Not only pandemics

You might think that we'd be well advised, as a species, to prepare for global disasters. And it's true that many people are working, sometimes heroically, at ways of doing so. There are quite a few organisations, for instance, that seek to reduce conflict or eliminate diseases, such as malaria. The difficulty I have is that their work is unsystematic, uncoordinated, and is rewarded in ways that bear no relationship to their success or efficiency. As well, and perhaps more dangerously, there are policies in play that can only accelerate disaster, such as: subsidies to fossil fuel extraction and consumption, the accumulation of weapons of all kinds; and the failure seriously to pursue one of the main goals of the Cairo Population Summit, where 179 signatory countries agreed to provide access to family planning services to all the women who want them. And last, there are ways in which the survival of millions is threatened by entirely new phenomena, such as COVID-19, whose full implications cannot be foreseen.


We need therefore to re-orient the incentives, and to do so in a coherent manner that rewards the survival of our species against calamities of all kinds. This is where the Social Policy Bond principle can help. The issuers of Disaster Prevention Bonds need have no knowledge of the relative likelihoods of known or unforeseeable catastrophic events. Neither would they have to prejudge, with our current limited scientific knowledge, the most efficient ways of ensuring our survival. Instead, the bond mechanism could target the sustained avoidance of any - unspecified - catastrophe. It would do so in a way that encourages the exploration and investigation of all threats, known and new, impartially. Policymakers would not (and anyway could not) have to decide on how dangerous each threat is. That would be left to bondholders, who would have powerful incentives to do so continuously. Investors in the bonds would be rewarded only if they can adapt to rapidly changing events and to our ever-expanding scientific knowledge.

This is a stark contrast to the current approach; the one that has led to highly intelligent people giving our survival a baleful prognosis. The people who are currently working in favour of humanity do so in ways that, while worthy of great respect, are within a system that is heavily weighted to favour the short-term goals of large organisations, including governments, that have little incentive or capacity to care about our future in the long term. Disaster Prevention Bonds, issued with sufficient backing, could change all that.

Tyres kill

For decades now I've been saying that, when looking at complex social and environmental problems, we should reward solutions rather than try to guess the source of the problem then tax or regulate that. Current news gives another example as to why we might do better to act on my suggestion. By focusing exclusively on exhaust emissions, we are ignoring what is quite likely to be a much more dangerous source of vehicular pollution:

Emissions Analytics theorised that, based on 1.5kgs of mass being lost per tyre over a 30,000-mile life, a car emits 200 milligrams of tyre particulate matter every kilometre. At that level, tyre emissions would be 22 times higher than the permitted levels in current exhaust gas regulations, which are 4.5mg/km.

In testing, it stacked the odds up in case practice yielded immeasurably low results. Low quality tyres, high speeds, intense cornering, high load in the car and a poor surface quality, were intended to help produce a measurable result. The results were shocking – 5.8 grams per kilometre lost. That’s 29 times the hypothesised result, and more than 1,000-times the allowed particulate emissions from an exhaust pipe. Tyre emissions 1,000 times WORSE than exhausts, Ethan Jupp, 1 February (or 2 January)

Governments have form with this: their singular obsession with greenhouse gas emissions led them to encourage diesel engines, which emit higher levels than petrol of pollutants other than CO2 that probably cause more illness and death.

So what am I suggesting? That governments, instead of trying to identify causes of complex problems (a moving target anyway), target favourable outcomes and reward the people who reach them. When it comes to air pollution, then, rather than try (and fail) to identify the worst culprits, and regulate those, government should have targeted an air pollution goal, and motivated people to achieve it. Government would then have stepped out of the tricky, divisive and futile role of trying to stipulate how that goal could be best achieved, and who is best placed to achieve it. Government is too monolithic, too unwieldy and too fixed in its ways to come up with the diverse, adaptive approaches that we need to solve complex social and environmental problems.

