First, the control group fell apart. Wardens at Rikers Island, the New York City jail, could not separate teenagers who were to participate in a course of cognitive behavioral therapy from those who were not supposed to attend.

Then the city’s Education Department, which had offered to put teachers on Rikers to assist the intervention, pulled out. And the budget of the Osborne Association, which had been enlisted to carry out the therapeutic program, was cut when Rikers’s teenage population unexpectedly fell below the level written into its contract.....

.....Can something that fails prove to be a success? That’s the question surrounding a bold experiment in putting Wall Street techniques to work in shaping government policy......

.....Aimed at reducing teenage recidivism by at least 10 percent, the Adolescent Behavioral Learning Experience was found, in a careful evaluation by the Vera Institute of Justice, not to keep teenagers from being sent back to Rikers at all.....

.....The beauty of the therapeutic experience, from New York City’s perspective, was that it was financed not by taxpayers but by a $7.2 million investment by Goldman Sachs — backed by a $6 million guarantee by Bloomberg Philanthropies. The city agreed to pay Goldman back only if the program could trim recidivism by a tenth, enough to save some money by closing a section of the jail. While Goldman’s profits would rise as recidivism fell below that threshold, the city would keep a share of the savings.....

.....Yet for all the enthusiasm among governments eager to draft private capital into providing social services, the new instruments carry potential drawbacks, too.

“Nonprofits are starved for funding and governments have little money to finance innovation,” noted Gordon Berlin, head of the social policy research organization MDRC, which led the program at Rikers for the city, contracting with Osborne to execute the plan. “Maybe people are loading a little bit more on this than they should.”

For one, designing social policy around precisely measurable results and narrow incentive mechanisms to draw private sector money might circumscribe the types of services the government will provide, in effect orphaning the messier, hard-to-measure challenges.

“If the government objective is to save money, it limits the use of programs like these to things that are very expensive, like prison beds, hospital beds, foster care beds,” Mr. Berlin said. “The choice of projects might be affected.....”

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