Christopher Coyne on War, Conflict, and the Quest for a Stable Peace

SHRUTI RAJAGOPALAN: Welcome to Ideas of India, where we examine the academic ideas that can propel India forward. My name is Shruti Rajagopalan, and I am a senior research fellow at the Mercatus Center at George Mason University. 

Today my guest is Christopher J Coyne, who is a Professor of Economics at George Mason University, the Associate Director of the F.A. Hayek Program at the Mercatus Center. We talked about the economics of conflict and peace, history of the US security state, the US intervention in Afghanistan, domestic consequences of militarism abroad, and much more. 

For a full transcript of this conversation, including helpful links of all the references mentioned, click the link in the show notes or visit mercatus.org/podcasts. 

Hi, Chris. Welcome to the show.

CHRISTOPHER COYNE: Hi, Shruti. It’s great to be here.

Economics of War

RAJAGOPALAN: Thank you so much. I’ve read all your books. I’ve known you for a long time. You are my go-to economist for the economics of war and peace. I don’t like the term defense economics. It sounds boring. This sounds like Tolstoy, right? We’ll stick with the economics of war and peace.

COYNE: Sure.

RAJAGOPALAN: On the economics of war, the way I think about it, economists have typically looked at the impact of war on the country that is being invaded or colonized and so on, but a lot of the thought process is also about what happens on the domestic front. This is, famously, classical economists talking about the impact of public debt or the rise in domestic wages or other unintended consequences. On the opposite side, you have the Keynesians who are basically talking about, “This is not ‘we wage war,’ but it’s good for the economy. It acts as a stimulus.”

COYNE: Stimulus growth, right?

RAJAGOPALAN: There are feminist economists who talk about how women started joining the workforce, all these other unintended consequences on the positive side. There’s also another literature within public choice on the special interest groups and so on. But you’re a little bit different from any of the standard narratives because you’re talking about this much broader and much more entangled impact of what happens with the human capital, physical capital and technological transmissions all the way back home, and that just persists. One, is that a good way to characterize your work, and how do you think about it?

COYNE: I think that is part of my work. Here’s what I would say: Another strand that economists have leveraged when it comes to understanding war is the causes of war based in rational choice theory, and political scientists too—political scientists like James Fearon on the rational choice explanations for war, credible commitment, asymmetric information and so on.

Frameworks for Understanding Conflict

I view all of these as various slices of the bigger onion, if you will, of understanding war. The way I would put it is something like this. One economist I really admire and I think is useful when it comes to these issues is Kenneth Boulding. In 1978, he published a book called “Stable Peace.” He has this framework in there, which I’ve utilized in many of my own works, and I think it’s just a very good framing of human life in general. It goes something like this, in brief: There’s human action, and then in the general category of human action, there’s peaceful human action and conflict—not violence—conflict. Conflict is when there’s a conflict of interest. Now, the way you navigate conflict can be peaceful or can be [by] using violent means. That’s where the interesting questions then start to arise.

Then that framework is useful because it can apply to very micro-level interactions. You and I could have a conflict of interest. Are we going to navigate that peacefully, sit down, talk it through, rely on some mechanism, whether it’s turn-taking, lottery, whatever? Or are we going to resolve it violently? You can apply that logic to groups within nations. Then it really opens the door to these interesting ways of thinking about it.

Then also Boulding shed light on what he called “phases.” There’s a tendency to think about a society or a situation as either being peaceful or violent. Boulding’s way of thinking was that was too simplistic; societies are not peaceful or violent in some kind of homogenous aggregate sense. Societies are constituted by people, but also societies can change as people within those societies make decisions. One thing I really admire about Boulding is there’s individuals, there’s choice, so there’s agency involved, and also there’s a process aspect to it. He has these categories of stable peace, unstable peace, unstable violence, stable violence, and you can move to those different phases. Then the interesting question becomes, let’s analyze each of those. That’s the overarching framework. 

Then in my own work, I’ve tried to leverage this to understand a whole host of different questions, some of which include things like, what is our ability to rebuild nations that are war-torn? When I say we, I’m here referring to governments, of course, [the] U.S. government mainly. Then that raises interesting questions about institutional change, economic development and so on. 

