the sorts of violent crime committed by a small number of people in the long term might see such direct payments at first, but these would be replaced by or co-exist with other, less controversial but more long-lasting projects, such as subsidising employment in crime-ridden districts, setting up sports or youth facilities, and other more creative routes out of crime.

Prioritising health rather than hospital design

Sadly, but not unexpectedly, my 9500-word essay submitted to a competition concerned with hospital design failed to progress into the final stages of the competition. The question posed was: How would you design and plan new hospitals to radically improve patient experiences, clinical outcomes, staff wellbeing, and integration with wider health and social care? I gave an example, early on in the essay, showing how what is good for the hospital can conflict with what is good for the patient, and went on to explain how the Social Policy Bond concept could maximise what, in my view, we should be trying to achieve: improvements in health, rather than hospital design.The essay can be seen on my website here, and a pdf downloaded from here. A shorter treatment, also describing the application of the Social Policy Bond concept to health is here.

Social Policy Bonds and their variants

Partly to simplify the exposition of the bonds, I haven't delved into  variants of the basic Social Policy Bond principle. These variants include such possibilities as:

• bonds that expire; ie, if the targeted social or environental goal isn't achieved by a certain date, they become worthless;
• bonds that yield a partial payout if the goal is only partially achieved;
• redemption funds that are not placed in escrow, but guaranteed, either by public- or private-sector bodies; and
• payouts indexed to some measure of inflation.

There are many other possible variations on the basic theme: the Social Policy Bond concept is a versatile one and, because it is best deployed on large scale and for long-term social problems, it would be worth exploring the potential of variants on a case-by-case basis. 

On a related note, I have been asked what would happen to the funds intended to be paid out if the terms of a Social Policy Bond issue were not met. I would think that much would depend on who is undertaking to redeem the bonds. If it's a government body, or some supranational body (like the United Nations), I would imagine that any funds placed in escrow could be diverted to other uses within that body. More likely, though, such bodies, being credible, would merely guarantee payout, as in my third bullet point above. These bodies would want to minimise any perception that they will not pay out, partly to reduce their costs (ie, bolster the float value of the bonds) and partly to maintain faith that they will pay out in future bond issues. 

What about smaller bodies, such as a group of philanthropists, with less credibility? In such an instance the funds could remain in escrow, hopefully earning interest, until the goal is actually achieved and sustained. It's likely that these smaller bodies would target goals with a shorter overall time horizon. If, say the goal were the elimination of serious armed conflict: while a UN body, say, could target a sustained period of peace of, say 30 years, I could envisage that a group of philanthropists or non-governmental organisations would have a less ambitious target; perhaps peace in the Middle East sustained for a period of five years. Then, if a conflict were to erupt within that five-year period they need do nothing with the funds; they could patiently wait until a five-year period of peace arises. Or when issuing the bonds, they could have specified the time period during which the goal had to be achieved and, if the bonds fail to achieve the goal within that period, they could simply withdraw their funds from escrow.

For this and further queries see the bonds' FAQ page.

Social goals and the Karpman Drama Triangle

I've written about the crippling limitations imposed on Social Policy Bonds by making them non-tradeable here and here. And I'm sometimes asked why Social Policy Bonds haven't yet been issued, either by government or the private sector, whereas their non-tradable variant (most often known as Social Impact Bonds), are now issued in about 25 countries.

My thinking goes like this. Governments and non-governmental organisations including charities, do not want to relinquish their power to decide who shall supply the goal-achieving services (and so benefit from redeeming the bonds). Nor do they wish to lose complete oversight over how the targeted goals shall be achieved. Ultimately, in my view, it's about power and control, which to many of us are not key drivers, so we may find it difficult to understand their potency. This also, and more disappointingly, applies to philanthropists as well as politicians: it is gratifying to be seen to be granting funds directly to beneficiaries or to people who help those beneficiaries. It is not so appealing merely to contribute to a fund whose eventual beneficiaries cannot be identified. As well, Social Policy Bonds are best deployed when they aim to achieve long-term goals and on a large scale, where the beneficiaries are even less easy to identify and, indeed, might not yet be born.

