Interesting Idea, But I’m Not Buying It

Wouldn’t it be nice if taxpayers could somehow get a refund for government programs that didn’t work?

Instead, the opposite tends to happen. Programs that fail to make a difference — like many of those that train workers for new jobs — endure indefinitely. Often, policy makers don’t even know which work and which don’t, because rigorous evaluation is rare in government. And competition, which punishes laggards in the private sector, is typically absent in the public sector.

But there is some good news on this front. Lately, both American and British policy makers have been thinking about how to bring some of the competitive discipline of the market to government programs, and they have hit on an intriguing idea.

David Cameron’s Conservative government in Britain is already testing it, at a prison 75 miles north of London. The Bloomberg administration in New York is also considering the idea, as is the State of Massachusetts. Perhaps most notably, President Obama next week will propose setting aside $100 million for seven such pilot programs, according to an administration official.

The idea goes by one of two names: pay for success bonds or social impact bonds. Either way, nonprofit groups like foundations pay the initial money for a new program and also oversee it, with government approval. The government will reimburse them several years later, possibly with a bonus — but only if agreed-upon benchmarks show that the program is working.

If it falls short, taxpayers owe nothing.

via For Federal Programs, a Bit of Market Discipline – David Leonhardt –

Buy why should taxpayers — who presumably would be glad to benefit from widespread implementation of programs that prove successful — be off the hook for any of costs of developing those programs? I could see some scheme where the nonprofit gets reimbursed on some sliding scale depending on how close they come to the benchmarks, but the idea that ie. a reading program should receive no money at all because it only increases literacy rates by 22% rather than 25% is absurd. It also assumes that the impact of these programs can be precisely measured and will definitely appear in the expected timeframe, and as Leonhardt himself points out the reliance on metrics and benchmarks opens up the possibility of cooking the books and/or selective enrollment.

One of Leonhardt’s links goes to a page at the Brookings Institute that says programs that promote childhood development (Head Start, etc) do not work because since 1973, the poverty rate has gone up. Because the only factors affecting the poverty rate are a few billion dollars’ worth of federal programs? So I’m really not sure how on-the-level this is, but that particular bit of reasoning might as well have come from Fox and Friends.

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