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A Classical Refutation of the Glazier’s Fallacy

July 25, 2014 1 comment

John Quiggin has a good post up on the Glazier’s Fallacy (which I’ve more commonly heard referred to as the broken-window fallacy).

Here’s the original argument from Henry Hazlitt:

A young hoodlum, say, heaves a brick through the window of a baker’s shop. The shopkeeper runs out furious, but the boy is gone. A crowd gathers, and begins to stare with quiet satisfaction at the gaping hole in the window and the shattered glass over the bread and pies. After a while the crowd feels the need for philosophic reflection. And several of its members are almost certain to remind each other or the baker that, after all, the misfortune has its bright side. It will make business for some glazier. As they begin to think of this they elaborate upon it. How much does a new plate glass window cost? Fifty dollars? That will be quite a sum. After all, if windows were never broken, what would happen to the glass business? Then, of course, the thing is endless. The glazier will have $50 more to spend with other merchants, and these in turn will have $50 more to spend with still other merchants, and so ad infinitum. The smashed window will go on providing money and employment in ever-widening circles. The logical conclusion from all this would be, if the crowd drew it, that the little hoodlum who threw the brick, far from being a public menace, was a public benefactor.
Now let us take another look. The crowd is at least right in its first conclusion. This little act of vandalism will in the first instance mean more business for some glazier. The glazier will be no more unhappy to learn of the incident than an undertaker to learn of a death. But the shopkeeper will be out $50 that he was planning to spend for a new suit. Because he has had to replace a window, he will have to go without the suit (or some equivalent need or luxury). Instead of having a window and $50 he now has merely a window. Or, as he was planning to buy the suit that very afternoon, instead of having both a window and a suit he must be content with the window and no suit. If we think of him as a part of the community, the community has lost a new suit that might otherwise have come into being, and is just that much poorer.
The glazier’s gain of business, in short, is merely the tailor’s loss of business. No new “employment” has been added. The people in the crowd were thinking only of two parties to the transaction, the baker and the glazier. They had forgotten the potential third party involved, the tailor. They forgot him precisely because he will not now enter the scene. They will see the new window in the next day or two. They will never see the extra suit, precisely because it will never be made. They see only what is immediately visible to the eye.

Quiggin’s response is basically Keynesian (which is fine by me):

Suppose that the glazier, having been out of work for some time, has worn out his clothes. Having fixed the window and been paid, he may take his $50 and buy a new suit. To make the story stop here, we’ll suppose that the tailor is a miser (a vice traditionally associated with the clothing industry, as with Silas Marner), and puts the money under his mattress. So, in this version of the story, the glazier and the tailor are both paid, and the social product is increased by a new window and a new suit.

What if the window had not been broken? Under the assumptions made so far, the shopkeeper would buy a new suit for $50, the tailor would hoard the money and the glazier would remain unemployed. The shopkeeper is better off, since (before the window was broken) he preferred a new suit to a new window. On the other hand, the glazier is worse off, since he gets no work and no suit. For society as a whole, both output and employment have increased.

So, the seeming refutation of the glazier’s fallacy falls apart on closer examination. On the one hand, Hazlitt uses language that implies the existence of unemployment. On the other hand, he is implicitly assuming that private and social opportunity cost are the same. The Second Lesson tells us that this won’t be true in general if the economy is in recession.

It’s a good response, but this argument isn’t going to move anyone who’s already inclined to dislike Keynes.  Instead, I think it’s better to deconstruct Hazlitt’s argument from a classical perspective.   As I see it, the problem with the Classicalists is that they view income as exogenous.  The most important thing that Keynes showed, however, was that income is endogenous–fixed at the level of spending.   Once that point is understood, it’s clear that Hazlitt’s scenario is a very special case even in the Classical tradition.

So, let me change Hazlitt’s thought experiment slightly.

First, suppose it is not the shop window which has been smashed, but a window at the shopkeeper’s home and suppose further that the shopkeeper doesn’t like to hang out at his now drafty house.  Technically, we say that the window is a complement for home-leisure activities which the shopkeeper likes to engage in when his home is intact.