The other thing I’ve looked at, which you touched upon in your opening question, is what are some of the domestic effects in terms of civil liberties, constitutional constraints and so on? That’s where these more nuanced questions about human capital, technologies, returning home come into play.

The overarching framework I use in addition to Boulding is Virginia Political Economy which, of course, is the framework you do a lot of your work in as well. Here we’re leveraging things like public choice economics, institutional economics, Austrian economics and the blend of all those things together to understand epistemic constraints, or knowledge constraints, but also the incentives at work. That’s kind of the lens I’ve employed to study and analyze all these different questions.

The Consequences of Intervention

RAJAGOPALAN: There’s a second element. If you think about this as a two stage problem. One stage problem is, let’s say we’re now talking about the U.S. government, should the U.S. government get involved in a particular conflict, let’s say, outside of the geographical territories of the U.S.? The second is, what comes after? I see a lot of your work more as let’s look at what comes after and maybe that will help us better define what should have come before and should the U.S. have intervened in the first place. Is that a good way of thinking about it?

COYNE: That’s a wonderful way to put it. Because so many people talk about these things in terms of having some kind of moral obligation to do X, to stop a genocide, hunger, whatever terrible thing. I understand why they have that pull. I share their concern that these are terrible situations where people are suffering. Where economics comes in, or political economy, as you put it quite nicely, is saying, Okay, look, we can’t answer the moral question, but it can help us inform the moral question by talking about what is possible or not. Even if those things are in broad-pattern terms of a pattern—what Hayek called pattern predictions—of what we might expect to happen. 

While that can’t in itself answer moral questions, it can help inform those things, and perhaps things that on the face of them appear to have moral weight. You have some obligation to help people that are suffering may not have any moral weight at all once you take into account the likelihood of perverse and pernicious consequences that might arise out of it.

RAJAGOPALAN: That’s the economist’s way of looking at it. There’s the intended consequence, which is we wish to stop or at least mitigate this humanitarian crisis that might be unfolding somewhere. Then the second part of it is, did you actually fulfill the intended consequence or did that actually happen? Or were there a host of unintended consequences? Among the unintended consequences, I want to parse out the different things.

The first is, and this is really the first book of yours I read, which is “After War,” that the intervention that the United States was planning in that instance, in the post-9/11 world in Afghanistan and then Iraq, that kind of reconstruction simply can’t be done, and it can’t be done for very similar reasons as the Soviet Union could not centrally plan an economy. There was this major problem with respect to knowledge at the local level. There was a major problem when it came to incentives of those who were intervening and those who were being governed. All of that led to an entangled mess where there’s no way you would’ve gotten the outcome that one would’ve liked before the intervention took place, right?

COYNE: Yes. The way I tried to approach that question was rather than attacking the stated goals of the interveners, I took them as given. The Bush administration was quite clear what they wanted to accomplish, which was to spread liberal democracy, economic development and growth, human freedom and flourishing. Again, wonderful things. They resonate with me like many others, but of course, wishing something so doesn’t make it so. This is, again, the way economists think about things.

It’s actually two levels. It’s planning within a given set of institutions, that’s “we’re going to create development.” But it was even broader in that the claim was we can actually oversee the design of the meta-institutions of society. Then you start getting into fascinating questions about, “Well, do we actually know how to design the foundational institutions of a free society? Then, do we know how to bring about economic development?” Of course, what you heard then, and you still hear this now—people love to employ this rhetoric. “We need a new Marshall Plan for X,” as if enormous injections of resources and expertise can bring about any end you want. 

What I did in the book, “After War,” which was an extension of my dissertation, was to compare different cases, so the cases of success for Japan and Germany post World War II, then Afghanistan and Iraq. Of course, those were ongoing at the time I was writing. That book came out in 2008, but still, I was able to leverage the knowledge we had of what had happened at that point and also to make some very broad forecast, if you will.

RAJAGOPALAN: Which unfortunately all turned out to be true.

COYNE: Yes. Not even forecasts, specific outcomes, just struggles that were going to happen based on what we knew at the time. At that time, we knew a fraction of what we know now. You look at things like the Afghanistan papers and a host of other documents on Iraq, and it’s pretty clear that U.S. officials knew that this wasn’t going well, but they just perpetuated the spending and the efforts.

