In no-strings philanthropy I trust

The Economist writes:

[T]he great expansion of higher education has coincided with a productivity slowdown. Whereas in the 1950s and 1960s workers’ output per hour across the rich world rose by 4% a year, in the decade before the covid-19 pandemic 1% a year was the norm. Even with the wave of innovation in artificial intelligence, productivity growth remains weak—less than 1% a year, on a rough estimate—which is bad news for economic growth. A new paper by Ashish Arora, Sharon Belenzon, Larisa C. Cioaca, Lia Sheer and Hansen Zhang, five economists, suggests that universities’ blistering growth and the rich world’s stagnant productivity could be two sides of the same coin. ...

Businesses had more responsibility for achieving scientific breakthroughs: in America during the 1950s they spent four times as much on research as universities. ...[W]hen it came to delivering productivity gains the old, big-business model of science worked better than the new, university-led one. ... Free from the demands of corporate overlords, [university] research focuses more on satisfying geeks' curiosity or boosting citation counts than it does on finding breakthrough that will change the world or make money.  Universities are failing to boost economic growth, the 'Economist', 5 February

To me, this speaks to the value of incentives. Research of the type done by universities is similar to the way that our social and environmental goals are pursued: they are done by large organisations whose employees are not rewarded in ways that correlate with their success. Those who work for government or government-dependent bodies are, consciously or not, disinclined to rock the boat. The funding of these bodies is hardly, if at all, linked to their success in coming up with problem-solving initiatives. Sadly, most of our important social and environmental goals fall under the remit of such government-dependent bodies. These include the elimination of poverty and crime, the reduction of environmental depredations and, on a global level, the solution to such trans-national problems such as over-fishing and war. Research is just one of the activities that government has brought into its purview, with the disappointing results that Arora et al relate. 

How is it that government constantly expands its remit? There is the sense that some things are too important to be left to the private sector, and that only government can be impartial as to the allocation of funding. This sense pervades such critical debates as to whether the UK's National Health Service should be partly or completely privatised. That debate rarely considers health outcomes or, indeed, any outcomes at all: instead, ideology and vested interests set the debate's terms. Some concerns are genuine: markets have been abused and undermined such that they, in many cases, are rightly discredited in the eyes of the public. 

Social Policy Bonds could combine the best elements of both the public and private sectors. Under a bond regime, government could articulate society's wishes and raise the revenue for their fulfilment; these are things that democratic governments can do well. But where they perform badly is in actually achieving society's goals, largely because of the incentive structures they put in place: the structures that reward activity regardless of outcome. The effect of a Social Policy Bond regime, however, would be to contract out society's goals to those best placed to the achieve them. In economic theory and on all the evidence, that is what competitive markets do best. An obstacle in the way of implementing the Social Policy Bond concept is the unwillingness of government and its funded bodies to relinquish their control over activities ostensibly directed at the public good. Rather than wait for government to do that, perhaps the best hope for a no-strings philanthropist to get the ball rolling....

The question nobody asks: are the cows actually better off?

The effort highlights a glaring cow-related contradiction in the BJP's [Bharatiya Janata Party's] Hindu nationalist ideology. The party says it wants to protect cows, which are associated with divine beneficence and venerated by Hindus. Yet its pro-cow policies, including bans on cow slaughter, appear to be detrimental to cattle welfare. They are thought to be causing an increase in stray cows, typically male calves and aged milkers which, having little commercial value, are let loose by their owners. Abandoned, they feed on plastic bags and other rubbish, cause car crashes and raid farmers’ crops. The Hindu right’s pro-cow policies are terrible for India’s cows, the 'Economist', 3 February

It shouldn't surprise us. The stated aim of a policy in today's policymaking environment need have no relationship to its result. The two may, as here, even be conflict. Collectively, we rarely hold the people who make a policy responsible for its outcome. In the private sector it's different: there are the disciplines of the market and competition, and reliable, visible, constantly readable indicators of the success or failure of an enterprise. But in the public sector: 

 [G]overnment bureaucracies non-self-evaluate. At a minimum, agencies with evaluative responsibilities are not invited to evaluate - they are kept out of the loop, their opinions unsought. At a maximum, government agencies actively suppress their own internal evaluative units and are discouraged from evaluating the beliefs and policies of other agencies. Why States Believe Foolish Ideas: Non-Self-Evaluation By States And Societies (pdf), Stephen Van Evera, Massachusetts Institute of Technology Political Science Department and Security Studies Program, 2002

So politicians can get away with selling their policies according to what they say they will achieve. In the absence of data we choose politicians who have lofty-sounding goals, or who look good on camera. We vote for people, or personalities, or out of tribal loyalty to political parties. 

