Friday, September 14, 2007

The "Surge", the "Dollar Auction", and a Useful Concept

Oliver Goodenough, a law professor at Vermont Law School, talks about a standard game economics professors use to "demonstrate how apparently rational decisions can create a disastrous result." The game is called "The Dollar Auction". I won't go into its details, since the Wikipedia link has a nice, succinct explanation.

Goodenough uses the Dollar Auction to illustrate how we got into such a bad situation in Iraq, and how the Surge is effectively just another bid in a now irrational auction.

A Dollar Auction is easy to understand, and seems be a useful conceptual tool for understanding how certain awful outcomes can result from seemingly (or genuinely!) rational actions.

13 comments:

Bryan said...

Here's the fallacy:

"America is long past the possibility of some kind of profitable outcome in Iraq."

An economist should know something about opportunity costs. The analogy doesn't hold because of the dynamics of world power. Consider, for example, how the game changes if the dollar undergoes a radical change in value during the course of the game--and after. Is it good to have saved 51 cents that is worth 5 cents at end game rather than paying $1.50 for a dollar that ends up being worth $2.00?

Marc said...

Here's the irrational exuberance:

On what plausible basis would one think that the game's going to change and that a "dollar's worth" of world power is going to appreciate to $2, when it's been on a solid slide for quite some time now?

Bryan said...

There has been no solid slide in the value of the dollar in terms of world power. The economy of the entire world depends on oil resources. Mess with that and you are literally messing with people's lives; it is the energy economy that allows human population growth to the extent we see it today.

To put in simply, people will die because of it; far more than you're seeing at present. That, of course, is under the assumption that the religious leaders of Iran are interested in extending their influence. There is a plausible basis for that supposition, given the combination of Iranian rhetoric and behavior.

I'll point out, Marc, that your response is itself a fallacy. You assert irrational exuberance but offer the burden of proof to the one who would say otherwise (fallacy of shifting the burden of proof).

No biggie--I'm up for it and I don't necessarily mind bearing more than my share of the burden of proof.

Marc said...

Let me be careful here and not mischaracterize your position:

1) You believe it is a fallacy that "America is long past the possibility of some kind of profitable outcome in Iraq."

2) You believe that "[t]he analogy doesn't hold because of the dynamics of world power".

OK so far?

As one who supported the invasion in 2003, believing it to be justified and hoping it might lead to planting seeds of democracy in the Middle East, I was slowly and reluctantly pushed away from that support by the policy ineptitude and lack of planning, until I was finally chagrined to admit that what happened wasn't worth it. I never expected things to go this badly, and I see few signs of hope in Iraq.

That said, I've had to reluctantly concur that "America is long past the possibility of some kind of profitable outcome in Iraq."

On that point I guess we'll have to disagree, for I no longer see a plausible reason to think that a "game change" will occur in the SW Asia theater that will be able to justify the expenditure of money and lives (American and Iraqi).

You appear to argue that the dollar auction analogy doesn't hold because it doesn't take into account the possibility of appreciation of the value of the goal, i.e. the "dollar that ends up being worth $2.00". Okay, if that kind of value appreciation was a viable possibility you'd have a point. But at the present, though, that dollar (or dinar) isn't worth what it was in 2003, and I can't see a good reason to think that it would not only rebound, but appreciate beyond that level, hence basing one's planning on such an expectation would be "irrational exuberance".

I find it fallacious to base one's criticism of an analogy on it not taking into account being confronted by an extraordinarily unlikely turn of events.

Bryan said...

Let me be careful here and not mischaracterize your position:

1) You believe it is a fallacy that "America is long past the possibility of some kind of profitable outcome in Iraq."


Something like that. The fallacy is the use of a questionable premise, sometimes called the "fallacy of the questionable premise."

2) You believe that "[t]he analogy doesn't hold because of the dynamics of world power".

OK so far?


Sure.

I've had to reluctantly concur that "America is long past the possibility of some kind of profitable outcome in Iraq.

Thus you'd find the argument persuasive (having accepted the premise).
What gets me is that in spite of the fact you say you're concurred reluctantly with the premise, you offer no attempt at persuasion.
Can you see how I would find that curious?

But at the present, though, that dollar (or dinar) isn't worth what it was in 2003

I dont know what dollar *you're* talking about, but I'm talking about the strategic importance of Iraq, and that value hasn't shrunk and will only grow until the world figures out an alternative to an oil-based economy. Shrinking supplies increase the strategic value of Iraq (the Iranians realize it, you should, too).

