Community Development Innovation Review

April 2013

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


Pay for Success (PFS) contracting, social impact bond financing, collective action, impact investing, human capital performance bonds–these are all fascinating and powerful ideas. But the big idea that unites them is progress. Over the years, most sectors of the U.S economy have displayed a long and steady march of progress, where innovation builds on innovation, relentlessly driving efficiencies and effectiveness to ever-higher levels. A particularly striking example is Moore’s Law, which has for 40 years correctly predicted a re-doubling of computer processing speeds and memory size every 24 months. The gains we have seen in medicine, leading to a 50 percent reduction in the U.S. death rates from coronary heart disease and childhood cancers in the last half-century, are no less impressive. Even from the broadest perspective, where America’s real GDP per capita has more than doubled since 1970, the steady march of economic progress seems almost inexorable. And yet, as Jon Baron, president of the Coalition For Evidence-Based Policy, pointed out in a November 29, 2012, New York Times op-ed, much of our social sector seems frozen in time. Forty years after Lyndon Johnson declared a War on Poverty, real median incomes among the poorest 20 percent of Americans have not budged. Nor have our national test scores on math and reading.

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Other articles in this issue

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

Pay for Success is Not a Panacea

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