Local Prosperity OR Foreign Carnage = Good Leader

Reviewing non-Levitt Freakonomics, Alex Tabarrok writes:

In "War Politics" (subscription required), a paper published in the prestigious American Economic Review, Gregory Hess and Athanasios Orphanides present evidence that presidents sometimes start wars for purely political reasons. Hess and Orphanides have a simple model: Voters care about two things, a president's war-making ability and his (or her!) ability to manage the economy.

If the economy is doing well, a sitting president is up on one score and without evidence can be assumed to be as good as the challenger in war-making ability. Thus, the president gets reelected. But if the economy is doing badly then an incumbent who cannot present evidence that he has superior war-making ability will lose for certain. Crucially, an incumbent can't demonstrate war-making ability without a war -- so when the economy is doing poorly and the President is up for reelection the model predicts more wars.

Hess and Orphanides define a war as "an international crisis in which the United States is involved in direct military activity that results in violence." Using data from the International Crisis Behavior Project, they compare the onset of wars in first terms when there is a recession with (a) the onset of wars in first terms with no recession and (b) second terms. Stunningly, however, they find that in the 1953-1988 period wars are about twice as likely in first terms with a recession than in first terms with no recession and second terms (60% to 30%). The probability of this result occurring by chance is low.

Need I mention that the Hess and Orphanides model has proven to have predictive power?

Reminds me of the Mencken quote: "Democracy is the theory that the common people know what they want and deserve to get it good and hard." It's kinda hard to blame our leaders for warmongering when they are just doing what gets them elected, which is how the system is designed to make them behave. But its rather sad that in this day and age, we still evaluate our leaders so tribally, with the main inputs being local prosperity and foreign carnage. Sigh. Perhaps some day we can find and excise the gene which sees war as gain...without completely eliminating testosterone.

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I haven't read the original

I haven't read the original paper, but Alex's description shows a bias (presumably present in the original). One could equally hypothesize that voters care about a president's ability to manage the economy and his (or her!) ability to protect and defend the country and its citizens.

With that view, the argument would then conclude that in poor economic times, sitting presidents would look for opportunities to demonstrate their ability to protect and defend. This could certainly take the form of "international cris[es] in which the United States is involved in direct military activity that results in violence", but it could also take forms in which violence does not result: a commitment to increasing military budgets, for example, or the successful use of the threat of military action (aka "hard-line" diplomacy) to favorably resolve potential crises. The Cuban missle crisis springs to mind as one example; the Iran hostage crisis is a good example of a failure.

Furthermore, while it is tempting to use the argument to conclude that sitting presidents in economic downturns are prone to provoke crises, one could also conclude that such presidents will be prone to react to unprovoked acts of hostility in ways that demonstrate (perhaps only superficially) effective strategies and tactics to defend against the hostile parties and prevent future hostile acts. Even libertarians would view such responses favorably if they did not cross the line from defense against violence to initiation of violence. A sitting president in good economic times might be less prone to act with sufficient vigor to provide an adequate defense.

Note that in the 2004 elections, the sentiment that the opposition candidates expressed was less frequently "invading Iraq was morally wrong" but rather "the way the administration has handled Iraq has made us less safe". Both the administration and the opposition were attempting to sell themselves as better defenders of the country, not simply better directors of military action.

I know that Catallarchy is generally opposed to war and specifically *the* war, and I don't wish to turn the discussion into yet-another-debate between libertarian hawks and doves. Consider it from this angle instead: in an anarcho-capitalist society, individuals would buy services from protective agencies that they think will do a good job of protecting and defending them while minimizing expenses from pursuing warfare and violence. Would protective agencies then not have an incentive to find or create opportunities to demonstrate their capabilities? How would their incentives, both good and ill, be different from those of a sitting president?

But Eddie does raise a good

But Eddie does raise a good point. How do you advertise yourself as a successful PDA? Well, pointing out just how many asses you’ve kicked seems to be one pretty obvious strategy.

Surely, but other things being equal, having low rates would also be a pretty good advertisement. And, if you believe that peace tends to be cheaper than war -- as I do -- the lower rate company will be the one that minimizes violence -- that kicks ass in an effective manner. If that creates an incentive for aggression, it is a similar incentive to that that the local police departments have. My guess is it will be a more efficient aggression that ends up being produced.

eddie, For one thing, the

eddie,

For one thing, the protection agencies would not also be entrusted with the "management" of the economy; their customers would not believe that the same agency that saves them from foreign invaders ought also save them from recessions, and would not blame them for failing to perform the latter function.

Nick, But Eddie does raise a

Nick,

But Eddie does raise a good point. How do you advertise yourself as a successful PDA? Well, pointing out just how many asses you've kicked seems to be one pretty obvious strategy. But that will mean making sure that you do actually kick some asses, so won't that create incentive to be somewhat aggressive?