I find it fallacious to base one's criticism of an analogy on it not taking into account being confronted by an extraordinarily unlikely turn of events.

I don't understand why (via analogy) you see the strategic value of Iraq shrinking or, alternatively, why you think that U.S. spending remotely approaches its strategic value (let alone the value of the many additional lives that would very probably be lost through a premature drawdown of coalition troops).

Marc said...

You say:

"What gets me is that in spite of the fact you say you're concurred reluctantly with the premise, you offer no attempt at persuasion.
Can you see how I would find that curious?"

Yes. So let me explain. One's position on the Iraq war has gotten so contentious that I think most attempts at persuasion are futile.

There was an anti-war contingent from the beginning in 2003. There is a remaining pro-war contingent that now seems to have stabilized at around 30%.
The rest, to which I belong, have shifted from pro- to anti-war (and perhaps there's a few that have gone from anti- to pro-, but I seriously doubt that's a significant number).

No one persuaded me to make this shift, it was the simple facts of 4+ years of occupation, ongoing sectarian violence, the lack of establishment of a unifying government, the billions of sunk and continuing costs, and the so far 3806 American fatalities.

One has to come to their own conclusion in this matter, and so while pundits (and bloggers :-) like to argue and argue over what could happen, or will happen, if we stay, or go, or surge, or draw down, (demonizing their opponents along the way) I find no value, and expect no resolution, to such arguments, so I opt not to play.

I'll explain how I came to my decision at this point in time, and continue to reevaluate it whenever I see objective evidence of change, but I don't expect to persuade anyone else of anything on this matter.

And then:

"I don't understand why (via analogy) you see the strategic value of Iraq shrinking or, alternatively, why you think that U.S. spending remotely approaches its strategic value (let alone the value of the many additional lives that would very probably be lost through a premature drawdown of coalition troops)."

The strategic value of Iraq isn't shrinking (the absolute value of the dollar doesn't shrink in the analogy either), it's the value relative to the expenditure, and the likelihood of the expenditure acquiring the value that appears to be shrinking.

How many dollars is the strategic value of Iraq worth? Why is the present course of expenditures believed to be the best way to capture that strategic value?

What if those (in Iraq) who claim that the American occupation is adding to the problem are right? (I'm not saying they are.) What if drawing down our forces leads to de facto partitioning and stabilization?

What about spending a hundred billion dollars on alternative energy R&D instead of the war? Would that more cost effectively diminish Iraq's oil-based strategic importance?

Even my mother, a lifelong conservative Christian republican, wants us out of the war--sometimes it's smart to listen to one's mother :-)

Bryan said...

One's position on the Iraq war has gotten so contentious that I think most attempts at persuasion are futile

Having changed your position, I figured you might have some added insight. :)

it was the simple facts of 4+ years of occupation, ongoing sectarian violence, the lack of establishment of a unifying government, the billions of sunk and continuing costs, and the so far 3806 American fatalities.

1) We're still occupying Germany and Japan, you realize.
2) Sectarian violence? Should the Brits have given up on Ireland after four years?
3) How does the cost in dollars and lives convince you minus an accounting of the consequences of failure? WW2 cost more in terms of both, so obviously there must be something more to it unless you're telling me that you would be in favor of letting Hitler roll Great Britain and cede the Pacific Rim to the Japanese emperor.
4) The United States Constitution went into effect in 1788. Guess how long that was after the Revolutionary War.

With an unelaborated argument like that above, you might as well tell me that you changed your mind because others changed their minds and you decided to join them.

Marc, I'm literally shocked that you choose not to engage in a discussion of outcomes. One can hardly conduct any kind of coherent foreign policy without calculating outcomes (I can give you dozens of examples if you like). The refusal to consider endgame scenarios (and you've been a courteous host so I apologize for this) strikes me as an ostrich response to the issue. Millions of lives hang in the balance one way or the other and you choose not to consider it? I'm flabbergasted.

...the likelihood of the expenditure acquiring the value that appears to be shrinking.

So you're not paying attention to the polling data that shows growing numbers (now a majority of Sunni and Shia, and if not a majority then a significant minority of Kurds) of Iraqis in favor of a unified non-sectarian government?
You're not encouraged by the effective operations against AQI and decreasing levels of violence against civilians in Iraq? The stabilization of Anbar province?

How many dollars is the strategic value of Iraq worth?

