27 November 2016

Policy for the post-truth era

US President Barack Obama talks about the new media system which:
...means everything is true and nothing is true. ...An explanation of climate change from a Nobel Prize-winning physicist looks exactly the same on your Facebook page as the denial of climate change by somebody on the Koch brothers’ payroll. .... Ideally, in a democracy, everybody would agree that climate change is the consequence of man-made behavior, because that’s what 99 per cent of scientists tell us. And then we would have a debate about how to fix it. That’s how, in the seventies, eighties, and nineties, you had Republicans supporting the Clean Air Act and you had a market-based fix for acid rain rather than a command-and-control approach. So you’d argue about means, but there was a baseline of facts that we could all work off of. And now we just don’t have that. It happened here, David Remnick, 'New Yorker' dated 28 November
Science isn't a consensual process though, so even if the majority of scientists agree 
on one thing, whether it's anthropogenic climate change, or acid rain, or whatever, that should carry no more weight than the collective wisdom of experts in other fields, such as economists or opinion pollsters. There is a genuine problem here: how should we make policy when the relationship between cause and effect in our ever more complex societies is impossible to identify? It's not simply a question of following the opinions of existing bodies often backed by vested interests - nor of reflexively ignoring them: they might after all be right as well as self interested. Nor should we simply identify a problem then mindlessly dole out funds to the organizations whose stated objective is to solve it, but whose over-arching objective - in common, I think, with all organizations - is self-perpetuation.

We should instead recognize that resolving complex social and environmental problems, cannot wait for our receiving perfect information about causal relationships, and nor should we delay making decisions until such information becomes available - it might never happen. Take climate change: it's likely that, by the time we know the effects of man's greenhouse gas emissions on the climate, it will be too late to do anything to avoid or reverse their catastrophic effects on the environment. The current way of addressing the problem seems inadequate: extravagant gestures that might lead to some reductions in emissions that we think contribute to climate change, which might lead to some tiny, almost imperceptible (but unverifiable) effect on the climate some decades hence.

I think we can do better than this. We could use the Social Policy Bond idea, first to identify exactly what we want to achieve; and second to channel the market's incentives and efficiencies into achieving it. With climate change, we need to clarify whether we are more concerned about climate change, or about the impacts of climate change on human, animal and plant life. In other words, we define the outcome that we wish to achieve, then let the market decide how best to go about achieving it. Most social and environmental goals will embody an array of conditions that have to be satisfied for the goal to have been deemed met and the Social Policy Bonds redeemed. Our climate change goal should embody measures of physical, biological, social and financial variables that shall have to fall within a targeted range for a sustained period before the redemption of Climate Stability Bonds.

And as with climate change so with other major challenges.The important point is that the Social Policy Bond principle works even when the facts about what causes climate change, say, or crime, or war, are disputed. As such, Social Policy Bonds are the perfect policy instrument for today's post-truth politics.

17 November 2016

Ideologues and vested interests impede good policymaking

A letter-writer reacts to the suggestion by the Economist that poor American consumers gain more from cheap imports than they would if imports were restricted and America produced the same goods:
Being able to buy a Chinese-made 50-inch TV when you work by flipping hamburgers for the minimum wage may be more efficient than working in a factory on wages where you can only afford the 30-inch American-made model. But Donald Trump’s voters weighed up factors that many economists and your newspaper often downplay: the marginal utility of consumer goods in a rich society, the distribution of wealth and a sense of self-worth. The medium through which they channelled their anxiety may be flawed, but their message is clear. Trump's triumph, Prof Diomidis Spinellis, the 'Economist' dated 19 November
Exactly so; countries as a whole benefit from free trade in that the benefits to the economy more than offset the losses, even if the losers - those whose jobs become obsolete - are fully compensated. The problem is that most of the gains are going to the wealthy, and the losers aren't being compensated.

One of the great advantages of the Social Policy Bond approach is clarity about ends and means. Free trade isn't an end in itself: it's a means to an end: the improved well-being of society. A bond regime targeting poverty or income levels would ensure adequate compensation to the losers from free trade (which could take the form of subsidies to struggling companies or laid-off individuals, or enhanced re-training opportunities). Or it could restrict trade, perhaps temporarily, if that were to better meet society's long-term income goal. Such measures would be heresy to the free trade ideologues, but in a bond regime it is outcomes that matter, not ideology.

