9.    Open earmarked funds to competitive processes.
The federal government’s fiscal year 2008 spending bills included $18.3 billion worth of earmarks. This controversial federal budgeting practice designates funds for a wide variety of specific projects and initiatives—including some aimed at addressing social problems—without employing competitive processes to guide decision-making. Often, these earmarks are given to one entity for decades.  By opening up earmarked funds to competitive processes administered by relevant government agencies, government could use these existing resources to seek out innovative, effective, and sustainable programs that government may not currently be aware of. This would also help to ensure that tax dollars are spent wisely.
 
Model: U.S. Dept. of Education’s Office of Special Education Programs 2007 Funding
In 2007, the Department of Education’s Office of Special Education Programs (OSEP) received $12 million in federal funding for special education, which had previously been allocated to one organization, through earmarks, for more than 15 years. OSEP opened up the funding to a competitive process, which enabled the agency to seek out the best solution based on the original purpose of the earmark: to make printed materials available to students with print disabilities—including blindness, low vision, severe dyslexia, and mobility impairment that prevents reading a traditional printed book. As Lou Danielson, a former OSEP division director, explains, “Lack of competition tends to stunt innovation and growth, particularly for the people who get the funding for long periods of time. Ultimately, it serves no one well.”

OSEP issued a call for proposals and administered a peer-review process that resulted in a 5-year, $32 million award to Benetech’s Bookshare.org, an organization OSEP had only recently become aware of. Bookshare.org was already the world’s largest accessible library of scanned books and periodicals that can be downloaded to be read as Braille, large print, or synthetic speech. OSEP funding has enabled Bookshare.org to build and improve upon a successful model and greatly increase its impact with students in elementary, secondary, and post-secondary schools. The organization is in the process of adding 100,000 new educational materials to its library. It is also coordinating with state education agencies, schools, and publishers to identify new content, and to provide that content at lower costs, for qualified disabled students.

Despite the best efforts of government, nonprofits, and individual citizens, solutions for social problems can be hard to find. As Gregory Dees notes, “With all of our scientific knowledge and rational planning, we still do not know in advance what will work effectively. Thus, progress in the social sphere depends on a process of innovation and experimentation…an active, messy, highly decentralized learning process.”  Given the challenges—and frequent failures—of attempts to innovate, social entrepreneurs supply a second valuable benefit to government. According to Jeffrey Robinson, assistant professor of management and entrepreneurship at NYU’s Stern School of Business, “Experimentation is the value of social entrepreneurship to government. How do you break a logjam? Social entrepreneurs are often successful in figuring it out.” 

Both Benetech and New Leaders for New Schools provide examples of social entrepreneurs helping government benefit Americans by developing solutions, testing new theories, or designing new approaches to addressing social problems.

Benetech

Market Failure
Twenty years ago, the best available technology for a blind person to read printed text was a machine the size of a clothes dryer with a five-figure price tag. It was an unrealistic and unaffordable option for accomplishing daily tasks like browsing a newspaper or looking over a piece of mail. Although the technology for creating an affordable, portable machine existed, the potential customer base—blind individuals and their employers—was too small to promise a traditional return on investment. As a result, technology investors were unwilling to take the risk to develop such a product.

Transformative, Financially Sustainable Social Innovation
Benetech was founded as a low-profit-market approach to ensuring the development of technology that promises to have a high social value despite low potential for generating a typical return on investment. The company’s first product, the Arkenstone Reading Machine, makes use of the optical character recognition (OCR) technology found in scanners and can be used with a personal computer to scan and read text aloud.

At a cost of less than $2,000, the Arkenstone Reading Machine quickly found a large customer base. In addition to blind individuals and their employers, people with learning disabilities and government agencies that serve the disabled, including the U.S. Department of Veterans Affairs, began purchasing the product. This expansive customer base helped to generate millions of dollars in revenue annually and ultimately led to the sale of the reading machine and the Arkenstone brand to a for-profit distributor of disabilities products, an example of how a low-profit-market approach can eventually develop a market that could be served by a traditional for-profit approach.

Societal Benefits
Benetech was able to test and ultimately develop a self-sustaining solution to a problem caused by a market failure that government was unable to address. Its inexpensive reading machine, tested in the early stages by accepting below-average returns, ultimately ended up creating a new and profitable market while serving the thousands of Americans—veterans in particular—who previously were unable to read printed text on their own.

Next week: Testing & Developing Solutions continued - New Leaders for New Schools