Game Theory, Israel and the Palestinians

October 30, 2007 at 9:02 am | In economics, israel, politics |

Since the ill-fated Camp David negotiations between Ehud Barak and Yassir Arafat collapsed into an orgy of blood and violence we now call the Second Intifada, many on the Israeli side have abandoned the principle of land for peace. This principle, which became official US policy after Russia hastily agreed to a UN-brokered ceasefire to the June War of 1967 that did not require a withdrawal to pre-war lines, remains the official policy of Israel, the US, the Quartet, the UN, the Arab League, the PA, Fatah; pretty much everyone except Hamas. So why have forty years gone by with no resolution to this conflict?

Along comes Bueno de Mesquita (no, it’s not a name for a delicious new Tex-Mex barbecue sauce, it’s a real person, and he’s a lot smarter than either of us) with an answer for not only that question, but also for the question of how to resolve the conflict.

“In my view, it is a mistake to look for strategies that build mutual trust because it ain’t going to happen. Neither side has any reason to trust the other, for good reason,” he says. “Land for peace is an inherently flawed concept because it has a fundamental commitment problem. If I give you land on your promise of peace in the future, after you have the land, as the Israelis well know, it is very costly to take it back if you renege. You have an incentive to say, ‘You made a good step, it’s a gesture in the right direction, but I thought you were giving me more than this. I can’t give you peace just for this, it’s not enough.’ Conversely, if we have peace for land—you disarm, put down your weapons, and get rid of the threats to me and I will then give you the land—the reverse is true: I have no commitment to follow through. Once you’ve laid down your weapons, you have no threat.”

Bueno de Mesquita’s answer to this dilemma, which he discussed with the former Israeli prime minister and recently elected Labor leader Ehud Barak, is a formula that guarantees mutual incentives to cooperate. “In a peaceful world, what do the Palestinians anticipate will be their main source of economic viability? Tourism. This is what their own documents say. And, of course, the Israelis make a lot of money from tourism, and that revenue is very easy to track. As a starting point requiring no trust, no mutual cooperation, I would suggest that all tourist revenue be [divided by] a fixed formula based on the current population of the region, which is roughly 40 percent Palestinian, 60 percent Israeli. The money would go automatically to each side. Now, when there is violence, tourists don’t come. So the tourist revenue is automatically responsive to the level of violence on either side for both sides. You have an accounting firm that both sides agree to, you let the U.N. do it, whatever. It’s completely self-enforcing, it requires no cooperation except the initial agreement by the Israelis that they are going to turn this part of the revenue over, on a fixed formula based on population, to some international agency, and that’s that.”

(Good Magazine via Marginal Revolution)

Not bad, huh?

10 Comments »

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You leave us hanging all this time and when you reappear it is to post this nonsense? What about the little one? Is your internal clock destroyed yet? Is the wife giving you the look that maims without killing at 3am?

Good thing its five years past that for me. Again, congratulations and condolences.

NOW THEN… I *think* I understand the point, of using money instead of land for peace however I am not sure what that will do other than to serve as a direct funnel of tourist funds to weapons brokers selling to the intifada loons that they will then use to blow up said tourists with.

Also, as stratified culturally as the two are, it makes one wonder, will the terrorists try to blow up Israeli tourist spots and then Israel be forced to retaliate and turn it all into a war of attrition as to who can turn off world tourism better? Well, one needs only look at Times Square during the sixties and seventies to see how that can go wrong without mortars.

I think that it is really not very likely that those interested in violence for its own sake as a temporary balm to their wounded egos (we’re bigger victims than you Jews, you took our land, Islam should be the world’s religion, I can’t drive to work because Hamas drew a retaliatory airstrike to my street and the street isn’t there anymore, whatever the excuse of the moment is) will bother to let money stop them.

The propensity of these terrorists is to see themselves as pure martyrs and victims and if the Palestinian Authority then says, “knock it off, the money is flowing and you’re making us look bad” they will play the principled warrior and become insulted and go on about their ideals not being for sale and then redouble their efforts to outrage and annoy everyone.

Self-righteousness is unfortunately drawn to violent expression more than peaceful loving expression and the other side is extremely self-righteous. They have to want to change their ways and money is not going to do it because what their public relations brochures are saying is belied by their actions.

Comment by suitepotato — October 30, 2007 #
Ach, I’m so tired I don’t even know where my manners are. B”H, my litte son is doing quite well, and my beloved, devoted, and considerate wife has largely allowed me to sleep the nights and give me a fighting chance of both making minyan and a good impression at my brand new job. It is ’suite’ of you to inquire!

I think that the greatest concern that I had when I read the idea was substantially similar to yours - so long as the money is flowing, can’t it be used to buy weapons and so forth? I’m not so sure that the two are connected.

