Social Policy Bonds blog

Low-hanging fruit

noreply@blogger.com (Ronnie Horesh) — Sun, 07 Mar 2010 10:47:00 +0000

The way big organizations work, whether they be public or private sector, there's often little incentive to explore cheap but effective ways of improving performance. There's little glamour attached to mundane ideas and, where status is correlated with budget size, little reason to adopt them when there's a more expensive option available. This mentality, of course, is encouraged by an environment in which outcomes don't matter. But when people do care about outcomes, there's a surprising amount of low-hanging fruit available for the plucking. Here's the result of using checklists for surgical procedures for 8000 patients for six months:

In every hospital major complications were reduced by 36 per cent and the death rate was halved. One minute with Atul Gawande, 'New Scientist', 20 February

This is outcome-based policy at its best. (See here for more.) All 167 hospital trusts in the UK are now adopting this simple innovation.

A Social Policy Bond regime would similarly encourage the adoption of efficient techniques, even if they are unglamorous. It would build efficiency incentives into all activities aimed at achieving the targeted goal. As Dr Gawande's work indicates, the scope for improvement under the current system is quite astonishing.

More transfers from the poor to the rich

noreply@blogger.com (Ronnie Horesh) — Tue, 02 Mar 2010 10:19:00 +0000

George Monbiot writes about the UK Government's feed-in tariffs for electricity produced by photovoltaic (PV) panels:

The government is about to shift £8.6bn from the poor to the middle classes. ... On April 1st the government introduces its feed-in tariffs. These oblige electricity companies to pay people for the power they produce at home. ... . Solar PV is a great technology - if you live in southern California. But the further from the equator you travel, the less sense it makes.... It’s not just that the amount of power PV panels produce at this latitude is risible, they also produce it at the wrong time. In hot countries, where air conditioning guzzles electricity, peak demand coincides with peak solar radiation. In the UK peak demand takes place between 5 and 7 on winter evenings. A great green ripoff, George Monbiot, 1 March

And so on and on.... This is what happens when policy is determined by image, sentiment, lobbyists and corporations. It's policy as if outcomes don't matter in the least.

A Social Policy Bond regime wouldn't allow this sort of nonsense to occur. Correction: it would - but only if people actually wanted it. That's to say, if people deliberately choose to transfer millions of pounds from the poor to the rich and to fraudsters, they could do so under a bond regime. The difference is, they'd be doing it with their eyes open, instead of having their view obscured by a policymaking regime that is concerned mainly about image, the welfare of corporations and government agencies, and arcane debate about structures and process.

Who cares about the planet so long as Al Gore look silly

noreply@blogger.com (Ronnie Horesh) — Mon, 01 Mar 2010 10:53:00 +0000

One of the virtues of the Social Policy Bond approach is that setting goals would be done deliberately, consciously and more rationally than it is now. Consider this quote from David Brooks, a 'New York Times' columnist says:

I have to confess, I am not at my best when dealing with environmental issues. On the one hand, I totally accept the scientific authorities who say that global warming is real and that it is manmade. On the other hand, I feel a frisson of pleasure when I come across evidence that contradicts the models. I don’t know if this is just because I distrust people who are so confident they can model complex systems or because I relish any fact that might make Al Gore look silly. Source (quoted here)

This sort of puckish perversity does matter, especially when widely promulgated in the mass media. In the absence of referendums about climate change and other major policy issues, it stands in for, and influences, received opinion. Yet his conclusion doesn't even reflect Mr Brooks' own opinion about the fact of climate change. Our current system gives us so little influence over policy that we treat the whole process as an entertainment.

Social Policy Bonds would bring some rationality to policymaking. Instead of focusing on personalities a bond regime would start out by considering which social and environmental goals we should aim to achieve. Because it is entirely focused on meaningful outcomes, it would bring more people into the policymaking process. We'd think carefully about which outcomes we want to target, and how we'd rank them and, in contrast to the current system, we'd do so relatively dispassionately.

Lamentable

noreply@blogger.com (Ronnie Horesh) — Fri, 26 Feb 2010 11:16:00 +0000

I refer to the standards of debate and the aspirations of some of our political representatives:

Mr Farage [UK Independence Party] drew jeers on Wednesday when he told the chamber of the European Parliament that Mr Van Rompuy had "the charisma of a damp rag" and the appearance of a "low-grade bank clerk". Source

It seems it's now respectable to judge our leaders by their appearance or whether they have charisma or not. Our political process is so corrupted and obscure that, it seems, we rely on a politician's image when it comes deciding whether or not they're worth voting for. Mr Farage is probably in sympathy with a large part of the electorate in this. It's the system that's at fault, and the fault is that we have become habituated to judging politicians by anything except outcomes. In a rational society outcomes would matter most. The problem is that society is so complex, and the political process so arcane, that identifying cause and effect in politics is largely impossible.

One result is the disengagement of ordinary people from the policymaking process. Corporations and lobbyists take their place. In a vicious circle, the wide gap between politicians and the people they are supposed to represent grows every larger. The current system makes it too easy for politicians and bureaucrats to evade or deflect censure for their inefficient or bad policies.

Social Policy Bonds would, I think, have many advantages. One is that they would refocus political debate on outcomes that are meaningful to ordinary people. In stark contrast to the current system, rewards would be inextricably linked to achievement of these outcomes, and the outcomes would be clear, explicit and stable. More people could be involved in the policymaking process; they would also have more realistic views about what can be achieved with public funds and about the inevitable trade-offs that have to be made. One huge benefit is that people would buy in to the process and the resulting goals. In such a process, we'd assign the personality or appearance of politicians correctly - as zero.