In this case, the relative opportunity cost of working is lower (his alternative to working are home-leisure activities in a now drafty house), and so on the margin standard theory would imply that he would substitute work for leisure.   Longer hours working means that the shopkeeper’s income is higher, which presumably you can again talk about his propensity of spend that extra income on goods-other-than-home-leisure.

The rest of the story is the same, but in my scenario it is only the labor-leisure tradeoff, rather than unemployment, which does the work.

Economic Rights are Positive, Political Rights are Negative

Simon Wren-Lewis has a great post up which relates to a point I’ve wanted to make for a long time…  It’s not really a new point, per se, (I heard similar points being made with respect to “right-to-work” laws and there is this from Brad DeLong in a similar issue), but… well… Simon just has a great thought experiment:

Employees are already beset by red tape if they try to improve their working conditions. Now the UK government wants to increase the regulatory burden on them further, by proposing that employee organisations need a majority of all their members to vote for strike action before a strike becomes legal, even though those voting against strike action can still free ride on their colleagues by going to work during any strike and benefiting from any improvement in conditions obtained. Shouldn’t we instead be going back to a free market where employees are able to collectively withhold their labour as they wish?
I doubt if you have ever read a paragraph that applies language in this way. Yet why should laws that apply to employers be regarded as a regulatory burden, but laws that apply to employees are not?
Here’s how I’d make the same point more generally:  Economic rights are always positive rights–rights provided by the government to expand citizen’s choice set–while political rights are always negative rights–that is, freedom from interference.
The fundamental unit of an economy–the economy’s “atom”, if you will–is the Transaction.  I do something for you, then you do something for me.  That’s what makes an economic system economic.
But a transaction cannot be defined for an individual.  Transactions always involve two (at least!).   That’s key.  There’s you, there’s me and we’re trying to trade something.  So what does this have to do with economic rights?
Consider freedom of contract.  There’s you, there’s me and we’re trying to come to agreement.  Obviously, we can come to agreement without government interference.  If we do, though, what happens when both of us are caught off guard by how events actually play out?  Well, we renegotiate.  But the possibility that we will renegotiate itself makes certain contracts/agreements undesirable, because each of us knows that we may be at a disadvantage if we have to renegotiate (this is called the hold-up problem).
Doesn’t sound like a big deal?  Consider the example of the humble spot transaction.   There’s no government, so suppose I have a horse you need to get around on (since there are no roads anymore) and you have a fistful of gold (since there’s no currency without government to provide it).  I’d like to trade my horse for your gold.  We meet, I get off my horse, you hand me your gold… now, what’s to stop me from jumping back on my horse and riding away?  Now I have both horse and gold.
Stealing the horse is a “spot-renegotiation” because it happened while the transaction was proceeding.   It just so happens that at one point during the transaction, I had all the bargaining power because I was physically in possession of both goods.   If we can’t manage to trade horse for gold simultaneously, this will always happen to one of us or the other, so we probably won’t even bother trying.   Really, this is a point you should already be familiar with from movies or TV when the good guys need to trade something with the bad:   doesn’t something always go wrong?
On the other hand, if there’s a government, guys with guns come to my home, take the horse back and lock me in jail.  That makes it easier for us to come to come to an agreement in the first place so we can trade that horse for gold.  The government provides the ability to make contracts  which will be upheld by our counter-parties because the government will actively use force to make sure everyone lives up to their agreements.  It’s what I called the “visible hand” of the market in previous posts.
This need not be a particularly anti-libertarian view.  After all,  this is the reason that libertarian philosophers like Nozick argue for minarchy rather than anarchy.  The government needs to exist to provide economic rights (at a minimum), because economic rights are always positive rights–they only exist when the government provides them.   Whenever people transact, there must always be someone to say to them, “live up to your agreement!”   And that someone is “the government” whether they want the designation or not.
The libertarian mistake is thinking that economic rights flow from a principle of non-interference.  Government is a necessary, if silent, collaborator in every transaction because government is what makes everyone play by the rules.  Non-interference is a property of negative rights and only negative rights are political rights.
Political rights govern our interactions with government itself.   “Free speech” doesn’t mean I can say what I  want without consequence.   I can get fired for trashing my company in front of clients, and rightly so.  Free speech only means that the government has no standing to punish me for my views about government.   Political rights are the activities with which government can’t interfere.
Libertarians are trying to have it both ways.  They want economic rights (ownership, contract) to be supreme over political rights (suffrage, speech, religion), but they also want non-interference to be supreme over positive rights.   Positive rights over negative rights over positive rights.
Nozick’s Wilt Chamberlain thought experiment tries to get around this problem by simply ignoring issues of ownership (an economic right) in his theory of distributive justice.  It’s not that he’s wrong precisely, but instead it’s weird to say “a distribution is fair if it resulted from non-interference”… right after assuming that all ownership rights are sorted out and agreed upon by all parties.    Agreeing on and sorting out those property rights is exactly the reason government exists.   It’s almost like saying “assume government isn’t needed, ergo non-interference by government is best”.  Well, duh.   It’s easy to miss this, because Nozick concentrates on Chamberlain’s human capital–which no one objects to his owning–and ignores everything else.
So, libertarians, this is your challenge.   Choose which is more important to you, economic rights above political rights, or non-interference/negative rights above positive rights.  Those positions are in direct conflict.
I’ve ranted on long enough.  So let me leave it at that.

