The Dollar Auction for Iraq

Are we caught in Martin Shubik’s diabolical game?

I think Mike O’Hare’s comparison of the “stay the course” mantra to the Martingale system at roulette is funny, but I’m not sure it’s right. The roulette wheel, after all, can’t be intimidated. Human opponents in situations of conflict can.

You don’t have to imagine “the insurgency” as some sort of unitary rational actor to think that Iraqis deciding whether to fight the new government and the continuing American presence need to make some sort of calculation about whether, if they can inflict sufficient pain on the U.S., we will go away. The more reasonable and calculating we appear, the more plausible the strategy of killing as many Americans as possible in hopes of driving us out.

So it probably makes sense for the Administration to conceal whatever realistic calculations it might be doing behind a wall of continuing bluster. (As Mike notes in an email, bluster is one of the very few one activities the Bush Administration executes competently.)

Moreover, this is not the last time the U.S. will be in a situation where we’re imposing costs on other people and they’re imposing costs on us, each hoping that the other will get tired first. So the optimal strategy for us to pursue in Iraq isn’t the same as the strategy that gets us the best results available at the least cost, in Iraq; we need to consider the effect of our actions now on the next confrontation we engage in.

Yes, yes, I know, this logic can be used, and has been used, to justify persistence in disastrous policies. And it’s very hard to appear unreasonable without becoming unreasonable.

But that doesn’t mean that the logic itself is wrong. One good reason not to start a war is that starting commits you to winning. (Napoleon said that the first maxim of warfare was, “If you set out to take Vienna, take Vienna.”

It seems to me that the right comparison to use isn’t the Martingale system but the Dollar Auction Game. Here’s how that works:

We’re going to auction off a dollar bill, but under somewhat unusual rules. As usual, the highest bidder gets the dollar, but both the highest bidder and the second-highest bidder have to pay the amount of their last bids.

A little reflection will suggest that, once the game starts, there’s no natural stopping-point; if I bid 90 cents for the dollar bill and you bid 95 cents, it’s certainly worth my while to add another dime to my bid, since I’d rather pay a dollar for a dollar than pay 90 cents for nothing. But then you will surely bid $1.05, since you’d rather lose a nickel by buying a dollar bill at that price than lose 95 cents by paying 95 cents for nothing. And so on.

In any situation where the winner has the prize, less his costs, and the loser has only his costs, the tendency on both sides will be to keep going, hoping that the other will quit first. It looks to me as if we and the Iraqi insurgents are playing the Dollar Auction Game.

In that context, our problem — if we don’t think the insurgents are going to get tired, which seems much less likely now than it did two years ago — is to figure out an outcome that’s tolerable to us and to (enough of) the insurgents so that they would rather accept it than keep fighting.

I’m not sure there is such an outcome, but let me suggest one: no permanent U.S. presence in Iraq. It was clear from the beginning that the maximum goal of the Administration was establishing a virtual American protectorate over Iraq, with a tame government (remember the idea that the first act of the new Iraqi government should be the recognition of Israel?), oil contracts for American companies, and permanent U.S. bases in Iraq to replace the bases we were giving up in Saudi Arabia and intimidate Syria, Iran, and whoever might be thinking about overthrowing the House of Saud. And I have no reason to think that the Cheney-Rumsfeld axis, even stripped of Scooter Libby, has any smaller aspirations now than it did going in.

What if we were to announce, not a timetable for withdrawal, but a commitment that there would be no continuing U.S. military presence in Iraq once the new Iraqi government was firmly established and its security forces adequate to handling the task of putting down the insurgency? Then, instead of fighting being a means to the end of expelling the U.S., peacemaking would be the means to that end.

Would that change the behavior of the dead-end Ba’athists and the al Qaeda fanatics? Probably not, or not much. But it might shift the balance of Iraqi — including Sunni Arab Iraqi — public opinion, by making reasonable nationalists associate the achievement of their goals with the success of the new regime rather than its failure.

I claim no expertise in Iraqi politics. But a Dollar Auction is a bad game to find yourself playing, and we need some serious thought about how to get out of it with as intact a reputation, and as few additional casualties, as possible.

Author: Mark Kleiman

Professor of Public Policy at the NYU Marron Institute for Urban Management and editor of the Journal of Drug Policy Analysis. Teaches about the methods of policy analysis about drug abuse control and crime control policy, working out the implications of two principles: that swift and certain sanctions don't have to be severe to be effective, and that well-designed threats usually don't have to be carried out. Books: Drugs and Drug Policy: What Everyone Needs to Know (with Jonathan Caulkins and Angela Hawken) When Brute Force Fails: How to Have Less Crime and Less Punishment (Princeton, 2009; named one of the "books of the year" by The Economist Against Excess: Drug Policy for Results (Basic, 1993) Marijuana: Costs of Abuse, Costs of Control (Greenwood, 1989) UCLA Homepage Curriculum Vitae Contact: