Virtuous profits: Pay for success arrangements and the future of recidivism reduction
| Published date | 01 April 2018 |
| DOI | 10.1177/1462474516680209 |
| Date | 01 April 2018 |
| Subject Matter | Articles |
Punishment & Society
2018, Vol. 20(2) 155–173
!The Author(s) 2016
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DOI: 10.1177/1462474516680209
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Article
Virtuous profits: Pay for
success arrangements
and the future of
recidivism reduction
Randolph R. Myers
Old Dominion University, USA
Tim Goddard
Florida International University, USA
Abstract
Pay for success contracting is the latest financial instrument for funding social programs.
Governments in Australia, the UK, the US, and elsewhere are piloting their use in
reentry programs, youth offender programs, and a host of other initiatives aimed at
homelessness, child welfare, workforce development, and preventive health care. Under
a pay for success arrangement, private investors put up capital to fund a program, and if
successful, a government agency will repay the investors with a yield, that is, with a
profit. This article situates pay for success contracting in the context of reentry and
decarceration and it theorizes how the arrangement will reverberate through new
alternatives to incarceration and fundamentally change the meaning of ‘‘what works.’’
The article concludes by locating pay for success within the broader drift toward
securitizing marginal populations under neoliberalism.
Keywords
evidence-based programs, pay for success, recidivism, reentry, social impact bonds
Introduction
In 2012, New York City (USA) launched the Adolescent Behavioral Learning
Experience program in the city’s Rikers Island jail. The program sought to
reduce the 47% recidivism rate of 16- to 18-year-old inmates returning home
Corresponding author:
Randolph Myers, 6018 Batten Arts and Letters, Old Dominion University, Norfolk, VA 23529, USA.
Email: rrmyers@odu.edu
(New York City Department of Correction, 2012). To ‘‘break the cycle’’ of incar-
ceration, the young inmates, 91% of whom were Black or Latino, received an
evidence-based cognitive behavioral therapy while incarcerated. An evaluation of
the Adolescent Behavioral Learning Experience program showed that 87% of the
1691 16- to 18-year-olds incarcerated for more than seven days at Rikers in 2013
attended at least one session of the program (Vera Institute of Justice, 2015).
A nonprofit organization implemented the evidence-based intervention, Moral
Reconation Therapy (MRT), which focuses on improving social skills, decision-
making, and instilling personal responsibility. The young men completed
workbooks designed to address a host of individual-level risk factors, including
maladaptive beliefs, attitudes and behaviors, negative relationships, and hedonism.
These workbooks—serving as a proxy for counseling and psychotherapy—seek to
reinforce positive behaviors, enhance positive identity formation, improve self-
concept, develop frustration tolerance, and encourage ‘‘higher stages’’ of moral
reasoning in participants.
This all seems unremarkable. The therapy at Rikers Island jail is not unusual
either in kind (evidence-based and individualized) or in mode (workbooks). That is
to say, MRT is one of numerous evidence-based programs (Lipsey, 2009) that
address the individual-level risks and needs of incarcerated people (Hannah-
Moffat, 2013; Ward and Maruna, 2007) and relies on workbooks to change the
thoughts and attitudes of inmates who are returning, very often, to the same social
ecologies that contributed to their offending in the first place (Davidtz et al., 2015).
What is unusual, however, is that the reentry success of these young men was being
wagered on by one of the largest investment firms in the world: Goldman Sachs
Bank USA. The global investment banking, securities, and investment manage-
ment firm paid $9.6 million upfront for the Adolescent Behavioral Learning
Experience program at Rikers. Contractually, the city of New York would only
be required to repay Goldman Sachs for its investment if an evaluation showed the
program reduced recidivism by 8.5% or more (Roman et al., 2014). A greater than
10% reduction would have led to a profit for Goldman Sachs—in the range of
$500,000 to $2.1 million. If the program did not meet the performance targets, New
York City would not have saved taxpayer dollars and therefore not be obligated to
repay Goldman Sachs.
In what is being called a pay for success deal, the repayment hinges on an
‘‘impact’’ calculation: the difference between the outcomes of program participants
and those of a comparison group. This arrangement—financed through what are
called Social Impact Bonds—transfers the risk from government to private inter-
ests and sutures the reentry success of young inmates in New York to corporate
profits. Unfortunately for Goldman Sachs, the recidivism rates for eligible youth
did not differ statistically from those of a matched historical comparison group
(Vera Institute of Justice, 2015). This meant that the City of New York was not
required to reimburse the investment company for the three years of programming
it paid for. Put into economic language: Goldman Sachs’ investment was not
profitable. Consequently, since private investors are ‘‘in charge’’ of funding,
156 Punishment & Society 20(2)
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