Efficiency, Optimality and Values

May 4, 2014 2 comments

For the record, I see this post as a continuation and (yet another) response to the Sargent-Smith/KrugmanHouse debate over Sargent’s equity-efficiency assertion which I’ve commented on before.   The latest round of posts related to the topic have this debate trending in what I think is an odd direction putting me in the awkward position of defending a concept, Pareto efficiency, which I’d be more comfortable criticizing.

My proximate purpose  is to respond to Simon Wren-Lewis’s new post which I think illustrates the problem–this is, I think, one of the biggest confusions among economists about our own subject (not that Wren-Lewis is necessarily confused here, but he’s at least bringing up the problem).   The key graf:

Why is there this emphasis on only looking at Pareto improvements? I think you would have to work quite hard to argue that it was intrinsic to economic theory – it would be, and is, quite possible to do economics without it. (Many economists use social welfare functions.) But one thing that is intrinsic to economic theory is the diminishing marginal utility of consumption. Couple that with the idea of representative agents that macro uses all the time (who share the same preferences), and you have a natural bias towards equality. Focusing just on Pareto improvements neutralises that possibility. Now I mention this not to imply that the emphasis put on Pareto improvements in textbooks and elsewhere is a right wing plot – I do not know enough to argue that. But it should make those (mainstream or heterodox) who believe that economics is inherently conservative pause for thought.    

The problem is that Pareto efficiency and optimality are not the same things, cannot (or should not) be used interchangably.  In fairness, when I’m being a sloppy, I do the same thing; but it’s important to remind ourselves why this is a mistake.

So to remind ourselves, what is optimality and what is efficiency?

Optimality is the solution to a kind of thought experiment; the answer to the question of what would a benevolent, god-like social planner do if it had complete control of the economy (or “constrained optimal” if the social planner must work under constraints).   The advantage of the approach is that it produces unambiguous outcomes (often a single point in allocation-space).   The disadvantage is that  the planner’s problem is by definition not values-neutral.   Why do I say it’s not value’s neutral?  Because you need to define the planner’s objective function (i.e. the social welfare function) and the social welfare function defines the trade-offs the social planner is willing to make, for example, when balancing equity/efficiency.   “All I care about is Bill Gates’ wealth” is an acceptable, if odd, social welfare function, as is “complete equity at all costs”.   The general case is somewhere in between these two.