We see similarly non-outcome driven approaches in other policy areas, where ideology or vested interests get in the way of rational, welfare-enhancing policies. Healthcare in the US is one example, where the interests of insurance companies and blind resistance to anything that could be called 'socialist' do so much to blight the security of even middle-class Americans.

09 November 2016

Bootlickers, yes men, liars

There are many ways we can interpret the US Presidential election result. I prefer to see it as the victory of ordinary people over the people who are supposed to look after their well-being. In domestic politics, just as in the international aid industry, a whole class of intermediaries, supposedly devoted to improving the condition of the ordinary man and woman, has grown and expanded so much that its interests have now diverged from the
very people they are supposed to represent. Mr Trump speaks for these people. Whether he will improve their lot remains to be seen, but it would difficult to do a worse job than the current motley coalition of politicians, bureaucrats, academics and media persons.

Two statements I take as axiomatic:
  • Every institution, whether church, government body, trade union, university, charity or whatever, however well meaning it began, however well meaning and hard working the people it employs will, sooner rather than later, have as its over-arching goal that of self-perpetuation.
  • Everybody - everybody - in a position of power, will always overplay their hand.
The US establishment - the political parties, the bureaucrats, the media, the countless lobbyists, academics and government bodies - are no better and no worse than innumerable other spinners of dreams, bootlickers, yes men, liars, whose corruption and degeneracy have let ordinary people down. Hence Brexit - and hence President Trump.

05 November 2016

Consensus and politics

Maria Bustillos introduces the concept of dismediation:
Dismediation is looking to make you never really trust or believe a news story, ever again. Not on Fox, and not on NPR. It’s not that we can’t agree on what the facts are. It’s that we cannot agree on what counts as fact. The machinery of discourse is bricked. That’s why we can’t think together, talk together, or vote together. ...
The peculiar mendacity of [George W Bush's] catastrophic presidency left us with worse problems than a bunch of lies to put straight and reflect on. There’s a broken trust to restore — to the extent that it’s possible to replace toxic cynicism with healthy skepticism — in media and in government. When truth falls apart, Maria Bustillos, 3 November
And, as this prolonged US Presidential election campaign reaches its end, she asks "How do we restore consensus in an age so divorced from fact?"

Here's my suggestion: we vote on social and environmental goals, rather than the supposed means of achieving them: namely, politicians or political parties. Personality is not a sound basis for choosing who shall make policy. Neither, we know now, are campaign sound-bites or media commentary. Currently though, we have little else to go on. We choose policymakers rather than policies; and we choose them on the basis of their image at worst, or their stated policy priorities or ideological leanings at best. Rarely are we given the chance to target desirable outcomes.

In theory, our current approach is practical: social, economic and environmental policymaking is complex and time-consuming. Ms Bustillos quotes Edward Bernays writing in 1928:
[E]very citizen makes up his mind on public questions and matters of private conduct. In practice, if all men had to study for themselves the abstruse economic, political and ethical data involved in every question, they would find it impossible to come to a conclusion about anything… Propaganda
But if we don't have the skills or energy to evaluate policy ourselves, and if we can't rely on the media any more, what can we do to bring about some consensus and repair what looks increasingly like a dysfunctional policymaking system?

I suggest outcome-based policy. Instead of voting for people or parties, we'd all participate in choosing and prioritising social goals. Social Policy Bonds lend themselves to a gradual transition to this sort of policymaking: by focusing on outcomes to be targeted they would be more transparent than the current policymaking process. A bond regime would generate more consensus - and, just as important - buy-in, about our chosen goals. A transition to a Social Policy Bond regime would be quite easy to arrange, with funding to existing activity-based bodies (mostly government agencies) being reduced gradually, at the same time as funds for Social Policy Bond redemption rise.

Choosing policymakers is fraught with problems, not the least of which is the raucous and destructive dialogue des sourds flooding out of our news media. It's time to target outcomes, issue Social Policy Bonds, and let motivated public- and private-sector bondholders work towards achieving society's goals.



25 October 2016

World Peace: the quick and efficient way

Keith Ward writes: 
There is any number of ways in which the Darwinian process of slow, gradual, cumulative adaptation could fail. This is not an argument for God. But it shows that reliance on the predictability of nature, and on its tendency to produce increasingly complex and adapted organic life-forms, is dependent on a very specific adjustment of physical laws that is itself hugely improbable. Why there almost certainly is a God: doubting Dawkins, Keith Ward, April 2009
Mr Ward is well aware that evolution - even if the human species represents its crowning achievement  - depends on very specific circumstances. We don't know (though we might believe) that there was a plan. Nor do we know whether the evolutionary path will continue to produce more complex life-forms.

