Friday, November 22, 2013

Coercion & Prospect Theory (School Paper)

A paper I wrote for class: November 18, 2013

Coercion & Prospect Theory
           State’s today have military capabilities that are far greater than any previous period in world history. Powerful state militaries have the ability to launch cruise missiles from the sea and use precision guided missiles from drones and aircraft with devastating effect. This has far reaching consequences for casualty averse democracies of the world that are now able to use superior airpower, limiting the risk of human loss allowing the use of force without necessarily putting boots on the ground. Coercive diplomacy since the Second World War is a tactic that takes advantage of the availability of these resources as a threat, though sometimes with force, as a way of compelling adversaries to change their behavior. This assumes there is a rational actor on the receiving end of the threat or action, and therefore the actor will make a decision based upon the costs and benefits of continuing or changing the behavior in question. However, states do not always act in a purely rational sense. Prospect theory offers a solution as to why one does not always see actors changing their behavior based on what others would view as rational. This paper will look at coercive diplomacy and how prospect theory answers the questions that the rational theory brings with it, as well as loss aversion and asymmetric conflict.
           Coercive diplomacy necessarily assumes a rational adversary in order to be a successful strategy. The theory stems upon the rational utility equation and the costs and benefits of the behavior that is taking place. If a state can change those costs then it should be able to force it’s adversary to change behavior by increasing the costs and decreasing the benefits of continuing the behavior it wants changed. Robert Pape puts it in easier words, “… coercion is to persuade the target state that acceding to the coercer’s demands will be better than resisting them” (Pape 1996). In order for this to work, the adversary is presumed to make decisions based upon the rational costs and benefits of the action. Supporters of a rational assessment of the target state believe it is possible to identify the costs and benefits perceived by the target state and manipulate them to change behavior. Put another way, “as long as we can define the costs and benefits, we can predict the choice by calculating the value of each alternative” (Kimminau 1998). So a threat of bombing by a coercer on a target state substantially increases the costs on the target state and they will choose to change behavior, or choose the alternative behavior that has the highest payoff value. Again, “The adversary can continue hostilities and suffer the threatened costs [or] the adversary could accede to demands and suffer the consequences of the coercer’s terms of defeat” (Kimminau 1998). In the instance above, if the coercer is increasing the costs of continuing hostilities and increasing the benefit of acceding to demands, forcing a change in behavior, viewed as successful coercion. Therefore, it is key to leave the opponent with a viable alternative that is less costly than continuing the behavior. If a state paints its adversary into a corner, it is less likely to give way because there are no other alternatives to choose from. The idea is to apply maximum pressure on the adversary, but not so much as to obliterate them, just enough to ratchet up costs and get the opponent to stop fighting (Packer Lecture 2013(b)). However, the assumption that actors will behave rationally has come under suspicion when looking at past instances of coercive diplomacy. Specifically, rationality does not take into account decisions made under risk, a flaw that prospect theory seeks to understand and account for.
           Prospect theory gives an alternative view for why states have not always made calculated decisions based upon the rational payoffs that many believed they would. For instance, “the assumption that imposing punishment may lead to a desire for negotiation can fail with adversaries who may seek even more risky ways of escaping losses” (Packer Notes 2013). Although it is not a rational decision to risk extending losses in a desire to eliminating losses all together, there are situations where this occurs. States may fight past the point where they have any reasonable chance for success (Packer Lecture 2013). Prospect theory offers that there are certain axioms that explain why decision makers may make these non-rational choices under certain conditions. First, decision makers may have a reference point, meaning where the actor started in the first place is a decision point. If reference points are in the domain of losses they become risk seeking and more conservative they view themselves in the domain of gains (Packer Notes 2013). The reference point is very important because it pins actors in the domain of losses or domain of gains, and behavior is derived from that position. Second, it is known that loses create more pain than a gain pleases. As Robert Jervis identified, “I doubt if I am lone in having been willing to tolerate an unusually high risk of significant losses in return for the chance of paying no penalty at all, or been willing to invest additional resources… in hope of recouping a recent loss” (Jervis 1992). Next, it is said people respond to factors outside of the though of parameters of decision-making. This is called framing, and it claims that decision-making can be altered by changing the context of the choice rather than its substance (Kimminau 1998). The last axiom of prospect theory is decision weighting, or the theory that probabilities are weighted differently depending on their size rather than absolute effects. In essence, some may overweight losses, which then encourages more risk taking to try to get rid of the loss. Taking this all into account, it