“Let’s Not Have the Perfect Be the Enemy of the Good”: Social Impact Bonds, Randomized Controlled Trials, and the Valuation of Social Programs

Abstract

This article uses the case of “social impact bonds” (SIBs) to explore the role of social science methods in new markets in “social investment.” Pioneered in the UK in 2010, SIBs use private capital to fund social programs with governments paying returns for successful outcomes. Central to the SIB model is the question of evaluation and the method to be used in determining program outcomes and investor returns. In the United States, the randomized controlled trial (RCT) has been the dominant method. However, this has not been without controversy. Some SIB practitioners and investors have argued that, while this may be the perfect tool, the need to grow the SIB market demands a more pragmatic approach. Drawing from a three-year study of SIBs, and informed by Science and Technology Studies (STS)-inspired work on valuation and the social life of methods, the article explores RCTs as both a valuation technology central to SIB design and the object of a micropolitics of valuation which has impeded market growth. It is the relationship between, and the politics of, evaluation and valuation that is a key lesson of the SIB experiment and an important insight for future research on “social investment” and other settings where methods are constitutive of financial value.