There's a similarity here with the downward trend in violence that Stephen Pinker has identified: Professor Pinker tells us that over human history most forms of violence have steadily and steeply declined, and that we live in one of the most peaceful ages in history. This seems right to me looking, as Pinker does, at relative, rather than absolute levels of violence in human society.

Just as with the evolution of life-forms, we cannot know whether this decline was inevitable, nor whether it will continue. What we can be sure of is that both trends have been have been extremely inefficient. Millions of species have no doubt been created and become extinct as complex life-forms developed. It's been a slow and wasteful process, if we are to take today's ecosystem as an end point. Similarly, and even more tragically, countless millions of human beings have been killed or maimed in deadly conflicts in our history - and it's still happening.

And we have no reason to assume that either our history as a species or as social animals will continue to play out favourably. Professor Pinker is writing descriptively rather than prescriptively and he does not say the trend will continue. Some would argue (see here, scroll down to "...Taleb's major complaints...") that the risk of catastrophic violence has risen, even as the actual level of physical violence has fallen.
What's all this got to do with Social Policy Bonds? Simple: whether or not initial circumstances are God-given, I think we could use the bonds consciously and deliberately to guide our progress toward a world of peace, and to speed it up.

Instead of relying on centuries of history, during which numberless millions of innocent people's lives have been destroyed, to bring about the tentative and incomplete peace that most of us enjoy today, my suggestion is that we issue World Peace Bonds. These bonds would be redeemable for a fixed sum only when a targeted array of indicators of peace had been achieved and sustained for a long period. They would reward people who do what they can to end violence. Backed by a combination of governments, non-governmental organizations, philanthropists and ordinary people, they would encourage a vast number of peace-generating approaches. Some would inevitably fail; the way the market for the bonds would work means that these efforts would be terminated and resources diverted into more promising initiatives.

The effect of World Peace Bonds would be to give incentives to accelerate and guide our progress toward a less violent world more efficiently than has happened so far: a protracted, haphazard and bloody path that has, true, given us a less violent world, but also one that has left us fearful of self-induced catastrophe. We can do better than that. By acknowledging that not all approaches are going to work, and supplying incentives for those that do, we can guide and accelerate evolutionary processes to bring about, quickly and efficiently, what is surely our most urgent goal: world peace

19 October 2016

The EU: killing its citizens and destroying rainforests


Craig Sams writes, in a letter to the New Scientist:
... In 1993 my company Whole Earth Foods launched a trans-fat-free spread, branded Superspread. Other manufacturers objected to our advertising: the Advertising Standards Authority banned it, effectively killing our product. We presented the ASA with the medical evidence, which was abundant 23 years ago. They accepted its validity but said we violated their code because we were “appealing to fear” by suggesting trans fats could damage your heart health. When Denmark banned trans fats the food industry replaced them with coconut and palm fats, and the EU was faced with a rapeseed oil glut, as that was the oil that was mostly hydrogenated. So the Renewable Transport Fuels Obligation required rapeseed oil to be blended with diesel. That requirement overshot. So we are now deforesting Indonesia to grow palm oil to make up the quota for vegetable oil in diesel. If there is anything to be learned from this tragic fiasco that continues to cost tens of thousands of lives annually and blights many more with ill health, it is that agricultural policy should never trump health policy. The tragic fiasco of trans fats, letter to the 'New Scientist', 16 October
In short, the European Union couldn't care less about the health of its subjects, and helps destroy Indonesian rainforests. It keeps on doing it. And there are no mechanisms in place either to stop the insanity, nor to make the decision makers accountable, nor even to identify the decision makers, still less to get rid of them. That's why I voted for Brexit, and hope that this whole tragic experiment, which began so nobly, gets dragged behind the barn and killed with an ax.




17 October 2016

How not to address climate change

How not to address climate change:

Government Subsidies to Fossil Fuels are 22 Times Larger than Government Support to Adaptation on Climate Change

That's the header to article by Laura Merrill, put online on 2 June by the Global Subsidies Initiative. And here's my suggestion.

14 October 2016

Make democracy work: target outcomes directly

George Monbiot writes about the weaknesses of democracy. He ends on a vague note but does ask: 'What if democracy doesn’t work? What if it never has and never will?' To which I would reply with another question: 'how do we know if it's working?'