A Social Policy Bond regime aiming at reducing air pollution, or environmental depredations in general, could be the answer. Such a regime would reward the achievement of our environmental goals, without specifying how those goals shall be achieved nor who shall achieve them. To see how the Social Policy Bond concept can be applied to environmental problems see here.

Targeting air pollution as a whole, rather than its more visible but less lethal components, would be an improvement over current policy. But perhaps an even better approach would be to target a range of broad indicators of health: see my essay here.

It's not just agriculture

They're still doing it! After at least forty years of being universally seen as corrupt, wasteful and stupid, the European Union's Common Agricultural Policy continues to subsidise aristocrats and wealthy landowners:

 An analysis by Greenpeace in 2016 revealed that the Queen was one of the top recipients of EU money, with her Sandringham farmland alone coining in £557,707 that year, with a similar sum every year. ... And What Do You Do?, Norman Baker, October 2019

Prince Khalid Abdullah al Saud, who owns champion racehorse Frankel, has reportedly described his farming interest as a hobby. Juddmonte Farms, which he owns through an offshore holding company in Guernsey, received £406,826 in farm subsidies [in 2015]. Source

The CAP's disastrous effects on the environment, small farmers, animal welfare, Africa and human health, have been well documented, but it is the persistence of the CAP, after years of its obvious failings, that should astonish us. It happens, in my view, because big government is remote government. It doesn't concern itself with the needs of ordinary people, because it's beholden to powerful vested interests: not just big business, but its own government agencies. 

And it's not just agriculture. Increasingly, the complexity both of society and our policymaking process is being weaponised in favour of the people who own and run corporations, or the people they pay (in or out of government) to understand and influence policy. Government and their paymasters can get away with this because we accept a policymaking system that doesn't explicitly target outcomes that are meaningful to ordinary people. Currently policymakers can - indeed must - express their decisions as vague declarations of intent and changes in institutional funding and composition, or legislation. Their focus is on the supposed means of achieving vague outcomes, rather than on the outcomes themselves.
 
A Social Policy Bond regime would, in contrast, have to be explicit about its objectives: transparency and accountability are built into a bond regime, as surely as they are excluded from the current policymaking apparatus. Insane, corrupt programmes, such as the EU's Common Agricultural Policy (now accounting for 35 percent of the EU's budget), have platitudinous, vague, mutually conflicting goals that sound high-minded but actually end up shovelling vast sums of taxpayers' and consumers' money into the bank accounts of agribusiness corporates and their lobbyists. If outcomes were built into policymaking, as they would be under a Social Policy Bond regime, such policies would get nowhere. Instead they have lasted for decades, at great cost to everybody except a few millionaire businessmen and landowners, a burgeoning, parasitical bureaucracy and lobbyists. Oh, and fraudsters.

The CAP's continued existence is a clear signal that we need to make systemic changes in the way we formulate policy. Instead of allowing overworked or corruptible officials and politicians to guess how we can best solve our complex and dynamic social and environmental problems we would do better to target the outcomes themselves and reward the people who help achieve them. The goals of a Social Policy Bond regime would be clear and stable: the ways of achieving them would be up to bondholders who would at all times be motivated to be efficient in the pursuit of society's goals. Transparent, comprehensible, meaningful goals, and investors motivated to achieve them: that would be the most effective way of closing the gap between politicians and the people they are supposed to represent. 

