Alex Goldmark explains the U.K.'s experimentation with the "social impact bond" and how its success may mean it's coming to a city near you:
Social entrepreneurs or community groups are loaned money by private investors to try out solutions to social problems. If the solution works, the government pays whoever invested in the solution a share of whatever spending is saved. In other words, as one writer put it, "It’s a way of transferring public sector savings to private investors who are willing to put money into preventative initiatives early on." …
This first use of the technique is to cut recidivism of those doing short-term prison sentences at Peterborough Prison, about two hours north of London. Right now about 60 percent of prisoners in that category re-offend, costing the state lots of money in policing, court costs, and prison operations. Simply put: If that recidivism figure drops, the government saves significantly.
To address this, investors pooled $8 million to fund three local charity groups, which will offer mentoring and drug counseling, among other things. If they meet their target of a 10 percent reduction in recidivism, investors will get their money back at between 7.5 and 13.5 percent.
The Dish 