A Social Policy Bond regime would be different. We'd vote for social and environmental outcomes, rather than the people or policies who say they'll achieve them. Politicians would retain their roles of articulators of society's wishes and revenue raisers, but their role of allocating finance and determining the structure of bodies charged with achieving society's goals would be diminished. Those decisions would be taken by bondholders, who would make them according to the sole criterion of efficiency in achieving the targeted goal at minimum cost. Bondholders would face the discipline of the market: if they are inefficient, their bonds would be bought up by more efficient operators. A transition to such a regime should be made gradually, partly for pragmatic reasons, but partly also to give existing bodies a chance to evaluate and improve their performance. (I discuss such a transition in my book.) There would be a gradual focus away from politicians and their antics, and more on the elements that make up society's well-being. So rather than be swayed by such rhetoric as how a particular policy would be good for cows in India, say, we'd look instead at whether things are actually improving for cows. Such a way judging is perfectly acceptable in the private sector; extending it to goals currently the remit of the public sector, could greatly benefit society.

Nothing to report

There's very little happening with the Social Policy Bonds idea. At least, I'm not aware of any progress. In many ways we seem to be going backwards. With climate change, for instance, there appears to be less focus on defining the outcomes we want to achieve, and more on such surrogate indicators as numbers of electric vehicles on the road or generating capacity of wind and solar installations. Other environmental problems receive even less attention. Nuclear and non-nuclear weapons continue to proliferate. Our politicians are judged less by their achievements or competence and more according to soundbites, personality and tribal identity. Outcomes - verifiable meaningful outcomes - are rarely cited now as goals of policy. Politicians hang on to power for its own sake, or because they can't find better jobs, or because it gives them immunity from prosecution for corruption or war crimes. A capable, aspiring, idealistic man or woman would hardly choose to go into politics, where the entirety of your private life and those of your family are scrutinised by those looking to sell a story. There are more suitable positions in the private sector, NGOs or religious bodies. 

So there's little to be optimistic about. The Social Policy Bond concept seems to be out of sync with today's realities. For the last thirty years I've been told that the idea is ahead of its time, but now I think it's behind its time, in that long-term goals are a yet lower priority than immediate concerns. The idea receives little attention now, and though such attention is welcome, it is invariably fleeting and unlikely to gain traction. 

I still think the bonds they could play a role where we are confronting big, urgent crises, such as war and nuclear war and the many global and regional environmental depredations. When it comes to war, right now almost all the financial incentives favour those who wish to foment conflict or who would benefit (at least in the short run) from it. We need countervailing incentives; incentives that would divert talented people from activities with little or negative social benefit, into improving the prospects for peace. It is disappointing that much of our undoubted human ingenuity is devoted to trading esoteric financial instruments, computer coding, advertising dog food etc, all of which would have their place if the probability of social and environmental catastrophes could be significantly lowered. I will carry on with publishing this blog, in the hope that, even if the ideas here and on my SocialGoals.com site are not taken  up immediately, they will be around for others to develop, refine and implement when I cease publishing.

Tantrums, bribes and world peace

Nobody seems to have high expectations for this year, beyond any personal hopes and dreams. War, fear of new pandemics, environmental tipping points, nuclear proliferation: the possibilities are frightening. Yet the ingenuity of our species knows no bounds. Each day brings news of discoveries in every field of the sciences, medicine, technology including IT... All driven by our curiosity, intellect, skills and hours of dedication and hard work. 

And - oh yes - by ample funding. Perhaps it's funding and the way it's allocated that explain the contrast between our boundless successes and the very real possibility that we are heading for at least one of a baleful array of potential calamities. We are collectively very happy to support research into activities that have identifiable winners, such as pharmaceutical companies, weapons manufacturers and also, to be fair, universities and research institutes. We are less happy to adopt the Social Policy Bond approach by targeting outcomes, such as world peace, however desirable they are, where humanity - the biggest beneficiary - cannot monetise its wishes. Such goals as world peace, if we believe them attainable at all are, we think, best worked towards by bodies that might have founded with idealistic goals and hard-working, well-meaning employees, but have (often) been ossified by routine and cynicism, such that their over-arching goal is now self perpetuation. Those bodies that have escaped that fate are pitifully under-resourced and make only localised impacts.