You realize any time you intervene in a complex system that you can never just do one thing. It’s like a whack-a-mole game in a way. You fix something over here, even if you can’t even fix it, and four or five other things pop up over here. It’s this never-ending cycle of interventionism that’s self-justifying.

Intervention in Afghanistan 

RAJAGOPALAN: When I look at India in the long arc, starting with, say, early 18th century, late 17th century—this is when the East India Company comes in, India is devolving into this set of warring tribes and monarchs. William Dalrymple has called it the period of “Anarchy.” Then the East India Company comes in and sets, I won’t say some kind of order, but eventually starts establishing some dominion, and eventually they dominate, but over a hundred-year period that brings about an enormous amount of peace.

First, all the crazy warring tribes all strike deals with the Company, and then they stop warring. Then if you take the 250-year view, it’s like, oh, they did manage to do what they said they wanted to do, which was to come to a particular part of the world and then spread the British values of democracy and liberalism and so on. To ask the counterintuitive question, was the failure of Afghanistan just that it was like a two-decade project and not a two-century project?

COYNE: Yes, that’s a good question. Now, there’s a couple of things I think that you have to wrestle with. First is for historical instances where you see what you might call success—if you want to call it that. I’ll come back to that in a moment. For every instance of success, there’s numerous instances of failures and chaos. That’s one. We have to be careful.

RAJAGOPALAN: I wouldn’t call the Indian thing a success. I’ll just say what they intended—

COYNE: They did what they intend, right?

RAJAGOPALAN: Exactly. What they intended was what was done.

COYNE: This is why I was saying, I’ll come back to the point of success. One of the things we always have to ask ourselves is, success from the perspective of which party? I don’t deny that you can get people to do what you want. Demand curves slope downwards. If you’re willing to impose a high enough cost on people, you might be able to get them to do what you want, but the question is, at what cost? It’s not just monetary outlays, it’s what are you doing to people?

In my book, “In Search of Monsters,” which was a recent book, one of the things I tried to point out was that many of the defense justifications—I’m not talking defense militarily—the justifications for American empire is that it’s a liberal empire, which is very much oftentimes what you hear about Britain as well, that it spreads liberal values and so on.

One of the arguments I tried to make in that book was that you can’t run an empire and maintain liberal values. You have to violate them and give them up in order to do what you say you want to do. If you take liberalism to mean individual freedom, self-determination, humility, limited government, spontaneous order and so on—we could keep going on with the kind of defining features—then saying, well, what do you need to do to bring about order, as you put it, or to maintain peace, is often going to require not just violating those principles, but gross violations of them.

That’s what you see in these cases of occupation, of empire, of colonization, is brutality toward other human beings. Now, the response to that might be something like—as my co-author, Abby Hall, and I’ve written elsewhere—you’ve got to crack some eggs to make the omelet of freedom. Maybe, but that, perhaps, is unsatisfactory. It’s unsatisfactory to me.

RAJAGOPALAN: That’s not my only question. I would say the standard economist question, relative to what? Now, maybe we can look at it from the point of view of the people. When I look at the Indian nationalists, say, in the late 19th century, early 20th century, what they are demanding is not that the British leave India at that time. What they want is actually to be treated as British subjects. They’re like, “We don’t have the same liberties as British subjects of the crown back home.” They don’t want to go back to the world of warring monarchs because that was not exactly some liberal panacea or peaceful panacea to begin with. I saw a similar hint of that when the U.S. pulled out because things weren’t going as well as planned.

COYNE: You’re talking about Afghanistan.

RAJAGOPALAN: About Afghanistan, and things weren’t going as well as planned. Of course, people had a lot of reason to complain, but the alternative is the Taliban. That is going to have horrific humanitarian consequences anyway. The alternative was not some lovely self-government of the Afghan people and so on. That would be my question about, compared to that, many of them might prefer a very long-term “colonization.”

COYNE: Sure. Some might, some might not. We don’t know. There’s a couple of things to think about. One is we don’t know. I feel comfortable saying that. I can’t say for sure. No one can, by the way. Here’s the other issue to think about. The U.S. government has what you might call, with foreign policy, attention deficit disorder. The government jumps around a lot. You see this. It’s like the kind of the flavor of the week. 