Crisis of capitalism

noreply@blogger.com (Ronnie Horesh) — Wed, 24 Feb 2010 09:03:00 +0000

Capitalism succeeds mainly because of creative destruction: the failure of businesses that respond inefficiently or not at all to the concerns of ordinary people, as manifested in a relatively free market. It fails when businesses become so big that they constitute monopolies, or so powerful that they can manipulate the trade and regulatory environment to suit their short-term interests at the expense of the longer-term interests of society and the environment. Such failure takes the form of inefficiency and a widening gap between government and big business on the one hand, and ordinary people and smaller enterprises on the other.

We are beginning to see a crisis of capitalism playing out now. Government and big business have done their best to subvert creative destruction, and are powerful enough to succeed. They are the most influential entities in our societies and they are big enough to distort or eliminate the market's way of responding to individuals' wishes. The result will be more central planning, and the increased alienation of ordinary people from the political process.

Social Policy Bonds might be a way of reconciling the need for centralised guidance of our large societies with the equally important need for efficiency - and freedom. They would contract out the achievement of our social and environmental goals to the private sector. Inefficient players would find themselves bid out of their part of the contract. Our goals would still be large scale, but the organizations of people with a vested interest in achieving them - holders of Social Policy Bonds - could be of any size, with a constantly varying composition. More important, these organizations would be subject to creative destruction. That's a marked contrast to the current system, under which the organizations supposed to help achieve our social goals are government agencies, whose immunity from creative destruction and whose close relationship to big business are at risk of discrediting the best features of capitalism and market forces for a long time to come.

Gaming the system, again

noreply@blogger.com (Ronnie Horesh) — Wed, 17 Feb 2010 14:21:00 +0000

Further to my previous post about Mickey Mouse micro-objectives in education: here's a story that describes something else that can happen when incentives are perverse: teachers changing their students' answers on tests from wrong to correct.

Use broad, meaningful, numbers

noreply@blogger.com (Ronnie Horesh) — Mon, 15 Feb 2010 10:10:00 +0000

Severe winter weather in England. Some schools decide to close, others to stay open. Marjorie Clarke from Devon, in a letter to 'the Independent', explains why:

[I]f a school decides to close, it will not affect the official attendance record, but if it opens and only half the pupils attend, this will be counted as poor attendance.... Letters, 'The Week', 16 January

...and the school penalised accordingly. School attendance records like this constitute another in the UK's prolific series of Mickey Mouse micro-objectives.

Using numerical indicators and targets is perhaps a regrettable, but largely inevitable part of governing large, complex societies. My work on Social Policy Bonds has convinced me that those numbers that are used should be as broad as possible, and inextricably linked to what we are really trying to achieve. There needs to be more clarity about means and ends. School attendance, for instance, however measured, is not a social goal: better educational outcomes are.

So my advice to the UK Government, or any well-intentioned body aiming to achieve meaningful social and environmental goals, is to think carefully about what you want to achieve and, as far as possible, reward people for achieving. It sounds simple, and it's the underlying principle of Social Policy Bonds. But with the odd exception it's rarely been deployed, and when it has (see here, for one example), it's seldom by governments, who are responsible for by far the biggest sums supposedly devoted to achieving social goals.

Zombie politics

noreply@blogger.com (Ronnie Horesh) — Tue, 09 Feb 2010 09:35:00 +0000

Describing the reaction of those conservatives in the US who now accept the mainstream scientific position on climate change, Jonathan Chait says:

[R]ather than proceed from that premise to some program of reduced emissions, they have feverishly devised a series of rationales for unlimited carbon use. Some have embraced fantastical geoengineering schemes--massive machines, for example, that would suck carbon out of the sky--with the rabid certainty of a science-fiction nut. Others insist that limiting U.S. emissions will do nothing to help force developing nations to do the same. Still other conservatives argue that the future world will be richer and thus able to cope with whatever calamities a hotter planet will bring. The telling thing here is not that these arguments are provably wrong, though they are highly speculative. It’s that those conservatives who have accepted climate-change science immediately jumped to some other reason to oppose government action. ... [V]irtually no conservative intellectuals seem to settle, even temporarily, on the view that climate change is real and that government regulation is therefore appropriate. They cling to climate-science skepticism like a life preserver, and then, when they can’t hold on any more, they grasp immediately for a different rationale. If government intervention appears to be the answer, they must change the question. Jonathan Chait, The rise of Republican nihilism, 'The New Republic', 30 December 2009

It wouldn't matter so much of these deadbeat political parties were subject to genuine competition or the sort of market disciplines that they themselves claim they would like to see in the economy. Sadly, though, they and their corporate paymasters are together powerful and self-interested enough to stifle any chance of real reform. Ideology becomes a means by which to paper over the widening gap between politicians' interests and those of ordinary people. It can't go on indefinitely, but it could well be that any worthwhile convergence will be preceded by some sort of catastrophe.

One way of avoiding that would be a gradual transition to a Social Policy Bond regime. If that seems drastic and far fetched, then at the very least we should start to express policy goals in terms of meaningful outcomes, rather than as ideological counters, activities or spending on government agencies.

