By Georgia Levenson Keohane
Despite social and economic advances around the world, poverty and disease persist, exacerbated by the mounting challenges of climate change, natural disasters, political conflict, mass migration, and economic inequality. While governments commit to addressing these challenges, traditional public and philanthropic dollars are not enough. Here, innovative finance has shown a way forward: by borrowing techniques from the world of finance, we can raise capital for social investments today. Innovative finance has provided polio vaccines to children in the DRC, crop insurance to farmers in India, pay-as-you-go solar electricity to Kenyans, and affordable housing and transportation to New Yorkers. It has helped governmental, commercial, and philanthropic resources meet the needs of the poor and underserved and build a more sustainable and inclusive prosperity.
Capital and the Common Good shows how market failure in one context can be solved with market solutions from another: an expert in securitization bundles future development aid into bonds to pay for vaccines today; an entrepreneur turns a mobile phone into an array of financial services for the unbanked; and policy makers adapt pay-for-success models from the world of infrastructure to human services like early childhood education, maternal health, and job training. Revisiting the successes and missteps of these efforts, Capital and the Common Good argues that innovative finance is as much about incentives and sound decision-making as it is about money. When it works, innovative finance gives us the tools, motivation, and security to invest in our shared future.
John E. Tyler II on Nonprofit an Voluntary Sector Quarterly wrote:"Georgia Levinson Keohane’s Capital and the Common Good is an excellent survey of recent developments in 'innovative finance,' and a text that provides important foundational research for scholars seeking to explore the integration of ethics and economics in the realm of finance. Her work surveys examples of situations where the invisible hand fails, so that economists, governments, and private firms need to deploy "a creative and ‘visible’ hand that corrects the market failure and provides for the public good” (2). Keohane’s examples of innovative finance are best interpreted as responses to market failures arising from the belief that because “markets are constructs, shaped by laws and customs” (3), market failure can be fixed. [...] The book is filled with concrete examples of innovative finance in response to market failure. [...] Keohane’s work should be of interest to those who explore the intersection of finance and ethics, but her work is largely descriptive and rarely normative—she offers little in the way of guidance as to how such innovative financial instruments and organizations should be used. Nevertheless, the book’s material offers ample fodder for the discussion of economic ethics and the theology of economics. [...] Filled with clear examples and case studies, Capital and the Common Good is a superior introduction to the world of innovative finance. Keohane’s attention to technology and financial theory balanced with a summary of challenges that each strategy faces results in a well-rounded treatment of the subject. It offers much for theologians, ethicists, and economists to consider."
"Given how Professor Keohane describes her ambitions for the book as an introduction to the subject of innovative finance as means for considering individual and collective roles in 'financing the public good and in developing market solutions to market failures,' her effort succeeds. Very early on, the book is quick to distinguish 'innovative finance' from 'financial innovation' as it contributed to the Great Recession. In doing so, however, the book deftly neither indicts nor disparages finance, banking, business, or markets more generally. This is critical as the book is premised on the realities of the necessary, even accelerant-inducing, roles of financial capital and markets and the social value to be gained there from. [...] Among the reasons the book succeeds are its objectivity, readability, and storytelling. [...] The book also takes otherwise complicated concepts in finance and makes them understandable and even relatable."
Discussion with Keohane on the Book
Relevant Links
- Interview with Keohane about the book, Forbes, 19 October 2016
Table of Contents of Capital and the Common Good
- Introduction: Innovative Finance and the Visible Hand
- 1. REDD Forests, Green Bonds, and the Price of Carbon
- 2. Health: Medicine for Market Failure
- 3. Financial Inclusion and Access to Capital
- 4. Toward a New Disaster Finance: Redefining Risk, Response, and Resilience
- 5. Innovative Finance in Communities Across the United States
- Conclusion: Financing the Future: The Lessons of Innovative Finance and the TIES That Bind
- Epilogue: The Road Ahead
About Georgia Levenson Keohane
Georgia Levenson Keohane is the Executive Director of the Pershing Square Foundation, a New York-based family foundation that supports exceptional leaders and innovative organizations that tackle important social issues and deliver scalable and sustainable impact. From 2014-2016, Keohane directed New America's Program on Profits and Purpose, an initiative exploring ways in which social entrepreneurship, innovation and finance can address some of our most pressing social and economic challenges. Keohane speaks and writes regularly on social and economic policy and the intersection of business and society. Her work has appeared in The New York Times, Foreign Affairs, TIME, the Harvard Business Review, the Washington Monthly, Slate, The Nation, The American Prospect, and other publications