RAJAGOPALAN: This week it’s Greenland.

COYNE: Yes. Well, which you smile when you say it, but it’s true. Next week, I don’t know what it will be. Serious people are talking about, now, Libya under Barack Obama. I’m not the first person to say this. Niall Ferguson, the historian, is a proponent of a very proactive U.S. foreign policy. In his book “Colossus,” where he defends a liberal U.S. empire, at the end of that book, he says, look, here are some of the issues with this. One of them is this issue of attention deficit disorder. He says you’ve got to be in it for the long term. 

The problem is once you endogenize politics, it’s unclear that that’s going to work out. Now here’s the question. Going back to your original framing of this issue, maybe the problem was it was 20 years and not 200 years. Once you endogenize politics, could it be 200 years? If the answer is no, given the way American politics works, then that mitigates against intervening in the first place if it’s going to be a 200-year project. Then when people say, “Well, if we had only stayed longer,” but we didn’t.

That, to my way of thinking, needs to be explained by proponents of subsequent interventions and a convincing argument needs to be made about why that’s going to be the case. It’s unclear to me that anything has changed since Afghanistan or throughout American history, for that matter. People talk about war as if it’s these very clear, compartmentalized like you’re either at war or not. Part of this is definitional, I get that, but we can’t rely on Congress declaring war to define it because they—

RAJAGOPALAN: Anymore.

COYNE: —gave up that constitutional obligation long ago. But the U.S. military has been involved in various parts of the world, basically throughout U.S. history. You can count the number of years that the U.S. government hasn’t been intervening abroad on two hands, maybe three hands. It’s not like we don’t have a history of this. They’re these quick in-and-outs. There’s a reason Afghanistan’s the longest war in American history because of these quick in-and-outs. Then the question becomes, if it’s this longer-term project, which is still unclear to me that it is, even if you stayed for 50 years, it’s unclear to me. Even if you stayed for 75 years, it’s unclear to me. Those are all very open-ended questions. Meaning that it’s not a given.

RAJAGOPALAN: Yes, because it could end up like Myanmar—

COYNE: Of course.

RAJAGOPALAN: —as opposed to end up like India.

COYNE: This is why we come back to for every case of success, there’s multiple cases of failure because there’s a tendency to cherry-pick, or, in technical terms, to select on the dependent variable, to pick the cases where things worked out and then say, well, you just have to do that again. Whether it’s the example you pointed out with the East India Company, whether it is post-World War II Japan and Germany, the Marshall Plan, which, by the way, is debated how successful that was or how big of an impact that was on the ultimate success. That’s debated. It’s not a given the way people say it.

The simple point is, it’s just spending a lot of money is not in and of itself a recipe for success. The more challenging issue, which is balled up, and, as you fully know from your own work in development economics and constitutional political economy, the bigger issue with these questions is, we don’t know. We don’t know how to go about creating liberal democracy, about creating development.

As you’ve shown in your own work, this series of papers you’ve done with Alex [Tabarrok] on India, the natural tendency is going to be for the experts to say, do this, that and the other thing. What they’re going to tend to do is look at what’s worked in their own backyard, and, as you’ve pointed out, it’s premature. Why is it premature? Well, it’s premature because other societies are not at the point where they can handle, if you will, that type of policy suggestion.

RAJAGOPALAN: Yes. Or best practices, as we like to export them.

COYNE: Best practices. That’s right. Why aren’t they at that point? Well, it can be a whole variety of issues. It could be informal norms. It could be formal institutions— your paper with Alex on where you take Epstein’s “Simple Rules,” and what’s your argument, if I remember correctly, for why people should embrace simple rules? Because they don’t have the capacity to carry out a more complex set of rules. That’s the natural tendency when you rely on expertise to make things more complex, and the experts are going to design them, and you can’t avoid that when you engage in outward projection of fixing the world.

Grounds for Intervention

RAJAGOPALAN: I think this was in the last chapter of “In Search of Monsters,” or maybe the last part of it, if I remember correctly, you talk about how what you’re suggesting is not that the U.S. never intervenes, or a particular country never intervenes. The point is that the bar has to be exceptionally high. Did I get that right?

