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Why Escalation Is Bad Policy

May 10, 2009

Let me let you in on a little secret. A secret that Kennedy knew, that Nixon knew  very well, but basically every president since Truman knew: Every difficult decision in your life, every “lesser of two evils” choice, no matter how trying it was for you, the RAND Corporation has already figured out what you should have done, or what you could have done to avoid such situations. RAND helped to define our ideas on how to look psychotic during the Cold War, a bit of learning Nixon took heartily.

But, as a highly-paid think-tank of strategic game theorists, they also figured out the absolute best ways to screw off at work without being caught, maximizing their work utility as it were. Specifically, theorists like Martin Shubik invented games like the Prisoner’s Dilemma (not his, but an important strategic scenario), but most importantly for the purposes of this post, the Dollar Auction

The setup involves an auctioneer who volunteers to auction off a dollar bill with the following rule: the dollar goes to the highest bidder, who pays the amount he bids. The second-highest bidder also must pay the highest amount that he bid, but gets nothing in return […] However, a problem becomes evident as soon as the bidding reaches 99 cents. Supposing that the other player had bid 98 cents, they now have the choice of losing the 98 cents or bidding a dollar even, which would make their profit zero. After that, the original player has a choice of either losing 99 cents or bidding $1.01, and only losing one cent.

The Dollar Auction is a singularly pervasive game when it comes to political and military theory. How many times, for those Americans out there, did you hear the Iraq War rationalized in terms of losses instead of gains? “If we pull out now, all those soldiers would have died for nothing, but if we stay in, we may be able to pull out later with some dignity! Also, pass me my tiny American flag.” Anytime you hear someone ‘staying the course’ on the basis of being the smallest loser, they are invoking the technically-rational but ultimately disastrious strategy of the Dollar Auction. Incidentally, the RAND Corp. figured out the optimal strategy for Dollar Auction escalation scenarios: Never get in them, and as soon as you realize that’s the game you’re playing, quit.

Oh, the things which would be different if nations could learn from that lesson.

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