Market incentives to end war: World Peace Bonds - Social Policy Bonds

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Market incentives to end war: World Peace Bonds

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This essay is about 5800 words long. For a shorter piece on the same theme click on Conflict Reduction, Middle East Peace, or Nuclear Peace in the right-hand menu

In the year 2000 wars directly killed 310 000 people: about 0.56 percent of all world deaths. But this figure massively understates the suffering wars cause. Indirectly, armed political conflict kills many more. In the entire 20th century, an estimated 191 million people lost their lives directly or indirectly as a result of conflict—and well over half of them were civilians. And, of course, war also maims and sickens people.  As well, resources devoted to the military are unavailable for life-enhancing sectors of the world economy. War traumatises non-combatants, and fear of war, fed by the endless accounts of war worldwide, adds to people’s anxiety, however distant they may be from current conflict. The possibility of war leads to underinvestment of people and resources in places that sorely need them.

War therefore is a major social, health  and economic problem. But of all humankind’s many troubles, it is perhaps the most disheartening because its casualties result from human beings’ deliberate use of force on one another.

Poverty, ignorance, despair, differences of wealth, ethnicity, religion, class, culture or ideology: all these, and more, are thought to be some of the ‘root causes’ of war and violence. Inward factors are also cited; such as individual pathologies, like a history of being abused that predisposes someone to take up violence in later life. Often blamed too are the media, and the frequency with which our children are exposed to images of violence - especially when violence is presented as an acceptable and effective way of solving problems.

No doubt all these factors can and do play a part in fomenting and fanning the flames of conflict. But even aside from the impossibility of eliminating any potential cause of conflict, there is no inevitability that these causes will lead to war. For each of these ‘root causes’ there are examples that disprove any simple cause-and-effect relationship: the dozens of  continents and countries in which people of different colours and creeds live happily side-by-side; the thousands of decent, peaceable and fulfilled adults who as children were horribly abused; the border between Scotland and England, once the setting of a 300-year old series of bloody conflicts, now as peaceful as any border in the world; the Swiss with their high rate of gun ownership and low rate of gun crime; and Japan, a relatively peaceful society, but one in which lurid depictions of violence are avidly produced and consumed.

It would seem likely, then, that political violence cannot reliably be pinned down to one, or even several root causes that can then be eliminated before they lead to armed political conflict. This essay takes a different approach. It explores a way of preventing or defusing war that will act independently of its causes: a means that is flexible enough to deal with root causes when these can be identified and tackled, but that can also operate even when the causes or aggravating factors are obscure or intractable.

Outcomes and incentives

The suggestion here is to reward the successful achievement of peace. Most people, of course, are already highly motivated to live peacefully. These include the countless millions caught up in hostilities who would like nothing more than to live their lives undisturbed by conflict. But a large proportion of those in governments, religious bodies; non-governmental organisations (NGOs), and other positions of authority, will also prefer peace to conflict.

Tragically though, there are many in positions of power or influence who are half-hearted about peace; others who feel threatened by it, and others who, for whatever reason, actively promote violence.

Ideally, then, we need a way of promoting peace that can modify or circumvent such     people’s uncooperative or obstructive behaviour. We need to mobilise the interests of the far greater number of people in every country of the world who want peace. We need to find a way that can co-opt or subsidise those people in positions of authority and power who want to help, and at the same time bypass, distract, or otherwise undermine, those opposed to our goal.

Ideally too, we would use market forces to ensure that peace-making efforts achieve their maximum return. Resources are always limited, and those devoted to reducing conflict are no exception. In economic theory, and on all the evidence, markets are the most efficient means yet discovered of allocating society’s scarce resources. Yet many believe that market forces must inevitably conflict with social goals. In recent decades deregulation of some economies, and an enhanced role for markets have made many people very wealthy indeed, but the less well-off have gained relatively little. More pointedly, it is market incentives that stimulate the manufacture and distribution of the weapons that cause so much human suffering.

