Why wars keep happening

  • Themes: War

A market-based approach to conflict misses essential elements of why, despite interdependence and the emergence of international norms, wars that make little rational sense continue.

British soldiers going 'over the top' in the First World War.
British soldiers going 'over the top' in the First World War. Credit: De Luan / Alamy Stock Photo

It is easy to forget how pervasive the language of the market is in our lives. The notion that individuals or collective entities and their behaviour are best understood through their efforts to maximise their utility and measurable, tradeable interests, and that we should view interactions between individuals through the transactional lens of bargaining, is – historically speaking – relatively recent.

This conceptual frame was unleashed by an intellectual revolution, taking off in the 1960s and 1970s in places like the University of Chicago, and gaining policy prominence in the 1980s, when this worldview defined those of Margaret Thatcher in the United Kingdom and Ronald Reagan in the 1980s. Its popularity was so widespread that it was continued and, in many ways, deepened by their successors on the left, Tony Blair and Bill Clinton, in what can be described as a neoliberal consensus.

The lens of game theory and economics – micro and macro – moved far beyond describing how prices were set and how markets in goods or the flow of finance capital worked. The language of the market was applied to subjects ranging from law to human social behaviour. Indeed, that language of economics and the market has increasingly been used to describe human activities – sports, love and romance, and even war – that were once understood as driven by passions that were hard to measure and immune to bargaining.

The application of the market to war and conflict, beginning during the Cold War and expanding since its end, is especially noticeable.

One of the earliest proponents of this way of understanding war was the Nobel Prize-winning economist and one of the world’s most renowned nuclear strategists, Thomas Schelling, who viewed competition and conflict through the lens of rational bargaining.

There were deep, often unrecognised tensions in Schelling’s work. Indeed, his two cornerstone works, written a year apart – Strategy and Arms Control and Strategy of Conflict – contradict each other. Strategy and Arms Control recommends policies to remove the incentives for states to engage in risky military behaviours, such as launching a surprise attack, by pursuing arms control. Strategy of Conflict lays out strategies to exploit the risks and uncertainties in military competition – such as playing games of chicken. The first suggests policies that are stabilising; the latter, ones that are destabilising.

Despite these tensions and contradictions – and that Schelling’s policies of signalling were associated with the Johnson administration’s disastrous bombing campaigns during the Vietnam War – the economic and market language of rational choice and bargaining increasingly came to dominate academic studies of war and conflict.

In fact, what is now commonly referred to as the ‘bargaining model of war’ has come to dominate the study of international politics. The seminal piece in this field was published in 1995 by the Stanford political scientist James Fearon and entitled the ‘Rationalist Explanation for War’. Based upon his dissertation, it is arguably the most influential thesis produced in the field of international relations in the United States in the post-Cold War period.

To Fearon and others, war is less a natural part of political life and more a puzzle to be explained.

Why? It is hard, if not impossible, to know with certainty, ex ante, the outcome of any conflict – you might lose and suffer devastating consequences. And even if you win on the battlefield, modern war is so terrible that both sides might come out worse than they began. This was certainly the case with the First World War, which even though Great Britain and France prevailed over Germany – with earlier help from Russia and later help from the United States – the costly victory left them far less powerful than when the war began. For Fearon and others, then, the question became: why didn’t states seek an agreement, or a compromise, that any rational market based bargaining model would predict?

Fearon identified three reasons war can happen despite conflict rarely making sense from a market perspective.

First, and most important, the capabilities and resolve of states involved in a conflict are hard to measure before a war. How good are the competing military forces? How willing are the players to stay in a fight and see it through to the end? There are also incentives, before a war, to mislead your adversary about both your power and commitment, typically in the direction of making both seem more robust. The truth about capabilities and resolve is only known after the war unfolds, when it is too late.

War can also happen because of what is called the commitment problem. States may not rationally be able to commit to not launching a war – attacking first may carry enormous benefits and a state may not want to give that up. Or a state worries that dramatic changes in the future balance of power may generate rational reasons to fight in the future.

The final reason war comes is because the contested issue rivals are fighting over is indivisible. In other words, the matter at hand cannot be bargained over. Curiously, advocates of the bargaining model tend to downplay and minimise how often indivisibility comes into play in war, in the same way that Schelling found the idea of wars aimed at complete annihilation of an adversary rare and strange.

You can see the powerful appeal of such a model. It helps explain what is often understood as one of the greatest tragedies in modern history – the First World War. The European empires rushed into conflict in August 1914 because there were believed to be great advantages to striking first, each state was worried about dramatic shifts in the future balance of power, and pretty much everyone greatly misunderstood the military power and resolve of their adversaries.

In other words, both sides – the Germans and the Austro-Hungarians, and the French and the Russians – believed they were stronger and more resolved, and that the war would be over quickly, and they would prevail.

It was clear after only six weeks of fighting – after the Germans were stopped during the first battle of the Marne – that this assessment was completely wrong. By the end of September 1914, the participants recognised the war would not be over quickly and would be a horrendous struggle of attrition, demanding the full mobilisation of every participant’s economy and society.

Yet, we also know these powers were committed to seeing it through in a way an economic model could explain – sunk costs of thousands dead, whose loss had to be redeemed, and prospect theory, in which it was attempted to reverse defeats instead of cutting losses.