becomes clearer why states may not behave rationally or continue a fight that is viewed by others as a lost cause. All of this explains why coercive diplomacy may not be successful when the coercer does not take into account a two-phase decision process. The reference point is most important, if an adversary views themselves as below the reference point or in the domain of loss, they will take more risk. It is possible that an actor in the domain of losses will continue an action that leaves little room for negotiation as long as it offers some small chance at success, in order to avoid loss (Packer Notes 2013). For example, in World War Two, in 1945, the Allies were using a strategic bombing campaign to try to force the defeat of Germany by changing the costs and benefits of continuing the war. However, Hitler weighed the probability of success and future costs of resistance against the terms of unconditional surrender and went for the less severe, which was continuing the war (Packer Notes 2013). Prospect theory offers the answer to why, even though the Allies were ratcheting up the costs of continuing the war for Germany, the German leadership decided to continue the fight. The benefit of unconditional surrender was viewed as too costly and continuing the war offered just a slight chance of success, but that was all that was needed. In the end, the axioms of prospect theory make way for answers as to why rational choice is not always decided upon. Taking into account bounded rationality and decisions under risk; prospect theory is more successful at explaining the decision-making of actors.
           One would expect that the stronger side should win the large majority of the time in conflict. However, since World War Two, the stronger side has prevailed less and less in conflict. The consensus has been pointed to resolve and the willingness to suffer of the stronger state and how that has affected conflict. Willingness to suffer has come into question it can be said because, “rather than resisting the more powerful opponent through conventional means, weaker adversaries have evolved strategic responses” (Packer Notes 2013). So, strategy has evolved by the weaker adversary and gives the weaker state the ability to win conflict by achieving different goals rather than a win through conventional warfare. Furthermore, weaker adversaries may have stronger resolve and motivation to fight because they are more likely to be fighting for its survival or for nationalistic aspirations. The strategy of guerilla warfare is essential for a weaker side attempting to inflict damage on the enemy and wither away at the stronger stat’s willingness to suffer. Democracies can be especially vulnerable to conflict in which the enemy takes to guerilla warfare and focuses on the willingness to fight of the democracy. As casualties mount up over a long period of time, the public in the democracy is more likely to become weary of the war, and if the war becomes unpopular at home it is hard for the state to continue the fight successfully. Put another way, if the weaker actor knows that the resolve of the stronger state is in question, it sees a higher payoff for continuing the fight and not submitting because it believes that it can outlast the stronger state as the latter continues to lose its willingness to fight. So, “in essence, the actor with the most resolve wins, regardless of material power resources” (Arreguin-Toft 2001). Taken in the context of coercive diplomacy, when the resolve of a country is at question, it changes the costs and benefits of continuing conflict or bargaining. For example, guerilla warfare imposes costs on the adversary while avoiding direct conflict in the aim of destroying the will of the attacker. This type of strategy is not meant for a quick or decisive blow, but aims to turn the conflict into a war of attrition, which brings the resolve of the both actors into the forefront reason for victory. When facing an insurgency, a strong state needs to employ counter-insurgency methods, which include winning the hearts and minds of the populace and making the people feel safe enough to turn against the insurgents. The average counter-insurgency lasts for 12 years; therefore it becomes difficult to have unwavering resolve for that long while guerilla tactics cause casualties amongst the stronger state (Packer Notes 2013). Consequently, it becomes increasingly easier for weaker states to use strategies that aim to hit the stronger states willingness to suffer and eventually force the state to withdraw from the conflict because the costs become too great.
           In conclusion, coercive diplomacy is a popular strategy employed by strong states in today’s age of technology in warfare. States can use laser guided missiles, and drone strikes with minimal casualties to ground troops while imposing large costs upon an adversary. However, the effect of coercive diplomacy by examining rational decision-making leaves gaps that prospect theory is better able to answer. Guerrilla warfare and loss aversion have an impact on the winning percentage of stronger states in conflict. Increasingly, relative capabilities become less of an answer as to why a state wins in a conflict. More and more, whichever side has the greater willingness to suffer and greater resolve has a higher winning percentage in conflict, especially if the side understands the resolve of their opponent in wavering or in question.

Works Cited

           Arreguin-Toft, Ivan. “How the Weak Win Wars,” A Theory of Asymmetric Conflict. 2001
           Kimminau, Jon. The Psychology of Coercion: Merging Airpower and Prospect Theory. 1998
Packer Notes. Airpower Coercive Diplomacy, Rationality & Prospect Theory. 2013
Packer Notes. Asymmetric Conflicts. 2013
           Robert Jervis, “Political Implications of Loss Aversion,” Avoiding Losses/Taking Risks, p.24. 1992.
Robert Pape, Bombing to Win (Ithaca: Cornell University Press, 1996), p. 15