Bruce BDM is Good

by Russ Roberts on October 29, 2007

in Podcast

EconTalk listeners and others will enjoy this profile of Bruce Bueno de Mesquita. It mentions a very clever idea to promote peaceful coexistence between the Israelis and the Palestinians (HT: Alex at MR):

Recently, he’s applied his science to come up with some novel ideas
on how to resolve the Israeli-Palestinian conflict. “In my view, it is
a mistake to look for strategies that build mutual trust because it
ain’t going to happen. Neither side has any reason to trust the other,
for good reason,” he says. “Land for peace is an inherently flawed
concept because it has a fundamental commitment problem. If I give you
land on your promise of peace in the future, after you have the land,
as the Israelis well know, it is very costly to take it back if you
renege. You have an incentive to say, ‘You made a good step, it’s a
gesture in the right direction, but I thought you were giving me more
than this. I can’t give you peace just for this, it’s not enough.’
Conversely, if we have peace for land—you disarm, put down your
weapons, and get rid of the threats to me and I will then give you the
land—the reverse is true: I have no commitment to follow through. Once
you’ve laid down your weapons, you have no threat.”

Bueno de Mesquita’s answer to this dilemma, which he discussed with
the former Israeli prime minister and recently elected Labor leader
Ehud Barak, is a formula that guarantees mutual incentives to
cooperate. “In a peaceful world, what do the Palestinians anticipate
will be their main source of economic viability? Tourism. This is what
their own documents say. And, of course, the Israelis make a lot of
money from tourism, and that revenue is very easy to track. As a
starting point requiring no trust, no mutual cooperation, I would
suggest that all tourist revenue be [divided by] a fixed formula based
on the current population of the region, which is roughly 40 percent
Palestinian, 60 percent Israeli. The money would go automatically to
each side. Now, when there is violence, tourists don’t come. So the
tourist revenue is automatically responsive to the level of violence on
either side for both sides. You have an accounting firm that both sides
agree to, you let the U.N. do it, whatever. It’s completely
self-enforcing, it requires no cooperation except the initial agreement
by the Israelis that they are going to turn this part of the revenue
over, on a fixed formula based on population, to some international
agency, and that’s that.”

Other than the word "whatever," which suggests that measuring and monitoring would be a piece of cake, there is a lot of wisdom here.

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saifedean October 30, 2007 at 12:20 am

Sorry, but this idea is very naive, to say the least. Bruno de Mesquita may be a great political scientist and has written great theory, but I am really amazed at how naively he ignores the most serious problems of this conflict and thinks such a simplistic scheme might in any way work.

The problem is that this conflict is NOT about economic issues and income primarily. The most important issues of this conflict can not be resolved by money. The bad economic status of Palestinians is a result of the conflict, and not a cause of it.

The real root of this conflict is that Israel has been dominating the lives of millions of Palestinians for decades and oppressing them. It won't allow them to have their own state, and has built settlements over their land, stolen their resources and oppressed them whenever they refused this. These are all real problems that will not change even if you gave each Palestinian a million dollars.

Whether you pay Palestinians or not, this will not remove the half-million Israeli settlers who make the life of Palestinians impossible, will not allow the Palestinians to have a sovereign contiguous state on which they can live like normal humans, and will not remove the segregated racist road network that tears the West Bank apart.

These are all fundamental problems that make life for Palestinians impossible, and make their independence and livelihood impossible. These things need to be removed for the Palestinians to have any semblance of normalcy. To suggest economic transfers as a solution while ignoring all of these issues is insultingly stupid.

This is the equivalent of offering Martin Luther King and southern blacks money to stop protesting segregation to allow there to be peace. All while ignoring the segregation, persecution and racism in which blacks live. I am sure that blacks would not have stopped their demand for an end of racism had they been paid; similarly, I am sure Palestinians would reject these payments if it means a continuation of their oppression, and would gladly trade them and all the aid that they have been given for a real sovereign independent state that can run its own economy and determine its own fate.

If you want to solve the conflict, work to end the oppression of Palestinians by Israelis and end the system that keeps 4 million Palestinians governed by an entity that doesn't represent them. Once that happens you will have peace and economic prosperity. The rest is just details.

ben October 30, 2007 at 12:44 am

Its a novel idea, but I have three immediate concerns with it. First, doesn't each side presently bear the costs of reduced tourism due to violence? If so, what difference does this rule make? (one answer is that if tourists go to Israel but not Palestine, the rule improves incentives by raising the cost of violence by Palestine against Israel)

My second concern is that at the margin, the rule forces each side to bear only a fraction of the cost of reduced tourism. This may well be better than what occurs presently, in which the side that is attacked bears all the cost and the attacker bears none, but it is not efficient in the sense it internalises the full cost.

A third concern is in the detail is how revenues are distributed. Tourist dollars are presumably earned by private hotels and tour bus operators and tourist attraction owners. How does Mr BDM propose to integrate his public revenue sharing system with what is largely a private industry?

ben October 30, 2007 at 1:06 am

I'm jumping the gun: I somehow missed that this is a podcast, I'm sure these issues are discussed in it, which I will now listen to.

Russ Roberts October 30, 2007 at 8:19 am

Saifedean (and Ben),

There was Arab violence against Jews in Palestine before the establishment of the state of ISrael in 1948. There was Arab terrorism against Israelis before 1967. So the problem is not simply a question of Israeli settlers post-1947 or oppression of Palestinians after 1948.

More to the point, Bruce's idea isn't to get at the so-called root cause of the problem whether you think it's Israel's fault, the Palestinians' fault or a mixture of both. Nor does it have anything to do with the economic status of either side. The point is much simpler–to raise the price of violence. That seems like a very good idea. Could it be implemented? Maybe not. It just struck me as a clever way to align the interests of two groups that right now don't have much of an incentive to cooperate in what appears to be a zero-sum game. And it is not the case currently that both sides are punished symmetrically by a loss of tourism dollars. Right now, each side imposes can impose costs on the other. Bruce's idea would make each side bear a cost when the other is hurt.

Ayn Random October 30, 2007 at 12:59 pm

This is not a "market" solution, since it is statist by design. The people who own and run the properties should be allowed to do as they see fit, including the retention of all profits for private use. The poor, the oppressed and the terrorized should go elsewhere for handouts, because leeching off the private sector has been tried before and shown to be a complete failure.

vidyohs October 30, 2007 at 7:55 pm


You are correct, just paying people for peace is never going to accomplish a thing. But, that wasn't what Bruce BDM proposed.

I see wisdom in what Bruce BDMfor proposed for the following reason. As the post above makes it clear the proposed cooperation in the arena of tourism means that no one is paying the other for peace, prosperity, or disappearance. What would be happening is that each is actually paying himself for participating in making the tourism work, grow, and become hugely successful.

As one who began independent business late in life (age 43) I can testify that paying one's self is much more rewarding than having to get your pay from someone else. It changes an attitude faster than anything in the world other than a pretty face on a willing woman.

Having my own business turned me around in a lot of respects, not the least of which was the understanding that the more I worked the more I could make. So, my attitude quickly became one of, "Call me, day or night, if you have business." And a man who would walk away from overtime when employed became a man that would get up in the middle of the night to go serve a customer.

Look at the Isreali/Palestine conflict in the same light. By forming the proposed partnership, each are equal owners in the outcome as well as the efforts. Attitudes change, and as in my case, sometimes very quickly when one owns the means of production (tourism).

Would that suit everyone in both countries and make universal top to bottom peace and wonderous co-existence? Definitely not instantly, but given time who knows what could come of it? Especially as there are other areas than tourism in which cooperation would be more life altering than just trying to kill each other.

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