The Surge's Moral Hazard

by publius

Via Juan Cole, al-Hakim’s son had an interesting take on Iran’s role in the latest clashes:

“Tehran, by using its positive influence on the Iraqi nation, paved the way for the return of peace to Iraq and the new situation is the result of Iran's efforts. . .”

The larger lesson here is that the recent uprising – and Iran’s mediation – pretty much drives a theoretical stake through the heart of the surge, and the military occupation more generally. It’s not just that the occupation isn’t achieving its political goals – it’s that it’s actively undermining those goals as well.

That last point is key. The current domestic debate seems mired in a “screwed if we do/screwed if we don’t” mindset. The nation agrees that the war was a bad idea, but they continue to accept prolonged, indefinite occupation because they don’t perceive our presence as making things worse. Our occupation, however, is making things worse – that’s the key lesson that the past weeks have taught us. And that's the point war critics need to emphasize more loudly.

Marc Lynch made an interesting observation a while back that the American presence is creating one giant “moral hazard,” not unlike the Fed bailout of Bear Stearns. He writes (quotes actually):

Moral hazard arises because an individual or institution does not bear the full consequences of its actions, and therefore has a tendency to act less carefully than it otherwise would, leaving another party to bear some responsibility for the consequences of those actions.

Here, the overriding risk is all-out civil war – whether inter-or-intra ethnic group – or regional war, or both. Our presence mitigates these risks – at least in the short term. Thus, Maliki can take risky actions like raiding Basra or openly turning the army into a wing of Badr, knowing that he and his allies won’t be exposed to the full risk of those actions (civil war) because of the American presence. Similarly, other countries (like Iran, Syria, and Saudi Arabia) feel less urgency to engage diplomatically (which is itself a “risky” omission) because of the American presence.

If, however, America announced that it would leave Iraq in a year, then the parties involved (both inside and outside Iraq) would suddenly bear more of the consequences of their risky behavior. Accordingly, they would be more motivated to bear down and bang out political deals.

I realize I’m not saying anything new – people having been arguing for some time that the threat of withdrawal is the only real leverage we have left for creating a semi-stable situation. But what the Iran mediation shows is that these arguments actually have some empirical merit. When the risk of all-out intra-Shiite civil war erupted, the Iraqi leadership and Iran banged out a political deal. Obviously, it may not last. But it reinforces the argument that politics and diplomacy are the only way that Iraq can be a non-disaster (relatively speaking of course).

This explains why the Kagans’ “Iraq 4-Ever” strategy is actually worse than withdrawal. The Bush/Kagan strategy is simply to keep the maximum number of troops in Iraq as long as possible in the hopes a pony will appear. To maintain political support for the Pony Strategy, they need to peddle worse-case scenarios and paint pictures of genocide and all-out civil war.

I’ll fully concede that such events are possible – anyone who doesn’t is being dishonest. But my point is that our occupation makes them more likely, for the reasons explained above. Specifically, the longer and more indefinitely we stay, the greater the moral hazard we produce. As long as we stay indefinitely, parties will act more recklessly than they otherwise would. These actions, in turn, will have profound, unpredictable, and irreversible consequences.

As last week shows, however, there is actually some decent chance that withdrawal would force the parties to internalize the risks of their actions. When the risks are internalized, it’s more likely that solutions will appear. It’s not a great strategy, but it’s better than the alternatives.

Comments

[dutchmarbel]

Joshua Holland writes an angry piece about the catch22 and the fact that NONE of the candidates will actually withdraw.

[hf]

The nation agrees that the war was a bad idea, but they continue to accept prolonged, indefinite occupation because they don’t perceive our presence as making things worse.

Not unless you mean members of Congress or perhaps people on talk shows (what I sometimes call the Powdered-Wig Punditry). Even the first group does nothing in part because they think it will help their personal careers. The nation as a whole "accepts" the occupation for now because we don't have recall elections for the White House.

[now_what]

The nation agrees that the war was a bad idea

The nation agreed - the majority at least - that war was a bad idea on the day the war started. But the majority of the nation wasn't listened to.

There's no real need to question why the majority wasn't listened to. It is because if there is one thing that both the right wing and the left wing can agree on, it is that listening to the wishes of the electorate is something to be feared.