I think there are two elements to an answer. One: democracy is working when people have buy-in to the way society runs. Two: it's working when things are generally getting better for ordinary people. The two go hand-in-hand. Buy-in is important, because unanimity over virtually anything in any large society is impossible and if we have been consulted we are more likely to go along with what wider society decides, even if it's not what we would choose. 

We do occasionally consult ordinary people over certain decisions. But - and this is where the other essential element comes in - these decisions are rarely expressed in terms of outcomes. Instead we are asked questions such as: which political party do you want to form the government? Whom do you want to be President?
Prospective politicians say what they hope to achieve; we vote for them on the basis of what they say and on factors such as their looks, delivery, public image, or their experience in or out of office. These attributes might tell us something about candidates' intentions but they tell us very little about the impact they will actually have on the things that matter to us.

Which is why I think policy should focus on broad, meaningful outcomes. Things like better health, a cleaner environment or, at a global level, world peace. We know something about how to achieve the first two of those examples: essentially, throw more money at them. But neither we nor any politician has a clue about how to achieve them with maximum efficiency. And world peace? We are completely clueless on that one.

Social Policy Bonds could be the answer. Instead of wasting time with political parties, public images, or simplistic and inescapably inadequate (at best) ideologies, we could instead move toward a policymaking system that targets outcomes directly. A bond regime would do that, and would inject the market's incentives and efficiencies into the every process needed to achieve our social and environmental goals. Because the bonds would be tradable, we could target goals that will require many approaches and that are inevitably going to take many years to achieve - such as, yes, world peace. Bondholders (or the people they contract) would have incentives to explore numerous approaches, to boost the successful ones and - something that seldom happens in the public sector nowadays - terminate the failures.


Our current policymaking systems fail because they don't engage the wider public. Buy-in is a lost cause. Political processes are arcane, legalistic, complex and time-consuming. The only people who follow it closely are those who have a strong financial interest in doing so; mainly big corporations, lobbyists and think-tanks. Social Policy Bonds could both widen public participation and achieve society's goals more efficiently. Then we'd know that democracy is working.

09 October 2016

Why I voted for Brexit

Some colleagues and friends were surprised by my voting for Britain to leave the European Union. I have tried to explain my reasons to them but, invariably, disappointingly, revealingly, they choose to ignore my arguments. It's not lack of interest in the topic: it's that they just know they're right. I agree with them that the European project began as a noble, well-intentioned and extremely successful way of anchoring democracy and helping keep the peace in Europe. I also value its helping to free trade within Europe and its promoting democracy in eastern Europe. Where we differ is that they think the EU retains its noble character and continues to be a force for good. I disagree and these are my reasons why.

First, as I wrote here and here: the persistence of the Common Agricultural Policy, in the face of four decades of its environmental depredations, its raising of food prices for European families (by around 17%), and its subsidies to the extremely wealthy:
Greenpeace analysed the top recipients of CAP subsidies in the UK for the first time. Some 16 of the top 100 are owned or controlled by individuals or families who feature on the 2016 [UK's] Sunday Times rich list, receiving a total of £10.6m last year in “single payment scheme” subsidies alone, and £13.4m in total farm subsidies.... The Queen, aristocrats and Saudi prince among recipients of EU farm subsidies, the 'Guardian', 29 September
Worse than all this is the CAP's crippling of trade opportunities for Africa, with the tragic results that we are seeing in the Mediterranean. Some would say that the EU's refugee crisis is largely self-inflicted. Bad karma.

Now the EU, again led by France, wants to do to Latin America what it did to Africa:
But 13 European countries, led by France, want to scupper the talks [about a trade pact] because their farmers are scared of Mercosur [a trading bloc whose core countries are Brazil, Argentina, Paraguay and Uruguay], the world’s most competitive producer of grains and meat. They forced the EU to withdraw, at the last minute, proposed tariffs cuts on beef. A trade pact between the blocks would make shopping cheaper for 750m consumers. Mercosur's missed boat, the 'Economist', 14 May
This is no small matter: the Common Agricultural Policy, still swallows up 40 percent of the EU budget. The EU has had 40 years to solve the CAP problem, but it has failed. The persistence of the CAP, in the face of all the evidence of its destructive insanity shows very clearly that the EU is systemically incapable of reforming itself.

