We’re pleased, this morning, to learn about social impact bonds, which inject “market discipline” into public welfare, by rewarding investors in measurably successful programs. We like the structural indirection, which de-politicizes the business end of making society better, and the idea of harnessing private investment to a limited time-span (the life of the bonds), after which programs that work can be taken over by the government or, even better, spun off as not-for-profit enterprises suits our vision of post-capitalist commerce.

Antony Bugg-Levine of the Rockefeller Foundation told me it had invested in the project for two main reasons. One, it expected to get its money back and then be able to reuse it. Two, if social impact bonds work, they have the potential to attract for-profit investors — and vastly expand the pool of capital that’s available for social programs.

Clearly, social impact bonds have limitations. For starters, it’s hard to see how private money could ever pay for multibillion-dollar programs like Medicaid or education.

Just as important, the execution of any bond program will be complicated. It will depend on coming up with the right performance measures, which is no small matter. Done wrong, the measures will end up rewarding programs lucky (or clever) enough to enroll participants who are more likely to succeed no matter what.

But whatever the caveats about the bonds, the potential for improving the government’s performance is obviously huge. That’s true in education, health care, criminal justice and many other areas.

Drop me a line at rjk@dailyblague.com
This entry was posted on Wednesday, February 9th, 2011 at 10:30 am.