We pay teachers, don't we? They receive salaries, as do doctors, nurses, and people who care for others. But we are squeamish about paying people for things that we think should be pursued solely for idealistic reasons. Example: paying people not to kill each other is a long way short of ideal, but I believe that, if it's the only or the best way of avoiding deadly conflict, then we should encourage it. It is one possible approach that investors in World Peace Bonds could follow; an approach that we eschew, not because it's been tried and failed, but because (I surmise) it's too crude, or too defeatist (as in 'are we really so degenerate that we have to bribe adults not to have murderous tantrums?'), or perhaps because it's never been tried before. Tried, tested and failed will always beat new, might-not-work and disruptive. In large institutions of any sort, things must never be done for the first time.

World Peace Bonds would allow for the possibility that such unsubtle measures as bribing or otherwise undermining those who foment conflict are the most efficient way of bringing about peace. They would encourage research and experimentation of all potentially viable measures, and refinement and implementation of only the most promising ones. The goal is always to achieve peace as efficiently and speedily as possible and the way the bonds work would ensure that all activities, always, would be aimed at that goal. To this end, approaches would be necessarily diverse (what works in one part of the world won't work in another) and adaptive (what works in some conditions won't work in others). Such flexibility is beyond the imagination of any current organisation, be it private- or public-sector.

There are other advantages to this application of the Social Policy Bond principle: the bonds would take a long-term view, paying out only when the goal (world peace, in our example) had been achieved and sustained for a period of, say, three decades. They would divert funds away from socially neutral or negative activities as investors, with an eye only on their financial returns, would see the light. This does not mean that only self-interested investors would be rewarded: the gains from holding the bonds while working to achieve society's goals would cascade downwards, so that the number of, and rewards to all those working for bondholders would benefit, just as civil servants, teachers or workers generally, benefit from the success of their employers.

Nobody wants nuclear war. So why is it increasingly likely?

Some recent reporting:lurk

South Korea is again considering developing and manufacturing its own nuclear weapons. The cause is the growing instability of North Korea and South Korean fears that the United States won’t fulfill its pledge to attack North Korea with nuclear weapons if the North attacks South Korea with nukes. source

Of the total global inventory of an estimated 12 512 warheads in January 2023, about 9576 were in military stockpiles for potential use—86 more than in January 2022. source

China, India, North Korea, Pakistan and the United Kingdom, as well as possibly Russia, are all thought to be increasing their stockpiles. source

There are two things that we can be almost certain about:

1. Very few people want to see a nuclear conflict, and
2.  the chances of a nuclear conflict are rising.

Why the disconnect between what most people want, and what we are very likely to get? In the nuclear policy arena, there is the self-entrenching idea of deterrence. 'If they were ever used they'd be failing in their purpose,' went the caption to a picture of UK nuclear-armed submarines lurking deep in the sea, in an advertisement for naval recruitment. Other countries have them, so we need them too. The logic is persuasive; the cost of not following it incalculably great - possibly. The problem is that very few of us have sufficient incentive to question this logic and to think of alternatives. There are organisations of all sorts, staffed by well-intentioned, hard-working people who do what they can, with their scanty resources, to minimise conflict. But they are institutionally bound to think and act along conventional lines. 

What I propose is that we offer incentives for people to think of alternative approaches, all of which would have as their aim to reduce the likelihood of nuclear conflict as efficiently as possible. I have no idea how to halt the drift towards nuclear conflict, but I can suggest that we put in place a system that encourages and rewards people for researching, refining and implementing the most promising of such alternative approaches. 

Nuclear Peace Bonds would be an ideal application of the Social Policy Bond concept, which is a way of rewarding verifiable outcomes that we are currently failing to achieve. In this instance, the targeted outcome could be nuclear peace sustained for thirty years. 'Nuclear peace' could be defined as something like 'the number of people killed within 24 hours by the detonation of a nuclear device is less than 500'. The bonds would reward those who achieve such a sustained period of nuclear peace, whoever they are and however they do so: only the outcome would be stipulated. For a short piece on how Nuclear Peace Bonds would work, please click here. For essays about applying the bonds to conflict in general, click here.