Social Policy Bonds: an alternative to policy mashup

noreply@blogger.com (Ronnie Horesh) — Mon, 08 Feb 2010 12:45:00 +0000

Jarol Lanier:

If everything is a mashup of everything, then everything becomes the same, gradually .... You need to have membrane walls to have creative evolution. The reason the Beatles are the Beatles is they evolved initially somewhat separately at a club in Hamburg (Germany) and at this funny club in Liverpool. If everybody is on Ed Sullivan all the time, you can't ever get a Beatles; everything will be the same. Silicon Valley visionary says life online needs some humanity, 24 January

A policymaking culture where there is only one solution to a given problem is unlikely to be effective. Government policy is increasingly centralised, and so becoming less capable of dealing with diverse populations and circumstances. Even if a policy applied very widely is efficient to begin with it will be unable to respond creatively to changing circumstances.

There's nothing wrong with wanting a uniformly agreed outcome, such as universal literacy, or reduced crime rates. But it is folly to imagine that a single approach can be efficient in supplying one. People differ, circumstances vary, and times change. Governments are too big and cumbersome to respond, and they much prefer a uniform approach to anything more administratively untidy.

Social Policy Bonds might be the answer. They would reward people for achieving outcomes as broad as world peace or the eradication of global hunger, but they would not stipulate how these goals shall be achieved. That would be up to investors in the bonds, who would have every incentive to seek out and implement any of a wide and expanding array of approaches, varying according to space, population and time. The contrast with the current policy mashup is stark.

Galbraith and government

noreply@blogger.com (Ronnie Horesh) — Tue, 02 Feb 2010 23:36:00 +0000

While [J K Galbraith] is perfectly able to see the defects of businessmen — their inclination to megalomania, greed, hypocrisy, and special pleading — he is quite unable to see the same traits in government bureaucrats.... A man who has devoted his life to the study of economics — and occupies one of the most prestigious chairs in the subject in the world — does not appear to understand that the existence of thousands of corporations, as well as the possibility of starting new ones, introduces a significant difference from a situation in which there is a single employer under very tight political control. The Galbraith Revival, Theodore Dalrymple, 'City Journal', Winter 2010

It's a common mistake, and an easy one to make for those of us lucky enough to live in societies with a history of benign and not-too-disastrous public policy. But the limitations of the single-employer approach are increasingly apparent. Dr Dalrymple mentions "the fact that Britain spends nearly $100,000 per child on public education, and yet a fifth of the population is unable to read with facility or do simple arithmetic...". I would point also to the persistence of poverty and disease in the poorer countries, the failure to eradicate war, and the increasing risk of catastrophic environmental or nculear disaster. We do, I think, need an explicit focus on such problems, and government is big and (generally) sufficiently well intentioned to provide it. But we also need a large array of diverse approaches and problem-solving bodies that can adapt their approach quickly to changing circumstances. We need in particular, a means by which inefficient solutions to social problems are terminated quickly. And government, however big and well intentioned, cannot effectively manage diverse, adaptive approaches. No single organization can.

Social Policy Bonds could square that circle. Under a bond regime, government, whether national or supra-national, is big enough to target global social problems and to raise the revenue for their achievement. It could stimulate diverse, adaptive solutions by issuing the bonds, which would be redeemed only when targeted outcomes - world peace, for example, or climate stability - had been achieved. Government can perform these tasks without getting involved in actually achieving these goals: such achievement would, under a bond regime, be contracted out to agencies (mainly private sector) who would be highly motivated to explore and implement only the most efficient solutions to our problems. Government would then function not as the monopolistic 'single employer', but more as the articulator of society's goals and the agency that transfers our scarce resources to the people who help achieve them.

Corporations versus humans

noreply@blogger.com (Ronnie Horesh) — Sun, 31 Jan 2010 09:19:00 +0000

We constantly confuse means with ends. For most of recent history a society's corporate health was a fairly reliable indicator of economic health which, in turn, was reasonably well correlated with the wellbeing of an entire population. But there's nothing inevitable about such strong correlations. Corporate objectives differ from those of ordinary individuals, and often conflict with them. But large corporations and government are now so big that they can manipulate the legislative environment to make sure they grow even bigger and more influential. Any link between the success of big organizations and the wellbeing of ordinary people is nowadays almost coincidental.

Social Policy Bonds could restore that link. They would subordinate the interests and activities of corporations and government agencies to outcomes that society itself chooses. Ones that would be inextricably linked the wellbeing of ordinary people. They would eliminate the confusion between ends and means that bedevils current policymaking at any but the most local level.

Meantime, the role of the corporate actor continues to expand. David Bollier reports that, on 21 January:

[T]he U.S. Supreme Court gave the go-ahead for corporations to enclose our democracy. The Court ruled that corporations must legally be considered “persons” who are thereby entitled to First Amendment rights. By this tortured logic, long-standing limits on corporate contributions to political campaigns constitute an unconstitutional infringement of free speech. [N]ow paid speech (on behalf of market interests) is privileged over people’s speech in electing our political leaders. “We the Corporations….” Corporations may now drown out the speech of real, live human beings for whom the First Amendment was designed. The Corporate Enclosure of Democracy, David Bollier, 21 January

Deployment of Social Policy Bond principle!

noreply@blogger.com (Ronnie Horesh) — Tue, 26 Jan 2010 10:57:00 +0000

"Today I am launching a new fund – www.arrestblair.org – to reward people who attempt to arrest the former prime minister." A Bounty for Blair’s Arrest, George Monbiot

When intentions and self-interest conflict

noreply@blogger.com (Ronnie Horesh) — Sat, 23 Jan 2010 08:48:00 +0000

Frederick Barthelme describes a genial shift manager at the Paradise Casino, in his novel Bob the Gambler:

