P1: Economics, Rationality, and the Bargaining Model of War

Lecturer’s organising image: concentric circles that move from broad structural forces down to the individual.
- Psychology → Social Psychology (already covered).
- This week: Economics and its view of violence/war.

Psychology/Social-Psychology: emphasise inherent variability in individual minds (emotions, personality traits, shifting desires) → variability can “trigger” violence.
Economics: accepts those differences but argues that, in politics, behaviour is more consistent than inconsistent because of the structure of choices.
- Looks for regularities produced by the situation, not by idiosyncratic minds.

Thomas Schelling’s survey on economic decision making.
- Scenario: You (Y) and friend (X) parachute, land off-target, cannot communicate; must re-unite somewhere on a map.
- Huge choice set (pond, buildings, etc.).
- Result: ≈ $80\%$ of respondents independently choose the bridge in the map’s centre.
  - Indicates a shared, self-evident “obvious” solution.
Concept: Focal Point / Decision Foci – an aspect of the situation that converges expectations without prior coordination.
Implication: Many political choices (driving lanes, cereal brands, etc.) have similar focal points → predictable regularity.

James Fearon adapts Schelling’s logic into the dominant Bargaining Model.
- War = breakdown of communication/diplomacy.
- Two actors desire some good (land, honour, status). Both prefer a deal over war but cannot find a mutually acceptable agreement.

        A demand?
          / \
     acquiesce  counter ← B’s move
                 /   \
           A acquiesce  resist

At every node: binary choice (accept / resist) → sequence can yield peaceful settlement or war.
Example shown in lecture: two hawks (low willingness to yield) → higher war probability.
Conclusion: War is a calculated, rational option when the expected utility of fighting ⩾ expected utility of conceding.

Historian Blaney asks: Why do weaker states ever fight when power disparity is obvious?
Answer: Wars erupt from disagreements about relative power, not (primarily) about the good itself.
- If power is perfectly known, the weaker side should accept the inevitable bargain → war disappears.
- Economic assumption: no “suicidal” or Pyrrhic wars; actors avoid hopeless fights.

Self-interest (realist logic) fuels ambition, tech advancement, wealth accumulation, and incentives to lie about capabilities.
Rational states have motives to over- or under-state power → misperceptions persist → bargaining failures.

Humans/States are utility maximisers choosing best means to fixed ends.
- Formal representation: $EU = \sum<em>{i} p</em>i \, u(o_i)$
Three cognitive steps:
1. Information: actors possess (ideally complete) data on options, costs, risks.
  - Some scholars relax to “sufficient” information.
2. Comprehension: must understand and attach probabilities & utilities to outcomes (“monkey brains” mastering the menu).
3. Choice: pick option that maximises benefit / minimises pain → make today better than yesterday.

Private (Hidden) Information & Incentives to Misrepresent
- Cited in Walter reading.
- States hide true costs, capabilities, resolve → opponent cannot see overlap.
- Diagram in class: aspiration range vs. resistance points; if each side lies, no visible settlement range → war.
Credibility / Commitment Problems
- Even with an overlap, parties doubt one another’s promise to uphold a deal.
- Realist link: anarchy lacks enforcement → build your own strength.
- Economics is more optimistic, positing potential commitment mechanisms, but acknowledges this as a key war trigger.
Indivisible Goods
- Items that cannot be split (honour, status, most territory).
- Pizza (divisible) vs. honour (indivisible) analogy.
- If the good is indivisible, no mutually acceptable division exists → resort to force.

Combined Thesis: War emerges from failed bargains—breakdowns driven by hidden info, credibility deficits, or indivisible stakes.

Fearon’s original model borrowed from labour-strike bargaining—may not translate cleanly to war.
Model assumes disagreement ⇒ war, but disregards hostility, identity, emotions stressed by social-psychology.
- Need motivational layer (“Why hate enough to fight?”) → promised for Part 2.

Psychology/Social-Psychology → variability, identity, hostility.
Realism shares self-interest, anarchy, power deception with economics, but is more pessimistic about solving commitment.
Economics adds structured choice & rational calculation to the toolbox.

If war is rational, moral condemnation must grapple with deliberate choice rather than miscalculation.
Policies to reduce war should aim at:
- Improving information transparency (satellites, inspections).
- Creating credible commitment mechanisms (treaties with enforcement, third-party guarantees).
- Reframing indivisible goods (e.g., joint sovereignty, symbolic gestures) to make them divisible.
Recognises ethical tension: Encouraging transparency may simultaneously expose vulnerability and invite exploitation.

Cold War arms-control talks: efforts to overcome credibility & information barriers via on-site inspections.
South China Sea territorial disputes: largely indivisible claims; high risk of bargaining failure.
Corporate strikes and mergers: origin of the model shows cross-domain applicability.

Economics focuses on choice structure; variability of human psychology is “filtered” through incentives.
Focal points demonstrate predictable coordination without communication.
Bargaining Model: war = costly signal that negotiation failed due to hidden info, commitment issues, or indivisible stakes.
Rational actors may still fight because lying and bluffing are, paradoxically, rational under self-help anarchy.
Be prepared to compare/contrast with psychological theories that foreground emotion, identity, and misperception.