Iran: Bruce Bueno de Mesquita updates his TED talk

TED asked Bruce Bueno de Mesquita to explain the Iranian negotiations. Do not miss his thoughtful answers at TED Blog – you will definitely not see any of this in big media. I have excerpted two fragments of his commentary, one on the nuance of sanctions, and then on the media frenzy over Ahmadinejad (who Bruce reckons is roughly #17 in the power ranking):

President Obama has also made reference to sanctions as a possible response to Iran developing their nuclear program further. How effective do you think US sanctions would be in this situation?

I’m going to try to answer this very precisely, because there’s a very important distinction to be made between the threat of sanctions and the enactment of sanctions. The threat of sanctions can be very effective if the Iranian leaders calculate that the cost of the concessions being asked for is smaller for them than the cost that sanctions will impose, and to avoid sanctions they will make concessions in negotiation. And so, threatening sanctions is a very good thing to do at this stage as negotiations get going. On the other hand, if the Iranian leaders calculate that the cost of the threatened sanctions when imposed is smaller than the benefits that they gain when maintaining the policy that we’re trying to change, then they’ll maintain the policy and the sanctions won’t work. And so, generally, except for calculation error, the threat of sanctions can be effective. Once sanctions are implemented, that’s a pretty good indicator that the target of the sanctions has made the calculation that they can bear the cost of the sanctions better than they can bear the consequences of making the concessions, and they won’t work. That’s a subtle distinction, but an important distinction.

It’s also important to distinguish between sanctions that are aimed at the general economy of Iran and sanctions that are leader-specific, that are aimed specifically, for example, at tying up the leadership’s access by the leadership to their money or their funds. Sanctions of the latter type, leader-specific, are more likely to get them to decide up front to make concessions, rather than pay that price. Sanctions of the other type, aimed at the general country, are more likely to either form an opposition to the regime which, if they anticipate, will produce concessions beforehand, or to consolidate support for the regime, sympathy for the regime internally, in which case they would backfire. I’ve not analyzed what the likely consequences are along those lines, but those are the questions from a strategic perspective that one would have to work out. The threat is, in any event, a good thing because the threat forces the Iranians to make these calculations and therefore to reveal, through the negotiations, whether they have concluded that the sanctions really would be costly to them or not.

Sanctions at our end are typically more or less cheap talk because they don’t really cost the United States a lot. It doesn’t cost us a lot not to buy oil from Iran since we currently don’t buy oil from Iran. So, we’re not really giving up much. And tying up their bank accounts doesn’t really cost us much. It costs a little credibility to our banks, but that’s about it. Sanctions are also more effective if they are politically costly to the people imposing the sanctions, because then it’s an announcement that they view the issues as so important that they are willing to pay a price. So far, we have not shown that.

There are also the negotiations around the three Americans who are being held by Iran at the moment.

They’re a bargaining piece on the Iranian side. They’re something that the Iranians can give up to make themselves look nice, thoughtful, considerate. And presumably they are going to try to extract something of value. It’s actually quite funny — Ann Curry of NBC interviewed (Mahmoud) Ahmadinejad, a week or so ago, and brought up these three alleged hikers, and he indicated that Iran was open to releasing them when the United States released several diplomats that we were holding in Iran and Iraq. She informed him that we had released those diplomats in July. He obviously didn’t know that, so he found himself in this awkward position. So now, he’s got to presumably look for something else to get.

That anecdote has an important element to it. The American media spend much too much time paying attention to Ahmadinejad. He is not a big power in Iran. Khomeini and the Supreme Council and the Guardian Council — these people are important. They’re the ones who run the show. He can’t wander very far form what they want and get away with it. Look at after he was installed, and attempted to appoint a cabinet that Khomeini didn’t like.

Please continue reading…

Seeking an Israel Palestine solution via rational-choice theory

Triggered by the desire to calibrate the value of the game theory research of Bruce Bueno De Mesquita (BDM) I found a useful review of his work by Michael Lerner. Following is a sample from the article — of BDM’s thoughts on more effective approaches to the Middle East conflict:

Recently, he’s applied his science to come up with some novel ideas on how to resolve the Israeli-Palestinian conflict. “In my view, it is a mistake to look for strategies that build mutual trust because it ain’t going to happen. Neither side has any reason to trust the other, for good reason,” he says. “Land for peace is an inherently flawed concept because it has a fundamental commitment problem. If I give you land on your promise of peace in the future, after you have the land, as the Israelis well know, it is very costly to take it back if you renege. You have an incentive to say, “˜You made a good step, it’s a gesture in the right direction, but I thought you were giving me more than this. I can’t give you peace just for this, it’s not enough.’ Conversely, if we have peace for land–you disarm, put down your weapons, and get rid of the threats to me and I will then give you the land–the reverse is true: I have no commitment to follow through. Once you’ve laid down your weapons, you have no threat.