At least as much as the lives of the tens of thousands who would probably die as a result of escalating sectarian violence. You name that figure and I'll estimate the increase.

Why is the present course of expenditures believed to be the best way to capture that strategic value?

Which alternative would you like to discuss, given that you're not into talking consequences?

What if those (in Iraq) who claim that the American occupation is adding to the problem are right? (I'm not saying they are.)

Wouldn't that require discussing potential consequences? If you're not willing to say that they're right and you're not willing to discuss possible outcomes then what's the point of asking the question? Just to get me to write more stuff that you'll just ignore?
You're confusing me. ;)

What if drawing down our forces leads to de facto partitioning and stabilization?

Partitioning would be a bad thing without a stable central government. Think Turkey, Kurdistan, and the PKK. Turkey will be plenty mad at us if a more-or-less independent Kurdistan results. I can't think of any reason why the "stable" Iraq resulting from a drawdown would be a good thing. Iraqis who cooperated with the US will be killed and persecuted if they don't flee the country. Minus US influence, chances are that Iran will prey on a weak Iraq and draw it into political orbit. That will be bad news for Kurds and Sunnis. Those who aren't killed outright are probably in for a rough time. Probably you don't want to think about that. Maybe it will be Candyland for everyone there. Yeah, go with that option.

What about spending a hundred billion dollars on alternative energy R&D instead of the war?

That might work if Iran doesn't bring us to our knees first by smuggling nuclear devices into our 10 biggest cities and then threaten to detonate unless we surrender.
And they may not even have to do that. Once they see what a pushover America is, they'll feel pretty good about moving against Saudi Arabia. If they cut off the oil from that region, the world economy tanks--unless we accede to their demands, of course. They might start small. Pray for them to start small.
In the U.S. we'll very probably experience a depression that makes last century's look like a picnic in the park.
You don't really care about these "what if" questions, do you?

Would that more cost effectively diminish Iraq's oil-based strategic importance?

I doubt it, particularly over the short term. We probably won't get a glimpse of a feasible replacement energy source for a good twenty years. Nuclear power is our best stopgap option, in my estimation.

Tell your mom I'd like to hear why she changed her mind about the war. ;)

Marc said...

...and so on and on and on it goes.

I have my rational reasons, they convinced me to change. I've been reminded that no battle plan survives contact with the enemy.

You have yours, many of which reflected my thinking before and in the early days of the war, and maybe you're right.

My mother probably changed her mind for the irrational and totally emotional reason that her nephew (my cousin) tried to commit suicide (twice) after returning from a year in Iraq in a "military ambulance" unit. She no longer thinks it's worth the price.

(He's doing okay now.)

Bryan said...

...and so on and on and on it goes.

I have my rational reasons, they convinced me to change.


Your first two sentences appear incongruous.

The first one implies that no amount of discussion will change an opinion. The second one (strongly) implies that (rational) reasoning can result in a change of opinion.

Together, they imply that my reasons are not rational while yours were (I grant that this may not have been your intent).

You have yours, many of which reflected my thinking before and in the early days of the war, and maybe you're right.

The first portion of this sentence from you concurs with the former implication. The latter portion, however, concedes that you may be wrong (ghost of a chance?).

Your cousin has my thanks for his service, and my condolences to your mom.

I think your cousin performed a valuable and worthwhile service by supporting the war effort in Iraq. And I'm glad to hear he's doing better.

Rational reasons that defy description aren't much good, in my opinion. Just sayin'. Constructive dialog depends on the supposition that discussion can make a difference. I think it would be a shame if you gave up that idea, and in fact it seems odd that anybody would bother to blog while lacking that belief.

Marc said...

As I said, I have my reasons for my change of opinion about the Iraq war. I listed them, and I find them rational and sufficient to justify my change.

Here's what happens:

You found it trivially easy to counter my simplistic rationale.

I then find it trivially easy to counter your simplistic counter-arguments.

Those counter-arguments, being simplistic, you find trivially easy to counter, ad nauseum.

For example:

1) We're still occupying Germany, and Japan, you realize.

I can't seem to find the reports of suicide bombings, ethnic cleansing, and sectarian violence from 1949 post-war Germany, Austria, and Japan.

Suggested counter: That's beside the point, the point is "A", "B", and "C".

3) [...]unless you're telling me that you would be in favor of letting Hitler [rule] Great Britain and cede the Pacific Rim to the Japanese emperor.

