Exit strategies

Looking at the developing disaster of this war, I’ve been trying my best to think of possible exit strategies (not that anyone who matters will listen). Here’s the best I can come up with so far. Suppose that the liberation of Basra turns out the best that can possibly be expected – that is, at least some of the inhabitants join in a rebellion against the regime and succeed with the support of British troops. The chaos in Basra (no water, not enough food, remnants of the Fedayeen) would be sufficient to justify a lengthy pause in the fighting to establish Basra as the core of a liberated Iraq. Given enough time, something might turn up – Saddam might die of his wounds or whatever.

At worst, the establishment of a liberated Southern Iraq, and an expanded Kurdish area in the North could be regarded as settling the unfinished business of 1991. The Coalition could establish a provisional government, give it sufficient arms to deal with any remaining Fedayeen, and provide air support against any counterattack from Saddam. Then it would be time to declare victory and get out. Given sufficient chutzpah, the Coalition could even say that they have forcibly inspected all the WMD sites identified by their intelligence and destroyed a number of WMDs found there (zero, but zero is a number).

Josh Marshall has also been considering possible outcomes, two of which are disaster scenarios of different degrees of severity, and one (making Rummy the scapegoat and going back to Blix) is an exit strategy, though one I can’t see the administration going for.

If anyone has seen or thought of any other ideas that don’t involve either a siege of Baghdad or a new Stalingrad, I’d be keen to hear about it.

Progress ?

Within the first hour of war (when I was at Parliament House in fact), the newsticker included claims that two entire Iraqi divisions were about to surrender. Twelve days later, Associate Press is running a story headed Three Iraqi Soldiers Desert the Army (running frontpage on the LA Times website). I was going to do one of those calculations about how long it would take for the entire Iraqi army to desert at this pace, but you get the drift.

Politician keeps promise

Quite a while ago, I posted on the apparent willingness of the Bracks government to keep a promise to reform the electoral system for the Victorian Legislative Council, even though this will probably mean they will lose control of the Council at the next election (a few years away, but it seems a pretty good bet that Labor will win in the Assembly and therefore continue in government. According to Paul Strangio in the Age, the legislation has now been passed. Dr Strangio is a bit upset that there hasn’t been much jubilation about this (perhaps people have something else on their minds right now) so I’d like to say that I, for one, am jubilant, not only about the substantive reform but at the possibility that political promise-keeping may be coming back into favor.

Fox lies, but at least they're honest about it (maybe)

Via The Agonist, I found this story of a journalist who sued Fox News after being fired because she was unwilling to participate in a false report about growth hormones. Allegedly, Fox won its case at the appellate level on the basis that the First Amendment included the right to lie (and presumably to force employees to lie).
I couldn’t find a confirming source for the story, which is in an Internet publication called the Sierra Times, and includes a mis-spelling of Rupert Murdoch’s name, and I must admit it sounds too good to be true -has anyone else among the Agonist’s legion of readers picked this up?

Almost instant update Me No No supplies a range of links, which led me to the Appeal Court’s judgement, available as a PDF file from this site, basically confirming the Sierra Times story (but not the original heading of my post, which I’ve now qualified). The crucial para is “We agree with WTVT that the FCC’s policy against the intentional falsification of the news – which the FCC has called its “news distortion policy” – does not qualify as the required “law, rule, or regulation” under section 448.102.” To clarify, the lawsuit was brought under a whistleblower protection act, and the judgement is that a reporter exposing lies by a TV station is not protected under the act. Fox does not admit that they were distorting the news, but chose to fight on procedural grounds rather than on the facts, which is pretty standard legal tactics.

