On Nov. 3, 2015, The New York Times broke a story that some in liberal social circles had been secretly wishing to see. The initial findings from a much-heralded social impact bond in Utah — a new way to finance social welfare programs involving private funders like Goldman Sachs — were suspect. The results were likely significantly overstated, The Times reported, in claiming that 109 out of 110 children avoided special education because of a preschool program.

“Aha,” said critics, here is evidence that the bankers are fudging the data to ensure they get paid. Former Assistant U.S. Education Secretary Diane Ravitch called the initiative an outright “threat,” telling readers of her blog to phone lawmakers “at once to stop this money-making scheme.”

You can’t blame them for being suspicious. Highly arcane financial products ultimately plunged the United States into a devastating recession and threw millions of people out of their homes. In some ways, this smelled like déjà vu all over again.....

.....The first U.S. SIB was launched in New York City in 2012 with the aim of cutting recidivism among young men leaving Rikers Island jail. Because of several hitches when rolling out the program, the Rikers SIB was ultimately cut short. Currently, seven SIBs are operating in the United States, including early childhood education programs (in Chicago and Utah), supportive housing for the homeless (in Santa Clara County, California, and Massachusetts), rapid housing for homeless mothers to reduce foster care placement of their children (in Cuyahoga County, OH), young adult recidivism programs in three cities in Massachusetts, and a New York State program to increase employment and reduce recidivism among ex-offenders. Dozens more are in the pipeline.

SIBs emerged amid two overarching trends — the push for more accountability and evidence-based decision-making in government, and a general fatigue with social welfare programs that never seem to work. To some, SIBs are the shot of innovation the social sector needs, aligning incentives to nudge the welfare sector beyond good intentions or political ideology. To others, the deals elevate “what works” and let the market winnow out programs that do not. According to two former Office of Management and Budget directors, Peter Orszag and Jim Nussle, less than 1 percent of government spending is backed by evidence of its effectiveness, which makes elevating the value of research and evidence sound like a good idea.....

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