Don't bring up what the nation agrees on as a topic for discussion - none of you care.

[GNZ]

Maybe Iraq never was a stable arrangement for a country, and that a rapid withdrawal might force everyone to realize that splitting it in three (a Iranian part a southern part and a Kurdish part) is the only long term way to go.

Basically no one, (except maybe Iran and probably not them either) would be willing to front up the troops etc to hold it together.

Otherwise, if stability is maintained, we might find the world propping up a continuous low level civil war for the next hundred years.

[radish]

Well, yeah, sure. But then again, we're still really badly screwed either way.

People complain about the irrationality of the sunk cost fallacy, but it has a perfectly rational game-theoretic basis, which is very relevant in this case. In "iterated" (multiple rounds) games with reputation and punishment, there's a significant benefit to knowing or deciding when the last round will be. Ideally, you know for sure that you will play "last" and you can do whatever you want in that play without possibility of retribution. But if your ability to predict or invoke the "last" iteration--or your position within it--is uncertain, you have a problem.

For example, suppose you're losing steadily in a game which you can probably, but not certainly, end whenever you want. What you really want is to simultaneously invoke the last iteration and take the most aggressive highest-stakes action available (in order to minimize your losses).

But if you don't know that it will be the last round, you're screwed. If you play an aggressive round but you turn out to be mistaken, your losses will be worse, potentially far worse, than they would have been otherwise. Especially if the stakes are variable, or there are multiple players who want to keep playing...

There are lots of variations on this. Maybe you don't know what the chances are that your attempt to end (or predict the end of) the game will be successful. Or maybe you can't play an aggressive last round without playing a next-to-last round that would signal your intentions. Or you might not be able to end the game without being the first player to play in the round, which would mean that the other player/s will still have a chance to punish you. Etc etc... Plenty of reasons one might be tempted to shrug and say "hazard, schmazard!"

Announcing our intention to withdraw practically guarantees that everybody involved will alter their strategy, but doesn't guarantee that we'll actually manage to withdraw. And another thing that's practically guaranteed in this case is that all the other people involved have constructed their strategies for "what to do when the US withdraws" a hell of a lot more carefully than we've constructed our strategy for doing the withdrawing.

This is all just a long-winded way of saying that while withdrawal probably is a better long term strategy than staying forever, it's unlikely to feel like a better strategy once we get around to doing it.

[felix culpa]

now_what: ?

Line the lame ducks up, Bush, Musharraf, Maliki, Mugabe.

Sadr is shaping up as a worthy leader and strategist. Moving the protest to Baghdad because “a protest there will allow people of other sects to participate."
Obeidi also said that the protest is "not limited to the Sadr movement. We want all Iraqis to take part. The target of the protest is the [US] occupation" (AlJazeera).
Next Tuesday. The next landmark.

[radish]

Hunh. It occurs to me that I just put a bunch of effort into an argument that's mostly moot. The surge and the occupation are not, and cannot, meet their stated goals. But that should not be construed as meaning that they're not accomplishing their real goals.

This is all a long way away from painful for the people who wanted it. It's not their treasure being spent, and it's certainly not their blood being spilt. But it is their stock values being propped up, their taxes being kept low, their privileges being protected.

Eh? What's that? Why yes, as a matter of fact bob mcmanus is indeed one of my heroes (pace the primaries of course). How did you know?

[bleh]

The Bush/Kagan strategy is simply to keep the maximum number of troops in Iraq as long as possible in the hopes a pony will appear.

I think rather that their strategy is to kick the can to the next administration, so that administration will incur the political costs of withdrawal, which costs Bush, Kagan, et al., will work to make as high as possible.

And people accept it because it's like getting a root canal. You're gonna have to do it eventually, and you're causing yourself needless pain by delaying, but it's so unpleasant that you keep putting it off.

About the only way to rationalize this sort of behavior is to assume that the time-discounting of the cost of pulling out exceeds the daily cost of delaying -- as if it were a big loan that you nevertheless continue to pay interest on rather than paying off, because you're making even more by investing it elsewhere. (Rather a bloodless analysis, I admit, but it's certainly less bad than what I think the Bush administration's calculus is.)

