Community Development Innovation Review

April 2013

Pay for Success is Not a Panacea


Our society needs Pay for Success (PFS) schemes to work. We are spending too much on social programs that do not generate results, too much on high-cost treatments, and not enough on lower cost and more humane prevention. Amid our deteriorating fiscal state, we must figure out how to do more with less. No wonder a growing array of academics, financial intermediaries, consultants, government officials, and New York Times commentators are extolling “The Promise of Social Impact Bonds,” an intriguing new variant of the PFS approach. Yet I’m hesitant to jump on the bandwagon, in part because to date there are only a few social impact bonds (SIB) up and running, and we don’t know yet if they are working. The most established initiative, to combat recidivism among inmates released from the Peterborough Prison in the United Kingdom, has yet to produce any definitive results. In 2012, the first SIBs were launched in the United States in New York City and Massachusetts, among other early adopters. But it will be years before we know whether these experiments have paid off. If the “invest in what works” movement is about scaling proven solutions, there is considerable irony in so many of its participants calling for widespread adoption of a financial mechanism for doing so that remains essentially untested.

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Other articles in this issue

Community Reinvestment Act (CRA) Banks as Pioneer Investors in Pay for Success Financing

The Real Revolution of Pay for Success: Ending 40 Years of Stagnant Results for Communities

The Promise of Pay for Success

Social Impact Bonds: Lessons Learned So Far

Pay for Success: Understanding the Risk Trade-offs

The Ethics of Pay for Success

Learning from the Low Income Housing Tax Credit: Building a New Social Investment Model

Using Social Impact Bonds to Spur Innovation, Knowledge Building, and Accountability

Social Impact Bonds: Using Impact Investment to Expand Effective Social Programs

Innovation Needs Foundation Support: The Case of Social Impact Bonds

Pay for Success: Opportunities and Risks for Nonprofits

Success Begins with a Feasibility Study

Government’s Role in Pay for Success

Rikers Island: The First Social Impact Bond in the United States

Human Capital Performance Bonds

Pay for Success: Building On 25 Years of Experience with the Low Income Housing Tax Credit

Can Pay for Success Reduce Asthma Emergencies and Reset a Broken Health Care System?

Supporting At-Risk Youth: A Provider’s Perspective on Pay for Success

Tax Increment Finance: A Success-Driven Tool for Catalyzing Economic Development and Social Transformation

Bringing Success to Scale: Pay for Success and Housing Homeless Individuals in Massachusetts

Making Performance-Based Contracting Work for Kids and Families