The ethical status of social impact bonds

ABSTRACT

I develop a framework for assessing the ethical status of social impact bonds (SIBs), drawing on evidence from UK and US SIBs that address recidivism, education, homelessness and healthcare. I extend work on the ethics of markets by Debra Satz to render it suitable for application to SIBs, highlighting informational weaknesses, power imbalances and the generation of harm. Ethical issues observed include the lack of informed consent, denial of care, prioritisation of profit over therapeutic effectiveness and unfair contracting. I find that SIBs are morally permissible in principle but are at great risk of becoming unethical in practice.

KEYWORDS:

• Ethics
• social impact bonds
• civil society

JEL CLASSIFICATION:

• D63 Equity
• Justice
• Inequality
• Other Normative Criteria and Measurement

Acknowledgements

I am grateful to Jason Alexander, David Floyd, Olivia Morley, Mildred Warner, and two anonymous reviewers for their helpful comments and suggestions on earlier versions of the paper.

Disclosure statement

No potential conflict of interest was reported by the author.

Notes

1. It should be noted, however, that at least 3 UK SIBs have been funded by the provider organisation and have received no upfront external investment (Floyd 2017, 5, footnote 22).

2. Many subtle distinctions exist between different versions of consequentialism in the literature; however, for the purposes of this paper, these subtleties can be ignored as my intention is to simply use the relatively straightforward cost-benefit analysis employed by advocates of SIBs to reflect upon the value of SIBs themselves as a method for achieving public policy objectives in general.

3. Urban Institute (2013). https://pfs.urban.org/pfs-project-fact-sheets/content/nyc-able-project-incarcerated-youth.

4. http://bssec.org.uk/wp-content/uploads/2011/03/SF_Peterborough_SIB1.pdf.

5. https://payforsuccess.org/project/nyc-able-project-incarcerated-youth.

6. https://payforsuccess.org/project/new-york-state-increasing-employment-and-improving-public-safety#.