COYNE: Yes. The way I put it in “In Search of Monsters” is to utilize the precautionary principle, but instead of applying it to technology or government, let’s apply it to government intervention.

RAJAGOPALAN: Yes, exactly. Now, there are two ways of thinking about this very high bar. One is, we look to the past and we say, “Look, we have Hitler.” That’s a pretty clear case where that bar has been met. Even Gandhi said, “We must support the British effort against Hitler and pause the Indian nationalist movement.” That’s one way of pegging the bar. Is this better or worse than these examples, and then we go for it.

The other way is, what we were talking about a few minutes ago, which is say that if we intervene, then it’s a 200-year plan, and the moment we put the bad guys in prison, all the civilians will have the exact same rights, privileges and entitlements as American citizens. Once you set that as the bar, then the impetus to do this at home will suddenly shrink, because the incentives have completely changed. What are some other ways of keeping the bar high? Because, otherwise, the natural conclusion of what you’re saying is, do absolutely nothing, which unfortunately doesn’t work all the time either.

COYNE: Sure. I should mention—I have no problem admitting this, because I believe it—my default position is to start from the premise of not doing something, of nonintervention. That’s my general operating position domestically as well.

RAJAGOPALAN: Sure. No, but it’s not “never intervention.” 

COYNE: Right. Yes. I also believe we cannot rule out as a blanket statement that if someone said to me, “Could an intervention make things better?” I can’t deny that possibility, and I wouldn’t. Then the question is, how do we think about it? This is the point you’re raising. People have suggested different things. 

By the way, people from a range of different disciplines and ideologies have wrestled with this exact issue, much of which around the time of Hitler, by the way. You had people like Bertrand Russell, for instance, Albert Einstein. These people considered themselves pacifists, but also understood the brutality of what was happening in the world, and this is why you get them wrestling with these issues. 

Some of them, like Bertrand Russell, made the argument for something like a world government. He was unable to envision a way that you could have dispersed nation states and avoid the Hitler problem, so he said, “We need a world government.” Now, I think that’s problematic. Other people made arguments for international organizations. The League of Nations, then, of course, the United Nations’ ways to mitigate these conflicts. Those have issues as well. There’s always tradeoffs, as you pointed out.

Other people, including people that we admire, people like F.A. Hayek, talked about something like an international federation, the kind of contemporary manifestation, that, even though Hayek wasn’t talking about it in its current form, would be something like the EU, not necessarily in that exact form.

RAJAGOPALAN: Or like NATO and other kinds of allied groups like NATO countering each other.

COYNE: Yes, and some collection of countries to navigate these challenges. Again, I think all those things have problems. But the way I would view it, or arguments I’ve made for other type of moves that can be made, is to look in your own backyard. Our tendency is to look outward. We need to go over there and fix this. That’s an outward way of looking at the world, but if we look inward, and we look at the way our own domestic policies interact with the world, is there a low-hanging fruit that can be taken to minimize harms that are being done? I think there’s some.

Just to name a couple, arms sales. There’s numerous arguments for arms sales. One is a deterrence/giving weapons to good guys, if you will, in order to deter bad behavior. Another is something you raise, which we didn’t talk about yet. It’s a Keynesian argument, and you hear this with Ukraine aid all the time right now. One reason not to be against the aid is it’s going to U.S. manufacturers that are producing arms, so that’s the stimulus point you’re raising. It’s going to create economic growth and development.

RAJAGOPALAN: Sure.

COYNE: Usually, these things are used in conjunction. You’re getting the benefits of government stimulus domestically; you’re getting the good effects abroad. [The] U.S. government is the world’s largest arms dealer, and if you look, many of those weapons, they’re not just going to good governments. Some of them are going to brutal governments—the Saudi government, Egypt and elsewhere. And to my way of thinking, the proponents of this should be making the argument. The burden shouldn’t be on me.