[Davis X. Machina]

The surge and the occupation are not, and cannot, meet their stated goals. But that should not be construed as meaning that they're not accomplishing their real goals.

We've seen Iraq mostly taken off the table as a campaign issue, and with that, the chances of GOP retention of the White House and reduction of further GOP losses in Congress both go up.

Mission accomplished.

Iraq isn't so much a war as the world's most expensive campaign commercial, and it may just deliver another one.

[Brick Oven Bill]

There is another option beyond walking the streets and a complete withdrawal. We have built massive military bases out in the isolated sands. Establish no-go zones for ten miles around the bases (enforced by some rented Iraqi tribe) in all directions to deny the photograph of the Iraqi children crying underneath the American flag.

Move all the troops and equipment to the bases and let Iraqi political water and/or blood find its own level. Our presence will act as a deterrent to a Russian or Chinese move on the oil. If Iraq turns into a theocracy, call it al-Qaeda and take out the leadership until a military guy emerges. He will be available for rent if needed in the future.

There is a reasonable chance that American politics will shift with a degrading economy. With $5/gallon gas, Americans may decide that we have a more valid claim to Iraqi oil than either al-Sadr or Ahmedinejad. A refund for the liberation that nobody wanted.

[Nell]

We've seen Iraq mostly taken off the table as a campaign issue

It's April, for crying out loud. And there's no need to passively accept it being "taken off the table".

But agreed that Dems don't want to hear the truth about the situation any more than the thirty-per-centers do. Can't think when I've enjoyed a congressional hearing as much as this recent exchange between Nir Rosen and Joe Biden before the Senate Foreign Relations Committee.

[Marshall]

George W. Bush's entire life has been one long illustration of the costs of moral hazard.

[nabalzbbfr]

Prime Minister Maliki has demonstrated bold and courageous leadership during the past two weeks, confronting Iraq's political problems head on. He bloodied the Sadr movement and forced them to back down in Basra. In the process he also smoked out Sadr's Iranian backers. General Petraeus is about to call Sadr's puppetmasters in Teheran to account in his Congressional testimony in the coming week. Check out the following references:

http://www.telegraph.co.uk/news/main.jhtml?xml=/news/2008/04/05/wiran105.xml

http://www.timesonline.co.uk/tol/news/world/middle_east/article3690010.ece

[John Thullen]

I don't comment on the war any longer, except to say f(*@ it.

But this:

"Moral hazard arises because an institution does not bear the full consequences of its actions, and therefore has a tendency to act less carefully than it otherwise would, leaving another party to bear some responsibility for the consequences of those actions."

I don't buy the theory of "moral hazard".

Bear Stearns (and the entire world financial system) did NOT behave they did because there was some implicit a priori understanding that they would be bailed out.

They saw the main chance, they operated in the vacuum of trailing regulation (regulation follows bullshit; it can't predict it); worse, they hired the best and the brightest (who could have been doing something more productive if it wasn't for their precious effing freedom to spend their time being unproductive) to operate without transparency because they have come under the spell that transparency leads to the Gulag, and worst of all, they offloaded all of the misunderstood, arcane, quanted risk to society, you and me, on purpose, with malice aforethought, because they were incentivized every step of the way to do so and they liked it.

They purchased outrageously priced wine for lunch and shared Elliot Spitzer's penchant for women.

They did what they did because they could.

Now, I suppose all of us are thinking, under the theory of moral hazard, that we need to rush out and engage in subprime mortgage fraud because the Federal Reserve has decided to save (clumsily, yeah, but it's a mopping up human institution, whaddya want?) the world's finacial system from Bear Stearn's exercise in freedom?

Not.

I mean, look, I'm not planning murder because many states have outlawed the death penalty. Maybe conservatives feel compelled to do so, not being able to resist the tug of moral hazard.

Hey, that was a cheap shot.

Brick Oven Bill:

No offense, but your comment can be summed up in two words:

Saddam Hussein.

Been there, done that.

We hung him. Now, we want him back?

I think I predicted that, and I'm a stinking English/Philosophy major, loosely speaking.

Graham Greene had us down:

Adopt peace and democray or we just might have to kill you.

