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Social Impact Bonds

Now here is an interesting idea.  The Big Apple government has this press release.

Mayor Michael R. Bloomberg, Deputy Mayor for Health and Human Services Linda I. Gibbs and Correction Commissioner Dora B. Schriro today announced that the City will award a contract for the nation's first Social Impact Bond, an innovative way to fund promising new programs at no cost to taxpayers. As part of the Young Men's Initiative, this investment will support a new evidence-based program for young adults on Rikers Island. The program - the Adolescent Behavioral Learning Experience (ABLE) - focuses on personal responsibility education, training and counseling, with the goal of reducing the likelihood of reincarceration. In this new model, private investors fund the intervention through a nonprofit contractor and the government pays the contractor only if the program meets its goals. Goldman Sachs will provide financing, Bloomberg Philanthropies will provide grant support for the effort and MDRC, a leading non-profit, will oversee project implementation.
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An independent evaluation, conducted by the Vera Institute of Justice, will assess the rates of reincarceration and determine the program's effectiveness over time. If the program does not meet its targets for reducing reincarceration, the City pays nothing. For Goldman Sachs to break even on its original investment, the program will need to reduce reincarceration by 10%.
I am deeply skeptical of the claims of "evidence-based" rehabilitation practices, because I know how easy it is for interested parties to produce "evidence" that is complete hogwash.  I also know how the amount of scrutiny that any research receives is strongly influenced by its Political Correctness quotient:  intense and hostile for research with conservative implications and vastly more lax for research with liberal implications.  But if Goldman Sachs' own money is on the line, they will surely examine the evidence of program effectiveness meticulously, and PC quotient be damned.
One flaw I see here is having the Vera Institute do the results evaluation.  That organization has a strong ideological interest in seeing rehabilitation programs declared "effective." A less interested evaluator would have been a better choice.

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