Monday Message Board

It’s time for your comments on any topic. As things have got a little over-excited in some recent comments threads, I want to emphasise my request for civilised discussion and no coarse language

Starvation as strategy

Ten days into the war, the high moral standards proclaimed by the Coalition leaders are rapidly being replaced by the brutal reality that this is going to be a war much like most others, with both sides committing grave crimes, and nobody really winning in the end. It’s already become clear that nothing said by either side can be trusted (I won’t resume the futile debate over which side is lying more). And, as the Pentagon has quietly dropped or relaxed restrictions on targeting civilian areas and civilian infrastructure, we can expect a steadily rising civilian death toll even before large-scale urban fighting begins. Of course, if Saddam had only surrendered peacably, or fought out in the open as the US wanted him to, none of this would have happened – the same is true of every war in history where one side has an overwhelming advantage in conventional terms.

Until now, I haven’t seen anything as disturbing as this Washington Post report which approvingly quotes the use of food aid as a weapon, not in the general sense of ‘winning hearts and minds’, but in the same way Saddam has long used it, with food being given as a reward for co-operation and withheld as a punishment for resistance.

Two trucks laden with food and water pulled up in front of a school this morning on the southern edge of this dusty industrial town where paramilitary fighters loyal to President Saddam Hussein have roamed the streets since shortly after the U.S.-British invasion of Iraq.

There was nothing random about the choice of this neighborhood for the first humanitarian effort by Special Operations forces. A local Shiite Muslim religious leader had been identified by a team of Green Berets as pro-American. …U.S. forces gave the Shiite notable a microphone to let the swelling crowd know that he, and not the soldiers, would determine who got the food. And, he said, more would follow in coming days.

The crowd applauded and a U.S. campaign to win political allies in southern Iraq through selective favors began in earnest….

“We have to give this guy legitimacy and let his people see that he’s the man that can get what his community needs,” said one Special Operations major of today’s operation at Zubair, a crossroads 10 miles southwest of Basra. “We have to find friends who can help us build support. There’s a purpose behind where we unload.”

An interpreter working with the Americans told the crowd over a microphone that they must be orderly or “we won’t come back.” …

The payback for such handouts, according to the major, is more than goodwill. With access to community leaders, the United States can obtain intelligence to target Hussein’s irregulars who are turning the 10-day-old war into a guerrilla campaign.

At a water treatment plant just outside Basra, for instance, workers who had been provided with food pointed out a hidden weapons cache to a Special Operations civil defense team after a second day of aid. (emphasis added)

And this is called a war of liberation.

What I'm reading

I’m still leafing through my collection of Borges short stories. A particularly interesting one, in the light of various debates in this corner of Ozplogistan last year (try starting here and reading forward through the archive), is The Don Quixote of Pierre Menard, about a writer who attempts to think himself into the position of Cervantes, and then reproduce Don Quixote, succeeding to the extent of two chapters. Borges, in the person of a literary executor, quotes from Cervantes’ original a conventional apostrophe to History , then the identical passage from Menard’s ‘reproduction’ which, he argues, is utterly different by virtue of being written by a 20th century author.

As much as I throw myself into this intellectual escapism, I have to admit that I’m reading everything I can find about the war. At an intellectual level, I’m still convinced that this is a pointless activity – having tried and failed to stop the war, there’s very little that supporters of peace can do now to mitigate its awful consequences. But this hasn’t stopped me thinking about it most of the time, and so I’ll probably resume posting about it before long.

Natural monopoly

My piece on oligopolies gave rise to a lively, and often vituperative, comments thread. As is usually the case, the substantive issues got lost in the name-calling (entertaining though the latter was at times). Attempting to extract some coherent issues from the thread, I focused on two:

  • whether some industries are naturally monopolistic and
  • what, if anything should be the role of competition policy (for historical reasons, this is called ‘antitrust’ in the US).

In this post, I’ll stick to natural monopoly. I think economists have tended to underplay the importance of natural monopoly, particularly in the period of microeconomic reform that began in the 1980s. There are three main factors leading to natural monopoly (or maybe, I like threeway classifications, and have organised a diverse set of factors into three classes).

