An odd headline masks a more thoughtful article from “Governing” while it’s all analysis of the Rikers Island bond. The most curious issue to me is this: given how government manifestly wastes so much money day in day out on ‘conventional’ programmes and legacy inefficiency, it is remarkable that a tool which actually cuts losses is subject to so much scrutiny as being itself an outlier – such is the diversion from common sense which has become modern day western ‘government’ ..which only multiplies the need for PFS and SIBs.
Are Governments ‘Paying For Failure’ With Social Impact Bonds?
Liz Farmer – Governing
Three years ago, New York City launched an ambitious and unprecedented social policy experiment at its jail on Rikers Island. Thousands of teenage inmates began receiving group therapy aimed at improving their moral reasoning by addressing their beliefs and thought processes in a step-by-step treatment. The goal was to reduce the number of repeat offenses once the inmates were released. Academic studies using the method, known as moral reconation therapy, had reported success in reducing recidivism. Still, no one had ever scaled up these studies to accommodate anything like the 9,240 inmates the four-year Rikers Island program aimed to serve. This month, the program is coming to an abrupt end.
The reason for the progam’s demise has to do with another feature of the experiment: It was financed entirely with a $9.6 million loan from Goldman Sachs. New York City was to pay the investment firm back if the repeat offense rate went down by at least 10 percent over four years. In June, a preliminary report showed the program not only was missing its recidivism target, it had no impact on the rate altogether. Goldman Sachs moved swiftly and took a contract option to cancel the program one year early. The first social impact bond program in the United States has officially failed.
Program Fails But Social Impact Bond Experiment Succeeds
Philanthropy News Digest
Although it failed to produce the desired results, the nation’s first social impact bond worked the way it was supposed to, attracting private capital to an effort to reduce juvenile recidivism in New York City and shifting the cost of the program to investors when the program failed to deliver.