Deb Mayer of Parents Across America in Oregon has thoughtfully created a graphic to explain the meaning of “Social Impact Bonds.”
First, she shares the graphic explainer created by Goldman Sachs. Then she superimposes on the graphic the language that clarifies what’s really happening and how the investor makes money.
A helpful deconstruction.
Diane Ravitch's blog 
Excellent graphic!
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This a another scheme from hedge funds to socialize the risk of the investment and privatize the profit. The graphic also had “independent evaluator” in quotes so I assume the hedge funds will determine the criteria for evaluating the program. The evaluation component should be handled by an authentic institution of higher education. If the goals are educational, the grantee should have to hire someone from a legitimate college of education, not a business school.
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In the case of the Chicago Preschool Program-a pay for success program, also known as a Social Impact Bond, the evaluator is Nobel Laureate in Economics James Heckman.
http://www.pbs.org/newshour/rundown/it-pays-to-invest-in-early-education-says-a-nobel-economist-who-boosts-kids-iq/
In more than one preschool SIB the children entering the program (a cohort) have passed muster by their performance on the Peabody Picture test. The test works to exclude students who have severe learning problems.
Each cohort of preschoolers is tracked for performance as they move into kindergarten and through (at minimum) grade three reading tests. The SIB pays off investors if students admitted to the program do not require special education.
Preschoolers with disabilities who are unlikely to meet the preferred on-time outcomes are screened out of the program.
Obama gave $200 million to help jump start these financial products. The Harvard SIB lab was an early incubator for these products. The early SIBs were backed up with money from major foundations and Wall Street investment houses. That backing made investors feel “comfortable.”
Robinhood.org has a website that shows some of the “metrics” that can be used to calculate the value of a preschool program in NYC. The basis for each calculation is given in detail. The overall result is an estimate of $50,650 per child…in 2014. See pages 3 to 6 for the specifics. There are additional calculations for the dollar value of social costs avoided, if “proper” interventions are made and produce the best outcomes.
You can bet your whatever that these programs do NOT invest $50,650 per child in preschool. The calculation is designed to market the program to government officials who have a short term goal of cutting budgets for social services, including pre-school. The marketers, include government officials who tell citizens that the “deal” will save taxpayers $50,650 per child in the long run. In fact, if the program succeeds in producing the carefully selected targets, taxpayers, must pay the investors back . The payback is designed to provide 5% to 7% return on investment.
This kind of financial product is being marketed internationally. One effect is that governmental responsibilities for the public welfare and the common good, especially social services, are transformed into opportunities for government-endorsed private control and profiteering.
Notice that Robinhood even has a metric for “quality of life years.” It is appropriated from finance in medicine.
Click to access Metrics-Equations-for-Website_Sept-2014.pdf
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The link refuses to work on my tablet, even when I cut and paste. Interesting…..very interesting…….
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Jon,
Try this:
http://www.paaoregon.org/single-post/2017/09/21/Social-Impact-Bonds—-a-Primer
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MORE THAN AWFUL AND MOST SICK!
This is just another SCAM!
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There is nothing there when I try to open the link. I am on an iPad. Not sure if it is a compatibility issue or if it is no longer there.
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Well done! The most clear and cogent explanation I’ve seen. THANKS!
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