From: ee | Sent: 2/10/2011 9:45:51 PM To: [email protected] Subject: macreonomics issue Importance: — High do you think something like this is worthwhile and should i engage? For Federal Programs, a Taste of Market Discipline By DAVID LEONHARDT Published: February 8, 2011 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. The first British test is happening at Her Majesty’s Prison Peterborough, where 60 percent of the prisoners are convicted of another crime within one year of release. Depressingly enough, that