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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