Another explanation is that, at some level, governments, foundations and philanthropists might be playing the role of Rescuer in what is known as the "Karpman Drama Triangle", involving a Victim, Persecutor and Rescuer, as modelled in transactional analysis. Perhaps this paragraph, from here is pertinent in some cases:

The Rescuer: The rescuer's line is "Let me help you." A classic enabler, the Rescuer feels guilty if they don't go to the rescue. Yet their rescuing has negative effects: It keeps the Victim dependent and doesn't allow the Victim permission to fail and experience the consequences of their choices. The rewards derived from this rescue role are that the focus is taken off of the rescuer. When they focus their energy on someone else, it enables them to ignore their own anxiety and issues. This rescue role is also pivotal because their actual primary interest is really an avoidance of their own problems disguised as concern for the victim’s needs.

I had hoped that SIBs would be stepping stone on the way to Social Policy Bonds. That is still possible, and new technologies are generating are encouraging more interest in my original concept. However, it is also possible that the lack of evidence (pdf) justifying the SIBs that have been issued could discredit the whole bond concept. We shall see. 

Make Xenophobia History: Introducing the Consortium of the Competent

A short, unpublished article, suggesting that people in failed states and badly-run countries be allowed to vote for, or otherwise install, politicians and ex-politicians from different countries who have a record of competence and integrity. It has nothing to do with Social Policy Bonds.

Bees, war, and root causes

From the current issue of the Economist: 

Detecting covid with bees, meanwhile, involves a method that goes back to ivan Pavlov and his dogs. The insects are offered sugar-water alongside SARS-CoV-2-infected saliva samples, but not with uninfected samples. The thus learn to extend their probosces when they sniff covid. The nose knows: Flies, worms and bees could help detect illness, the 'Economist', 31 July

What does this have to do with Social Policy Bonds? It's often suggested that in order to tackle such social and environmental problems as crime, violence, war or climate we need to identify the 'root causes' before we can devise ways of solving them. I disagree. I think our first step should be to clarify exactly what we want to achieve, and then reward the achievement. Let investors in the bonds decide whether it's worth looking for root causes or whether it's more efficient, and quicker, to find different ways of solving our problems. We could (and, effectively, do) delay, say, reducing conflict, by postulating some ideal world in which there is no poverty and everyone is nice to each other. The implicit assumption is that war is an intractable part of human nature, as the ancient Greeks thought. It's a convenient excuse, especially as the search for root causes - usually the task of people whose lifetime earnings are correlated with the time taken to find them - need never end. As Tolstoy put it:

The deeper we delve in search of these causes [of war] 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.  Leo Tolstoy, 'War and Peace', Norton Critical Editions, New York, 1996 (page 536)

Just as we can train bees to detect covid without knowing about the mechanisms underlying how they do so; so we can target such goals as world peace, reduced crime, or the elimination of poverty without wasting time and energy on endless searches supposedly aimed at identifying their root causes.

This post was intended for publication: 

Social Policy Bonds: an evolutionary approach to social policy

Society is today is so complex and ever changing that it would be more efficient to reward evolutionary solutions to many of our social problems than it is for a government, or any single body to try to develop top-down solutions, which are necessarily be out of date, uniform and inflexible. Just as evolution in nature leads to diverse, adaptive solutions to the problem of surviving in a complex, changing environment, so would an evolutionary approach – given the right incentives - lead to diverse, adaptive solutions to our social and environmental problems. No conventional policy approaches, with their emphasis on fossilised science, self-interested institutions and insufficiently flexible funding arrangements can adapt in a timely way to changing circumstances including our expanding knowledge. Take health: our understanding of the scientific relationships and our technological capabilities are constantly expanding. Most of the interdependencies between intervention and outcome are impossible to identify. In former times links between cause and effect, while not always obvious, were at least discoverable by dedicated medical individuals, such as John Snow who could trace an outbreak of cholera in London in 1854 to one water pump. Today, no single conventional body, public- or private-sector, can effectively monitor all relevant new developments and react accordingly. But while our understanding of the determinants of our health is constantly changing, the goal of better health, as measured by an array of metrics including longevity, infant mortality and quality adjusted life years, is stable. It is some combination of these goals that I believe government should target, not the means by which current science thinks we can achieve them.