[wendell]

Why I keep up with you guys. Best post I have seen ANYWHERE in the run-up to the Petraeus-Crocker show.

Unfortunately, from a U.S. perspective, the best comment I have seen is from Nir Rosen, whose commentary has been consistently illuminating:

"There’s no positive scenario in Iraq these days. Not every situation has a solution." (That came from his testimony to the Senate Foreign Relations Committee--and kudos to whichever aide decided to have him testify.)

One other point: most of us don't have the experience to be culturally sensitive about the Mideast yet (but we're trying!). Col. Pat Lang (ex-DIA) does. He says:

http://turcopolier.typepad.com/sic_semper_tyrannis/2008/03/quds-force-medi.html

"If it is true that the commander of the IRGC Quds Force mediated the intra-Shia fracas, then the US policy in Iraq of favoring the ISCI/Dawa/Badr dominated Maliki government is in serious trouble.
The role of "Wasit" (intermediary) is highly significant in the Middle East. For the Iraqis to assign that role to the Iranians would indicate an acknowledgment of what they think the situation is going to be in the future.
A Reminder: The Quds Force is the IRGC element that the US Senate branded a terrorist organization some time back pl"

Note: All of this affirms, and (bridge term) doubles (if not re-doubles), Publius' point.

Sound bite: We're screwed. Thanks (or something else) very much, GWB 43.

[hf]

It would seem that Iran's government either prefers Maliki's Shiite militia to Sadr's, or doesn't care that much which of them runs the country. I gather the main difference of opinion between the two involves the role of the central Iraqi government and the proper ownership of the national oil company.

[Brick Oven Bill]

Ivan the Terrible was a bad guy. I mean a really bad guy. He had his rivals tortured in ways that the water boarding apologists would not recognize; turning them on a spit at various distances away from the fire and stuff like that. Saddam came close with the throwing people off roofs that were high enough to maim and not kill thing, but he was no equal of Ivan the Terrible.

In 1564, Ivan got angry because he felt that he was not appreciated by the populace and he quit. Just up and left. Screw you guys, I’m going home (or to Austria).

And guess what? Things fell apart.

Ivan the Terrible agreed to return in exchange for absolute power, which he was granted.

Russia has plenty of brilliant Citizens, and even more ordinary moms and dads. Russia tried pure democracy too, for a little under a decade. And now they’re eating our lunch.

[magistra]

We've seen Iraq mostly taken off the table as a campaign issue, and with that, the chances of GOP retention of the White House and reduction of further GOP losses in Congress both go up.

I'm not actually sure about the effect on the White House race. Isn't one possibility that the worse things are in Iraq, the more people will tend to vote for a 'strong military leader' (i.e. McCain), even if his ideas are actually worse for solving the problem? Whereas if things quieten down (or at least Iraq drops off the US news agenda), voters may be more willing to elect someone with less military experience/background (i.e. Clinton or Obama).

PS: Is it a breach of the posting rules to say that it's more and more tempting to rename Brick Oven Bill as Gas Oven Bill?

[Johnny Pez]

Isn't one possibility that the worse things are in Iraq, the more people will tend to vote for a 'strong military leader' (i.e. McCain), even if his ideas are actually worse for solving the problem?

It's much simpler than that. If fewer people are dying in Iraq, then it means The Surge Is Working, so vote for McCain. If more people are dying in Iraq, then it means The Surge Is Working, so vote for McCain.

It remains to be seen whether people are still willing to swig the GOP kool-aid. Recent polls suggest not.

[Hartmut]

Bill should not have left out that when Ivan left (he went to a place near to Moscow btw not far away), he took the whole content of the treasury with him (a behavior shared by many other dictators although few are recalled to take office again). No doubt he was a shrewd politician.
I hear Stalin is still popular with many Russians too (no, that is not irony on my part).
Maybe it is time to change "e pluribus unum" to "oderint dum metuant" officially and borrow the http://www2.sptimes.com/Treasures/TC.2.1.2.1.html>Monomach Cap from the Kremlin to crown Lord Chain-Eye Supreme Being of the World.
Btw, unlike the chicken hawks Ivan loved to personally torture. I doubt that the selected shrub would have the stomach for that, if it goes beyong kittens and small birds. Since the US can't afford weaklings in the highest office, I propose that any presidential candidate has to proof his (no her may apply) balls by personally strangling a terror suspect and, when elected, do all federal executions by hand with a blunt axe (the delinquent may be anesthesized before to avoid conflict with the "cruel", let's skip the "unusual" for the moment).
[/rant]

[low-tech cyclist]

I agree with the main thrust of your post, publius. I just have one minor nitpick:

The Bush/Kagan strategy is simply to keep the maximum number of troops in Iraq as long as possible in the hopes a pony will appear.