As well as pursuing activities the exact nature of which we cannot anticipate, investors in Nuclear Peace Bonds could do things that cannot be done by existing organisations, constrained as they are by precedent, and their perceived need to maintain their existence and so satisfy the bodies that fund them. So, for example, in today's world, nobody would have any incentive to bribe people close to decision makers in politics or the military to advocate nuclear disarmament. Likewise, an existing body is unlikely to try to get religious extremists to tone down their rhetoric, even if it believed that were the most efficient way of reducing the probability of nuclear conflict. The risk and consequences of exposure and backlash are too great for current institutions to bear. Holders of Nuclear Peace Bonds, however, would not be deterred from whatever actions they think most effective: funds to redeem their bonds could be held in escrow. Once nuclear peace had been achieved and sustained, their reward would be guaranteed.

Make saving the planet profitable

"Making oil is more profitable than saving the planet ..."

...says the headline, accurately. There are many other activities that are more profitable than saving the planet: fomenting conflict, manufacturing, office work, mining...etc. We try to curb some of their most obvious environmentally destructive by-products with taxes and regulation, but we also support activities that destroy the environment - to the tune of $1.8 trillion, annually.

I don't know whether making oil will destroy the planet: there are many negative externalities that accompany oil production and consumption, but there are also many positive externalities. Thus, Alex Epstein writes:

There are many other positive externalities of fossil fuels that are almost never discussed—including ... clear benefits [arising from] warmer temperatures in many places where cold-related deaths far, far exceed heat-related deaths. To not consider these is pure benefit denial, regardless of whether you use a word like “externalities.” Fossil Future, Alex Epstein, 2022

Whether the benefits of oil production and consumption outweigh all its costs to society, to the environment and to the long-term future of the planet can never be calculated in a meaningful way. With such urgent, hugely important and complex issues, I suggest that we set in place a range of acceptable outcomes and reward people for achieving them. These outcomes could be expressed, to take those relevant to oil, in terms of atmospheric composition and human, animal and plant well-being. That means that we should target reductions in polluting gases (not only greenhouse gases) while maintaining acceptable levels of human welfare and indicators of environmental well-being.

Doing that would recognise that there are trade-offs; that rapidly reducing oil production and consumption could drastically reduce the quality of life for millions of people. That is one reason why there's been no discernible progress in actually cutting greenhouse gas emissions:

'Climate activism became a big public cause about halfway along this graph. Notice any effect?' From Riding the Climate Toboggan, John Michael Greer, 6 September

Targeting atmospheric composition and, simultaneously, indicators of planetary well-being would, I think, be less unpopular and more attainable than the current efforts supposedly aimed at reducing climate change. My suggestion is that we achieve our aims by issuing bonds that would be redeemed only when all our targets have been achieved and sustained for some decades. This we could do by applying the Social Policy Bond concept to our targets. We do need, though, some clarity about what we are trying to achieve: do we want to target the Earth's climate, or the impacts of adverse climatic events or  - to take the current focus - the concentration of greenhouse gases in the atmosphere? At this late stage it's probably best to aim for more immediately verifiable goals, so I suggest that it might be preferable to target atmospheric composition rather than the stability of the climate, which has been the focus of my previous work. If such an application of the Social Policy Bond concept were ever implemented then we'd go some way to making saving the planet more profitable than activities that have, as a by-product, accelerating its destruction.

To be frank, I don't think anything like this will happen. Our political systems are incapable of solving global problems, even if our leaders had the will to do so. The Social Policy Bond concept has, to my knowledge, never been tried, and there are few incentives and commensurately few resources that are channelled into saving the planet. It's sad.

Health and efficiency

(No, not H&E!)

Dr Malcolm Kendrick, in the third part of his inquiry into the UK's National Health Service (NHS) What is wrong with the NHS?, summarises the problem: 

[I]n the last four to five years, productivity has fallen by around twenty per cent. ...[W]hat we have is twenty per cent more staff, working just as hard, probably harder. Yet, they are creating no additional clinical outcomes. Where does this leave us? ...There is only one possible conclusion. Which is the following. At least twenty per-cent of the work that clinical staff are doing is non-productive.

A large part of the problem appears to be the lamentable proliferation of regulatory oversight and overseers in the NHS. He quotes from a report (pdf) by the Institute of Government:

We found that hospitals that had more managers or spent more on management were not rated as having higher quality management in the staff survey, nor did they have better performance. The implication being the overall hospital performance is dictated by clinical actions and behaviour, while hospital management is focused on administrative tasks ensuring regulatory constraints are met. The number of managers in each hospital was largely determined by the administrative tasks that needed to be fulfilled, with the scope of management circumscribed to these well-defined tasks. (Dr Kendrick's emphasis)

Dr Kendrick illustrates this point by showing a picture of Dr Gordon Caldwell lying beside the paperwork necessary to admit one patient to the Accident & Emergency department of an NHS hospital.