Enough with the dog-food

Qatar has a population of about 2.6 million. Amongst other facts and figures about weapons sales to the Middle East, the Economist this week tells us that:

Qatar already has Chinese-made ballistic missiles. From muskets to missiles, the Economist, 15 February

Not, thankfully, nuclear. Not yet anyway - nuclear is available only to larger, responsible players on the world stage. Like Pakistan and North Korea. What are the odds, I wonder, against a nuclear attack in the near future? Luisa Rodriguez summarises her findings:

...I get a rough sense of how probable a nuclear war might be by looking at historical evidence, the views of experts, and predictions made by forecasters. I find that, if we aggregate those perspectives, there’s about a 1.1% chance of nuclear war each year, and that the chances of a nuclear war between the US and Russia, in particular, are around 0.38% per year. How likely is a nuclear exchange between the US and Russia?, Luisa Rodriguez, Effective Altruism Forum, 20 January

You'd think that we'd put a bit more effort into avoiding a nuclear attack and its dire consequences than we do. But much of our ingenuity is instead devoted to activities of comparatively little social merit: financial trading, property speculation or (one of my hobby horses) clever advertising campaigns aimed at selling more dog-food.

This is not just a question of efficiency. It's quite possible that the activities of peace-making organisations (like this one) are as cost-effective as they can be, given their limited resources. The question is more one of human priorities and translating what I (presumptuously) see as the likely wishes of most of the world's population for nuclear peace into funding for those bodies working to achieve it. The disconnect here between ordinary people and the politicians supposed to represent us is near total.

The answer could be Nuclear Peace Bonds. Targeting a sustained period of nuclear peace, they could be backed initially by a combination of governments, NGOs, philanthropists, and subsequently members of the public. Floated on the open market they would become redeemable for, say, $1m each only after a thirty-year period during which no nuclear detonation killing more than fifty people takes place. They might initially fetch say just $10000 each, if the market thinks the probability of thirty years’ nuclear peace is low. But these bonds would be tradeable: their value would rise and fall according to how likely people think the peace target will be reached.

Initial investors would buy the bonds and do whatever they can to increase that probability. Even helping existing ways of monitoring nuclear material might see the value of their bonds double. Others, with expertise in different areas, would buy their bonds and do what they can to raise the value of the bonds still further. At every stage, the bonds would be in the hands of those most able to bring about nuclear peace. The bondholders’ goal is exactly congruent with society’s: they make money only by achieving society’s goal. And at every stage of every process required to achieve that goal, incentives will motivate people to be as efficient as possible.

Rather than encourage endless speculation about what projects will make the world more peaceful the bonds would, in effect, contract out the achievement of world peace to the market. They would encourage a wide range of adaptive projects, whose sole criterion for funding would be that they would raise the probability of world peace being achieved. In this way, the governments and others who back the bonds would do what they are best at: articulating society’s goals and raising the revenue for their achievement. At the same time, the market would be doing what it is best at: allocating resources as efficiently as possible.

It's too complicated for current politics

James Fenton writes to the New Scientist, questioning whether planting trees will mitigate climate change:

It may not always work. Planting trees on open ground may change the reflectivity, or albedo, of land. At higher latitudes this can cause a warming effect, as three-dimensional woodland absorbs more radiation than the essentially two-dimensional open ground that it replaces. In many places new planting is likely to be targeted at upland areas, which generally possess stratified soils with a high organic carbon content. In the UK there is an order of magnitude more carbon stored in soil carbon than plant biomass. Tree planting on such soils can oxidise this carbon, potentially releasing more than the amount taken up by the trees. And practices such as ploughing land before planting can dry out the soil, causing carbon release. At the other end of the forestry cycle, modern tree extracting machines can similarly churn up the soil. So it isn’t clear to me whether tree planting will benefit the climate. Can planting trees combat climate change very much?, James Fenton, letter published in New Scientist, 8 February

When scientists can't be certain about relationship between tree planting and atmospheric levels of carbon dioxide, we need a climate change policy that allows for such uncertainty. For many years I've been advocating that we need clarity over what we are trying to achieve. Let's assume that we are trying now to slow down and stop the climate changing by reducing the level of greenhouse gases in the atmosphere. (That sidesteps the question of whether we should be concentrating on reducing climate change, or reducing the negative impacts of climate change - see here.) Planting trees might have an important, even crucial role, in determining climate outcomes. But we don't have a policymaking system that allows for the uncertainties that Mr Fenton cites, nor for any other massive uncertainties such as the effects of certain sorts of cloud - see my post here.