Efficiency means that there are no unexploited gains (no one can be made better off except at the cost of making another worse off):  contra Wren-Lewis, I want to argue that this is very much a values-neutral idea.   To see why consider this little factoid: regardless of the social welfare function you choose, the solution to every planner’s problem is Pareto efficient.  The converse is not necessarily true (Pareto efficiency is a necessary, not sufficient condition of optimality… as an aside this is where the confusion–I think–comes from, since economists often refer to the planner’s solution as “efficient”).   So here’s the thing, for every point in the Pareto set there is a social planner who would choose that point as the optimum (or you might say there’s a set of values which corresponds to each point in the Pareto set).   That’s the sense in which Pareto efficiency is values-neutral.

What Wren-Lewis is arguing about is slightly different issue.   Is the search for Pareto improvements also values neutral?  I think most economists would say ‘yes’.   After all, no social planner would be any worse than indifferent to a Pareto improvement (a valid social welfare function is weakly increasing in the well-being of every individual agent in the economy).

Does that actually make a Pareto improvement values neutral, however?   No, of course not (this is what I think Wren-Lewis has in mind, but I’m only guessing).   A Pareto-improvement shifts the outcome in allocation-space, but as a general matter a Pareto improvement “picks a direction”–different social planners will disagree that it is the correct direction to take.   Some social planner’s would even prefer to take away from some agents to give to others.   To put it more simply, if you keep exploiting Pareto inefficiencies randomly until you reach an efficient outcome, is the result optimal?   The answer is that with probability one, it will not be.

I’m not sure if I have any other comments to make… just a reminder to myself and others to be careful regarding efficiency and optimality.   I do suspect that the “confusion” here reflects a preference among some economists for the “core” solution concept of cooperative games… but I need to think about that a bit before I make that argument.  So I’ll leave this post here for now.

Who’s in the echo chamber?

April 29, 2014 1 comment

Via Krugman, I see this post by Chris House talking about an efficiency-equity trade-off.  House, of course, is just writing from the standard, near consensus view within economics.   The thing is, though, there is no evidence or theory (not depending on modelling choices) within economics which supports the view that there is necessarily a trade-off.

Let me be clear.  I’m not saying that there is no trade-off, I’m saying that House and Sargent (whose speech to some Berkeley undergrads started this whole blog debate) are making a claim which, while commonly believed by many economists, has no other justification.

Sargent’s speech lists 12 principles of economics that everyone ought to know, the principle in question is his assertion that:

There are tradeoffs between equality and efficiency

Again, I’m not saying this is wrong, I’m saying there is no justification.

So, what is House’s case?   Basically this:

The truth is that if we want to really attack the problem of income inequality (promote equality and help the poor) then we are going to have to take stuff away from richer people and channel it to poorer people. This kind of action will most likely have consequences for markets and these consequences will be unsavory.

Taking stuff away from the rich and giving it to the poor equals unsavory consequences… and you can justify this generally, without invoking a model-specific result, right Chris?

I’ve written about this before, but this particular argument is one that I perhaps didn’t adequately deal with, so here goes.   House is saying that in order to correct for a… let’s call it a maldistribution… will require taxes and transfers.   Taxes and transfers have efficiency costs, ergo equality-efficiency tradeoff.   QED.

That’s not how it works, Chris.

The way it actually works in economics when we want to study efficiency is that we imagine a god-like social planner and ask ourselves “what would the social planner do”… so what would a social planner view as a maldistribution of wealth?   (I’m presuming that utility is weakly increasing in wealth, not income, btw)  You can view this in several ways, but the simplest intuition is just this:  GDP, which House is implicitly using as a measure of well-being (although it’s nothing of the sort), is “additive”, but all else equal, social welfare is “multiplicative” (as a result of convexity).    Maximizing a sum (or equivalently an arithmetic mean) would leave a social planner indifferent to distribution… there is no maldistribution in House’s world.   Social welfare on the other hand is maximized at the point of equality (or equivalently the geometric mean).

The reason that there would be any “optimal” inequality at all, then, is that there is an informational rent associated with figuring out which factors are most productive and encouraging those factors to be active.   This is the heart of Mirlees’ optimal taxation result.   So House has things backward: a sufficiently god-like social planner would make sure that everyone has equal wealth, ceteris paribus and any deviation from that result has to be justified on informational grounds.   Inequality can only be justified as constrained efficient, not to be confused as efficient.