So it is important to remind ourselves that market forces and self-interest can serve public, as well as private, goals. Unfortunately though, they are seldom used to solve social problems, which are almost entirely the remit of non-commercial bodies. The result is that while self-interest operates all too freely in creating conflict it is denied a major role in conflict reduction. The rest of this paper describes a new financial instrument, World Peace Bonds, which would aim to redress this balance. They are intended to channel the market’s incentives and efficiencies into ending for all time what must surely be the world’s most grievous social problem: war.

Assume that governments, institutions and anyone else with a genuine interest in peace contribute to a fund that would be used to redeem an entirely new sort of financial instrument: World Peace Bonds. These bonds would aim to create a coalition of interests with a powerful incentive to reduce the level of violent political conflict. World Peace Bonds would be issued on the open market and would become redeemable for a fixed sum only when the number of people killed or injured by warfare reached a very low level. Importantly, the bonds would make no assumptions as to how to bring about greater peace—that would be left to bondholders.

Normal bonds are redeemable at a fixed date, for a fixed sum, and so yield a fixed rate of interest. World Peace Bonds would not bear interest and their redemption date would be uncertain. Bondholders would gain most by ensuring that the targeted definition of peace were achieved quickly.

Under the bond mechanism governments, with the help of the United Nations, NGOs and charities, would collectively decide on the exact specification of the peace objective, and contribute toward the funds needed to redeem the bonds. The bonds would be issued by open tender, as at an auction; those who bid the highest price for the limited number of bonds would be successful in buying them. Each bond would become redeemable for, say, $1 billion once the targeted level of peace, as certified by objective measurements made by independent bodies, had been achieved and sustained. Once issued, the bonds would be freely tradeable.

Assume that World Peace Bonds, redeemable for $1 billion each, had been issued, and that they each sold for $100 million. People, or institutions, now hold an asset that gave them a return of 900 percent once the targeted peace level had been achieved. It is this prospect of capital gain that would give bondholders a strong interest in ending deadly conflicts, and in doing so as cost-effectively as possible.

World Peace Bonds could target an index comprising a wide range of indicators of conflict and peace simultaneously, over the entire world.

What to target?

World Peace Bonds would be versatile. They could target simultaneously an index comprising a range of indicators of, for example: the numbers killed directly and indirectly by conflict, the numbers of refugees from conflict, the sums spent on weapons worldwide, and the numbers of military personnel in full-time equivalents. As a starting point, we could ‘the number of people who are directly or indirectly killed by violent wars or civil wars’, as measured by an accredited impartial body.

Peace Bonds could be issued for different continents or regions, with different targeted definitions of peace to suit local conditions. For instance, bonds targeting peace in the Middle East could readily target numerical indicators of dead and injured, as these figures are well documented in comparison to other conflicts. In other regions, where casualty numbers are less reliable, other indicators would have to be targeted. These could include quality of life indicators, such as literacy, or the numbers of moving across certain boundaries, or the value of weapons purchased by potential participants in conflict. Or conflict-related deaths could be estimated through demographic analyses of census data before and after conflicts  or through indirect mortality measurements such as survey questions  on survival of siblings, parents, or spouses.

Bonds could target peace over certain periods: they could be redeemed once peace had been sustained for a period of ten or twenty years, say. But World Peace Bonds would offer their greatest benefits over an extended period. If we were to have as our goal peace sustained for a period of fifty years, then it would be in bondholders' interests to take out longer-term measures, including those that influence younger children.

For example: the Cold War ended peacefully, but if World Peace Bonds issued in the year 1950 had a target period of sustained peace of just ten years, then bondholders would have profited, despite the accumulation of ever more horrific atomic and nuclear weapons, during the period that preceded the Cuban Missile Crisis of October 1962. If the same bonds had been issued with a target of fifty years of sustained peace, then bondholders would have been motivated to reduce tensions, including by such means as reducing the weapons pile-up, or fostering better relations between the US and USSR. A ten-year goal would see the original bondholders making profits while the prospects for peace looked ever darker. A fifty-year goal would have seen the value of their holdings collapse before and during the Crisis.

