David R. Henderson  

Public Choice in Foreign Policy

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1.3 million is greater than 58,000

One of public choice economists' biggest insights is why, in a representative democracy, concentrated interest groups often gain at the expense of the dispersed consumers or taxpayers. Our favorite examples tend to be the sugar lobby, the farmers' lobby, and the steel industry's lobby. Even though it can be shown that the losses to consumers in higher prices from restricting competition from imports exceed the gains to suppliers in the industry, government officials still often restrict imports.The reason is that the suppliers have a lot at stake per person and, therefore, have a large voice in the political process. Each consumer, though their losses are large in the aggregate, has a relatively small amount at stake. As a result, their collective voices are rarely heard, primarily because they are silent.

This explains why an industry that competes with imports can get protection from foreign competition. But why is the protection not complete? Why are any imports allowed at all? It must be because the costs to consumers and to exporters would then get high enough that many of them would put pressure on the government. In short, what we have is a political equilibrium that comes about because the politicians are trading off the support of the industry against the feeble opposition from consumers and possibly stronger opposition from exporters. They hit their political "sweet spot" with positive tariffs.

But now imagine how high tariffs would be if consumers and exporters could not vote. The equilibrium would change. The new sweet spot, from the politicians' viewpoint, would be higher tariffs or smaller import quotas to restrict imports more than before. We can apply this insight to foreign policy.

Among those who bear large costs of one government's foreign policies are people who live in other countries. So, for example, if country A's government kills people in country B, the potentially biggest losers from this policy are people in country B. But because people in country B cannot typically vote in country A's elections, and cannot typically give campaign contributions to politicians in country A, some of the biggest losers from government A's policy cannot directly influence political outcomes in country A. Thus some of the opposition to the government's foreign policies, though potentially strong, cannot legally be brought to bear on the politicians making the decisions. A clear implication is that the politicians will not care as much as otherwise about damage done to foreigners and that, therefore, the equilibrium could involve a lot of damage. Couple that with the fact that citizens in country A will be even less well informed about many of these actions than they are about the government's actions in their own country, and the implication is even more destruction of country B than otherwise. This is just one implication of the public-choice way of thinking.


This is from David R. Henderson, "The Economics of War and Foreign Policy: What's Missing?" in Defense & Security Analysis, Vol. 23, No. 1, pp. 87-100, March 2007.

I thought of this while reading an excellent piece in the May 5 New York Times by David Samuels. The piece, on President Obama's foreign policy advisor Ben Rhodes, is titled "The Aspiring Novelist Who Became Obama's Foreign-Policy Guru."

Here's the passage that reminded me of what I wrote 10 years ago:

Obama's particular revulsion against a certain kind of global power politics is a product, Rhodes suggests, of his having been raised in Southeast Asia. "Indonesia was a place where your interaction at that time with power was very intimate, right?" Rhodes asks. "Tens or hundreds of thousands of people had just been killed. Power was not some abstract thing," he muses. "When we sit in Washington and debate foreign policy, it's like a Risk game, or it's all about us, or the human beings disappear from the decisions. But he lived in a place where he was surrounded by people who had either perpetrated those acts -- and by the way, may not have felt great about that -- or else knew someone who was a victim. I don't think there's ever been an American president who had an experience like that at a young age of what power is."

This zeroes in on one of the few things I have always sensed in, and liked about, Obama.

By contrast with Obama, the typical U.S. foreign policy person I read seems not to care much at all about victims of U.S. foreign policy in other countries, except when it gives him a talking point to use in a debate. And these foreign policy experts are not, by and large, bad people. They're simply people for whom people in other countries seem like an abstraction rather than real people: thus Rhodes's mention of the game of Risk.

I'll give an instance. At various conferences I've attended over the years, I've run into Larry Korb, a former defense official in Ronald Reagan's administration, and a man who very much judges the world his own way. I have great admiration for Larry. He's a fantastic story teller and I've urge him to write up his stories in a book. He's also a compassionate man. In my view, he's one of the best there is in the U.S. foreign policy establishment. So imagine my surprise when, watching him on a C-SPAN call-in show one morning, I saw him tell the audience that approximately 58,000 people had been killed in the Vietnam war.