Well of course! Just because the countries are different, the regions are different, the histories are different, the cultures are different, the religious backgrounds are different, the relationships amongst the countries are different, the technologies are different, and the warfare tactics are different, how could one possibly intellectually defend coming to different conclusions regarding WW2 vs Iraq merely on the basis of just about everything being different between these conflicts?

Suggested counter: They're not that different when you see that "D", "E", and "F"!

4) The United States Constitution went into effect in 1788. Guess how long that was after the Revolutionary War.

7 years. Relevance of the context in which the US Constitution was written (late 18th century, agrarian economy, travel by foot, horse, or sailing vessel; fresh from indigenously initiated and executed fight for independence) to Iraq (early 21st century, oil-based economy, Islamist factions, predilection, and neighbors; fresh from externally imposed government overthrow and under active occupation)?

Suggested counter: -Sigh- The relevance is "G", which means that "H", "I", and "J".

Oh, and I see you skipped 2), so you clearly have no response to that!

Then I'm supposed to go refute the relevance or validity of A-J, which you'll then trivially refute, and then me, and then you, and I've already seen way too much of this show.

Look at the facts, judge for yourself. You've done it, I've done it, originally we drew the same conclusions, the changing situation has changed mine.

Constructive dialog depends on the supposition that discussion can make a difference. I think it would be a shame if you gave up that idea, and in fact it seems odd that anybody would bother to blog while lacking that belief.

This isn't a blog about Iraq, and other than displaying and updating the number of American military personnel killed so far, there has been exactly 1 posting (out of the 40 made since this blog started) that pertains to Iraq. And that post, i.e. this one, was merely meant to pass along a writeup that provides an analogy (if one considers it a valid analogy) that helps explain American policy towards Iraq.

So Bryan, you win the dollar. Enjoy.

Bryan said...

I can't seem to find the reports of suicide bombings, ethnic cleansing, and sectarian violence from 1949 post-war Germany, Austria, and Japan.

Suggested counter: That's beside the point, the point is "A", "B", and "C".


Good job with the counter suggestion. I answered your first point with my mention of the enduring occupation of other countries. You "counter" by reiterating your second point.

Why would you attempt a rebuttal that is so easily countered? You haven't touched my point at all, and you can't reasonably argue that I didn't answer your point complaining about a 4 year occupation.

Point number 2 disappeared on account of the fact that you already invoked it to attach to point number 1, I suppose.

2) Sectarian violence? Should the Brits have given up on Ireland after four years?

Insurgencies last an average of 10 years. Sometimes the insurgents win out, other times they lose. The Angolan war of independence provided a good example of counterinsurgency operations.

(there must be something more to it)3) [...]unless you're telling me that you would be in favor of letting Hitler [rule] Great Britain and cede the Pacific Rim to the Japanese emperor.

Well of course! Just because the countries are different,


I specifically left you the option of expanding on your point (conveniently omitted by you, for some reason). If your concern was greater than the mere cost then it behooves you to make some mention of it.

So you don't want to tell me what the real reason is. It's not just money, it's (money+x) where x is not identified.
That's good, Marc. If you keep the real reason secret then it's harder to counter.

7 years. Relevance of the context in which the US Constitution was written (late 18th century, agrarian economy, travel by foot, horse, or sailing vessel; fresh from indigenously initiated and executed fight for independence) to Iraq (early 21st century, oil-based economy, Islamist factions, predilection, and neighbors; fresh from externally imposed government overthrow and under active occupation)?

So, with all those advantages Iraq should establish its stable democratic government faster?
Pardon me if I don't understand your counter. You complained about the lack of a unifying government. Are you saying you want autocratic rule for the Iraqis or should we help keep country stable while they take no less than six years to achieve the goal of a representative government?

Oh, and I see you skipped 2), so you clearly have no response to that!

Nice try, but I guard pretty carefully against fallacious argumentation. ;)

Then I'm supposed to go refute the relevance or validity of A-J, which you'll then trivially refute, and then me, and then you, and I've already seen way too much of this show.

You should address the arguments for real (if you can) instead of trivializing the process of argumentation itself, in my opinion.

If you don't realize that my original points remain solid and that you haven't offered a serious counter to any of them as of this point, then I have reason to doubt the rational basis for your change of mind on the war even if you won't describe it beyond the crayon sketch above.

Look at the facts, judge for yourself. You've done it, I've done it, originally we drew the same conclusions, the changing situation has changed mine.