One of my big things is to reverse the burden of proof. That’s the precautionary principle point I was raising earlier, that in delivering these arms around the world, even if you think they’re going to do good, they also allow very bad people to engage in gross violations of human rights and to create harm, and also they foster conflict. Scaling back on that is a good thing that I would advocate for in many cases. Again, I think the burden should be extremely high in terms of the distribution of these weapons. 

Migration, that’s another thing. Of course, this is a very contested issue now, but allowing people to move is one way to allow them to escape and avoid very terrible humanitarian situations. Now, whether those tradeoffs are economically in domestic programs, that is an empirical question that people can debate. That’s beyond what you and I are talking about here, but we have to understand part of the tradeoff is, you’re going to block people from avoiding those terrible situations.

Foreign aid is another thing. Again, foreign aid often ends up in the hands of people that are doing great harms, so thinking about avoiding that are all wonderful ways to think about avoiding these things. Will that solve all the world’s ills? Of course not, but I think it can help us mitigate on many margins and their domestic policies and their, what I’ve called, unblocking reforms. They don’t require intervening in a foreign country, they don’t require imposing things on people abroad. Doesn’t require solving the knowledge problem. You’re not saying, “I’m going to create X, Y and Z. I’m removing barriers that are preventing people from doing things.” 

Self-Determination and Liberal Values

A lot of this comes down to where you locate and how much weight you put on self-determination. This goes back to what you and I were talking about earlier. One argument might be like, “Well, people in Afghanistan, or people historically, want the British Empire or whatever to stay and do things.” Maybe, but this does raise important questions about imposition and self-determination.

One of the arguments, and many liberal writers, by the way, in the liberal tradition, I should say, John Stuart Mill including them, believed that certain groups of people were unable to engage in self-governance.

RAJAGOPALAN: That the colonial project was a civilizing project.

COYNE: That’s exactly right. By the way, Ferguson, we brought up earlier, makes the same argument. At the end of “Colossus”—and I don’t know his position on this now—but at the end of “Colossus,” if I remember correctly—

RAJAGOPALAN: Oh, Niall Ferguson, sorry.

COYNE: Yes, Niall Ferguson, my apologies.

RAJAGOPALAN: Not Adam Ferguson.

COYNE: No, not Adam Ferguson. This is Niall Ferguson, because we were talking about him, his defense of American empire, in his book “Colossus,” earlier. He invokes the example of Liberia, and he says, “Look, Liberia cannot engage in self-governance, and the U.S. government shouldn’t pretend like they can.” We’re not going there to export democracy. We should set up a military government. We’re going to have this long-term project, like you pointed out earlier, and when they’re ready to self-govern, they can self-govern, but we’ll determine that. You can make that argument.

RAJAGOPALAN: That doesn’t sound as good and won’t have as much buy-in, is your point.

COYNE: Maybe, or maybe it’s not something we want to—depending on what your view is of liberalism, it’s hard to say “I’m a liberal,” I think, and—

RAJAGOPALAN: Still engage in that project.

COYNE: —still engage in that project.

Was Gandhi Right?

RAJAGOPALAN: I want to parse out two things. There’s the Gandhian version of this. The Gandhian version is just simply you have to have means–ends consistency, which is exactly what you’re saying.

COYNE: Yes.

RAJAGOPALAN: That to have the empire or the imperialism project, you necessarily have to engage in some illiberal activities. To say that we’re going to get liberalism through illiberalism, there is an inherent tension or a problem in that.

COYNE: Correct.

RAJAGOPALAN: We don’t know what the outcome will be, but let’s say, even if the outcome is going to be good, we do have to account for the means justifying the ends. Is that a good way to think about that?

COYNE: Yes. If you’re willing to give that up, and if you can give it up and maintain liberal values. If the ultimate goal is liberal values, and it may not be, by the way—sometimes that’s the rhetoric that is employed.

RAJAGOPALAN: Yes. Sometimes it’s natural resources. Sometimes it’s we don’t want China to get in there and so on.

COYNE: That’s right. Now, for whatever reason, whether it’s political correctness, whether it’s intelligence on the people engaged in this, they are much more careful with their language. Typically, the rhetoric is always grounded in self-determination, liberalism. As we were talking about, in the past, people were much more blunt about this. It’s like, “These people can’t do it. They’re savages. We’re not. That’s the white man’s burden.”