The EU's Common Fisheries Policy is another disaster, also with grave environmental implications.
The EU, meaning Brussels bureaucrats, knows the CFP is crazy. Top European Commission officials say the current quota system is indefensible. The problem is that certain key national governments, eg, France, Italy, Greece, Malta, Poland (it is a long list), are adamantly opposed to any reforms that would lead to wholesale restructuring and consolidation of fishing fleets. Britain and the EU, Bagehot's notebook, 13 January 2011
Again, the real problem is not simply that the CFP is deranged, corrupt and environmentally disastrous. It is that, even knowing this and having known it for decades, the decision-makers at the EU won't reform it. Worst of all we, the common people, cannot even identify who's making these decisions; still less boot them out of office.

Nor are the Eurocrats addressing the problems caused by a common currency - including high unemployment in southern Europe - or immigration.

I regard these two statements as axiomatic:
  • Big government is remote government, and 
  • People in power always overplay their hand. No exceptions. 
The EU has morphed into an unaccountable, anti-democratic, opaque, self-interested, coercive body. Its structure and activities are creating precisely those most poisonous forms of nationalism that it was supposed to eradicate. The consequences of this threaten to negate all the undoubted good that European integration has brought about.

Divorce is always painful but sometimes it's necessary. Relationships, however glorious their beginning, frequently turn sour or abusive. Brexit might just be the shock that stimulates the EU to reform itself. I hope that happens, but I wouldn't bet on it.

04 October 2016

Limitations of the Payment by Results model

An interesting comment from Mr Toby Lowe on an article extolling the benefits of Payment by Results (PbR):
[I]n order for PbR to work, 'results' must be directly attributable to particular interventions .... In complex systems, results are never attributable to particular interventions, and so PbR cannot work. This is not a technical issue about measures, it is an inescapable consequence of the way that complex systems operate. Toby Lowe, commenting on The next step in payment by results by Rodney Schwartz, 28 September
You might think that this - valid - point undermines the Social Policy Bond concept. But I would disagree. PbR as practised today differs from Social Policy Bonds in that the bodies that are paid to perform better are (1) conventionally structured, and (2) generally known in advance.

Both these features multiply the opportunities for gaming and manipulation. Bodies that are paid by results under current regimes are service providers that have a persistent composition and identity, and mainly for that reason are committed to a fairly limited range of activities. The 'results' for which these bodies are paid, though termed 'outcomes' are therefore quite narrow. So a body can, for instance, game the PbR scheme by simply exporting a targeted problem to areas not covered by that scheme. More importantly, the very scope of the 'outcomes' targeted is greatly restricted in time and space by the constraints imposed by the structures and activities of existing organizations. I belive that to tackle broad social problems we need a new type of organization; one of protean structure and composition, so that at each point along the outcome-achieving path it forms a coalition of the bodies that will be most efficient at solving the targeted problem. Social Policy Bonds would bring about such organizations.

What about the difficulty of attributing results to interventions in complex societies? Again, I agree with Mr Lowe. But under a Social Policy Bond regime, there would rarely be a need for direct, deliberate (and manipulable) attribution. Take for example the goal of targeting a nation's health for sustained improvement over, say, thirty years, as measured by a combination of such indicators as longevity, infant mortality and quality adjusted life years. Under a Social Policy Bond regime, such Health Bonds would be valued not by some cash-doling bureaucracy, but by the market for the bonds. Any activities undertaken by holders of the bonds would raise the value of their bonds only if they, in the market's view, make the early achievement of society's health goal more likely. Bondholders can undertake, or finance, a vast range of health-improving activities, some of which might benefit from a PbR approach, others of which will not (and might even conflict with one). It will be for motivated bondholders to decide. Such broad outcomes, undertaken by bodies that come and go during the lifetime of the bonds and overseen by a motivated market, cannot be manipulated. The complexity of the interventions and their effects is matched by the complexity of the bondholders', their coalition and the vast range of approaches that they will try in their efforts to achieve the targeted goal. Direct attribution of payment to successful interventions is no more necessary in such a long-term, broad project than it is to employees of a hospital.

Most of the PbR schemes that are being talked about involve Social Impact Bonds (also known as Payment for Success bonds), which are non-tradeable versions of Social Policy Bonds. I have discussed the limitations of such bonds, and my ambivalence toward them, here and here and in many posts in this blog: here and here, for examples, or search this blog for Social Impact Bonds. Long ago I did a post on New Public Management, which is also relevant.