I emailed him to tell him that it was quite a few more.




COMMENTS (5 to date)
ThaomasH writes:

The issue of policies with foreign costs is particularly great in the case of the Drug Wars. They amount to a multibillion dollar subsidy to the creation of criminal enterprises that can approach (or surpass) that of a State and once created can branch out to other forms of crime. I witnesses up close the harm caused to Colombia in the '90's and form a distance Mexico and Central America more recently.

John Goodman writes:

Phil Porter and I worked out the mathematics of this some time ago and showed that complete producer capture (the profit maximizing sugar quota, e.g.) requires that consumers make no effort at all.

So corner solutions (where either consumers or producers are totally victorious) will be rare. We also showed that optimal public policy is virtually impossible.

See here: http://link.springer.com/article/10.1007%2FBF00119449#page-1

And here: http://link.springer.com/article/10.1007%2FBF00179738?LI=true

Maniel writes:

Since war is so destructive of life and property, it should be avoided whenever our lives and freedoms are not directly threatened. Unfortunately, there is little evidence that our decision makers have (or use) the tools necessary to organize the information affecting the related decisions they (think they need to) make. War provides a rich and tragic set of experiences that suggest that cost is a measure, and can also be a predictor, of success or failure.
Whether or not one agrees with the 2003 decision to invade Iraq, the claim that events have unfolded as advertised is difficult to support. If we suppose that, in this case as in general, a cost-benefit analysis (CBA) was conducted prior to the decision (e.g., benefits: remove Saddam Hussein from power, find and destroy WMDs, nation-building, etc.), it is unlikely that the presumed CBA analysis was a careful tradeoff of costs and benefits to both the “Coalition of the Willing” (USA) and to Iraq.
US taxpayers picked up most of the bill in Iraq and Afghanistan and our check books have stayed open a very long time. A country and its government rarely plan for a long war; rather, they begin with the idea that each operation (an attack on Fort Sumter, a bombing of Pearl Harbor, an invasion of Russia or Afghanistan, etc) will be an isolated event whose benefits will outweigh short-term costs. Moreover, believing the wealth and power of their country to be unlimited, leaders of an empire may conclude that any operation is affordable. However, as histories of the Roman, Ottoman, British and Soviet empires teach us, resources are finite, dominance is temporal, and CBAs make sense even for self-proclaimed “super-powers.”

Brian writes:

David,

I'm curious to what extent you would use economic reasoning in evaluating the decision to go to war in Vietnam. Had we been successful, South Vietnam, like South Korea, would likely have had a per capita GDP at least a factor of 10 higher than what it does today. That implies that the Vietnamese had much more to gain from the conflict than we did, and that a larger loss of life on their side could still be a net gain for them. Or to put the math slightly differently, with the U.S. per capita GDP being almost 30 times higher, 58,000 dead might exceed 1.3 million, economically speaking.

None of this is meant to question your main point, which is a good one. But shouldn't the economic perspective go into whether the action is appropriate?

Cassandra writes:
This zeroes in on one of the few things I have always sensed in, and liked about, Obama. By contrast with Obama, the typical U.S. foreign policy person I read seems not to care much at all about victims of U.S. foreign policy in other countries, except when it gives him a talking point to use in a debate. And these foreign policy experts are not, by and large, bad people. They're simply people for whom people in other countries seem like an abstraction rather than real people: thus Rhodes's mention of the game of Risk.

Obama explicitly ran on the premise that Afghanistan was "a war we had to win". I was paying close attention, b/c my husband spent the next year over there. Yet in 2015, after Obama had promised to make winning that war one of a never-ending series of "top priorities", civilian casualties in Afghanistan were at record levels.

And then there's Libya, and Syria. Victims of US foreign policy, indeed. Somehow, I am missing the exquisite sensitivity to foreign casualties. I'm pretty sure our allies in these nations, who trusted us (or tried to) are missing it, too.

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