Coe and Markowitz Crude Calculations

Abstract

• Conquest was common for centuries, central to international politics.

• Decline of conquest: need to understand its causes.

• Existing theories fail to explain why powerful states do not conquer resource-rich territories.

• New theory developed: relationship between economic productivity and conquest profitability.

  • Productivity increases opportunity costs of diverting assets to conquest.

  • Productivity reduces the quantity of assets needed for conquest.

• Documented trend: since 1950, investment has largely favored civilian innovations over military.

• Higher productivity reduces net profitability of conquest, rendering it generally unprofitable for high-productivity states.

Decline of Conquest

• Historical context: large-scale conquest has become rare since WWII.

• Foundational theories: a world where conquest is attractive leads to conflict and instability; the opposite promotes cooperation and stability.

• Existing explanations:

  • Shift toward human capital wealth makes resources harder to conquer.

  • Commerce has become cheaper, reducing necessity for conquest.

  • Norm against conquest exists due to moral considerations and fear of punishment from the international community.

• These theories do not explain the rarity of conquests of resource-rich areas.

New Explanation:

• Economic productivity's impact on conquest profitability explained through two mechanisms:

  1. Higher productivity increases opportunity costs for diverting resources to conquest, making it more expensive.

  2. Higher productivity enhances military technology, requiring fewer assets.

• Prior theories do not predict whether increasing productivity raises or lowers conquest profitability.

• New theory demands that productivity must reduce profitability below zero for explanation of behavior.

• In recent decades, productivity's effects show that conquest has become unprofitable even for high-productivity states.

Empirical Evaluation

• Selected cases for study: US (2003) and Iraq (1990) aimed at conquering Persian Gulf reserves (PGR).

• Methodology: bounds estimating benefits and costs of conquest based on similar historical instances.

• Findings:

  • Demonstrated that high-productivity states would not profit from conquering PGR, unlike low-productivity states.

  • Estimated profitability for Iraq considerably higher due to lower productivity.

Theoretical Foundations

• Discussed two contrary effects of productivity:

  • Opportunity cost effect increases costs for resource diversion to military; higher productivity results in higher opportunity costs.

  • Prowess effect lowers overall costs by requiring fewer assets for successful conquest as productivity increases military efficiency.

• Prediction asserted: as investment oriented predominantly towards civilian improvements, opportunity costs would rise faster than efficiency gains in military prowess.

• Effect of productivity turns unambiguously negative for high-productivity states, leading to non-profitability of conquest.

Previous Explanations for Conquest Decline

• Divided into economic and normative explanations:

  • Economic shifts (human capital vs natural resources) lessen benefits of conquest but not able to explain the lack of conquests.

  • Normative theories suggest fear of punishment and morality deter states but do not clarify enforcement rationale.

• Our findings imply productivity's role is central to both the economic and normative explanations of declining conquest.

Costs Analysis

• Examined the potential costs of conquest:

  • For the US, potential costs calculated based on historical invasions.

  • For Iraq, costs estimated based on historical data from the Iran-Iraq War.

• Summary of costs vs benefits for US and Iraq showed stark differences in profitability:

  • US: $82B in benefits vs $198B in costs → Loss of $116B.

  • Iraq: $159B in benefits vs $123B in costs → Profit of $36B.

Conclusion

• The radical shift in powerful states' interests away from conquest driven by increased productivity.

• High-productivity states find conquest unprofitable even in good circumstances, while low-productivity states still explore conquests when possible.

• Norm against conquest presents a deterrent for weaker states but is less impactful on stronger states with high productivity.

• Needs further research on the origins and potential changes in such international norms in light of economics and historical context.