Our policymaking system relies on our being able to identify with reasonable certainty the relationship between cause and effect. But our society and environment are now too complex for that blithe assumption to work. We just don't know whether planting trees will mitigate or accelerate climate change, but we cannot currently make policy in any other way. l.

Which is why I suggest we target the goal we want to achieve, and reward the people who find the best ways of achieving them: ways that we cannot now identify with any certainty. Any efforts, then, must be long-term in nature, and they must encourage research, experimentation and, finally, implementation, all of which means that policy must be consistent over time. We cannot at this point convincingly advocate, say, tree planting, but what we can do is provide a system of incentives that will reward tree planting (more accurately: the right sort of tree planting) to the degree that it helps achieve society's climate change goal. We reward the outcome, and let investors work out the best ways of achieving it, giving assurances that their successful long-term efforts, which will doubtless entail many failed experiments, will be rewarded.

Long time readers will know that, of course, I'm advocating the application of the Social Policy Bond concept to climate change. We urgently need to reward people who (1) are investigating exactly the sort of relationships about which Mr Fenton writes and (2) are implementing the most successful of their activities and terminating those that are less promising. We need to encourage a wide range of diverse, adaptive approaches and we need to reward the most useful of these. Our current policymaking system is too sclerotic to contemplate such a flexible approach.  

It's not just climate change, where at least we think we can identify many of the likeliest explanatory variables. There are just as urgent, big issues, such as nuclear peace, or disaster reduction, where the complexities are so obvious even to policymakers that any activities now being undertaken to address them are half hearted, scattered, incoherent, and too poorly-financed to achieve anything useful. The Social Policy Bond concept can be applied to those issues too.

Climate change, conflict reduction, nuclear peace: these are huge, urgent problems whose causes we cannot identify with any certainty, and vary with time and geographic area. Conventional policy cannot cope with the diverse, dynamic nature of these problems, which are going to be solved only with an array of diverse, adaptive approaches. Social Policy Bonds, by targeting outcomes rather than the supposed ways of achieving them, can deal with uncertain, complex relationships between cause and effect. Current politics can't.

See here for links to my papers on Climate Stability Bonds, and here for my work on conflict reduction.

Locusts, potato crisps, and nuclear catastrophe

The Economist writes:

The last big locust crisis, in north-west Africa, lasted from 2003 to 2005 and caused an estimated $2.5bn worth of damage to harvests. Getting it under control cost almost $600m, with donors footing much of the bill. That is enough to cover preventive measures in the same region for 170 years, say experts. But prevention does not attract much funding. “This is a Catch-22,” says Keith Cressman, the Senior Locust Forecasting Officer at the FAO. “Donors are interested in funding big emergencies, big problems.” And governments, unlike locusts, move slowly. East Africa is reeling from an invasion of locusts, the Economist, 1 February

So it goes. We pay attention to fast-moving problems that make a vivid visual impact. Slow-moving, unglamorous problems that cry out for policy initiatives go neglected. Prevention of emergencies, like locusts, are one example; climate change, and loss of habitat for the world's animal and plant life are others. By the time their worst effects are known and we belatedly respond, the problems have taken on overwhelming dimensions.

We respond to events if they are fast moving enough. That is a failure, in that early response to less obvious problems would be more efficient. But it's a failure too in that we are wedded to responding to noticeable events. We do not have policies that to deal with unknowable disasters whose provenance and scale we cannot foresee. We need to recognise that the maintenance of the status quo is worth targeting, even if we cannot foresee how it is threatened and especially if we cannot think about how best to go about dealing with those threats.

