2003 August 23 Saturday
Why The Israeli Palestinian Conflict Keeps Going And Going

Writing for Jewsweek Micha Ghertner reports on a new research paper by economist Tyler Cowen on economic theory applied to the Palestinian-Israeli conflict.

First, the Israelis and the Palestinians may both be engaged in a game of chicken, vying to strengthen their reputations in order to gain more power and eventually, a larger share of the pot. Whichever side backs down first will reveal a weakness and lack of commitment, thereby strengthening the resolve of the other party. The important point to note here is that each minor conflict (i.e. each intifada, each incursion, etc.) is simply a reputation builder for the overall conflict, and the final reputations of each party will determine which side has more bargaining power when an eventual deal is reached.

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Both the Israelis and the Palestinians may worry that weak reputations will leave them open to future bullying from some of the surrounding Arab nations, thereby increasing the likelihood of even more conflict.

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Another possible explanation, which Cowen takes from the burgeoning field of "behavioral economics," may be that both parties are unwilling to accept a compromise below what they had previously expected and below what they feel they deserve.

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Finally, Cowen suggests that perhaps neither party is "meta-rational." By this he means that people tend to favor their own view of the world and have a very difficult time placing their own views in a larger context with the views of others. For example, most people believe that they are smarter, better looking, or more moral than the average person, yet this can only be true for half of us.

Here are some excerpts from Tyler Cowen's original paper published in Public Choice which is available for download: "A Road Map to Middle Eastern Peace? -- A Public Choice Perspective" (PDF format) (my bold emphasis added below)

Married parties bicker, in part, because they are concerned with their future share of the cooperative pie. For instance, assume that a husband and wife consider an agreement on some matter of dispute, but the husband would receive only an epsilon of the resulting cooperative surplus. The husband might prefer to hold out and stop the agreement, even if he otherwise gets nothing at all. If the husband agrees to only an epsilon of surplus today, he is weakening his bargaining power for the future. Why not turn down today's epsilon for some chance of a greater share in the future? The wife of course may feel the same way. Even a fifty-fifty deal may meet with resistance. After all, why take fifty percent today, when you have some chance of getting ninety-nine percent tomorrow? So the two will bicker rather than settling all of their disagreements. Here the difficulty arises precisely because there will be future transactions, and not because transactions costs are too high (in fact we might get a better outcome if trading costs eliminated the possibility of future transactions). Similarly we get a bad outcome precisely because future gains from trade are high.8

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The literature on behavioral and experimental economics tries to isolate exactly which sorts of adverse changes set off destructive reactions. Workers, for instance, seem to mind small nominal pay cuts more than they mind small real wage cuts. Or a nominal wage cut offends less if it can be described as "fair," or if it is seen as part of an overall process affecting everyone's compensation. Many of these results are context-dependent rather than general, nonetheless they suggest that the degree of resistance will depend on packaging and symbolic values. It also suggests that experimental and labor market research may teach us something about the causes of war.

Note that terrorism interacts with behavioral factors. Imagine the Israelis and Palestinians moving toward some kind of peace agreement, whereby each side offers some painful concessions to the other. Just as each side is trying to accept what it must give up, some form of terrorism strikes. A Palestinian, for instance, might blow up a bus in Jerusalem. This kind of behavior makes it harder for the Israelis to accept their "wage cut" as they will feel more aggrieved than before. Terrorists, knowing this, may choose to strike at precisely at these times and aim to reopen the appropriate wounds, all to prevent peace.13

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Parties to war and conflict are unlikely to be meta-rational.16 We do not know why, but non-meta-rational behavior tends to be especially prominent in certain areas. For instance, people tend to have especially stubborn and irrational opinions in the areas of religion and politics. Large numbers of people think they are the world's best judges of truth in this area, but few people have comparable opinions about their relative expertise in building bridges, or in thermodynamics.

Given this tendency, peace negotiators may expect the other party to defer to their positive view of the world. The Israelis will overrate their ability to judge what will work, and the Palestinians will do the same. The general tendency is to think that what benefits one's own interest also benefits the world at large (Klein 1994, Cowen forthcoming). The two parties will then find it hard to agree, since they do not share the same positive vision of how the world works. Note that only one party need lack metarationality for an agreement to be hard to strike.

A lot of the factors that Cowen brings up seem like plausible contributors to the continuation of the conflict. Because of the differences in perceptions over what is fair and why things are as they are it seems unlikely that the conflict can be solved as long as those differences in thinking exist. Therefore it seems reasonable to at least try to minimize the body count as the conflict continues. The barrier being constructed to separate the West Bank from Israel seems like the only prospect for reducing the body count.

As for whether there is something that could be done to cause a change in the thinking of people on one or both sides: if the past is any indication it seems unlikely. As long as there is not an all-out war in which one side is made to lose in a devastating fashion enough members on each side are going to hang onto conflicting goals that there will be no resolution.

As outsiders it is important to appreciate just how unfair humanity is. People really do tend to see things from the perspective of their own interests and do not do a very effective job of recognizing the ways they are unfair to others.

Share |      By Randall Parker at 2003 August 23 11:03 PM  MidEast Arabs Versus Israelis


Comments
Patrick said at August 24, 2003 5:32 PM:

"people tend to have especially stubborn and irrational opinions in the areas of religion and politics. Large numbers of people think they are the world's best judges of truth in this area, but few people have comparable opinions about their relative expertise in building bridges, or in thermodynamics."

Maybe that's because you can look about and see that there are some fantastic bridges designed by people who are clearly heaps better than it than you. Politics and Religion do not have such examples. Even if some examples ARE strikingly subtle and brilliant, it takes a great deal of study and analysis to be able to appreciate this. And clearly a lot of the major examples are pieces of rubbish that I could improve heaps given a spare afternoon (and dictatorial powers).

Randall Parker said at August 24, 2003 6:28 PM:

Pat, Yet many continued to support communism in the face of enormous evidence that it was a failure. Heck, there are still plenty of socialists and Marxists running around.

blogal villager (cbrayton) said at September 22, 2003 5:22 PM:

Thanks for an interesting read. Though the increasingly irrelevant traditional left scream "apartheid" at the prospect of a security wall, I tend to agree with you that it may be the best option available, if that is the security model Israel feels it needs in exchange for stopping its incursions into Palestinian territory and withdrawing the settlers. I read of a poll recently that said a large majority of Israeli settlers would be glad to retreat if the government would compensate them, with a similar attitude prevailing among ordinary Palestinians. Who wants to live in a war zone? (Sorry, can't find the reference offhand.) A Palestinian West Bank left to develop a working economy over several decades might develop a sense that it has an economic stake in not wasting the talent of its youth on interminable and fruitless conflict against an insuperable military power. I really believe that ordinary people on both sides would simply like to get on with the business of growing lemons and coding computer games or whatever it is that keeps them in groceries. Not that I'm an expert on the situation. But here's a case where the much maligned neoliberal rationale might actually make sense, if pursued to its logical conclusion: a real chance for material betterment through job-creating foreign investment might actually trump the appeal of organizations like Hamas. Create a stable stragegic stalemate, invite in Microsoft and Sun, and rechristen the Jordan the Silicon River ...


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