Social Policy Bonds and Aboriginal Welfare

Several years ago economist Ronnie Horesh came up with the idea of Social Policy Bonds. These would be tradeable non interest bearing bonds issued by government or some other organisation that would be redeemed at a set date if certain social goals were reached and sustained. That social goal could be reducing long term unemployment, improving health , reducing international conflicts or just about anything else. The securities would be auctioned at issue and may only originally sell at a small percentage of their face value. However anyone who has an idea on how to achieve the goal could buy then cheaply. As the bonds are tradable their value would increase if the social goal became more likely to be achieved. The bond holders could then sell some of their bonds to realise a capital gain, effectively providing them a reward for their success before the redeem date.

The big advantage to government is that they only need to pay out if the results are achieved. They would have effectively contracted out public policy to the market.

Recent talk on how to improve Aboriginal welfare reminded me of Horesh’s idea. How much would it be worth to say, improve Aboriginal health in the Northern Territory? Offer the amount as a Policy Bonds and lets see if they would energize community action. The government would have nothing to lose and it just might work.