This is where Social Policy Bonds can play a role. They can motivate people not only to solve visible but slow-moving problems, but also to work so as to prevent those unforeseeable problems. Take, for instance, the threat of nuclear conflict. We know one would be catastrophic but we  have so few ideas about how to lower the threat level that we devote far more ingenuity (and quite possibly, funding) into digital marketing strategies for dog-food, or into developing new flavours for potato crisps. There are well-intentioned, hard-working people working to reduce threats like nuclear conflict, but their resources are limited by our historic and inefficient practice of responding only to events that are actually occurring. And we have no mechanism for rewarding the institutions that are working for peace in ways according to how well they do so. This means they are not as motivated as they otherwise might be, but more importantly that these bodies do not receive funding commensurate with the importance of their goal. Everybody in the world would suffer grievously from a nuclear exchange, but there is no means by which we can currently channel our well-founded fears into ways that will help avoid one. We have to rely on bodies such as the United Nations, non-governmental organisations, and philanthropists, most of which are - inevitably, and in common with all organisations - pre-occupied with self-perpetuation.

The answer could be Nuclear Peace Bonds. Targeting nuclear catastrophe they would be backed by governments, NGOs, philanthropists and anybody with a strong interest in human well-being. Floated on the open market they would become redeemable for, say, $1m each only after a thirty-year period during which no (lethal) nuclear explosion takes place. Floated on the open market, they might initially fetch just $10000 each, if the market thinks the probability of thirty years’ nuclear peace is low. But these bonds would be tradeable: their value would rise and fall according to how likely people think the peace target will be reached.

Initial investors would buy the bonds and do whatever they can to increase that probability. Even helping existing ways of monitoring nuclear material might see the value of their bonds double. Others, with expertise in different areas, would buy their bonds and do what they can to raise the value of the bonds still further. At every stage, the bonds would be in the hands of those most able to bring about nuclear peace. The bondholders’ goal is exactly congruent with society’s: they make money only by achieving society’s goal. At every stage of every process required to achieve that goal, incentives will motivate people to be as efficient as possible.

Rather than encourage endless speculation about what projects will make the world more peaceful the bonds would, in effect, contract out the achievement of world peace to the market. They would encourage a wide range of adaptive projects, whose sole criterion for funding would be that they would raise the probability of world peace being achieved. In this way, the governments and others who back the bonds would do what they are best at: articulating society’s goals and raising the revenue for their achievement. At the same time, the market would be doing what it is best at: allocating resources as efficiently as possible.

If nuclear peace sounds too lofty a goal, then we could start by aiming for something like peace in the Middle East. The same principle would work for natural disasters or climate change. In every case, we'd be rewarding the successful achievement of a sustained, desirable outcome, even if it's as unglamorous as maintaining the status quo in the shape of nuclear peace. It is a shame that few people seem to think along these lines.

My short piece on Nuclear Peace Bonds is here. The links in the right-hand column of that page point to papers on similar themes: Conflict Reduction, Disaster Prevention, and Middle East Peace

The sad, infuriating, truth about our climate target

David Roberts writes:

Humanity has put more CO2 in the atmosphere since 1988, when climate scientist James Hansen first testified to Congress about the danger of climate change, than it did in all of history prior.... No country has implemented anything close to the policies necessary to establish an emissions trajectory toward 1.5˚C; many, including the US and Brazil, are hurtling in the other direction. The sad truth about our boldest climate target, vox.com, 3 January

What can I say without repeating myself? Six years ago I wrote that Kyoto is doomed. and that Kyoto is a dog's breakfast. Four years ago I repeated myself, saying wrote that current climate policy is doomed to fail. 