Is Hamas or any of the other groups struggling to buy weapons for lack of funds? I don’t think so. As evidenced by the incredible smuggling efforts that these groups go through to get not-so-fancy weapons through tunnels into Gaza from Egypt, it appears that there are structural problems that have little to do with money and lots to do with enforcement and what kinds of weapons Iran is willing to introduce into the region. Fact is that Hamas won’t be able to get anti-aircraft weaponry of any serious caliber because it is not in the interest of anyone who has them to let Hamas have them, or to provoke Israel in that manner.

I think we can’t view things in absolutes. Those people who are interested in violence for its own sake are far outnnumbered (and out-powered) by those interested in violence because it brings them power. And when power is threatened, it brings retribution. So while the ideologues might still be motivated to launch attacks, I don’t think they will have as much supportive infrastructure, and they may well have to contend with law-enforcement efforts that they’ve never dealt with in the past.

I don’t know if it’s the answer, but heck, it’s a lot better than land for peace, which is dead.

Comment by rejewvenator — October 30, 2007 #
My view is that the Arab Israeli conflict is driven primarily by Muslim religous fundamentalism and the complete inability of Arab states to function democratically. (While Israel has also done its share to continue the conflict, it has typically been in response to those problems). Until those issues are resolved or disappear, (maybe though some sort of Arab version of the Rennaisance followed by an Enlightment) there will be no peace with Israel or the West. I am not trying to be glib, but if this thought experiment were put into practice, you would get Hamas and Islamic Jihad killing anyone who cooperated with Israel as traitors, and the PA lining their pockets with whatever money they could make off of it. Ultimately, the Arabs have to fix their own broken community; the West can’t do it for them through economics, and this article just buys into that myth (AKA “Thomas Friedman Syndrome”). Let’s face it: there is no solution to the problem, Israel should unilaterally create defensible borders in a majority Jewish state and take reasonable steps to alleviate humanitarian concerns in the West Bank. End of story.

Comment by mjfire — October 30, 2007 #
Thank you, Ehud Olmert! Or should I say Arik Sharon? Isn’t the idea of defensible borders as mythic as the idea that the West can ‘fix’ the Mideast? And isn’t the notion that Israel is going to alleviate humanitarian concerns among Arab populations an even greater myth?

Comment by rejewvenator — October 30, 2007 #
1. “Defensible borders” is a relative term, but I think that the security fence shows that there is a way to keep suicide bombers out of Israel, which, over the past 10 years, has been the primary threat to the Israeli population. Obviously, no border (defensible or otherwise) can keep out a missile; you have to go where the missiles are being fired from and deal with it there.

2. I said the “West Bank” which you turned into the “Arab population.” I think that certain steps, such as a halt on building new settlements, could make life easier for Palestinians in the West Bank by eliminating sources of tension over land ownership and checkpoints. I do not believe that these steps would magically transform the Palestinians and make them trust Israel, but I believe that it’s important that Israel take all possible steps to remain a humane and moral state in its dealings with the Palestinians.

Comment by mjfire — October 31, 2007 #
Maybe you could clarify your view a little bit. You said that if the idea in the original post were to be enacted, Hamas and Islamic Jihad would kill anyone who cooperated with Israel, while the PA would line their pockets.

How is this different from the status quo, in your opinion? And are you really contending that shifting incentives so significantly, and potentially releasing a large amount of money to the PA (regardless of whom it is controlled by) will have no effect on the political realities? I think that economic realities and incentive must have some small influence on political realities, even in your thinking?

Comment by rejewvenator — October 31, 2007 #
I don’t think that economic incentives will have more than a marginal impact here because I don’t think this is a conflict about money. It’s ultimately a nationalistic conflict between two groups who each believe they have an absolute right to the same piece of property. In short, I find the position you have taken to be patronizing, naive, and largely mechanistic; you seem to believe that anyone can be bought off if they would just buy into the global economy. While we’re at it, why don’t we also give every Palestinian kid a lap top with access to the internet? I’m sure that will broaden their minds. And yes, I know all the Weberian arguments, and it has not yet been disproved that those arguments are simply reflective of the Western experience. Besides, there are plenty of economically comfortable Jews in America and elsewhere who have or are in the process of making aliyah for ideological reasons (and not just because the only alternative was being raped by cossacks). Just because you make someone wealthy, it doesn’t mean they give up all their other hopes and dreams, and particularly their nationalist goals. Either they continue to act on them, or they use their new-found wealth to fund the goals that are important to them, which in this case, would be the establishment of a single state in Palestine for Jews and Arabs (which as I’m sure you know would be majority Arab).

Second, I don’t think that this would have any significant effect on the status quo, since in the past the PA has been given access to large amounts of money (from the EU and from Israel), and that has not seemed to shift the political realities.