Bueno de Mesquita’s answer to this dilemma, which he discussed with the former Israeli prime minister and recently elected Labor leader Ehud Barak, is a formula that guarantees mutual incentives to cooperate. “In a peaceful world, what do the Palestinians anticipate will be their main source of economic viability? Tourism. This is what their own documents say. And, of course, the Israelis make a lot of money from tourism, and that revenue is very easy to track. As a starting point requiring no trust, no mutual cooperation, I would suggest that all tourist revenue be [divided by] a fixed formula based on the current population of the region, which is roughly 40 percent Palestinian, 60 percent Israeli. The money would go automatically to each side. Now, when there is violence, tourists don’t come. So the tourist revenue is automatically responsive to the level of violence on either side for both sides. You have an accounting firm that both sides agree to, you let the U.N. do it, whatever. It’s completely self-enforcing, it requires no cooperation except the initial agreement by the Israelis that they are going to turn this part of the revenue over, on a fixed formula based on population, to some international agency, and that’s that.”

As we have learned, “incentives matter”, in foreign policy just as in economics. Surely BDM’s proposal would at least improve the possibility of future cooperation. Will it take two generations of such policies to wash away enough of the Palestinian indoctrination of their young?

BDM founded Decision Insights Incorporated in 1981 and the New York consulting firm Mesquita & Roundell in 2003, but has been consulting independently for years for clients in the private sector and for a long list of governments:

…As one of the foremost scholars of game theory–or “rational choice,” as its political-science practitioners prefer to call it–Bueno de Mesquita is at the center of a raging hullabaloo that has taken over some of the most prestigious halls of learning in this country. Exclusive, highly complex mathematically, and messianic in its certainty of universal truths, rational-choice theory is not only changing the way political science is taught, but the way it’s defined.

To verify the accuracy of his model, the CIA set up a kind of forecasting face-off that pit predictions from his model against those of Langley’s more traditional in-house intelligence analysts and area specialists. “We tested Bueno de Mesquita’s model on scores of issues that were conducted in real time–that is, the forecasts were made before the events actually happened,” says Stanley Feder, a former high-level CIA analyst. “We found the model to be accurate 90 percent of the time,” he wrote. Another study evaluating Bueno de Mesquita’s real-time forecasts of 21 policy decisions in the European community concluded that “the probability that the predicted outcome was what indeed occurred was an astounding 97 percent.” What’s more, Bueno de Mesquita’s forecasts were much more detailed than those of the more traditional analysts. “The real issue is the specificity of the accuracy,” says Feder. “We found that DI (Directorate of National Intelligence) analyses, even when they were right, were vague compared to the model’s forecasts. To use an archery metaphor, if you hit the target, that’s great. But if you hit the bull’s eye–that’s amazing.”

Lerner closes with “A sample of Bruce Bueno de Mesquita’s wilder–and most accurate–predictions”

Forecasted the second Intifada and the death of the Mideast peace process, two years before it happened.

Defied Russia specialists by predicting who would succeed Brezhnev. “The model identified Andropov, who nobody at the time even considered a possibility,” he says.

Predicted that Daniel Ortega and the Sandanistas would be voted out of office in Nicaragua, two years before it happened.

Four months before Tiananmen Square, said China’s hardliners would crack down harshly on dissidents.

Predicted France’s hair’s-breadth passage of the European Union’s Maastricht Treaty.

Predicted the exact implementation of the 1998 Good Friday Agreement between Britain and the IRA.

Predicted China’s reclaiming of Hong Kong and the exact manner the handover would take place, 12 years before it happened.

For readers interested in a deeper assessment of Bueno de Mesquita’s work, see his 17-page CV at NYU [PDF].

The Logic of Political Survival

…why do governments that cripple or destroy their own societies survive in office for so long? …why do democratic leaders typically govern with less corruption, more prosperity, and less war for their peoples?