More than that, though, is that its just not clear that taxes must necessarily cause inefficiency.  It’s not at all difficult to tell a story in which wealth taxes, for example, can encourage capital formation by, say, encouraging complementary human capital to accumulate or by encouraging productive capital over “frivolous” capital (by that I mean things like McMansions).   Taxing productive capital may increase its after-tax cost, but the redistribution it funds can also increase the value of its production stream.

So, are efficiency and equality free of any tradeoff?   Not necessarily, and certainly that’s not what I’m saying.    No, the point is that Sargent’s “principle” is not some immutable law of nature, but a model-dependent best-guess.   You might say that the sign of the tradeoff is ambiguous in theory… and it is at this point that I should mention that the only empirical evidence I know of which directly test the sign of that tradeoff are those IMF studies that suggest that equality and efficiency move together.

So, Chris, if you’re reading this, I leave you with the following wise words:

Talking in an echo chamber can be fun but public intellectuals like [House and Sargent] have a greater responsibility to self-censor than most because they have large audiences. They have a responsibility to the public and also a responsibility to their… readers who take their statements to heart

Just sayin’…

No, there is no trade-off between equality and efficiency

April 21, 2014 1 comment

Matt Yglesias has a good post up knocking down Tom Sargent’s claim (now circulating the econo-blogosphere, although the speech was in 2007) that “There are trade-offs between equality and efficiency“.

The thing of it is that not only is Sargent wrong here–although the sentiment is common among professional economists–but more importantly is that there really isn’t any reason to believe that this is right… just some vague sense that proper incentives require paying the most skilled among us more.  So basically, Yglesias is letting Sargent off much too easy.

To show why, I’ll go through all the interpretations of Sargent’s claim one-by-one and explain why each is wrong.    I could do much more than this: one of my thesis projects is directly relevant here, although that work’s not really ready for daylight.

  1. Efficiency requires a particular distribution.   Nope.    In standard theory, the set of Pareto efficient allocations turns out to contain any distribution of wealth/utility between the agents.  One person has 100% of the wealth?   There’s an efficient allocation like that.   A different person has 100% of the wealth?  Also one like that.   Complete equality?   Yep, there’s one like that, too.  This is always true in any trading situation.   The only thing that causes Pareto inefficiency are market distortions.
  2. Efforts to correct for the distribution result in inefficient allocations.  Nope.  The proof for the Second Welfare Theorem in fact requires redistributing wealth before trading.  Then, after this redistribution is completed, it is shown that any efficient allocation can be attained.   You like perfectly equal, efficient outcomes?   The Second Welfare Theorem says that there is a redistribution which will provide that efficient outcome.  The statement precisely is that the efficient market will produce the efficient outcome as a “price quasi-equilibrium with transfers” (from Mas-Colell if you’re curious).
  3. Dynamic Inefficiencies from redistribution?   This is the point that Yglesias is in effect debunking.  So, I’ll leave that to him and send you back to that post.   I will add to his argument only that wealth is itself a market distortion.  How can I say that?   Well, I’d say go look at my thesis, but that’s out (for now)… so instead just think about it in terms of Piketty’s point: if the rate of capital accumulation, r, is greater than the economy’s growth rate, g, then it must be the case that wealth (i.e. claims to ownership) explodes in the limit.  That is, one  person eventually owns everything.
  4. Countries with unequal wealth grow faster, and do so for a longer time?   No, on both counts.   Don’t ask me, though, just ask the IMF.  Oh snap.   The sign seems to go in the opposite direction.  Ouch.   In fairness, Sargent didn’t know about this line of research which hadn’t been published yet.   But then, maybe that’s why he shouldn’t make strong claims to impressionable college students who go home with the wrong lesson which they then hold tight to for the rest of their lives.
  5. Wealth rewards the exceptional for being awesome.   Heh.  No.   And anyway, economics isn’t a morality play and outcomes aren’t rewards for anything.  If I were Joe Stiglitz I might even argue that the current economy is one in which fortunes are amassed mostly through rent-seeking, anyway.