It seems to me that they don't really even care about the pony - they want to base U.S. troops in Iraq indefinitely, period. Even the hoped-for pony is strictly for public consumption.

[novakant]

I’ll fully concede that such events are possible – anyone who doesn’t is being dishonest.

Thanks for that.

[Nell]

Sen. Biden wants a pony, too, aka a "plan for success in Iraq."

More pretense that our presence there has anything to do with the interests of the Iraqi people, more of the bland assumption that we have any right to be there.

The best we can do is get the hell out in a way that mitigates the many risks involved. There's no "success" to be had. Please encourage the Democratic candidate for your Congressional district to sign on to the plan for withdrawal that 50 of their counterarts are running on.

(The candidates' plan is a heartening example of refusing to allow the corporate media blackout to take the issue of the Iraq occupation off the table as an election issue.)

[dutchmarbel]

The candidates' plan is a heartening example of refusing to allow the corporate media blackout to take the issue of the Iraq occupation off the table as an election issue.

I read through it, and my description comes closer to the plan being a whole lot of vague statements, combining a wide variety of issues, and as such being rather useless.

It adresses too many issues. That should be divided. Voting for congressional oversight is different from voting on veterans GI rights, alternative energy, sueing war criminals, minority representation in media ownnership, phone tapping options and deployment of troops in Iraq. If you have that many issues in a plan, it will not ever get you anywhere. It just 'sounds nice'.

There is hardly anything in it about the Iraqi's. Their neighbours ought to be involved, the International Community should be involved - preferrably Nato because of its wonderfull experience with nation building..., they want to start an International Court that can handle warcrimes but carefully forget to mention the ICC, let alone assume that Americans would be held responsible by such a Court, etc.

Right in the beginning it said: The continued presence in Iraq of so-called “residual” forces beyond the minimum needed for standard embassy-protection would be a serious mistake. Any such troops would become a magnet for insurgent
attacks and unless they did nothing at all would inevitably become players in Iraq’s domestic political disputes, thus forcing the United States to continue to play referee to Iraq’s civil conflicts. Soldiers tasked with training missions would, to be effective, have to be embedded in Iraqi combat formations necessarily involving them directly in combat, thus continuing to hold American strategic fortunes hostage to events
in Iraq that are beyond our control.

If the Iraqi people unambiguously request peacekeeping forces, the U.S. should work with legitimate international organizations to assist in that regard.

What does "the minimum needed for standard embassy-protection" mean? Especially in Iraq where most of the green zone is part of the US ambassy? And if *they* (which they? isn't part of the problem that there is no 'they'?) want peoacekeepers, who are you going to ask? Oh, yeah, later in the plan they say UN and Nato. Nato??? Again??? Have you allready turned them into an US controlled UN competitor? How about paying all your dues to the UN and than pay a load more and say “ please take over. We were wrong to think that we could do this and are very very sorry about it” . I've been told that apologies for mistakes are valued highly in the US these days.

Oh, and the president should say again that the US really doesn't want to control Iraqi oil. They *will* come up with a good solution for Kirkut, and wierdly enough there is not a thing about how the US-backed Iraqi cabinet approved a new oil law that is set to give foreign companies the rights to that oil, but really, that means nothing.

A step in the right direction was taken when the Administration created the Office of the Coordinator for Reconstruction and Stabilization (S/CRS) in 2004, in order to enhance our capacity to respond to crises involving failing, failed, and post-conflict states and complex emergencies.

Complex emergencies? Would big floods drowning cities fall under that? Somehow maybe the US is not the first party I think of when I need advice or assistance in complex emergencies.