First, physical economies of scale are important in a lot of different contexts. For a city the size of Brisbane (a million or so people), it makes sense to have just one airport, one major brewery, a handful of major hospitals and so on. For network distribution services (phones, electricity, water supply etc) the same point arises a bit differently. In physical terms, it’s optimal to have only a single distribution network in any given local area. This is pretty obvious, but there were a lot of silly claims in the 1990s based on the fact that since microcomputers had displaced mainframes, it was obvious that technology would in future be small-scale and inherently favorable to competition. The fact that the world’s microcomputer chips were made in a steadily shrinking number of plants costing a billion dollars apiece (and rising) escaped the attention of these gurus.

Second, the economic importance of information is increasing all the time and information is nonrival in consumption – giving information to me doesn’t make it any less available to you. So, the technically efficient procedure is for information to be produced once and shared freely. Again in the 1990s, the slogan ‘information wants to be free’ was repeated a lot. Unlike the idea that new technology is inherently small-scale, this slogan was at least half-right. Once information has been discovered it’s costly and wasteful to keep it secret or restrict its use. But the slogan is also half false. Discovering/producing information in the first place is costly and those who discover/produce it want to be paid in some way.

So far I’ve been talking about information of the “E=MC-squared” type, but another sort of information is equally important or more so in explaining the prevalence of natural monopoly. Human relationships, including long-term economic relationships depend on the beliefs, preferences and intentions of those involved, and these are hard to discover. I can discover my own intentions and beliefs by introspection and I can infer those of other people from observation and experience – the human capacity for self-deceptions means that the latter kind of information is sometimes more reliable than the former.

As a trivial example, when I write a column for the Financial Review, the opinion editor expects that I will check my facts before I submit the column – (I flagged my uncertainty about the authorship of the airlines cartoon I cited recently, but as it turned out I should have asked on my blog first). For some columnists and some papers, this isn’t a problem of course, but for papers that aspire to accuracy, it’s easier to rely on contributors who are known to be reliable than to take on new writers who may require more careful checking. This kind of problem arises in all kinds of employment and contractual relationships.

As Ronald Coase pointed out over 60 years ago, it is the transactions costs associated with this kind of information that explain why so much economic activity is arranged through firms and other organisations (governments, households, clubs, and now Internet-based virtual communities) rather than through markets. If it were not for transactions costs, even physical economies of scale would not produce monopoly, since the same asset could be shared by an arbitrarily large number of firms.

I’m going to leave the question of competition policy for another post, but I’ll observe that one factual implication of the arguments above is that competition policy makes a difference. If it were not for restrictions on mergers and for the tight regulation to which monopolies are often subject, a lot of industries that are currently oligopolies (dominated by a few firms) would be monopolies.

War reading

As I said a few days ago, I’ve decided to stop posting on the war for the moment – I can’t see anything good coming out of it, or propose anything that is likely to produce a better outcome. But, as usual, I agree with nearly everything Tim Dunlop has written.

Carr wins again

Although it took place eons ago in blogtime, I haven’t got around to commenting on last weekend’s New South Wales state election until now. The result is a striking one, giving another landslide victory to a government that’s looked pretty tired at times in the last few years. It seems to me that Labor has become the natural party of government at the State level in Australia, simply because people want more public expenditure and services and don’t think the Liberals will deliver them. The fact that the Federal government raises most of the revenue while the states do most of the spending (and that most voters aren’t really aware of this) means that this factor isn’t as significant at the Federal level. Even so, without Tampa and other foreign policy crises, the Howard government would almost certainly have lost in 2001.

In quite a few recent state elections, the combined Liberal-National vote has been near, and sometimes below, 33 per cent. This is a critical value in a preferential system (for overseas readers, this is the same as an instant runoff). As long as a party can hold its vote above 33 per cent, it is guaranteed of finishing first or second in the primary vote, and cannot be displaced by a third party. Below 33 per cent, and the possibility of a wholesale loss of seats to a new party becomes real. This happened with Pauline Hanson’s One Nation in Queensland in 1998, but the fortunate implosion of Hanson’s party gave the Coalition another chance.

As an aside, the other crucial figure in relation to three party contests is 25 per cent. If you have less than 25 per cent of the ‘three-party preferred vote’ you can’t win. Either you finish third and are eliminated, or you finish second, but the first-placed party already has more than 50 per cent.