The point is not only that peace sustained for a decades-long period encourages longer-term thinking. It is also that by choosing the longer-term goal, our targeting of a relatively easy-to-measure metric like deadly violence and its consequences, we shall also do  much to eliminate the much less specifiable and quantifiable - but hugely important - precursors of violence.

One such precursor that adds the likelihood of war are efforts to gain public support. Indicators could include the number of bellicose opinion-leading articles in the mass media.  

Once issued the bonds could be bought by anyone. Governments—including those currently engaged in deadly conflicts—might decide to buy World Peace Bonds. So too might non-governmental militant organisations and others who are currently financing violence. Or the issuers might give the bonds to certain of these bodies as a form of aid. Ownership of World Peace Bonds would enable them to reap financial rewards by ceasing to foment conflict. They could do this in ways they have not fully explored, because they have had no incentive to do so.

But World Peace Bonds, being tradable on the open market, could be bought by other institutions or individuals at any time until redemption. If at any time people, governments or other institutions thought they could reduce conflict more effectively than those who already held the bonds, they would be in a position to bid more than the bonds were worth to the existing owners, and buy them. They could then use their own capital, or borrow on the strength of the redemption value of their bondholdings, or on the strength of any increase in the value of their bonds, to support projects that would lower the level of violent conflict.

Note that the bond mechanism would be helped by the support and participation of the relevant governments or militant organisations, but it would not rely on such support. New, specialist organisations might come into being, devoting themselves to achieving the objective targeted by the World Peace Bonds.

What would determine the price of the bonds? Most obviously, the market’s assessment of how close the peace target were to being achieved. Interest rates on alternative investments will also be a factor. The bonds would sell for small fractions of their issue price if people thought there were virtually no chance of world peace being achieved in their lifetime. People would differ in their valuation of the bonds, and their views would change as events occurred that made achievement of the targeted peace objective a more or less remote prospect. But the bonds, once issued, would be transferable at any time. Bondholders, having contributed to a lessening of the conflict, would see the value of their bonds rise. They could then sell their bonds and realise a capital gain.

The market prices of World Peace Bonds would be publicly quoted, just like those of ordinary bonds or shares, and these prices, and their changes over time, would help those allocating conflict-reducing resources as effectively as possible.

What could bondholders do?

Some people might buy World Peace Bonds as they would a lottery ticket, or a publicly quoted company share. They would think that their bonds’ value might rise even if they did nothing to help achieve peace. Such passive investors would want to become ‘free-riders’ hoping to benefit from any increase in the bond price without actually participating in any peace building activities. But the way markets work would limit the opportunities for this sort of investor. The more bonds they collectively owned, the more remote the targeted peace level would become, and so the more they would stand to lose as the aggregate value of their bond holdings fell. At some point, then, it would become worthwhile for these passive investors either to become, or to sell their bonds to, active investors.

Active investors would finance initiatives aimed at ending conflict. They could use their own capital, or borrow on the strength of the redemption value of their World Peace Bonds, or on the strength of any increase in the value of their bonds, to support projects that help reduce violence. They would have every incentive to co-operate with each other to help achieve the targeted peace objective, and to do so as cost-effectively as possible. Their motivation would arise from the expected capital gain they would experience as the value of their bonds rose in line with the enhanced probability of conflicts ending.

The lower the targeted level of violence, the more likely bondholders would be to undertake projects that would pay off only in the long term, but note that it would be unsatisfactory to achieve a low level of violence just for a short period. The ultimate objective is a sustained low level of violence, and that is how the targeted objective should be specified.