Incidentally, I heard a paper at a conference that made similar claims about military virtue. Once warlike characteristics become virtues, soldiers will want to show that they have such virtues. How do they do that? They need a war. So his conclusion was that the praise of military virtue may have the long-term effect of making societies more war-prone. I would think that a similar sort of argument might apply to PDAs.

I'm not sure that this

I'm not sure that this reflects so much on the voting populace, who are assumed only to care about the economy and war. In the last Election, a substantial majority voted on simple image issues which are almost completely unrelated to the presidents performance, i.e. Vote for the guy you can have a beer with or the guy who cares about your grandmother. As a result the context is decided largely by elites who tend to vote their class interests. I don't doubt that the model is somewhat true (of course) but I do think that perhaps there are a few erroneous underlying assumptions which color their conclusions.

There's an economic effect

There's an economic effect of war as well, which is probably the primary effect. Both a Macro (it can serve as a stimulus) and a micro effect (it can reward the guys who funded your campaign.) Thus what you may be seeing are two different political models:

1. The "good economy" president has a broad base of support because everyone's pockets get a little fatter.

2. The "war" president has a narrower base of political support because a few cronies get their pockets really really fat. And of course, if you consider the general macro stimulus, everyone's pockets get fat right around election time.

Now this is a simplistic model, one that's actually dead wrong in a few complicated ways, but nevertheless I think it describes a general picture which is accurate. There's a "rally around the flag" effect from war but it's fairly temporary, and given that elections are decided by elites anyway (Shout out to Jonathan Wilde and his love of Domhoff) it's more fruitful to appraoch this subject by looking at the political effects on elites.

by the way- I think this whole exit vs. voice thing is bunkum. Comparing the two is apples and oranges, because "Exit" (in this case meaning do I buy or not, right?) is rarely intended and/or interpreted politically. It's jnst reflective of tastes as a general rule, not of deeper policies and is incomparable to "voice" in which you can ideally specify what you want and mean. Now it is a fair point to say that there's not much "voice" in current US politics (which is the point I'm making above) but that's not a theoretical failure of democracy, because it hasn't always been that way (and because the sham elections aren't the only way you can have a political voice.)

-Matt

Consider it from this angle

Consider it from this angle instead: in an anarcho-capitalist society, individuals would buy services from protective agencies that they think will do a good job of protecting and defending them while minimizing expenses from pursuing warfare and violence. Would protective agencies then not have an incentive to find or create opportunities to demonstrate their capabilities? How would their incentives, both good and ill, be different from those of a sitting president?

The situation is very different, because I get to choose my PDA but not my president. My president makes war with other people's money, my PDA makes war with my money.

That is, my decision about who to vote for is a decision about a symbolic statement of which leader I approve of. I may symbolically approve of military might, but if actually given a real choice about whether to pay an extra $100 in taxes this year so that we could rattle our sabres, I would decline.

With a PDA, the incentives are private. The PDA, like any business, does have an incentive to demonstrate its capability. But, like any business, its advertising must be cost-effective - otherwise the bottom line suffers. Our nations advertising does not have to be cost-effective, as it is not accountable to shareholders or customers who have the power of Exit.

But Eddie does raise a good

But Eddie does raise a good point. How do you advertise yourself as a successful PDA? Well, pointing out just how many asses you’ve kicked seems to be one pretty obvious strategy. But that will mean making sure that you do actually kick some asses, so won’t that create incentive to be somewhat aggressive?

Not at all. That's how you advertise that you are a wasteful PDA. Do police demonstrate that they are good police by conducting raids on neighborhing cities? No, they demonstrate it by keeping their city safe, and by nailing people who break the peace.

A successful PDA would advertise by zealously and efficiently hunting down those who foolishly fucked with its clients. And the efficient part is important - I wouldn't want a PDA that had a team of 5 working for a week to recover a stolen $100 watch. Yeah, you'd always get your stuff back, but the premiums would be too high. It is that comparison of cost and value which public protection lacks, and which we know that a market needs in order to be efficient.

I should explain what I mean

I should explain what I mean by "primary effect" of war above- certainly I'm not claiming that the deaths of 100,000 iraqis in a war of aggression is not a "primary effect", but rather that it's not the effect which motivates the important proponents of the war. That's what I'm referring to when I mention the "primary effect."

-Matt

Patri: "Do police

Patri: "Do police demonstrate that they are good police by conducting raids on neighborhing cities? No, they demonstrate it by keeping their city safe, and by nailing people who break the peace."

True. Of course, police these days don't have to compete for clients, so there really isn't any pressing need to show that they are good police.

There are, however, plenty of people who are willing to pay a lot for security even when all that extra money isn't being spent efficiently. Consider, for instance, the degree to which Americans are willing to spend lots of money to fight terrorism, when terrorists kill fewer Americans each year than lightening does. Actually, my favorite example is the Bear Patrol from _The Simpsons_.