So, yeah, there’s no support in economic theory for Sargent’s claim.   He’s just saying something that he believes without any theoretical or empirical support.

Now it IS generally true that most taxes will have a dead-weight loss… that people will react to the tax in a way that results in less economic activity.   A tax can distort the market.  Interestingly, though, there are taxes which in theory mimic an efficient “lump sum” tax.   I’m thinking an idealized consumption tax in particular.

I would also emphasize that the Second Welfare Theorem’s redistribution has a flavor of “wealth” redistribution, not income redistribution.   That’s important.   That’s all the caveats that occur to me at the moment.

A Little More on Hobby Lobby

March 25, 2014 Leave a comment

My last post didn’t really address the issue I’d intended.  How is the thinking of the corporate person-hood boosters so muddled?

As I argued, proponents are conflating the corporations with their owners.   I argued that that is wrong, not that its wrong-headed and muddled… but it IS wrong-headed and muddled!

OK.   So, here’s the point.   There are only two possibilities:

  1. Corporations are people and therefore distinct from their owners/managers.  The manager/owner is not the same person as the corporation so that when the so-called corporate veil is pulled back, that manager/owner’s preferences and rights must be kept separate and distinct from the preferences and rights of the corporation, which are not the same.
  2. Corporations are not people and therefore are distinct from their owners/managers.  The manager/owner is definitely a person, the lack of person-hood makes clear that the manager/owner has rights the corporation does not.

There is no other possibility because the corporation, whatever you think about its person-hood, is a distinct entity by its very nature.  The very thing the invention of the institution of corporate law solves is the separation of the corporation’s ownership and actions from those of the owner/manager.

Get that?  The point of the corporation is that it is a distinct entity and that’s the true purpose of corporate person-hood… although I’d certainly argue that the actual purpose of the corporate person-hood is currently to troll the regulatory state and transfer regulatory authority from the legislature to the supreme court.

But that’s not what we’re talking about!  Being a separate entity rules out the possibility that the religious views of the owner/managers are identical to the corporations!

The proponents of person-hood have to choose one or the other: stop conflating the owner/manager with the institution or abandon person-hood.  Forget about the other rights.   That’s the real muddle at the center of this legal mess.

Ukraine and Obama’s Anti-Swagger

Noah Smith has a good post up pointing out the obvious: Obama is a pretty good foreign policy president.

First, a disclaimer: I am not a foreign policy expert. I don’t want to be. I am, however, a bit of a specialist in human decision-making, bargaining, game theory and other topics which are directly relevant to these sorts of issues.

To put it bluntly, if foreign policy expertise is about trying to predict the behavior of foreign leaders like Putin, then I have expertise to offer into the actual decision-making process but not the motivations behind it. The later requires some knowledge of the history and politics that structure the constraints and motivations that guide Putin’s decisions. To put the point in Economese: I don’t have a clue about Putin’s utility function, but I do know something about his strategies.

So, it’s in this context that I have my own two cents to add; something that’s been on my mind for quite a while, which I like to call the Swagger Theory of Foreign Policy.

What’s Swagger Theory?

In short, it’s the George W. Bush Doctrine: the projection of strength (often nebulously defined) abroad will deter behavior from our enemies which may be detrimental to our interests. The basic idea seems to be that if we are sufficiently violent, sufficiently willing to overreact, then no one would be crazy enough to challenge our stated interests for fear that we will in fact overreact.

Every time you hear that some foreign leader is doing something against US interests abroad because they see Obama as weak; that is a statement of the Swagger Theory.

As I see it, notable Swagger Theorists are your typical neocons: John McCain, Lindsey Graham. Some left-leaning think-tank types like Michael O’Hanlon. Journalists like Tom Friedman. See here for an example in action.