Phil Post was always pleasant, always commiserating, urging us to leave when we were ahead or when we got even after a bad run of cards. He seemed genuinely friendly, but he worked for the Paradise, so who knew. He was paid to grease the skids, to shill, so it didn't matter whether he was friendly or not, because even if he was, even if everything he said to us and everybody else he dealt with was as genuine as the day was long, it still amounted to coaxing more money out of our pockets. (page 123)

It's unfortunate that, as with the well-intentioned but necessarily compromised casino employee, policymakers have no real interest in downsizing or efficiency. From the current Economist:

Periodic attempts to build “bonfires of regulations” have got nowhere. Under [George W] Bush the number of pages of federal regulations increased by 7,000, and eight of Britain’s ten biggest regulatory bodies were set up under the current government. The power of these regulators is growing all the time. Policymakers are drawing up new rules on everything from the amount of capital that banks have to set aside to what to do about them when they fail. Britain is imposing additional taxes on bankers’ bonuses, America is imposing extra taxes on banks’ liabilities, and central bankers are pondering ingenious ways to intervene in overheated markets. Worries about climate change have already led to a swathe of new regulations, for example on carbon emissions from factories and power plants and on the energy efficiency of cars and light-bulbs. But, since emissions are continuing to grow, such regulations are likely to proliferate and, at the same time, get tighter. The Kerry-Boxer bill on carbon emissions, which is now in the Senate, runs to 821 pages.

Fear of terrorism and worries about rising crime have also inflated the state. Governments have expanded their ability to police and supervise their populations. Britain has more than 4m CCTV cameras, one for every 14 people. In Liverpool the police have taken to using unmanned aerial drones, similar to those used in Afghanistan, to supervise the population. The Bush administration engaged in a massive programme of telephone tapping before the Supreme Court slapped it down. Leviathan stirs again, 'The Economist' (subscription), 23 January

I don't see big government as necessarily a problem, but I do see remote, inefficient government as a problem, and one that's getting worse. Government is now so big it alone determines its size and rate of growth. In my view, the size of government should be a by-product of the social and environmental outcomes we want to achieve. There are some things that only government can do, two of which are articulating society's goals and raising the revenue for their achievement. Where government tends to be inefficient is in actually achieving these goals. Contracting out such achievement, as would be done under a Social Policy Bond regime, would bring competition to many services that are currently delivered by government agencies. Competition is not an end in itself, of course; it is a means to the end of greater efficiency. Unfortunately, our current system is not efficient. Some of its achievements have been impressive, but much of their cost has been deferred as far as politically possible. That's the financial cost. There have been other costs, as the Economist points out, including ever-growing state intrusion into our lives. Social Policy Bonds, or something like them, could be the answer.

Economic growth = hungry children?

noreply@blogger.com (Ronnie Horesh) — Sat, 16 Jan 2010 11:54:00 +0000

From the current Economist':

According to the Food Bank for New York City, an estimated 1.3m New Yorkers now rely on soup kitchens (which provide hot meals) and food pantries (which give away food). The number of people having trouble paying for food has increased 60%, to 3.3m, since 2003. ... Almost half of all New York City households with children have difficulty affording enough food. A staggering one in five of the city’s children, 397,000 small people, rely on soup kitchens — up 48% since 2004. The Big Apple is hungry (subscription), 'Economist', 14 January

This must be the 'Bush Boom', that Jerry Bowyer writes about. As the blurb for his book, The Bush Boom: How a Misunderestimated President Fixed a Broken Economy has it:

[George W Bush] resolved to pursue an economic policy that included unprecedented tax cuts. What’s the result of Bush’s low-tax economic program? Jerry Bowyer confronts the critics and offers clear and convincing evidence that the Bush Administration fixed a broken economy, boosting the fastest economic turnaround since President Ronald Reagan. Source

Taking refuge in equations

noreply@blogger.com (Ronnie Horesh) — Fri, 15 Jan 2010 09:05:00 +0000

Not only was [David Bohm] not given full credit for his plasma work, but most physicists appeared uninterested in the deeper philosophical questions of their subject. To make matters worse, they even ignored the underlying physics they were studying, preferring the surface brilliance of mathematical techniques. Infinite potential: the life and times of David Bohm, F David Peat

Sadly economists and, increasingly, policymakers have exactly the same tendency. You might think or hope that their cynosure would be the wellbeing of ordinary people. But no. Like the foremost physicists of their generation, their focus is on intellectual elegance, symbol manipulation and mathematical consistency. And, in truth, it is easy to be distracted or hypnotised by the numbers and to work on the assumption that relationships that held in the past hold true today. So we have the lazy, implicit, targeting of Gross Domestic Product per capita, which takes no account of, amongst other determinants of wellbeing as the state of the environment or leisure time. Or, when the maths manifestly fails, the substitution of ideology for pragmatism, when pragmatism would do the job.

But the pragmatic approach, in policy, means some humility on the part of our politicians and bureaucrats. Social Policy Bonds, about which I have been talking for 20 years now, have gone nowhere, partly I suspect because governments would have to relinquish some of their assumptions about how policy goals are to be achieved. The bonds would encourage diverse, adaptive approaches to solving our social and environmental problems. Nobody - least of all governments - would know in advance which approaches would work and which would not. Much easier to preserve the illusion of emotional security by adopting an ideological position or taking refuge in the internal consistency of elegant equations.