'These are the forms that now have to be completed to admit one patient in Accident and Emergency.'

It's not uncommon, in my view, for large institutions, be they public or private, to lose sight of their original goals. After enough time these organisations' existence is taken as a given, and they cease to be judged solely on how good they are at achieving their stated objectives. In the case of NHS hospitals, the original goals would have been expressed in terms of clinical outcomes but, because of regulatory pressures from outside, those outcomes have ceased to be the over-arching measure of success. 

This is where a Social Policy Bond regime could help. It would set down our long-term social and enviornmental goals and inject market incentives into their achievement. At every stage of progress toward achievement of our goals, investors in the bonds would have efficiency as their over-riding criterion. The bonds would always be owned by those who can maximise the speed and cost-effectiveness of the targeted goals. 

A bond regime targeting the health of a country's population would express its goals in terms that are stable, and long term. A health bond would target a range of indicators that could include such goals as improvements in longevity, reductions in infant mortality, and improvements in Quality Adjusted Life Years. (It should exclude such indicators as five-year cancer survival rates, which can mislead.) Broad measures such as those a bond regime target would be readily comprehensible to the public, and so would attract more buy-in. Links to my work on applying the Social Policy Bond concept to health can be found here.

Investing in world peace

As a species, we know the solutions to a very limited number of social and environmental problems. If the motivation and resources are there, we can be quite effective at solving visible and localised problems, such as a polluted lake, or high levels of crime or unemployment in a small area. But with any degree of complexity and complexity we're out of luck. We simply don't know the best ways of reducing crime, eliminating poverty, dealing with climate change or ending large-scale conflict. These are problems that are:

• long term,
  
• broad,
  
• likely to need a mix of diverse, adaptive approaches to their achievement, and
  
• resistant to any current or envisaged efforts by policymakers to their achievement.
  

Such problems are exactly those that Social Policy Bonds are poised to solve. Take a goal such as sustained world peace, which many of us see as impossibly idealistic. Our efforts, for the most part made by hard-working and well-meaning people, are distinctly unsuccessful. It's a problem suited to the Social Policy Bond idea. The bonds would, by rewarding the sustained achievement of world peace, motivate existing bodies to do more. This is where criticism of the bonds usually begins and ends, as if I am suggesting that employees of such organisations as the United Nations are motivated purely by money, and need more of it to do their jobs effectively. There's a hint of disdain for such mercenary motives here, familiar to those of us brought up in a society pervaded by class conflict and snobbery. To which I have two answers:

• The bonds would not just see that existing organisations pay their people more; they would also give these bodies more resources to work with, provided that investors in the bonds regard them as efficient; and
• The bonds would represent a commitment to a stable, long-term goal. With incentives to achieve that goal, not only would efficient, existing bodies benefit, but new organisations could be created whose every action would be devoted to achieving peace quickly and efficiently.

So a sufficiently funded World Peace Bond regime would generate more resources for all bodies, existing or new, so long as they are efficient. The effect would be to encourage research into diverse approaches; to finance trials of the most promising ones (and, importantly, to terminate those that are failing), and to enable the refinement and implementation of only those approaches that are most effective. 

Peace: the long view

Financial incentives aren't going to prevent terror groups from killing civilians of a different persuasion. They're too far gone for that. But that fact doesn't undermine the workings of Middle East Peace Bonds or World Peace Bonds.

It's true that we are unlikely to be able to deflect a terrorist who's been brought up from birth to hate members of a different religion, sect or ideology, from murderous intent with some cash payment. It is, however, possible, though still unlikely, to prevent him or her acting on that intent. But it's far more likely that if bonds had been issued targeting sustained peace in the Middle East (say), that such a person would not exist. A long-term peace strategy, of the sort currently pursued by well-intentioned but under-resourced groups could not only try to staunch the conditioning of schoolchildren and set up alternatives to the hate-filled media that is often a precursor to war, but would have the incentives and resources to do so effectively.

