PLY Two very interesting articles today, no further comment required from me, happy reading:
Can Capitalism Keep People Out Of Prisons?
Steven Godeke & William Burckart – Quartz
The tendency for former criminals to end up back in prison generates over $50 billion every year in corrections costs nationally. After Medicaid, it is the second fastest growing budget item in the US. Three years ago, Goldman Sachs, New York City, and then-mayor Michael Bloomberg’s foundation aimed to do something about this, and inked a $9.6 million deal to reduce the recidivism rate of youth offenders at Rikers Island Prison using cognitive behavioral therapy.
The transaction, known as a Social Impact Bond (SIB), was structured with no upfront cost to the city and let investors (Goldman) and philanthropists (Bloomberg) assume the upfront risk for the social programs provided to current and former inmates, while the government only had to pay back the investors for the programs that actually worked.
The Rikers Island Prison SIB is one example of fast-emerging interest and activity around these kinds of strategies, which are also known as pay-for-success financings. SIBs create packages for achieving social progress where government only pays when it saves money; the investor can receive higher returns for higher impact, and the provider of the service can grow.
Good Failure/Bad Failure
Robert E. Slavin – Huffington Post
Evidence junkies (like me) are reacting to the disappointing news on the evaluation of the Adolescent Behavioral Learning Experience (ABLE), a program implemented at Rikers Island to reduce recidivism among adolescent prisoners. Bottom line: The rigorous independent evaluation of the program failed to find any benefits. What makes this experiment especially interesting is that it is the first U.S. application of social impact bonds. Goldman Sachs put up a $7.2 million loan, and Bloomberg Philanthropies committed to a $6 million loan guarantee. Since the program did not produce the expected outcomes, Goldman Sachs lost $1.2 million.
Ironically, New York City administrators are delighted about the outcome because they do not have to pay for the program. They think they learned a great deal from the experience, for free.
It’s unclear what this will do to the social impact bond movement, currently in its infancy. However, I wanted to extend from this fascinating case to a broader issue in evidence-based reform.