Many bondholders would be in a better position than governments to undertake a range of peace-building initiatives. They could work to influence governments, including those of countries that supply the weapons that fuel conflicts. They could try to influence financial supporters of conflicts to redirect their funding into more edifying activities. Bondholders could also lobby, or work with, governments to, say, give a higher priority to peace studies in schools, but they could also develop peace-teaching projects of their own. While immediate peace might not result, much more could be done to enhance the prospect of peace in the future. Bondholders could, for instance, make strenuous efforts in conflict-ridden regions to have some mixed classes of children of different nationalities, religion or ethnic origin at kindergarten and school. They could, for example, finance sports matches between opposing sides of current or potential conflicts. They could promote anti-war programmes on TV or set up exchange schemes for children or students of opposing sides. They might even subsidise intermarriage between members of different nationalities or religious communities.

Other examples of activities that bondholders could undertake would be:

  • Lobbying for the elimination of all state-sponsored inflammatory propaganda, in textbooks, radio, TV, newspapers and the Internet.

  • Lobbying western countries, to improve trade access to poorer countries, so as to give developing countries the chance of economic growth.

  • Promoting genuine democracy in, and foreign direct investment into, conflict-ridden regions.

The rationale for these last measures is to give the populations of these countries some means of becoming prosperous other than by plunder. This would give people a chance to build trust and take a stake in a peaceful future and a better life for their children—a chance that many regimes are largely denying their own people.
More positively, it is to open the eyes of the younger people to the virtues and rewards of democracy and economic growth. If it works for older people too, so much the better; if not, these measures may at least distract them from current conflict.

These are only examples, of course, though they do illustrate the potential for people with influence to undertake peace-building initiatives that they currently cannot or will not consider. Some organisations do involve themselves in these, or similar activities, but under a World Peace Bond regime, there is one crucial difference: bondholders would have powerful incentives to ensure that the projects they initiate or finance are as effective and efficient in reducing conflict as possible.

In reality, bondholders would be likely to undertake a range of initiatives, the precise nature of which need not be known in advance. It would be up to bondholders to decide on those programmes that would give them the best return for each dollar they spend, and this means they would look for and put into action ways of achieving peace that they believe will be most effective.

Trading the bonds

World Peace Bonds, once floated, must be readily tradable at any time until redemption. The operation of such a ‘secondary market’ would be critical to the working of the bond mechanism. Many bond purchasers would want, or need, to sell their bonds before redemption, which might be a long time in the future. With a secondary market, these holders would be able to realise any capital appreciation experienced by their holdings of Peace Bonds whenever they chose to do so. Tradability would make the bonds a more attractive investment in the first place.

As the bonds were traded, they would tend to flow towards those who would be most able to help reduce the violence. In fact, though, an actual flow of bonds would not be necessary. Large bondholders might simply decide to subcontract out the required work to many different agents, while they themselves held the bonds from issue to redemption. The important point is that the bond mechanism would ensure that the people who allocate the finance had an incentive to do so efficiently and to reward successful outcomes, rather than merely to pay people for undertaking activities. At the limit we can conceive of just one single buyer of all the bonds. If this buyer were determined to hold on to the bonds until redemption, then the bonds would function as a sort of performance-related contract, with the backers paying only when the objective had been achieved. The buyer could contract out most, or all, of the work required to achieve the objective, with the incentives given by the World Peace Bonds for speedy accomplishment cascading down from the bondholder to those subcontracted to do the work of reducing the violence.

Too large a number of small bondholders could probably do little to help achieve peace by themselves. If there were many small holders, it is likely that the value of their bonds would fall until there were aggregation of holdings by people or institutions large enough to initiate effective peace-building projects. As with shares in newly privatised companies the world over, World Peace Bonds would mainly end up in the hands of large holders—be they individuals or institutions. Between them, these large holders would probably account for the majority of the bonds. Even these bodies might not be big enough, on their own, to achieve much without the co-operation of other bondholders. They might also resist initiating projects until they were assured that other holders would not be free riders. So there would be a powerful incentive for all bondholders to co-operate with each other to help bring about peace. They would share the same interest in seeing targeted objectives achieved quickly. So they would share information, trade bonds with each other and collaborate on conflict-quelling projects. They would also set up payment systems to ensure that people, bondholders or not, were mobilised to help build peace. Bondholders would either trade bonds, or make incentive payments to ensure that any proceeds from higher bond prices, or from redemption, would be channelled in ways most likely to end the violence. Large bondholders, in co-operation with each other, would be able to set up such systems cost-effectively.