Most likely, such an approach would need to be taken in parallel with others, including strong defences, controls on weaponry, more inter-faith dialogue and other trust-building exercises. The reasons for applying the Social Policy Bond concept which, at its heart, is about using financial incentives are that:

• Once bonds have been issued there would be no uncertainty about policy changes, so investors in the bonds would be sure that, if successful, they would be rewarded; 
• Given the long-term vision, a wide range of possible approaches could be researched and tried and, if promising, implemented and refined. The bonds would reward only the most successful approaches and, in contrast to current policy, ensure that failing approaches are terminated. 

So, yes, people are right to be sceptical that fanatical ideologues can be dissuaded from killing people by a some pecuniary reward. But once a system of incentives is in place, all types of people could work towards countering hateful ideologies, promoting the benefits of tolerance, and creating the conditions for peace. The relevant question here is less 'could it work?', that 'is it more likely to work than the current array of (in my view) failing approaches?'

Peace in the Middle East

Decades of negotiations and initiatives have failed. 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. 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 way of encouraging people to find effective and efficient solutions. At this time, my vision of peace must sound like an impossible dream, but we can look at, for instance, the current relationship between Scotland and England; the long-running vicious battles between the two countries have ended and the border is one of the more peaceful in the world. There are other examples.

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 enough powerful people inside and outside the region with a vested interest in keeping conflict going. They include men of religion, ideologues, politicians and bureaucrats. There are also, of course, the weapons merchants and their corrupt beneficiaries in government. Well-meaning idealists on all sides do what they can, but their efforts are overwhelmed and relentlessly undermined by the powerful people and institutions that want them to fail.

Peace above all

We also need to focus exclusively on our goal of peace, which will mean putting aside feelings of fairness and justice, except insofar as they help our cause.

And we need ways of promoting peace that can modify or circumvent people's uncooperative or obstructive behaviour; ways 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 deploy 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.

We need to give people and organisations of all kinds the incentives to create and sustain peace, rather than conflict.  We also need a verifiable definition of peace, which will consist of a combination 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
• minimal forcible expulsions of people        
• no use of nuclear weapons

As well, given the strong causal relationship between mass media incitements to violence and actual violence we could add to our definition of peace:

• a drastic reduction in mass media incitements to violence; and
• school texts to be approved by all sides of the conflict. 

I would aim to issue Middle East Peace Bonds, which would reward investors only when all the conditions for peace have been satisfied and sustained for two or three decades.

Middle East Peace Bonds

My suggestion is that philanthropists ideally 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 at some future time 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 issuers of the bonds would make no assumptions as to how to bring about greater peace. No one solution, nor even an array of solutions will work all the time. We need diverse approaches that are adaptive, and therefore unlike anything our current institutions can envisage. The bonds instead will stimulate diverse, adaptive solutions.

Nor do we need to know who would hold the bonds or carry out peace-creating projects. Those decisions would be made by would-be investors in the market for 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. As the prospects for peace brighten, the value of the bonds will rise.

Trading the bonds
Middle East Peace Bonds, once floated, must be readily tradable at any time until redemption. 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.

The bonds will be worth more to those who believe they can do most to help reduce the violence, who will then own most of the bonds. Large bondholders might decide to subcontract out peace-building projects to many different agents, while they themselves held the bonds from issue to redemption. The important point is that the bond mechanism will ensure that the people who allocate funds have incentives to do so efficiently and to reward successful outcomes, rather than merely pay people for undertaking activities.

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 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. Large bondholders, in co-operation with each other, would be able to set up such systems cost-effectively.

Regardless of who actually owns the bonds, aggregation of holdings, and the co-operation of large bondholders, would ensure that those who invest in the bonds are rewarded in ways that maximise their effectiveness in bringing about peace.

So, in contrast to today’s short-term, tried, tested and failed approaches, a Middle East Peace Bond regime would stimulate research into finding the  most cost-effective ways of achieving peace. Indeed, bondholders would be in a better position than governments to undertake a range of peace-building initiatives, having more freedom 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 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.

By appealing to people's self-interest, Middle East Peace Bonds would 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 and elsewhere who currently benefit from conflict.

Middle East Peace Bonds would focus on an identifiable peace outcomes and channel market efficiencies into diverse, adaptive ways of achieving it. They might sound implausible and radical but - let’s be frank - the way things are currently going, with no end of well-meaning inter-faith dialogue and not-always-well-meaning interventions by UN bodies, governments outside the region and NGOs, isleading all of us into the abyss.

For another version of this essay, see here. For applying the Social Policy Bond principle to conflict reduction more generally, see here.