The economics of war and coercion

Question 1

Is there any rational explanations for wars?

Answer 1

Puzzle: Wars are very costly for all parties → why do they keep occurring? (not very rational). Why don’t we negotiate instead?

4 attempts on rational explanations (that no one really believes)

1. Anarchy: We live in a Hobbesian-world: everyone fights everyone without a legal structure
   - Counterargument: Even in such a world it would be rational to bargain
2. Rational preventive war
3. Positive utility from invading a country
   - You get everything in the country if you win
   - Counterargument: You could have gotten more by bargaining
4. Miscalculation due to lack of information

Question 2

What are more promising explanations for why wars happen, even though it seems irrational?

Answer 2

1. Private information
   - In certain situation it is rational to keep information hidden: e.g. on military capabilities, moral
   - A war can happen if countries misjudge each others relative strength due to unshared private information
   - Example: Russia right now → has probably overestimated own strength → Ukraine has no incentive to share their private information
2. Commitment problems
   - No party will commit to not attacking first → makes it rational to attack first
3. Indivisibility
   - Sometimes you fight over stuff that can’t be divided: bargaining won’t work.

Question 3

How important are economic factors in deciding who wins wars?

Answer 3

Very: resources matters for who wins wars

Question 4

What is the trade off between using carrots or sticks in non-democratic countries?

Answer 4

Trade-off between carrots and sticks

Carrots:
- Plus: Increase popularity
- Minus: Reward protest

Sticks
- Plus: Decreases likelihood of protests
- Minus: Decrease popularity