Policy as if outcomes mattered

1. Policy as if outcomes mattered Social Policy Bonds www.SocialGoals.com

2. Outcomes • Social and environmental outcomes are those that are meaningful to ordinary people

3. Social problems are currently solved indirectly • Relies on correct identification of relationship between cause and effect • Depends on people whose success does not generate greater financial reward

4. Where government works best • Relationship between cause and effect is clear and static • But today many social and environmental problems are complex and fast changing • Best solutions to such problems are evolutionary: terminate failures

5. The unimportance of being right • Failures don’t terminate: they can self-perpetuate or even self-reinforce • Success and reward are uncorrelated

6. Society is complex and fast-changing • Too complex for any single organisation to comprehend • Need evolutionary methods: diverse, adaptive approaches

7. Solution • Specify targeted outcome • Reward achievement of the outcome • Subordinate markets to outcomes, not the other way round

8. Social Policy Bonds • Contract out achievement of outcome to highest bidders • Bonds auctioned and tradeable • Bonds redeemable once objective achieved

9. Generating incentives • Market value of bonds approach redemption level as goal becomes more likely • Incentives cascade down from bond holders • Incentives dictate structure as well as activities

10. Potential problems • Free-riders? • Rewarding people out of proportion to their efforts?

11. Advantages • Efficiency • Stability • Transparency • Buy-in

12. Social Policy Bonds • Governments do what they are good at: • Articulating society’s goals • Raising revenue • Markets do what they are good at: • Allocating scarce resources with maximum efficiency

13. Social Policy Bonds • www.SocialGoals.com • rh@socialgoals.com