70 Finance & economics The Economist March 19th 2022
Wargames
S
ixty yearsago, a dispute over the placement of Soviet missiles
in Cuba pushed Washington and Moscow perilously close to
allout war. The crisis provided history’s most extreme example
yet of nuclear brinkmanship, situations in which governments re
peatedly escalate a very dangerous situation in an attempt to get
their way. It also demonstrated the extraordinary value of the work
of Thomas Schelling, an economist then at Harvard University,
who used the relatively new tools of game theory to analyse the
strategy of war. The war in Ukraine has made Schelling’s work, for
which he shared the economics Nobel prize in 2005, more rele
vant than ever.
Game theory came into its own in the 1940s and 1950s, thanks
to the efforts of scholars like John von Neumann and John Nash,
who used mathematics to analyse the strategies available to par
ticipants in various sorts of formal interactions. Schelling used
game theory as a prism through which to better understand war.
He considered conflict as an outcome of a strategic showdown be
tween rational decisionmakers who weighed up the costs and
benefits of their choices. If a wouldbe attacker expects to gain
more from aggression than any cost his adversary can impose on
him, then he is likely to go through with the aggressive act.
For a government hoping to deter an aggressor, the effective
ness of its deterrence strategy thus depends in part on the size of
the retaliatory costs it can inflict on its attacker. But this is not an
exact science. Both sides may have incomplete information about
the relative costs they can expect to bear. When Vladimir Putin,
Russia’s president, was preparing his invasion of Ukraine, for ex
ample, Western democracies threatened to impose stiff sanctions.
Just how tough the sanctions could be was not necessarily know
able to either side beforehand, because the details needed to be
negotiated with allies.
The credibility of retaliatory threats matters, as well; both sides
of a potential conflict may issue grave threats, but if they ring hol
low they may be ignored. The threat of stiff sanctions by Western
democracies—clearly a powerful tool in hindsight—might well
have been weakened by doubts that governments were prepared
to expose their citizens to soaring oil and gas prices. Governments
deploy a range of tools to bolster the credibility of their threats. AnAmericanpromise to defend an ally may be strengthened by the
placement of American troops within the ally’s borders, in harm’s
way, for instance; an American president would presumably find
it more difficult to back down in the face of an attack that claimed
American lives. Schelling, for his part, noted that credibility can
sometimes be enhanced by taking costly actions or limiting your
own options. A general’s promise to fight to the bitter end if an en
emy does not withdraw becomes more credible if he burns the
bridges that provide his own avenue of retreat.
The problem of credibility becomes far more complicated in a
showdown between nucleararmed powers, which both have suf
ficient weaponry to retaliate against any first strike with a devas
tating attack of their own. If the first use of nuclear weapons is all
but assured to bring ruin on one’s own country as well, then ef
forts to use the threat of nuclear attack to extract concessions are
likelier to fail. Wars may nonetheless occur. The invasion of Uk
raine could be seen as an example of the stabilityinstability para
dox: because the threat of a nuclear war is too terrible to contem
plate, smaller or proxy conflicts become “safer”, because rival su
perpowers feel confident that neither side will allow the fight to
escalate too much. Some scholars reckon this helps to account for
the many smaller wars that occurred during the cold war.
And yet the cold war also threatened to turn hot at times, as in1962. Schelling helped explain why. He noted that the threat of a
nuclear attack could be made credible, even in the context of mu
tually assured destruction, if some element of that threat was left
to chance. As a showdown between nuclear powers becomes more
intense, Schelling observed, the risk that unexpected and perhaps
undesired developments cause the situation to spiral out of con
trol rises. (When nuclear forces are on high alert, for instance,
false alarms become far more dangerous.) The upper hand, in
such a situation, is thus maintained by the side that is more will
ing to tolerate this heightened risk of allout nuclear war.
This is the essence of brinkmanship. It is not merely a matter of
ratcheting up the tension in the hope of outbluffing the other side.
It is also a test of resolve—where resolve is defined as a willing
ness to bear the risk of a catastrophe. Mr Putin’s move to increase
the readiness of his nuclear forces may represent an attempt to
demonstrate such resolve (over and above the message sent by the
invasion itself ). President Joe Biden’s refusal to escalate in kind
could be seen as an acknowledgment of the conspicuous fact that
an autocrat embroiled in a pointless war has less to lose than the
rich democracy to which Mr Biden is accountable.
The only winning move
It could be, however, that Mr Biden had something else in mind. In
his Nobel lecture, Schelling wondered at the fact that nuclear
weapons had not been used over the 60 years that had elapsed
since the end of the second world war. While he chalked up the ab
sence of nuclear use between superpowers to deterrence, he reck
oned that in other wars and confrontations restraint was best un
derstood as resulting from a taboo: a social convention that stayed
belligerents’ hands when they might otherwise have deemed it
strategically sensible to deploy nuclear weapons.
Russia’s aggression has shattered another taboo, against ter
ritorial aggrandisement through violence. And though the gov
ernments of the West feel compelled to respond to limit the dam
age that has caused, they are no doubt also keen to restorethe old
convention—to demonstrate that the world has movedbeyond an
age where the mighty take by force whatever they want.nFree exchange
The disturbing new relevance of economists’ theories of nuclear deterrence