What is government for?

noreply@blogger.com (Ronnie Horesh) — Wed, 13 Jan 2010 12:56:00 +0000

In contrast with the past, what is good for America's global corporations is no longer necessarily good for the American people. The disposable worker, 'Business Week', 7 January

Exactly. Big corporations are like big government: concerned almost solely with self-perpetuation. It's unreasonable to expect them to be altruistic, under the current legislative arrangements, but it is reasonable to expect governments to change those arrangements so as to favour ordinary people. Instead, most governments and political parties, most of the time, still believe that corporate goals are identical with those of wider society. Or, if they don't believe it, they behave as if they do. Often, their funding depends on maintaining that fiction.

At best, government has confused ends and means. It should concentrate not on bailing out failed businesses, or supporting inefficient sectors, but on the wellbeing of its citizens. What do we see instead? Massive transfers not only to bankers, but to large industrial and agribusiness corporations that would otherwise go under. Government instead of facilitating the creative destruction of failed business models, is resisting it. Big corporations are the winners (in the short run). So is government, which enlarges its role in the economy. But ordinary people are losing out.

We need, urgently, to realign government with the interests of natural persons, as against corporations. Social Policy Bonds could refocus government on ordinary people's wellbeing, not on the presumed ways of reaching them. If that means that certain businesses or sectors go to the wall, then so be it. Government should be about protecting disadvantaged people, not subsidising inefficient corporations.

Madness

noreply@blogger.com (Ronnie Horesh) — Sun, 10 Jan 2010 10:28:00 +0000

According to the New Scientist's review of Storms of my grandchildren, James Hansen believes that the threat posed by climate change:

...is far worse than [I] thought even a few years ago. The very survival of life on Earth is at stake.... "Your governments are lying through their teeth", he says. [T]he Kyoto protocol is a dismal failure, and its proposed successors, along with the cap-and-trade schemes favoured by [US] President Barack Obama, have no chance of achieving what is needed either. Earth on the brink, 'New Scientist', 12 December 2009

James Hansen and I agree that our political system is incapable of acting effectively because politicians serve the short-term interests of special interest groups with plenty of money to throw around, rather than the long-term welfare of citizens. It's madness.

Systems or results?

noreply@blogger.com (Ronnie Horesh) — Fri, 08 Jan 2010 09:45:00 +0000

Reading Infinite Potential, the biography of David Bohm by F David Peat, one is struck by the overwhelming wish of great physicists to unify and systematise; to generalise from past data or past experience; to abstract principles that can apply to new situations. We probably all have this tendency, which has served us very well, for the most part. But in great scientists it seems to be all consuming and, perhaps inevitably, to lead to grief. Reality is just too complicated.

Policymakers in our increasingly large and complex societies are ever more remote from ordinary people. So they rely more and more on the advice of experts, all of whom are trained to abstract general principles and relationships from history and datasets. It's a never-ending, never-complete task of course but it's an approach that yields useful insights and has led to the development of unambiguously good policies. Unfortunately, though, many of our most urgent policy goals are just not amenable any longer to that approach. We are increasingly interlinked; relationships between cause and effect are ever more tangled; and society is changing so fast that there is very little precedent for solving some of our most challenging social and environmental problems.

But our policymaking system doesn't recognise this. As a result, it's both too limited and, perversely, too ambitious. Too ambitious, as, for instance, when it tries to tackle climate change by identifying one variable that it can control (or say it's trying to control) - greenhouse gas emissions - and assuming that that will be enough. Too limited, in that it fails to deal with problems, such as war, that it recognises it has no hope of solving with the current array of policy instruments.

Our policymakers are perhaps more interested in control than in results. They want not so much to see problems solved, but rather to identify organising principles and approaches that they can use to solve our problems. Implementing Social Policy Bonds would mean that politicians would have to relinquish some of their power and to subordinate their wish to identify and control policy levers (even if there aren't any) to the achievement of results. It would mean a massive psychological shift. But the rewards are potentially huge.

What would Ivan do?

noreply@blogger.com (Ronnie Horesh) — Sun, 03 Jan 2010 05:34:00 +0000

Chase Madar writes:

Elite professional groups, wrote [Ivan] Illich, have come to exert a “radical monopoly” on such basic human activities as health, agriculture, home-building, and learning, leading to a “war on subsistence” that robs peasant societies of their vital skills and know-how. The result of much economic development is very often not human flourishing but “modernized poverty,” dependency, and an out-of-control system in which the humans become worn-down mechanical parts. The People's Priest, 'American Conservative', February 2010

Illich does seem to have anatomised a growing problem: our passivity in the face of the growing influence of corporations, and their crowding out of non-corporate - that is, human - ways of doing things. I would include government here one of the corporations. Criticism is all very well, but as Mr Madar says: 'A common, spluttering response to Illich’s polemics was “Just what does he propose we do instead?” Good question.....' Perhaps the answer is twofold: first, that economic development has gone hand in hand with population growth and life expectancy; it might not, in net terms, have raised the quality of life much, but it has certainly raised the quantity of life. We have collectively consented to that trade off, and presumably we could, if we wanted, reverse that decision.

A more proactive answer would be to subordinate economic growth or social change not to corporations (including government again) and their incentives (primarily self-perpetuation), but to the outcomes that ordinary people would wish for. A Social Policy Bond regime, for example, would allow our social and environmental outcomes to be achieved by means that are diverse, rather than dictated by government or corporations. Radical monopolies need not arise, because the most efficient way of achieving a specified outcome will most likely vary according to space and time. Investors in the bonds will be motivated to continuously reappraise their projects; they would have no built-in bureaucratic or ideological wish to convert the rest of us to their way of doing things.