This whole plan is really a load of nonsense AFAIAC. But hey, it sounds nice, so go ahead and urge to sign.

[Hartmut]

dutchmarbel, nobody (ok, that's a bit far) is going to believe any US statement that there is no intention to control Middle Eastern oil. A statement on that is therefore in my opinion useless.

[dutchmarbel]

Oh, I agree Hartmut. That was a part of the plan, one of the recommendations, that the president of the US should say that.

[Nell]

dutchmarbel, do you want to see the U.S. occupation end?

If so, how do you see it happening?

The election of a bloc of members of Congress that could add significantly to the size of the 'Out of Iraq' caucus (an existing group inside the House of Representatives, not just my label) would seem to me to be a crucial step in that direction.

It's also politically vital that Iraq be made an election issue, and that this not be left up to the presidential candidates -- even if there were a consensus Democratic nominee at this point, much more so because there isn't.

I strongly recommend some of the commentary on the plan as well as the plan itself. The plan site has pointers to much of that discussion. Thomas Nephew's post at Newsrack is one of the better ones that's not in that list.

And, of course, I'm primarily aiming these recommendation at U.S. voters, who are more likely to grasp the political significance of this development and more likely to examine the proposals in good faith in that context than to pick them apart as falling short of the perfect, total approach to U.S. policy in Iraq.

I will answer just one of dutchmarbel's objections: The proponents of the plan call for the U.S. to have only a normal-sized, regularly functioning embassy in Iraq after withdrawal -- not the Green Zone, not the giant moated monstrosity that's already "built" but incapable of being moved into which would not even conduct normal functions like issuing visas.

They are referring to an embassy protection force of Marines of the type and scale we have in the vast majority of countries in the world -- something neither of the Democratic presidential candidates has addressed yet, because both of them are not really planning to end the occupation. They both envision "residual forces" of some kind.

[Nell]

To spell out the politics of the situation:

The fundamental political divide on Iraq is between those who see that withdrawal is the responsible policy, and those who are willing to continue the occupation.

Sen. Russ Feingold is on the withdrawal side. The Democratic Senate leadership and both presidential candidates are on the occupation side (to differing degrees).

Fifty-and-counting Democratic Congressional candidates promoting a withdrawal plan add welcome weight and momentum to the withdrawal side.

[dutchmarbel]

And, of course, I'm primarily aiming these recommendation at U.S. voters, who are more likely to grasp the political significance of this development and more likely to examine the proposals in good faith in that context than to pick them apart as falling short of the perfect, total approach to U.S. policy in Iraq.

Because that is exactly what we expect, us furreners, the perfect total approach. USA voters are not likely to note that the 'plan' addresses too many issues (media ownership, telephone taps, habeas corpus, clean energy, international criminal court but NOT the existing one, etc.)?

I will answer just one of dutchmarbel's objections: The proponents of the plan call for the U.S. to have only a normal-sized, regularly functioning embassy in Iraq after withdrawal -- not the Green Zone, not the giant moated monstrosity that's already "built" but incapable of being moved into which would not even conduct normal functions like issuing visas.

Where do they do that? The plan only says: "This solution requires that no residual U.S. troops remain in Iraq. The continued presence in Iraq of so-called “residual” forces beyond the minimum needed for standard embassy-protection would be a serious mistake."

Fifty-and-counting Democratic Congressional candidates promoting a withdrawal plan add welcome weight and momentum to the withdrawal side.

But I agreed with that, didn't I? "But hey, it sounds nice, so go ahead and urge to sign" because making them sign something that sounds nice and talks about withdrawel seems to be the goal.

[dutchmarbel]

Darn, the third paragraph should have a closing tag for italics. And the fifth paragraph should be in italics again.

[Craig Johnson at cognitorex]

You say:
"To maintain political support for the Pony Strategy, they need to peddle worse-case scenarios and paint pictures of genocide and all-out civil war."
Obama has now begun an exploration of getting this "litany of horrors" on the table. Define these and show them one by one for the falseness behind the premis of fear.
He sould be able to wrap up McCain's "fear and patriotism" schtick in a neat bundle and so lead independants and moderate Republicans to more honest appraisals.