The economist Steven E. Landsburg once wrote: “Most of economics can be summarized in four words: ‘People respond to incentives.’ The rest is commentary.”
It’s these seemingly trivial sentences that draw me to economics again and again. Sentences so simple at first glance that you could quickly forget them. But if you do not, if you think further, they can give manifold insights into cohabitation. And not only in the context of economic matters. Also about the lives of dictators, for example.
However, in the context of this text, a second fundamental sentence from economics is needed. An assumption all economics begins with namely that all human behaviour is rational.
This is a provocation for some people. It sounds obviously wrong to them. There seems to be so much irrationality in our world. So much needless distress. So much suffering. – It is one of the strengths of economics to put across how bad conditions can result from rational human actions – and how this can be changed.
Clarity lives in simple sentences, so I want to write down some simple insights relating to Vladimir Putin’s behaviour that one can derive from the assumptions above: people respond to incentives and people generally behave rationally.
Before, two preliminary remarks.
a) To assume that people behave rationally doesn’t say anything about their preferences. There’s no accounting for tastes is one of the economist’s slogans. Economists wouldn’t call a man irrational if he pays 1 Euro for a lottery ticket that gives him one chance in ten million of winning 10 million euros. People have different attitudes toward risk or just pay for the idea of winning. In the case of Putin, I not only assume that he is acting rationally but also that he has one crucial preference: staying in power. Putin spent large parts of his life trying to gain control, hold it or expand it. I see no evidence why this preference could have changed.
b) Some people think dictators act irrationally when they wage war. War is insane, so those who start a war are insane, too, they argue. I disagree. Dictators wouldn’t be dictators if they couldn’t strategically pursue their goals. They’re mostly not insane, they’re ruthless.
So again, what simple lessons can be derived from the assumptions that Putin
wants to remain in power,
responds to incentives and
Here is my brief list:
1) Dictators usually increase their power when they win wars, they decrease power when they lose wars. As a result, Putin will do a lot to win the war in Ukraine.
2) If Ukraine were part of the military alliance NATO, Putin would not have attacked the country. The probability of losing the war would have been too great. That also means as long as he sees a chance to stay in power, he will not attack NATO member countries.
3) The power of a dictator relies on giving money to those who support him. Sanctions reduce the financial possibilities of a regime. So implementing sanctions can be a way to reduce the power of dictators.
4) The prospect of lifting sanctions (if war ends) can be an incentive for Putin to end the war in Ukraine. Therefore the West will have to prepare to return to the negotiating table with Putin.
5) Not only does a dictator follow his interests, but also his people. They want to live, they want to live well, they want to live in freedom. Sooner or later, every dictator comes into conflict with their people. To remain in power, dictators have to restrict the people’s choices. At least the dictator cannot leave the choice of political leadership to the people.
6) Absolute rulers purport they were almighty. They are not. The fact that Putin is currently further restricting Russian civil liberties shows that every dictatorship needs the support of the people. If the people’s opinion was irrelevant for Putin’s stay in power, he wouldn’t need to restrict people’s freedom.
7) For an actual loss of power, those must turn against Putin, who have their hands on guns. How can this happen? – The people working for the police and military forces follow incentives as well. They arrest because they get paid well and kill because they have to (desertion carries the harshest penalties in times of war). But how will these people behave when conditions change? When likelihood increases of being held responsible for the regime’s atrocities? When the number of demonstrators becomes so large that a blind shot into the crowd could hit a gunman’s family member? When hope grows to live a better life under a different leadership? – Those who exercise power are most important to Putin. If they break away from Putin, Putin will perish. But this group has the most at stake. They must be concerned about perishing with Putin. They also have to worry about being held accountable in a post-Putin era. So probably, there will be the need at some point in the future to offer these people a bridge so that they will turn their backs on Putin.
I guess many items could be added to this list.
Just one last note for today: It was long before the Ukraine war started that Putin had decided to assert his interests against those of his people. He chose to increase his well-being not with cooperation but with suppression, appropriation and annexation. All people whose coexistence is based on cooperation (the only legitimate means to follow one’s interest in a free world) have the incentive to end such a regime. It is simply against the people’s interests. And since this conflict is so fundamental, it will only vanish when dictatorship ends.