The same applies to other social and environmental problems, including those that are deemed intractable, such as eliminating crime, climate change and war. Our ingenuity is boundless: witness the superbly creative television adverts for dog-food, or the ballistic missiles whose nuclear warheads can accurately target and destroy thousands of members of our species on the other side of the planet. I have no doubt that, channelled into more edifying outcomes, our ingenuity could achieve what today seem like remote, impossible, goals.

In economic theory, and on all the evidence, market forces are the most efficient way of allocating our scarce resources. Sadly, markets have a bad press, having been undermined, abused and manipulated so that they now are seldom associated with the public interest.

To ensure that the market’s efficiencies and incentives are directed into public benefit, I suggest that governments issue Social Policy Bonds: a new financial instrument that would inextricably link the rewards gained by efficient resource allocation to the achievement of our social goals. These non-interest bearing bonds would be redeemable for a fixed sum only when a specified social goal – such as improved health – had been achieved and sustained. Whereas their non-tradeable variant, Social Impact Bonds, favour existing institutions, are inherently narrow and short-term in scope, and impose relatively high monitoring costs, Social Policy Bonds’ tradeability would allow the targeting of national, or even global, long-term goals, using approaches many of which will require years of research, trials and refinement before they can be successfully implemented. Investors could buy the bonds and make a profit on them within a limited time frame: the time-till-redemption of the bonds would be much longer than any investor's time horizon. This would encourage long-term planning: bondholders could try an array of innovative approaches, and the incentives would be there for them to refine and implement the most efficient of these and, importantly, to terminate those that are unpromising. This is how evolution selects those species that are best adapted to an ever-changing environment.

The optimal mix of approaches cannot be conceived by any single conventional organisation, which is why I expect that issuing Social Policy Bonds would generate a new type of organisation, whose protean structure, composition and activities would at all times be solely dedicated to achieving society's social and environmental goals at least cost to the taxpayer. 

Under a Social Policy Bond regime government would be doing what it does best: articulating society’s social and environmental goals and raising the revenue for their achievement. But the actual achievement of these would be contracted out to the market, which would continuously direct society’s scarce resources into their most efficient use – all for the benefit of ordinary citizens and the environment.

Ending war: imagery or incentives?

We often hear war correspondents say that they undertake their gruelling assignments so that others will come to realize the horror of armed conflict. I don't doubt their sincerity, nor their bravery in embedding themselves in military campaigns and recording the carnage that is the outcome of man's inhumanity to man. I do, however, doubt whether widely disseminated graphic reports and pictures are the best way, or even an effective way, of bringing about an end to war. They may be the best we have come up with - but they patently haven't ended any form of violent political conflict. 

Piling up weapons, unfalsifiable 'deterrence' doctrine, peace talks, talks about talks: these are roundabout methods of addressing our tendency to destroy others of our species and a big chunk of the natural environment too. They lack even the grim entertainment value of the reporters' images and commentary. Here's a question: if we are truly serious about ending armed conflict, why don't we reward the ending of armed conflict rather than the failed means of preventing it? Incentives matter, and the current incentives are all for arms merchants to sell more arms, for bureaucrats to engage in endless talks, for fanatics and governments to inflame aggressive religious and nationalistic passions. 

Humanity would benefit if there were countervailing incentives, by which I mean financial incentives. The wish that almost everyone has, when we are not reacting to propaganda or provocation, to live in peace, has not been monetised and so, sadly, counts for very little when set against the interests of the weapons manufacturers, bureaucrats and zealots. 

Which is where the Social Policy Bond concept, applied in the service of world peace, could make a contribution. Under a bond regime targeting a combination of such metrics for reduction as numbers of people killed and made homeless, people would be rewarded for the achievement of sustained periods during which wars are reduced or eliminated. 

World Peace Bonds would channel the market’s incentives and efficiencies into ending war. Governments, institutions and anyone else with a genuine interest in peace would contribute to a fund that would be used to redeem the bonds, which would create a coalition of interests with a powerful incentive to reduce the level of violent political conflict. For more about how the bond concept can be applied to conflict reduction, and links to short essays on the subject, see here.