Why are modern scientists so dull?

noreply@blogger.com (Ronnie Horesh) — Wed, 30 Dec 2009 10:49:00 +0000

Why are modern scientists so dull? asks Bruce G Charlton. His conclusion?

[S]cientists are dull mainly because the progressive increase in the requirements for long-term plodding perseverance and social inoffensiveness has the effect of deterring, driving-out and failing to reward too many smart and creative potential scientists before they ever get a chance to engage in independent research.

I think the same could be said of policymakers and public servants and for broadly similar reasons. Any large organization is going to rely more on willingness to conform to the organization's rules and processes than on the contribution an individual makes to a particular outcome. An individual's conformity to procedures is much easier to measure than his or her contribution to a possibly nebulous or undefined outcome.

In my book about Social Policy Bonds I explain how attempts in the 1980s to reform New Zealand's public service faltered over the question of how to measure departmental performance. At the outset of the reform programme, government departments had been envisaged as achieving specific outcomes, but instead outputs became the measure by which departments' performance is judged. Why did that happen?

One reason is said to be the self-interest of ministers and public servants, who are unwilling to be scrutinised. Another is that while the supply of outputs can be directly attributed to departments performance, outcomes can be influenced by factors beyond their control. As one commentator put it: outcomes are externalities in two-party relationships; therefore it is exceedingly difficult to assign responsibility for them. Market solutions for social and environmental problems: Social Policy Bonds

So it looks very much as though the perceived need to assign responsibility in effect hijacked more thoroughgoing reform. The perception of such a need arises because the players - those whose responsibility is to be assigned - are known in advance and are assumed constant. And who are these players? Why, they are the existing government departments, of course. In effect the New Zealand reforms have subordinated results to an assumed need to assign responsibility, which in turn seems to be driven by existing institutional structures and their wish to perpetuate their own existence and degree of control. It's a potentially disastrous failing: leading to a divergence of the objectives of departments in particular and government in general from the people whom they are supposed to serve. The results, throughout the democratic countries, are becoming all too clear: a widespread disenchantment with conventional politics, a growing cynicism and despair over government ever being able to deliver what ordinary people want and need.

Sterile life-prolongation

noreply@blogger.com (Ronnie Horesh) — Thu, 24 Dec 2009 10:33:00 +0000

Sterile life-prolongation, as against creative destruction. It's what you get when major funding decisions are made on the basis of who you are (or how much you give to political parties) rather than what you achieve. And, increasingly, it's the regime under which we live. It's the way our politicians operate, in conjunction with their friends and paymasters in the large organizations, whether they be government agencies, corporations or trade unions. It's the system that brought the Soviet Union to collapse and it's well on the way to securing the same destiny for the west. (See here for a blog making this comparison.)

Creative destruction means that unsuccessful businesses fail. In social policy it should mean the same for unsuccessful programmes. But it rarely does; government too often acts as a monopoly supplier of social and (increasingly) environmental services. As tax revenues rise, government tends to crowd out alternative ways of doing things. Take scientific research, which is now essentially a nationalised industry. In itself, this need be no bad thing, but the way government typically allocates funding is always going to be determined by politics rather than results. Funding is to institutions, rather than outcomes. This leads to idiocies like the use of citation indices to evaluate research.

What's needed is a more direct relationship between taxpayer funds and those outcomes that are meaningful to ordinary people. Government can -and indeed, should - be the articulator of society's goals, and it has a vital role in raising the revenue needed to achieve them. But like all big organizations, and like monopolies in particular, it doesn't work well when creative destruction is required. It's too big to adapt quickly; it's too slow to terminate failures. It doesn't like diversity, and it doesn't do creative destruction. No single organization can. And we need diversity and adaptiveness in complex, uncertain ventures, especially where our scientific knowledge is growing rapidly. I've written numerous times about the need for a mosaic of different approaches to tackle problems like climate change or war. Such problems just cannot be solved by any single organization, however big and however well intentioned. Sadly, the vast majority of resources aimed at these problems is now allocated by government. Even more sadly, the failure of government to address these challenges threatens our entire species.

Social Policy Bonds would, in contrast, supply the necessary creative destruction. Projects would be appraised continuously by highly motivated actual or would-be investors in the bonds. There motivation would be pecuniary, of course, but through a bond regime it would be channelled to serve the interests of society as a whole. Funding would be allocated entirely according to results, as anticipated by a plurality of interests. Sterile life-prolongation (a la Kyoto, for instance) would surrender to creative destruction.

Subsidising planetary destruction - the story continues

noreply@blogger.com (Ronnie Horesh) — Wed, 16 Dec 2009 09:34:00 +0000

Subsidyscope researchers found that non-users of the highway system contributed $70 billion for nationwide road construction and maintenance in 2007. Source

That refers to the federal US highway system, and works out at about 35 percent of the total. This amount excludes the costs of accidents, air and noise pollution, and the impacts on wildlife. It appears that state and municipal roads in the US are even more heavily subsidised.

Social Policy Bonds would mean contracting out the achievement of social goals to the private sector. Two crucial points relevant to roading are: (1) clarifying whether cheap, easy transport is an end in itself or a means to ends that would be better targeted more direction, and (2) transparency, which in this context is about making it clear to people where there taxes are going. In short, it's quite possible that people are willing to pay for cheap roading, even if many of us are nonusers. We might even be willing to shore up reckless banking behaviour, or massive agribusiness corporations, car and truck manufacturers and all the rest. But we should be given the option. The current system doesn't allow that: by emphasising process, institutional structures and spending, regulations and legalisms, it tends to exclude ordinary people from policymaking. In contrast, Social Policy Bonds would have transparency built in. A more ethical, as well as more efficient, way of achieving social goals, I think.