I bring this up in part because for the last few days, since the invasion of Crimea by Russia, I’ve been hearing a near constant refrain from foreign policy “experts” on TV (including democratic-aligned ones) that it was Obama’s weakness (specifically with respect to Syria) that precipitated the current crisis. I call BS on that, but first let’s explore Swagger Theory to understand why.

The Limits of Swagger Theory

The first thing to note about Swagger Theory (ST for short) is that it is not entirely crazy. Really. There really is theory and evidence that I could cite suggesting that a reputation for irrationality can be used strategically to capture a greater share of surplus. The intuition is straightforward: if you knew that the other guy is likely to walk out on a negotiation, you’ll be willing to settle for a worse price.

The trick, and the under-appreciated cost, is establishing that reputation in the first place. In models, we can assume that the reputation exists, then work from there. In the real world, to get a reputation as being irrational requires doing something irrational… this is something I’ve harped on in the past, signals require realizations.

So, what are the hidden costs of using ST as a guiding principle of foreign policy?

  1. As I just mentioned, to be seen as crazy (willing to blow up important negotiations, invade part of another country, etc) you almost certainly have to be willing to DO something crazy. You sometimes hear from conservatives that Reagan was able to bring the Soviet Union down because the Soviets believed he was crazy. I don’t know if that’s true, but if it is, it was almost certainly the invasion of Granada and the largest peacetime rearmament in US history that convinced the Russians of this, not Reagan’s tough rhetoric. The point is that these crazy acts are expensive. Strategically, financially, or all of the above; it doesn’t matter, because paying that unnecessary price is the signal.
  2. Doing crazy and aggressive things, means that people are less likely to trust you in the future. Sure Putin gets Crimea now, but what of the ethnic Ukrainians in the west of the country? Do you really think they view Putin better now than before? What about the people of Europe? How did the world react to George W. Bush’s invasion of Iraq? Not well, that’s how. There are real long term costs to any kind of foreign adventurism.
  3. Put #1 together with #2. To gain the advantage assumed by STs, you need to do something a little crazy, causing people to lose trust in you. Some of what you have gained by being “strong” is lost as those on the other side prepares to push back/fortify/etc. The game begins to resemble a classic prisoner’s dilemma. This cost is in addition to the costs incured in step #1.

At this point, you might object that I’ve replaced the STs’ “strong” moniker with “crazy”. You are correct, but diction aside there’s simply no there, there. How do the STs define “strong” leadership? They rarely seem to like negotiations… In fact, I first invented Swagger Theory to explain to myself the (confusing to me at the time) very negative reaction to Obama’s negotiations with Iran. He was weak for talking to the Iranians. Just talking to them, not doing anything else. Why? In ST, it’s simple, refusing to negotiate is itself a relatively inexpensive way to forgo some obvious benefits. That’s #1 above. Call that “crazy” or call it “strong”, I don’t care, it’s the same thing.

The Backward Application of Swagger Theory in Ukraine

So who has Swagger in Ukraine? Not Obama. Putin. How’s that working out for him? We’ll see, but I doubt it’ll look like a good idea to invade in a year’s time. Remember that just a few months ago, Putin’s Russia was the dominant force in Ukrainian internal politics. Sure, Putin didn’t get everything he wanted from the Ukrainians, but Ukraine was definitely allied with Russia. Now, Russia and Ukraine are hoping to thread the needle so as to escape a shooting war. Mr. Putin has the position of strength by the reckoning of the STs, but it doesn’t seem to me that he’s helping himself much.

On the other hand, Obama seems to me to be the opposite of a Swagger Theorist. If I were to pinpoint Obama’s foreign policy philosophy, I’d say he’s a realist-internationalist. An ST proponent can’t be an internationalist because all that Swagger damages relationships with foreign powers. Nor can an ST proponent be a realist; inflicting on oneself unneccessary costs and engaging in negative sum competitions seem to me to be anathema to the realist worldview.

So, read Noah’s post, and think about it in terms of the benefits of Obama’s Anti-Swagger.

Categories: Fallacies, foreign policy