Regardless of who actually owned the bonds, aggregation of holdings, and the co-operation of large bondholders, would ensure that those who helped build peace were rewarded in ways that maximise the reduction in violence per unit outlay.

Efficient costing

The resources that can be devoted to ending conflict are finite. They should therefore be channelled into those initiatives that can bring most benefit per unit outlay.

The most important question is how much the issuers would be prepared to spend on the world peace objective. The maximum cost would equal the total number of bonds multiplied by their redemption value, minus any revenues gained on floating the bonds. But while the issuers would have to decide on the maximum cost of achieving the objective, they wouldn’t have to calculate the actual cost with any accuracy - that would be done by bidders for the bonds in the open market. For example: if one hundred bonds, each redeemable for $1 billion, were issued, this would mean the maximum cost to the issuers of achieving the objective would be $100 billion. If, when they were first marketed, they fetched just $100 million each, the actual cost to the issuers would be $90 billion. But suppose the issuers were in the dark about how much it would cost to achieve the targeted objective and instead of issuing one hundred World Peace Bonds, they issued one thousand, each redeemable, again, for $1 billion. They would then be liable for a maximum cost of $1 trillion rather than $100 billion. But would-be purchasers market would still reckon that they could achieve the objective for $90 billion. So instead of valuing the bonds at $100 million each, they would bid up the issue price of the bonds to the amount that would involve the issuers’ incurring the same estimated total cost of $90 billion, which would be $910 million per bond. (World Peace Bonds would be an unusual financial instrument, in that the more that were issued, the higher would be their value!) The crucial point is that potential investors in the bonds would have estimated how much the targeted objective would cost to achieve, and would have every incentive to minimise this cost. They would do this when they bid for the bonds at issue and at all times subsequently until the bonds were redeemed. At the same time, the issuers could put a cap on their total liability by limiting the number of bonds issued.

These facts, and bondholders’ incentive to minimise their costs, contrast with the current system, in which the costs of containing conflicts, if they are estimated at all, are not widely known, nor subject to competitive bidding. A further point is that the issuers could add to the number of bonds in circulation after floating, at any time, if they wanted to boost the efforts going into peace-building initiatives.

What happens once an objective has been achieved?

Assume that World Peace Bonds had been issued targeting a reduction in conflict sustained for a period of, say, five years. What would happen then?

Once the objective were close to achievement, the issuing body could float a new set of Peace Bonds aimed at maintaining the achieved outcome, or at further improvements. Sustaining the outcome beyond the period specified in the original bond issue would most probably be cheaper than achieving it, while further improvements targeted by a second bond issue are likely to cost less, in terms of benefit per unit outlay, than those achieved by the first issue. There are two linked reasons for this:

Bondholders may have invested in systems or capital assets that cost less, per unit benefit, to keep running than they did to set up.

Bondholders, in a similar fashion, would have learned from their experience of achieving the objective targeted by the first bond issue. They would have looked for, and experimented with, different methods of solving the targeted problem, and be able to choose the most efficient ones for subsequent bond issues. Any know-how about conflict avoidance or conflict reduction would be more cheaply available once an initial targeted lower level had already been achieved.

Advantages of World Peace Bonds

The main advantage that World Peace Bonds would have over conventional means of bringing about peace is that they would build a coalition of interests with a strong incentive to reduce deadly violence as effectively and efficiently as possible. Self-interest and market forces would channel peace-building resources into achieving the desired outcome efficiently. This contrasts with the current system under which funding is generally allocated to organisations that may be well-meaning, but that are not rewarded in ways that correlate with their success in achieving peace objectives. A coalition of bondholders would have more freedom to initiate projects that governments and others in positions of power cannot support, or do not wish to support, or do not wish to be seen to support. Holders of World Peace Bonds would have incentives to support whichever peace-building initiatives would be most effective. Their objective and that of the people who would back the bonds would therefore be exactly the same. The more efficient were bondholders in reducing the level of violence, the more they would gain from appreciation in the value of their bonds. This efficiency would maximise the reduction in violence that could be achieved per dollar outlay.

