PLY: If you don’t specialise in financial markets, you may never have heard of Frank Partnoy but I have had the pleasure of speaking alongside him on the conference circuit and reading his books. His article on SIBs is an interesting review of a book which alas, seems from this review to have slightly missed the broader point on financial innovation but at least understands the SIB revolution. Also news from Lancaster in the USA of progress too…
‘Smart Money,’ By Andrew Palmer
Frank Partnoy – NY Times
In 2012, The Economist published a 14-page special report on financial innovation entitled “Playing With Fire.” It opened with the line “Financial innovation has a dreadful image these days.” The goal: rehabilitate that image.
The report’s author, Andrew Palmer, then the magazine’s finance editor, attempted to shift focus away from the infamous subprime mortgage bets that nearly brought down the financial system. Instead, he pointed to several new deals bubbling up in unexpected corners of the markets. Palmer began in Peterborough, England, site of the first-ever “social-impact bond,” a novel — and humanitarian — transaction that sought to reduce recidivism among prisoners.
Prison reform is not typically in the same paragraph as financial derivatives, but Palmer argued that the Peterborough deal did what financial innovation is supposed to do: match the needs of different people and institutions, so that all can be better off. Investors in the Peterborough social-impact bonds paid cash into a prisoner training program; in exchange, they received a promise of future payments from Britain’s Ministry of Justice if the prisoners committed fewer crimes than did other groups. The deal promised a win-win-win: Prisoners would learn life skills and a trade, government would spend less money on prisons, and investors would earn an attractive return. Palmer raved about the tripartite deal: “Here, surely, is a financial innovation that even the industry’s critics would agree is worth trying.”
The Peterborough pilot program deserved more than a brief mention in a magazine piece, and it now anchors the second half of Palmer’s fascinating book. Palmer is a muscular, efficient writer; he relates in-person interviews and statistical evidence with ease and humor. The chapter on social-impact bonds tracks one man who, after being in and out of prisons for decades, “turned his initial work placement into a full-time job at a builders’ merchant. He was in work, in accommodation, paying his own bills. . . . His life had improved because of a dose of financial creativity.”
New Payment Model Could Benefit Lancaster’s Population Health Efforts
Heather Stauffer – Lancaster Online
Lancaster could benefit from an experimental, result-oriented funding model for delivering social services called “Pay for Success’’ that Gov. Tom Wolf is pushing, speakers at the county’s annual health summit said Thursday.
Keynote speaker Rick Brush described the initiative as an important national movement focused on “the idea that we can be more efficient in spending the government’s money.”