If you would like to deepen your understanding of politics — to be able to better predict what politicians will do, read on.

The Logic of Political Survival by Bruce Bueno De Mesquita, Alastair Smith, Randolph M. Siverson, James D. Morrow; MIT Press, Cambridge, MA, 2003

Russ Roberts’ Econtalk podcast series offers two wonderfully instructive conversations with Hoover Institution and NYU political scientist Bruce Bueno de Mesquita about his theory of political power — how dictators and democratically elected leaders respond to the political forces that keep them in office. The first was 14 August, 2006, The Political Economy of Power. The second was 12 February, 2007 Bruce Bueno de Mesquita on Democracies and Dictatorships. I recommend listening to the discussions in order.

I’ll attempt to summarize the kernel ideas, which provide a common framework for understanding how leaders behave over the spectrum of systems of government – from democracy to kleptocracy. I.e., the theory attempts to explain the incentives seen by a John Howard as well as by a Fidel Castro:

  • The primary focus of political leaders is to retain power.

  • The behavior of dictators differs from democratic leaders primarily due to the institutional characteristics of their respective systems.

  • Three parameters describe much of the institutional influence: the size of the Selectorate, the size of the Winning Coalition, and the ratio of those sizes.

  • The Selectorate are all those who influence the selection of new leadership — i.e., in the US that would be the electorate. In North Korea that would be the influential military officers, the drug & weapons smugglers, etc.

  • The Winning Coalition is the subset of the Selectorate that receives the “Private Goods“, and via loyalty keeps the leader[s] in power. In Australia that would be approximately the politicians of the governing party [and secondarily, the party voters]. In North Korea the Winning Coalition is a tiny fraction, estimated at between 250 to 2500 men who share about US$ 1.2 billion, or about 10% of the economy.

  • Private Goods are those given by the leadership to their supporters. In the Australian example these are ministerial appointments, etc. In Saddam’s Iraq the goodies given to the cronies were primarily corruption opportunities.

  • Public Goods are the inverse of the Private Goods. Public+Private Goods = the outputs the government controls.

  • If you are a leader, say Saddam, supported by a very small Winning Coalition, then corruption is the most efficient way to stay in power. I.e., starve Public Goods in order to provide Private Goodies to your cronies.

  • If you are a leader, say John Howard, supported by a very large Winning Coalition – i.e., roughly half of the Selectorate, then the most efficient way to stay in power is by the provision of Public Goods. E.g., education, defense, roads, health, retirement.

  • From a leader’s perspective the optimum institutional design is the one Lenin invented – that of Rigged Elections – where you have a relatively Very Small Winning Coalition and a Very Large Selectorate. The relatively-smaller the Winning Coalition the more loyal they are [because they run a BIG risk of not being included in an alternate leader’s coalition]. I.e., of being cut off from the bribes.

  • Lenin’s invention of the rigged-election-autocracy is of course no longer secret: reference Ahmadinejad, Chavez, Castro, or Putin.

  • Essential to the rigged-election-autocracy is for the leader to prevent freedom of assembly and to control the media. Given those two controls it isn’t so important to control the vote counting – that’s just a nice to have. Note especially that “certified honest elections” are meaningless in this context.

  • Regardless of institutional design, a leader’s optimal economic framework is the “resource curse” such as oil or diamonds. Then he need not tax labor to feed the corruption.

  • Foreign aid behaves exactly the same as the cursed resources – aid props up the dictator. Aid is channeled first to the corrupt Winning Coalition – making the situation of the intended recipients of the aid worse off than before the aid. There is a way to make aid effective, but it has never been attempted. See the podcast for the details on how to reform the World Bank, etc.

That’s my attempt to summarize the foundations. These two podcasts delve into much, much more: from term limits to war-making to war-exiting to trade. Enjoy!

You can retrieve two excellent academic reviews of Bueno de Mesquita’s latest book “The Logic of Political Survival” at Political ReviewNet by searching for the book title. The first review is by Stephen G. Walker:

It is not surprising that this book took four authors a decade and almost 500 pages of text, sans footnotes and references, to complete. In spite of the scope of the analysis and the use of powerful mathematical and statistical methods, The Logic of Political Survival is written in an engaging style that makes the argument accessible to a general reader.

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