By Drew Calvert
Based on insights from Sandeep Baliga
Is unpredictability a virtue or a hindrance in the realm of national security?
Since the election of Donald Trump, inquiring minds want to know. Some political commentators view volatility as an asset. This line of argument tends to invoke Richard Nixons madman theory of international relations, according to which adversaries are more cautious simply because they are worried about the impulsiveness of a U.S. president.
But Sandeep Baliga, a professor of managerial economics and decision sciences at the Kellogg School, takes a different view. In his research, Baliga applies game theory to study issues in international relations. Using this model, he has found that meticulous strategy, not volatility, is ultimately the best approach.
National security always involves a complex set of games, Baliga says. Its not just about acting tough or keeping others on their toes. You have to track the logical conclusions of your assumptions, outline those assumptions carefully, and deduce the conclusions in a rigorous way. Thats how you avoid mistakes.
No Single Model
In zero-sum games like poker, it can pay to be unpredictableeven strategically random. If a players bluffing becomes apparent to the other players, his bluff will be called and he will not win.
But international relations is not a zero-sum game. In the language of game theorists, war leads inevitably to surplus destruction, which essentially means less to go around for everyone. Nations thus often have a clear incentive to trade with one another, and coordinate on peace efforts, rather than appropriate one anothers resources by engaging in a costly and uncertain war.
Ultimately, an effective national security policy is one that accounts for these complexities and entertains a wide range of variables and outcomes. Theres no single model of the world that works all the time, Baliga says. Acting tough might work in some cases, but it might backfire in others. So before deciding on a policy, leaders should first determine what kind of situation they face.
Take the U.S. response to Al Qaeda and ISIS over the past two decades. As Baliga sees it, Al Qaeda was engaged in asymmetric warfare with the goal of provoking the U.S. into a larger military conflict, thereby winning broader support from moderate Muslims around the world.
This example suggests that a national security strategy must account for the possibility that an aggressive military intervention might actually end up radicalizing a population rather than eliminating terrorism.
In national security, predictability can definitely pay.
ISIS, on the other handcomprised as it is of Sunni militias that emerged from Iraqs disintegrationhas been fighting a more traditional war. At least in the beginning, they were acting more like an army, and it wasnt in their strategic interest to provoke the U.S., Baliga says.
But by radicalizing young people and inspiring terror attacks with its propaganda, ISIS may have miscalculated, virtually guaranteeing U.S. military involvement. And now that it is on its heels, ISIS might be adopting a strategy of provocation similar to the one that characterized Al Qaeda.
From the U.S. perspective, Baliga points out, these are two different games. One is a game of escalation; the other is a game of deterrence. Recognizing this is critical, because each requires a different response.
Your optimal strategy should take into account what you know or dont know about the game youre playing, he says.
Who Wants a Madman?
So is there truth to the effectiveness of the madman theory of international relations?
For the most part, Baligas answer is no. To explain why, he points to the work of Thomas Schelling, an economist and Nobel laureate who used game theory to study approaches to nuclear deterrence during the height of the Cold War.
Schelling promoted the importance of reputation as a useful deterrent. But while Richard Nixon believed that a reputation for unpredictability was the most effective deterrent, Schelling knew that consistent behavior was more effective. If your opponents believe you will keep your word, then your word can shape their actions.
As Baliga puts it: in national security, predictability can definitely pay.
Schellings approach pioneered the principalagent problem, where a principal finds herself dependent uponand needing to incentivizean agent whose interests may not align with her own. In a classic example, an employer might incentivize an employee to be productive by linking his salary to outputs such as sales. If the employee believes the employer will renege on paying him, or that her payment is random and independent of performancethe madman theory of pay? Baliga asksthere is no incentive for him to work.
The same dynamic holds when the principal is the United States and the agent is North Korea. In this case, the U.S. wants to influence North Koreas decision-making by linking it to outputs such as the de-acceleration of North Koreas nuclear arms program. If North Korea is left without a clear sense of how the U.S. might respond to aggression or appeasement, its leaders might choose a more reckless and destabilizing course of action. After all, Baliga points out, it has not gone unnoticed in North Korea that the end of Libyas nuclear program led eventually to Muammar Gaddafis deathnot his permanent acceptance into the international community.
In other words, an agent is more likely to be swayed if he believes the principal will abide by any agreement the two parties reach. Therefore, it is important for a principal to cultivate a reputation for following through on policies designed to incentivize the actions of even unsavory agents.
If you are a truly mad leader, why would anyone change their behavior as a function of what you do? If they know you might do something crazy whether they do something you like or not, they might just say the hell with it, Ill do whatever I want. The madman actually has to be clever, doing something crazy if you dont do what he wants and being accommodating if you do. In that case, well, hes no longer mad.
The underlying logic for designing incentives is similar in the employeremployee and the U.SNorth Korea versions of the principalagent model, says Baliga. But there is one key difference: In a business transaction, a contract enforced by a powerful court system can make a principal behave, making a reputation for trustworthiness slightly less important. In international affairs, on the other hand, there is no comparable, efficient enforcement mechanism.
So a reputation for trustworthiness is all the more important, says Baliga.
The article was originally published in the Kellogg Insight.
Drew Calvert is a freelance writer based in Iowa City.
Sandeep Baliga is the John L. and Helen Kellogg Professor. He is also the Professor of Managerial Economics & Decision Sciences.