Less irritatingly, I've asked whether we should be more concerned about the effects of climate change than on climate change itself. One of the advantages, as I see it, of a Social Policy Bond regime is that it perforce, and at the outset, specify very clearly what we want to achieve. As applied to the climate change problem we would express our policy goal as a combination of physical, social, biological and financial measures that must fall within specified ranges for a sustained period. Only then would holders of Climate Stability Bonds be paid out. These bonds would, in effect, contract out the achievement of our multiple climate goals to the private sector, leaving it to respond to our ever-expanding scientific and technical knowledge. Current policy is rigid and arrogant, in that it is based entirely on current science and assumptions about future trends. It cannot adapt to new knowledge. These are other reasons why it's failed to capture the public imagination and hasn't, in fact, achieved anything. We need a multitude of diverse, adaptive approaches to achieving our goals relating to climate change and its impacts - many of which will have nothing to do with greenhouse gas emissions. Climate Stability Bonds would encourage them. Current policy, as well as being politically divisive, imposing extremely high upfront costs, and achieving nothing, will not.

Mickey Mouse micro-objectives: rape statistics

In our complex societies, the alternative to coherent, meaningful, goals expressed in numbers are incoherent, meaningless goals expressed in numbers. That's bad enough, but there are times when numerical targets are devised such that they are not just devoid of meaning, but work in ways contrary to their ostensible intention. Here is one recently reported example:

Pinellas Sheriff’s Office boosts its rape stats without solving cases, Allison Ross, 'Tampa Bay Times', 5 January

The details aren't important: it's a familiar story. The problem with this, and other Mickey Mouse micro-objectives, is that the numerical target is uncorrelated to any aspect of societal well-being. They sound good, these targets, and they might have started out as well intentioned. But they are too easily devised or perverted by people with an interest in avoiding effort. People can get away with this because few of us will challenge such high-sounding goals as 'reducing rapes', or 'dealing with crime', or 'reducing climate change'. Only in retrospect do we see how the targets and indicators associated with such ideals are so poorly or cynically designed that they have the effect of nullifying their stated goals.

The case for Social Policy Bonds rest on two pillars. One is the channelling of market forces into the achievement of our goals. The other, though, is the precise definition of these goals. For any quantitative measures of progress, our goals should not only be meaningful to ordinary people. They should be ends in themselves or inextricably linked to those ends. They need to be broad and long term, so that solving one problem can't occur simply by creating others, or shifting the problem into another region, or kicking the can down the road.

So how would Social Policy Bonds deal with rape? One way forward could be to target for reduction -  nationally - the numbers of people in anonymous surveys who respond 'yes' when asked whether they have been raped. That could form one of an array of indicators, which could include some that are currently used. All such indicators would have to fall within a prescribed range for a sustained period before the bonds would be redeemed. Choosing these indicators wouldn't be simple. But what is the alternative?

For more about Social Policy Bonds see SocialGoals.com

Input legitimacy: the Swiss approach

The Economist writes:

One of the great arguments for democracy is what Fritz Schapf, a German scholar of politics, calls “input legitimacy”. Even if a system does not give people what they want, the fact that those running it reflect a democratic choice is legitimising. Can technology plan economies and destroy democracy?, the 'Economist', 18 December 2019

 This chimes with some decades-old research done in Switzerland. It is a shame that the Swiss model of ‘direct democracy’ is something of an outlier. Switzerland has a federal structure whose 26 cantons have use assorted instruments of direct democracy, notably initiatives to change the canton’s constitution, and referendums to stop new laws, change existing ones, or prevent new public spending. Cantons vary in the ease with which these instruments can be used. Research by Bruno Frey and Alois Stutzer of the University of Zurich showed that, even after allowing for other variables, the more democratic the canton, the more people living there reported being happy. The effect is significant:

 [T]he marginal effect of direct democracy on happiness [was found to be] nearly half as big as the effect of moving from the lowest monthly income band (SFr980-1,285, or $660-865) to the highest (SFr4,501 and above). Happiness is a warm vote, the 'Economist', 15 April 1999

By looking at the reported happiness of foreigners (that is, people who cannot vote in the referendums) living in the Swiss cantons, the researchers found that it wasn’t just the effect of the decisions made by direct democracy that led to greater well-being. The participation in the process itself accounted for most of the increased happiness.