The ramifications of victory vs. the ramifications of defeat haven't changed since the beginning, and I had my eyes open to that from the first. Tens of thousands--perhaps millions--will very probably die if withdrawal is done too soon, and the consequence beyond that are even more dire as the global balance of power starts to hang in the balance.

This isn't a blog about Iraq ...

Obviously, but blogging about anything would seem to reflect an expectation that your opinion can make a difference in persuading somebody of something. Even if it's only to persuade them that Jesus isn't coming back soon so nobody should waste time teaching it.
Get the point? Or am I wasting my time since communication is a flawed notion? Don't answer that in the affirmative, lest you self-stultify.

Marc said...

You should address the arguments for real (if you can) instead of trivializing the process of argumentation itself, in my opinion.

People smarter and more well-versed than you and I in all the ins and outs of history, diplomacy, regional politics, international relations, etc. have been arguing about this now for several years--each providing what they consider air-tight rational arguments for their pro-war or anti-war positions.

Yet the argument continues, each side promoting their position and countering (and often disparaging) the other's.

Are both sides making rational arguments? Then why isn't a common understanding being reached? Are all those in the opposition "idiotarians", "denialists", or stubbornly ignoring the plain evidence?

It grieves me to realize that "argument" no longer seems to be a useful tool for dealing with this subject. Both sides have dug in, and bring up whatever facts or historical analogies are needed to derive what appear to be obvious conclusions. Which the other then trivially dismisses as wrong, irrelevant, or as being misinterpreted.

Are we all really that simple-minded when framing our arguments?

Bryan said...

Yet the argument continues, each side promoting their position and countering (and often disparaging) the other's.

Isn't that true for a host of topics, Bible eschatology among them?

Are both sides making rational arguments?

I can't say yes to the arguments of those who would withdraw on short notice until they provide some way of managing the fallout. I won't assume that there is no accounting for the likely disaster, but neither can I assume that there is such an accounting if it doesn't occur in their arguments.

It doesn't help that political calculus can easily be imagined as the motivation for early withdrawal. The GOP has nothing to gain if it really is hopeless. Visit icasualties.org and you'll see some strong indicators that civilian violence is way down. Would that happen if the cause were lost?

Then why isn't a common understanding being reached?

For the average joe, probably because the mass media hasn't stopped spinning it as a big loss (and many people uncritically accept bad arguments). Among higher-level Democrats (and waffly Republicans) it's either stupidity or an unbelievable Machiavellian streak. Democrats can gain (short-term) from defeat in Iraq. They can also gain from a soft stance on illegal immigration. I'd like to hope that base motives such as these do not move my fellow Americans, but it's hard to explain their behaviors without invoking the possibility.

As for experts and elites it's hard to say--but they're people after all and often they don't really know much more than we do, anyway.

Are all those in the opposition "idiotarians", "denialists", or stubbornly ignoring the plain evidence?

I have no idea. I try to judge each case individually--but you're throwing up your hands as though argument is futile in the midst of offering some exceptionally unsatisfying answers to my challenges. If you encountered somebody who was unwilling to get down to the nitty-gritty of the argument and wrote the whole dispute as futile what would you conclude if you were in my shoes?
In point of fact I'm not making a firm conclusion. But you've got me leaning (and it's not toward agreeing with your position).

It grieves me to realize that "argument" no longer seems to be a useful tool for dealing with this subject.

Am I being that unreasonable? :)
And can you give me an example exemplifying my unreasonableness? Or am I so unreasonable that it's pointless to give an example?

Both sides have dug in, and bring up whatever facts or historical analogies are needed to derive what appear to be obvious conclusions.

Isn't that normal in every deeply-contested dispute, including Biblical eschatology?

Which the other then trivially dismisses as wrong, irrelevant, or as being misinterpreted.

You mean "trivial" easy or "trivial" vacuous? If the latter, I'd like your best example of my tendency to dismiss your arguments trivially.

Are we all really that simple-minded when framing our arguments?

I don't see how I'd know without trying. I think I can give you a fairly obvious example of a poor argument you've given me, but I can't guarantee that you'll agree with my assessment even if I were to show that your argument perfectly matched a pattern of fallacious reasoning.

I enter an argument with the expectation that there is some possibility of persuading the other person through reason, however. Otherwise there's no point in talking to one another over a disagreement.

I think I'll never understand starting with the assumption that discussion is pointless.