Of course, many enlightened individuals and organisations are already carrying out valuable peace-enhancing activities. But under a World Peace Bond regime many more might be enticed to do so, while very large numbers of people could be encouraged to moderate their opposition to measures that build peace. Importantly, under a bond regime, funds for building peace could bypass corrupt or inefficient governments or, by appealing to their financial self-interest (if they were bondholders, or bribed by bondholders) could effectively modify their behaviour in favour of achieving the peace objective.

It would be in the interests of bondholders and those whom they influence to seek out those ways of achieving the targeted level of peace that would give them the best return on their outlay. It would also be in the interests of those, whether taxpayers or private individuals, who would be the ultimate source of funds used to redeem the bonds. Crucially, it would be only when the violence had fallen to the targeted lower level, and been sustained, that that the bond issuers would end up paying for these efforts. Until then it would be up to bondholders to finance those initiatives that they believed would bring about reductions in the violence. Again, this contrasts with the current system, where taxpayers incur costs for funding conflict-reduction schemes regardless of whether they are effective or not. The body that issues World Peace Bonds would, in effect, be contracting out the achievement of peace to the private sector. It would still, though, stipulate the definition of peace that it wanted to see achieved and, by undertaking to redeem the bonds, would be the ultimate source of finance for that achievement.

A further advantage of World Peace Bonds would be the stability of their objectives. Many conflict-reduction programmes will have a necessarily long lead-time. Current efforts to reduce conflict often depend on particular people or governments remaining in power. Or their success depends on particular views about causes of conflict, or on the nature of the protagonists. As events and circumstances change, then these conflict-reduction efforts are often slow to adapt. Under a World Peace Bond regime bondholders would aim to reduce conflict as cost-effectively as possible. They would be free to choose how to achieve the targeted objective. The goal of a world without war is more stable over time than the best ways of achieving it.

Another significant advantage of World Peace Bonds would be their transparency. They would make clear to everybody exactly what would be the real objectives of those governments, NGOs, and individuals that back the bonds. The objective of a Peace Bond issue would be clear and explicit: to reduce the level of inter-communal violence to a very low level.

Some powerful people in governments, militant organisations or religious institutions would resent the targeting of such objectives by external agencies in this way. But, while under the current system they can oppose peace in ways that attract support, under a World Peace Bond regime, they would have to openly declare their opposition to peace itself. It is precisely this focus on the outcome of peace—rather than activities or institutions—that would help mobilise and motivate the coalition working to achieve it.

Potential pitfalls

One potential disadvantage of World Peace Bonds is the possibility that bondholders could try to bring about peace in ways that conflict with other societal goals. It is hard to imagine much worse than war. But suppose the targeted peace objective were specified only as some reduction in the absolute numbers of people killed by war. Such a badly crafted objective could be achieved by starving an entire population. Careful definition of bonds’ target would solve this potential problem.

The other major possible disadvantage of a World Peace Bond regime is that of perverse incentives. Governments or military organisations could benefit from their own bondholdings, or from payments by bondholders, if they ceased engaging in armed conflict. The danger is that their expectation of reward for ceasing to engage in conflict would encourage them to threaten to initiate or prolong an existing conflict, in the hope that it would benefit from such windfalls. A regime could threaten war, hoping then to buy up bonds that have consequently fallen in value; it could then moderate its rhetoric and sells its bonds for a higher price.