Comment by mjfire — October 31, 2007 #
The conflict is not about money, but I don’t know of any conflict that was solved without a discussion of resource allocation, and in point of fact, much of the political conflict between Israel and the Palestinians has been over allocation of money and water, not over land. As you have acknowledged in the past, the final division of land has largely been worked out and we all know what it will look like. The conflict is not about terrorism, terrorism is only one small expression of the underlying clash.

I’m going to skip to your final point, because I think everything in the middle has no bearing on what we’re saying. Sure, people do things for ideological reasons. But in far larger numbers, and far more predictably, people do things for financial reasons.

And that’s really the point. The issue is not so much whether the Palestinians have received money, but rather what their incentives are regarding spending that money. If you think that the only thing that’s stopping terrorist attacks is the fence, and not the freezing of funds to the PA since Hamas took power, you’re willfully ignoring economic realities. And the proposed method of divvying up tourism money does not only incentivizes government to crack down on terrorists to maintain stability, but also to improve tourist locales, clean up cities, and so forth. But one step beyond that, it encourages citizens to vote for parties that commit to that program. Already we’ve seen tremebdous erosion of popular support for Hamas, now that the money is largely dried up, and Hamas cannot offer the social services it one did.

I’m not supposing that the entire conflict can be resolved through a profit-sharing agreement, only that stability of a better sort than the one we have today can be achieved, and that it may serve as a foundation for future reconcilation.

Comment by rejewvenator — October 31, 2007 #
I remain unconvinced.

First, you say that the conflict is not about money, and not about terrorism, (I agree on both points, obviously) but you don’t say what it’s actually about. So what is it about? Sure, resource allocation is key to solving the problem, but it’s paperwork when compared to the actual underlying sources of the conflict — not the question of who how you will divide up tourism revenue, for example, but the existential question of “why should I divide up tourism revenue–I was here first!” You have to deal with that question before you can ever enter into a serious discussion where you might have to give it up. And neither side is capable of that, and sharing revenue first instead of first dealing with the underlying issue just repeats the same strategy that Israel made in the past — let’s give up land and maybe then they’ll be OK with us in Jerusalem and Jaffa and will give up the right of return.

The PA is corrupt and inept. The Israeli socio-political system is a joke. There are no leaders willing to make the tough choices required, let alone convince their populations that they will have to give up some of their dreams. Until you have solved those problems, you can’t expect that any so-called rational incentivizing will have any effect.

As a side note, I think that things are actually pretty stable, aside from Gaza and Sderot.

Comment by mjfire — October 31, 2007 #
What is the conflict about? I don’t think that there’s one answer to that, and I think that attempting to find a single complete answer comes at the expense of finding many smaller and more effective answers.

Yes, there are people for whom the conflict is over the exclusive rights of one people or another to dwell on a particular piece of land. But these people are not truly powerful. On the Israeli side, those people have lost Gaza, and on the Palestinian side, those people have lost the West Bank.

I don’t think you have to answer the existential question of why you have to divide up tourism revenue. I think that pragmatists on both side acknowledge that both populations are here to stay, regardless of the justness of either side’s cause or whom exactly God backs in this struggle.

Revenue sharing is, of course, quite different from land for peace, a point that de Mesquita makes, but you ignore: “If I give you land on your promise of peace in the future, after you have the land, as the Israelis well know, it is very costly to take it back if you renege. You have an incentive to say, ‘You made a good step, it’s a gesture in the right direction, but I thought you were giving me more than this. I can’t give you peace just for this, it’s not enough.’ Conversely, if we have peace for land—you disarm, put down your weapons, and get rid of the threats to me and I will then give you the land—the reverse is true: I have no commitment to follow through. Once you’ve laid down your weapons, you have no threat.”

Revenue-sharing is effective because incentive always exists. If you want to keep getting money, you need to keep attracting tourists. What happens on the political front is, as we’ve already seen, not so important in many ways. The Palestinians do not have the capacity to threaten Israel’s existence, or even long-term security. They can sometimes pull acts of terror, but especially of late, with the combination of financial crackdowns and the security fence, that power has been eroded. It may swell again in the future, but the problem has largely been contained. Hamas et al have gone from terrorizing Israelis from Tel Aviv to Haifa to Jerusalem to basically lofting rockets of marginal effectiveness at Sderot. As for Israel, it has not the capacity to destroy the terrorist organizations, or the ability to govern effectively in the territories. So we are at a stalemate whose timetable is measured in the humanitarian conditions in Gaza.

DO you really believe that the obstacles to peace are that the Palestinian people as a society are not ready to accept Israel as a permanent reality? I’m beginning to realize that the Palestinians know for a fact that Israel is a permanent reality - a reality they resent and fear and resist against because that is all there is to do. You can’t live in Gaza city and have warm and fuzzy thoughts about Israel or Israelis, much like an Israeli couldn’t patrol Jenin or Hebron without hating and dehumanizing Palestinians.

Comment by rejewvenator — November 1, 2007 #