Opinion: Social Impact Bonds Show Promise in Addressing Ills

The potential for “social-impact bonds” to address deep-rooted problems such as homelessness and criminal recidivism is assessed by a New York Times blogger.

Tina Rosenberg, a contributor to the Fixes blog, takes a detailed look at the first attempt the put social-impact bonds into practice—a privately financed project in the English city of Peterborough to help repeat offenders build productive lives outside prison.

While they are relatively untested so far, the bonds—which raise private funds to try new social programs and pay off investors if projects are successful—are attracting significant attention from state governments. Massachusetts is aiming to issue $50-million in bonds this summer for homelessness and juvenile-justice projects.

The new funding instrument represents “the latest illustration of two new and welcome trends in social services,” Ms. Rosenberg writes. “One is measuring outcomes, not outputs. … The other trend is paying only for success: if the program doesn’t work, the taxpayers can tear up the bill.”