We need explicit, meaningful, policy goals

noreply@blogger.com (Ronnie Horesh) — Sun, 13 Dec 2009 13:39:00 +0000

Society's size and complexity mean that numbers are going to have to be used to help determine policy. Numbers inevitably distort, but if things aren't measured they tend to be ignored at the policy level. We want numbers, ideally, to represent human wellbeing - which immediately raises the question of whether or how animal and plant life are to be weighted when it comes to setting policy goals. There are many other questions, but where numbers correlate strongly with what we want to achieve, there's no objection to targeting them, a la Social Policy Bonds, as part of a wider political process. The key is to ensure that the correlation remains strong over the target range. For instance, the correlations between, say, educational level, household income, or longevity, and wellbeing are strong at the lowest levels of all these variables, but become much more tenuous as we move into tertiary education, higher incomes or age ranges.

If Social Policy Bonds were ever to be issued, they would benefit from the work already being done to quantify even such complicated things as human wellbeing - see, for instance, the Human Development Index. Now it appears that people are trying to aggregate and quantify climate change. A group called the International Geosphere-Biosphere programme has launched the 'IGBP Climate-Change Index'. This and the HDI would need refinement before they could be explicitly targeted, and there would always be debate about what they should include and relative weightings.

Even then, they might not be perfect as policy instruments. But what is the alternative? In the absence of explicit targets that are meaningful to ordinary people we are seeing the good intentions of politicians being almost entirely hi-jacked by the short-term financial interests of rich corporations. If that sounds far-fetched, you have only to look at the levels and persistence of government (taxpayer) support for the banks.

We the paying public can't do anything much except admit defeat and settle back for the next set of bills. In the meantime, perhaps we should try and think of a name for the new economic system, which certainly isn't capitalism: that, remember, is all about 'creative destruction', and the freedom to fail. That's exactly what we don't have. The most accurate term would probably be 'bankocracy'. Bankocracy, John Lanchester, 'London Review of Books', 5 November

Heading for disaster

noreply@blogger.com (Ronnie Horesh) — Sat, 12 Dec 2009 10:37:00 +0000

This post summarises my position on climate change

There is overwhelming, but not quite conclusive, evidence that the global climate is changing. That said, scientists and policymakers are divided as to (a) how fast climate is changing, (b) what is causing it to change, (c) the likely effects of climate change, (d) how much we can do about it, and (e) how much we should do about it. Despite these uncertainties, climate change has the potential to inflict serious harm on large populations, so there is a strong argument for doing what we can to prevent it or minimise its adverse effects. The December 1997 Kyoto treaty required developed countries to bind themselves internationally to numerical targets. If there is any universal consensus about Kyoto it is that, for all the bluster and bureaucracy, its impact on the climate will be so small as to be unnoticeable.

Gaming the system

The forthcoming climate change summit in Copenhagen, if deemed successful, will be more of the same. At best we can look forward to minimal reductions in emissions; undetectable effects on the climate; and the squandering of billions of dollars on wasteful, corrupt schemes all over the world. The big beneficiaries will be third-world dictators, Swiss bankers, and the burgeoning bureaucracies at national and supra-national level who will be charged with administering and ensuring compliance with whatever emission reduction regime is agreed. This is not cynicism, it’s realism. The manoeuvrings of the various interest - fossil fuel extractors and users, as well as farmers, forest owners, the auto industry, politicians and officials - tell us all we need to know about where human ingenuity is going: in bickering, lobbying in defence of vested interests, and competing with other interest groups for subsidies. Gaming the system in other words. One example: US companies and interest groups involved with climate change hired 2430 lobbyists just last year, while 50 of the biggest US electric utilities spent $51 million on lobbyists in just six months.

They are all reacting perfectly rationally to the incentives on offer, and those incentives are perverse. They have little to do with actually solving meaningful problems, and far more to do with the prime, over-arching goal of all institutions: that of self-perpetuation – even if the rest of the world has to undergo catastrophic climate change. Under Kyoto-Copenhagen that’s where humanity’s boundless energy and ingenuity will be diverted and that’s why it’s not going to work.

Rewarding achievers

Here’s a different approach: agree on the outcome we want to achieve, and reward people for achieving it. The outcome we should be targeting is some agreed, meaningful definition of climate stability, which should include indicators of human, animal and plant wellbeing as well as climatic variables and the rate of change of those variables. Targeting climate stability means that we don’t prejudge the best way of achieving it. This is, in my view, the most glaring flaw of the Kyoto-Copenhagen approach: it assumes that the best way of tackling climate change is to reduce anthropogenic greenhouse gas emissions. There is no evidence for this, even though the evidence that links such emissions to climate change appears convincing – with our current knowledge.

But our knowledge is rapidly expanding. We are constantly discovering more about the links between greenhouse gas emissions and the climate, and about ways in which we can prevent or minimise the impacts of climate change. Kyoto is a single, one-size-fits-all, top down, supposed solution to the climate change problem, and it’s based on science fossilised in the last 20 years. But the climate change problem may be so huge and so urgent that we need instead a mosaic of diverse approaches that can adapt to our rapidly changing knowledge and rapidly changing circumstances.