My point is that there is and probably always will be a market for an inefficient but really bad-ass PDA. But bad-ass PDAs can be bad-ass only if they beat up on somebody. Once somebody starts the pissing contest, others are, in some sense, forced to compete or get squashed.

In a purely rational world, PDAs would of course all avoid war since war is far more expensive than peace. But many people don't behave rationally, especially when safety is involved. The same sorts of people who will go take low-paying, high-risk jobs because they see commercials with guys painted green and jumping out of helicopters are likely also to want their PDAs to be like the 82nd Airborne. Again, though, one can get the reputation for being tough and aggressive only by actually being tough and aggressive. Once that's a selling point, there is incentive to actually create conflict to demonstrate one's toughness and aggression.

Joe, There are, however,

Joe,

There are, however, plenty of people who are willing to pay a lot for security even when all that extra money isn’t being spent efficiently. Consider, for instance, the degree to which Americans are willing to spend lots of money to fight terrorism, when terrorists kill fewer Americans each year than lightening does. Actually, my favorite example is the Bear Patrol from The Simpsons.

I don't think that there's any proof that Americans are willing to spend lots of money to fight terrorism. "Spend" doesn't really apply in this. To spend, one must voluntary fork over his own money. Taxes are an involuntarily forking. True, some people - many even - would be willing to fork if they had a choice, but many also wouldn't. We can't know since there's no market. Polls can help us figure that out, but what people say in polls and what they actually do are different things as I'm sure you know. And if there was a market, those willing to fork would have a lot less money to work with to fight their war as those unwilling to fork would not be forking.

As an example, in a free market for security, I would be willing to fork over money to any PDA that would protect me. I would probably be willing to fork to a company whose goal it was to hunt down Al-Qaeda.

In a purely rational world, PDAs would of course all avoid war since war is far more expensive than peace. But many people don’t behave rationally, especially when safety is involved. The same sorts of people who will go take low-paying, high-risk jobs because they see commercials with guys painted green and jumping out of helicopters are likely also to want their PDAs to be like the 82nd Airborne. Again, though, one can get the reputation for being tough and aggressive only by actually being tough and aggressive. Once that’s a selling point, there is incentive to actually create conflict to demonstrate one’s toughness and aggression.

I agree that there are irrational people who want to jump out of helicopters, fork over their money, etc. The question then becomes - which political system minimizes the their influence?

In the market, if 60% of the people prefer Coke and 40% prefer Pepsi, then all things being equal, Coke's market share would be approximately 60% and Pepsi's market share would be approximately 40%.

In a political market, if 60% of the people prefer Coke and 40% prefer Pepsi, then Coke's market share is 100%. The 60% externalize the costs of their preferences onto 40% of the people who don't prefer Coke.

In a political market, if 60% of the people prefer to fight the War on Terror, and 40% prefer not to fight the War on Terror, then 100% of the people have to fork over their money to fight the War on Terror. The 60% externalize the costs of the aggression, irrationality, etc on the 40% who don't.

The political market magnifies aggression because it's monopolistic.

The above example uses a majority externalizing the costs of its preferences to a minority. However, due to the diffuse costs of aggression and focal benefits of agression, a political market also allows small minorites to externalize the costs of their aggression to the majority.

For example, textile Company A whose workforce comprises less than 1% of the population would benefit by $10 million if tariffs were enacted on the rest of the population. Yet, the costs bourne each individual in the 99% that don't work for the company is a $1 a year in higher priced clothing. The company might be willing to spend $1 million to contribute to the campaign of a congressman running for re-election. In such a situation, the company would get a 10-bagger return on investment ($1 million ---> $10 million).

But there's little reason for the 99% to spend much more than a dollar fighting the tariffs. Why should anyone spend millions of dollars to fight tariffs in order to save $1? Hence, the tariffs pass even though the vast majority oppose them. The costs of aggression of a focal minority are externalized and dispersed to a large majority.

Hence, today we have hundreds of special interests groups that successfully exploit the system for tariffs, subsidies, government projects, pork, enforcement of victimless crimes, etc. They are simply aggressive would-be PDAs that would have a tough time surviving in a free market but are able externalize the costs of the aggression to a large majority in order to not only survive, but actually thrive.

Getting back to the original example, if I was serviced by a PDA that also serviced a small minority of diehards were eager to fight a war, the minute I found out, I would call up a different PDA. I would not fork over any money to fight the war. The PDA would have less money to finance their aggression. I'm sure a similar amount of "rational" people like myself would do the same. Competing PDAs would be made stronger, and those competing PDAs that wanted to advertise their competence to these rational people, they would do their best to fight the rogue PDA as efficiently as possible. Efficiency, not aggression, would be the thing to advertise.

A better description for democracy, often thought of as tyranny of the majority, is a tyranny of the minority.

War for Votes At first

War for Votes
At first glance, it seems like presidents go to war to get re-elected, but does the evidence really support such a conclusion?...