There would be no easy victory, nor would there be an easy way out, and indeed, four empires – the German, Austro-Hungarian, Ottoman, and Russian – would collapse into revolution and anarchy, and the French, despite victory, would forever more be a second-rate power.

There is a problem with the rationalist model, however. And that is to explain the decision-making of Great Britain.

Great Britain had been a reluctant entrant to the war. The Liberal government of Herbert Asquith engaged in serious debate over whether to commit to a war against Germany or not. Recall also that as much as England saw Germany as a threat, in recent memory Russia, and even France, had been far sharper, more threatening rivals. British interests by no means completely aligned with their French and Russian partners.

Recall also that, unlike the other four participants in the early days of the conflict, Great Britain’s military commitment to the war had been minimal, with only 80,000 ground forces on the Continent, far smaller than the other four major participants. As a result, there was little fear of sunk costs or making up lost gains driving British decisions. They could have easily cut their minimal losses and reoriented their grand strategy at little cost. Indeed, given the tepid initial commitment and reservations about its allies, and given the general recognition that the war would be long and draining, what would a market based, utility maximising, bargaining model tell us that Great Britain should do?

Consider the counterfactual. A Great Britain that brought its small army home after the Battle of the Marne, that decided, instead of committing to one side, it moved to play the balance wheel, allowing these two enormous alliances to bleed each other in an attritional war, to intervene only on behalf of the side that was losing to tip the balance and prevent a continental hegemon, to rely on and exploit its traditional power base, the Royal Navy and London’s financial power.

In this scenario, a Great Britain that held back, that maximised its interests and utility in ways that make sense from a market perspective, may have dramatically increased its relative power compared to any present and future rivals, would have avoided the painful dependence upon the United States that developed in years to come. Great Britain would have gained a commanding voice in how the war and politics unfolded on the Continent, and would have helped Europe avoid the chaos and turmoil that plagued it for years after the war finally ended. Great Britain would have likely remained the world’s pre-eminent power.

This is not what Great Britain did, of course. Instead, it raised a massive army and sent it to the continent to fight brutal battles of attrition for four more years until it found itself, with Russia and France’s armies severely weakened, bearing the greatest weight of the conflict.

In the end, Great Britain defeated Germany, but at enormous cost, ceding its primary world-power position to the United States and leaving itself too weak to prevent Germany’s rise, Russia’s radical shift to communism, or the splintering of its own vast empire.

Why focus so much on this market based, bargaining lens to understand war? Because it underlays much of what experts have got wrong about war in our own time.

Many, if not most, international relations experts believed that Vladimir Putin was pursuing a coercive bluff when he mobilised his military and threatened Ukraine in late 2021 and early 2022.

Indeed, from a rationalist, bargaining perspective, Russia’s invasion made little sense.

Neither Ukraine, nor even western NATO countries, were a threat to Russia. Unlike in times past, winning in Ukraine would do little to add to Russia’s strength. The Donbas in 1900 possessed coal, wheat, and a supplicant population, key sources of power in the past. Brutal imperial aggression was often ignored by the world.

In 2022, neither coal nor wheat are elements of state power, conquest is far more difficult and populations are not pliant, and aggressors pay a price, often a steep price, for invasion.

Yet Putin still attacked.

We can imagine similar analyses of China and the United States squaring off over Taiwan. In neither case would the loss of Taiwan pose an existential threat, yet a war between the United States and China would bring ruin. A bargaining model would suggest there were powerful incentives to find a compromise, to negotiate a deal, because neither side would benefit from a war, even if, like Great Britain in the First World War, one side or the other won – in so far as Great Britain truly won in 1918.

The language of the market, where participants coolly attempt to calculate the best ways to maximise their interest and their utility, who threaten force largely as a tool to get a better bargain, and who fall into war mostly because they misperceive their own or their adversaries capabilities and resolve, does a poor job of explaining conflict in a world where former colonialism has been thrown on the dustbin of history, plunder has been replaced by globalisation, and conquest almost never pays.

Unlike the world of the market, international politics is far more often zero-sum and far more issues are indivisible and immune to bargaining.

None of this comes as any surprise to military historians. As Thucydides reminds us, nations go to war for three reasons: fear, honour, and interest. An economic lens is not very helpful, and indeed potentially misleading, when applied to the first two.

Historians understand that war is launched for many reasons, not a few of which have little to do with bargaining or utility maximisation. The desire for respect or recognition or feelings of national pride or hatred for the other or even because war, as irrational as it can be, has long been an inextricable, powerful, mysterious part of the human experience.

This is not to say game theory, bargaining, and the language of the market aren’t helpful. But, similar to their failures to create the best sports teams or to produce the ideal algorithm for love and romance, a market-based approach to conflict misses essential, vital elements of why, despite interdependence, massively increased wealth, the emergence of norms of tolerance and human rights, war, even wars that make little or no rational sense, continue, and are likely to continue.

And if we are to understand, prevent, and indeed, when tragically unavoidable, prevail in these conflicts, perhaps it is to the historians, and not the game theorists and economists, that we should turn to for insight.


Francis J. Gavin