We also need to enlarge and motivate the pool of people prepared to do something to tackle climate change. Currently there is probably more human ingenuity devoted to marketing new brands of dog food or securing the bonuses of failed bankers than to finding ways of preventing or mitigating climate change. The fact is that the rewards to a successful pet food campaign manager or a reckless banker can be in the millions of dollars, while someone trying to generate new ideas for tackling climate change that don’t fit in with the Kyoto paradigm will have difficulty getting attention, let alone adequate funding.

We need to target a stable climate however that goal is to be achieved. We cannot afford to let the bureaucrats who run the Kyoto-Copenhagen industry dictate the pattern of the world climate: we cannot afford the waste and inefficiency of brainpower that people will expend on gaming the current system.

Climate Stability Bonds

It is for all these reasons that I believe Climate Stability Bonds would be an improvement over Kyoto. Climate Stability Bonds would be backed by the world’s governments. They would be redeemable once a specified climate stability goal had been achieved and sustained. They would be freely tradable and their value would rise or fall as the targeted goal become more or less likely to be achieved. The goal could be specified as a combination of climate and other indicators. And crucially, Climate Stability Bonds would not prejudge the best ways of achieving our goal. They would reward the achievement of a sustained period of climate stability, however it is achieved. Investors in the bonds would have incentives to respond quickly, appropriately and with maximum efficiency to new knowledge about what is causing climate change and to new ways of dealing with it. Governments would be the ultimate source of finance for achieving climate stability, but the private sector would allocate society’s scarce resources. Investors in Climate Stability Bonds would have exactly the same interest as society: achieving climate stability and the lowest cost.

A Climate Stability Bond regime would express its aims in terms that people can understand. Its explicit goal would be climate stability. If people understand what a policy is all about, they can participate more in its development, refinement and implementation. This matters hugely when, as with climate change, government will probably have to encourage us to rein in activities to which we have become accustomed. Kyoto discourages buy-in because it is focused entirely on one single policy: the cutting back of net anthropogenic greenhouse gas emissions which, at best, will do little to prevent climate change and despite being ineffectual will impose heavy, and up-front, financial costs.

There is still some legitimate doubt about just how big a threat climate change represents. Here Climate Stability Bonds have another huge advantage: because they would be auctioned on the open market, it would be bidders for the bonds, rather than governments, who would have to take a position on just how much will have to be spent to achieve climate stability.

To summarise: Climate Stability Bonds have a comprehensible, meaningful goal: the achievement of climate stability. They would channel the market’s incentives and efficiencies into the solution of our most urgent environmental problem, at least cost to society. And with their focus on a targeted outcome, rather than a supposed means of getting there, they would also encourage greater public participation and buy-in to the solutions they generate. We need a widely supported, coherent, and efficient response to climate change. Climate Stability Bonds have all those features. Kyoto, and whatever will be agreed at Copenhagen, have none.

Soviet Earth; or Government doesn't do diversity

noreply@blogger.com (Ronnie Horesh) — Sun, 06 Dec 2009 06:21:00 +0000

Mick Hume writes:

The top bankers and businessmen of the UK might have proved themselves worse than useless. But an economy managed by state bureaucrats will be no better. ... We are left with the prospect of the worst of all worlds – a state-subsidised capitalist economy, but one denuded of the dynamic side of capitalism that Karl Marx long ago identified alongside the system’s destructive aspects, and which has driven economic growth through the modern age. What happens if the state turns off the ‘life support’?, 25 November

All the evidence bears out Mr Hume. Government intervention has generally started out with the best of intentions: to maintain employment, to prop up allegedly strategic industries (like car assembly or industrial agriculture), and before long it becomes indispensable to its favoured sectors. Taxpayer support is capitalised into asset values, making its withdrawal problematic. Sectors use their status and subsidies to bias the international trading and domestic regulatory environments in their favour, and to finance lobbyists whose job is to maintain their vested interest. State supoprt, like a drug habit, is easy to start, difficult to stop. And now it's propping up not just individual sectors, but our entire financial system. The result will be ossification, the Sovietization of our economies and, inevitably, collapse. If that sounds far-fetched, consider that, government accounted for two-thirds of the Welsh economy - before the financial crisis. (And read about some of the social implications here.)

Difficult to imagine, but it gets worse. We are now looking to manage our global environment in the same manner: that is, by setting irrelevant targets, imposing them heavy-handedly, pre-supposing that government knows what's best, and suppressing alternative solutions. I refer of course to Kyoto-Copenhagen, where government is using fossilised science to tackle one of the alleged causes of climate change. Spectacularly expensive, politically divisive, bureaucratically intrusive - Kyoto-Copenhagen will Sovietize the entire planet. The end result is absolutely foreseeable: runaway climate change, widespread poverty and an ever more entrenched and brutal bureaucracy telling the rest of us us what to do.

The debate is so debased and politicised that anybody reading the above will think I don't believe anthropogenic climate change is happening, or that government should just sit back and do nothing. But it's just the opposite: I think climate change is far too serious to be left to the same government mentality that has given us, for example, an agriculture sector absolutely dependent on imported oil, with its denuded landscape, devastated wildlife, and polluted waterways. Government does have an indispensable role to play in ensuring climate stability: it can define our climate goals, articulating society's wishes. It can raise revenue to reward the people to help achieve that goal. But, crucially, it must stand back from dictating how that goal shall be achieved (see here for my suggestion).

We need diverse, adaptive approaches, and we need them urgently. Unfortunately - tragically - government doesn't do diversity nor does it have the ability to adapt quickly to changing circumstances.