How could the potential for such a perverse activity be minimised? One response would be point out that preparation for war involves mobilisation of military personnel and materiel, which carries a cost. It also involves preparing public opinion, and this takes time as well as money. The deceiving party then would have to invest considerable financial and political capital for a return from its bondholdings (or from bondholders) that might be large or small, but would definitely be uncertain. So, unless bondholders were exceptionally naïve, we could expect them to quickly distinguish between credible and unrealistic bellicose declarations.

The threatening party might also have cause to fear for its survival. Note that war can be defined as:

"[A]n occurrence of purposive and lethal violence among two or more social groups pursuing conflicting political goals that results in fatalities, with at least one belligerent group organized under the command of authoritative leadership."

It is the political nature of this conflict that separates it from other forms of lethal violence such as mob lynchings, gang turf battles, and organized crime vendettas.  Politicians, even the most tyrannical, can be deposed. Politicians who declare aggressive intentions, are more likely to be deposed if there is a bond regime that could finance opposition to them. Crucially, this holds whether their declarations are genuine or not. Bondholders would benefit by deposing a regime that threatened war. A regime thinking of threatening its neighbours would have to take this possibility into account, as well as the costs of believable preparations for war, when considering whether to make warlike noises.

Regime change would not be the worst fate that cynical warmongers might face from bondholders or their agents. Whoever declares war, or makes threats, is saying that they prepared to risk people’s lives by creating conflicts. Bondholders would feel no ethical constraints, therefore, in putting such people in a position where they could no longer make such threats, again whether such threats were cynical or not. Whoever makes threats of this sort would, under a bond regime, be putting themselves at risk from bondholders use funds arising from the expected appreciation of the value of their bonds to defuse such threats.

There are other considerations that further reduce the likelihood of cynical behaviour induced by perverse incentives.

  • It would be in bondholders’ long-term interest never to pay off cynical aggressors. While it is possible to imagine particular instances when paying cynical warmongers would be effective, bondholders would be keen to avoid establishing a trend. They might therefore nip any cynical behaviour in the bud by refusing to reward it even when in the short run it might seem in there interests to do so.

  • The most serious conflicts are the very large ones. The World Wars dominate the overall death toll over from about 1820 until 1950. Together they account for some 36 million deaths, which is about 60 percent of all the quarrel deaths in the 130-year period. The cynical aggressors are likely to threaten only relatively small conflicts. If the bonds targeted peace over the entire world, or an extremely large area, then the variation in bond price generated by the threats of small players would be dwarfed in comparison to the effects of the larger players. This would reduce any profits likely to accrue from cynical behaviour, even if it were successful.

These potential problems should not be overstated. Careful choice and specification of targeted objectives would probably circumvent or remedy most of them. And we should not forget that the comparison that matters is with the current system, under which all sorts of perverse incentives to create conflict abound and are exploited. The overall effect of a World Peace Bond regime would act as a counter-weight to such incentives.


By appealing to people’s financial self-interest, World Peace Bonds could be more effective than conventional efforts aimed at reducing the level of violent political conflict. In channelling market forces into the achievement of this objective the bonds would ensure a maximum reduction in violence for the outlay of those bodies that contribute to the funds allocated to redeem the bonds.

In today’s emotional climate decision-making is too often reactive. It is too easily swayed by those with a propensity for violence or those who benefit from the conflict, whether financially or emotionally. There are enlightened people and organisations working for peace, but their ability to deploy resources effectively is constrained. The funding of the United Nations and other multilateral conflict reduction bodies is conditional on their carrying out a range of activities limited by the imagination and insecurities of their sponsoring governments. Private peace-building bodies work in admirable and diverse ways, but their efforts are relatively small-scale and uncoordinated. For both sets of organisations the financial rewards from reducing building peace are not correlated with their effectiveness in actually doing so. World Peace Bonds, in contrast, would explicitly reward movement toward a targeted peace outcome. They would harness market efficiencies into the reduction of violent political conflict. They could be the most effective way of ushering in the era of world peace that humanity has so desperately wanted and needed for so long.

© Ronnie Horesh February 2003 and June 2016

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