This is a position I have long advocated. Social Policy Bonds would target outcomes: transparent, verifiable outcomes that are meaningful to ordinary people. Discussion and debate about these outcomes and their priority is inherently more accessible to ordinary people. The current political systems in most democracies rarely declares their goals (if they have any) in terms that mean anything to natural persons. Their goals have more to do with retaining power, and usually mean favourable treatment for the most powerful, especially government agencies and big business, at the expense of small businesses and ordinary citizens. The system gets away with this, because its goals are expressed vaguely if at all, and policymaking takes the form of recondite, legalistic discussion about institutional structures and funding. Social Policy Bonds in contrast would subordinate all such processes to meaningful, explicit goals. This would draw more people into the political process. As the long-standing research into Swiss direct democracy shows, this is an end in itself, as well as a means to greater well-being.

Politics as career drama

There's much that's worthy of quote in Greg Jackson's latest article in Harper's Magazine, but I will limit myself to this for now:

As things are, the job of politicians is to feed the emotional-entertainment industry that we call “news,” which is accomplished by grandstanding and self-promotion. Reporters and pundits cover politics by analyzing how politicians succeed and fail as spokespeople and media figures. Interest shifts, by turns, to how the game is played, how the media fits into this game, and, eventually, how journalists do their jobs. The news today, properly understood, is about the careers of politicians and journalists. It is career drama. (My italics) Vicious Cycles, Greg Jackson, 'Harper's Magazine', dated January 2020

In the absence of any more meaningful measure of politicians' competence, we focus on how they appear in the media. But what else can we do? The links between what politicians say, what they mean, and what actually happens are tenuous, obscure or non-existent. Only rarely can we say that this politician did something that led to that outcome. Society is just too complex to identify cause and effect with certainty. There are exceptions: decisions to go to war, for instance. But for the most part, when wondering whom to vote for we depend on the news or, as Mr Jackson accurately puts it, "news".

When seeing the wide, and widening, gap between politicians and ordinary citizens, we are right to draw attention to the baleful influence of the wealthy organisations - public- and private-sector - who, along with their lobbyists, are the only people that have the time and motivation to understand how policy is made and how they can manipulate it for their own benefit. If only there were a means by which we could make politicians enact policies that benefit the people they are supposed to represent.

Social Policy Bonds are one such means. You might have heard of Social Impact Bonds, which are the non-tradeable version of my original (long pdf, scroll to page 266) idea. There are several reasons why I think we need the bonds to be tradeable if they are going to make significant gains in policy effectiveness and efficiency. I write about those reasons here and here. The important point is that the bonds reward outcomes: outcomes, moreover, that are meaningful to ordinary people and which, in fact, ordinary people can help identify and prioritise. Because Social Policy Bonds are tradeable they can target long-term goals, whose pathway to achievement is unclear. We can therefore target remote goals, such as universal literacy or world peace, because we do not have to specify in advance how those goals shall be best achieved, nor whom we shall charge with achieving them. The market for the bonds would ensure that only the most efficient projects will be rewarded. The long-term nature of the bonds means that investors will have incentives to research a wide range or initiatives, and persist only with the most efficient.

Our biggest, most urgent challenges - such as climate change or conflict reduction - will require a mosaic of diverse, adaptive projects. These are exactly the sorts of projects that government at any level implement. The top-down approach is good for articulating society's wishes, and for raising the revenue for their achievement, but when it comes to actually achieving any but the most obvious goals - the ones with the clearest link between cause and effect - it fails. A Social Policy Bond regime would see politicians doing what they do well: helping society define its goals and raising taxes. But it would contract out the achievement of these goals to more motivated investors, who have a sustained interest in achieving their goals - which are exactly the same as those of society. Economic theory and all the evidence tell us that competitive markets are the most efficient way of allocating scarce resources to achieve prescribed ends. Under a Social Policy Bond regime it is society that would determine these ends, and market forces would channel the market's incentives and efficiencies into achieving them.