RAJAGOPALAN: Yes, exactly.

COYNE: “I’m the enlightened, you’re the savages.” You cannot do this. You might think that’s terrible, but that’s what they were doing. They were very clear about the means–ends in that case. Now we really want to do this, and we really want to uphold these values, but then you have to think about [how] it’s not just a short term, we’re going to just flip the switch off, do a couple illiberal things and then get good outcomes.

You really have to give up the entirety of the game because you have to rely on not just getting rid of self-determination of individual freedoms for the individual to choose on the recipient side, but you also have to embrace top-down planning. This gets into the domestic effects then, ruled by experts, centralized government, fascist economic policy, because that’s what happens to the economic systems under empire.

RAJAGOPALAN: Yes. That’s war economics.

COYNE: That is the war economy. It’s not just you’re just doing a few illiberal things. It affects all aspects of both domestic and international life once you dive into it. And “In Search of Monsters,” my goal was to balance this, because so much of this discussion is grounded in how economists talk about public goods but pushed up to the global level. They’ll say, “Look, defense is a public good domestically, but then global security is a global public good.”

Well, there’s no global government, so who’s going to provide it? The hegemon is going to provide it. Who’s the hegemon? America. Now you get the logic of public goods pushed up. The flip sides of public goods, of course, is public bads. To my way of thinking, that side of the ledger, if you will, is severely lacking in treatments of this. It was to point out that there’s all these public bads, both foreign and domestic, that can emerge from these things, and you need to take them into account.

Checks and Balances in the Global Order

RAJAGOPALAN: The other way of looking at this global order, if we are not thinking about a single hegemonic power, is there are a few checks and balances. This is very much a Cold War sort of world. You have folks like Schelling and others who are looking at nuclear deterrence and so on, where you think about it as checks and balances. You’re going to have some arms race, and you need to have some domestic military-industrial complex to prevent the whole world from devolving into war. Is that just a kind of inevitability in this new world that we need a small domestic military-industrial complex to prevent a large domestic military-industrial complex?

COYNE: Well, it depends who you talk to. The view you just laid out is certainly one view. That’s the deterrence, of course, that with nuclear weapons is mutually assured destruction, which you can have an arms race, of course, without that. That’s nuclear weapons.

RAJAGOPALAN: Even the regular arms are no longer—we’re not sending in the cavalry on horseback anymore, right?

COYNE: Sure.

RAJAGOPALAN: Most weapons are pretty sophisticated now. They can do a fair bit of damage.

COYNE: Yes. It’s getting more sophisticated. This is the idea of what you and I would talk about in terms of markets, entrepreneurship applied to weapons. It’s technological advances lead to efficiency, but in this case, the ability to harm people.

RAJAGOPALAN: Yes. I wouldn’t just say, “Oh, the deterrence theory is only about nuclear weapons.” What I meant is now it extends to modern warfare, which is extremely sophisticated technologically, can do a lot of harm. But does that inherently then prevent the world from devolving into a greater amount of conflict?

COYNE: Right. This is a debate. You can view it from two sides. Again, you can come down either side depending on what evidence you find convincing. Here’s what I mean about that. You can make the argument, as you laid out quite nicely that, “You acquire arms, I acquire arms. Okay, so now we don’t fight with each other.” That’s the deterrence-type view. You’re not going to attack me because I have weapons and vice versa. 

Of course, the flip side is the idea of the security dilemma, which is that any time I acquire weapons, outside parties will tend to feel less secure because they know that I have weapons that can harm them so that they then are going to have to acquire weapons to balance that. That’s the logic of the arms race.

Now, then the question becomes, how stable is that situation? This is a matter of discussion and debate. Oftentimes, people take the absence of some large-scale conflict, and they attribute it to that, the existence of those weapons. That’s certainly one possibility. The alternative is that it’s a spurious correlation. For instance, in America, have we not had any large-scale terrorist attacks the equivalent of 9/11 because of the war on terror or because of other factors, whatever those might be? We could identify many. I don’t know.

RAJAGOPALAN: The nuclear deterrence has slightly better evidence. A lot of the diplomatic papers and the red phones, which were like this open communication channel. You have [Stanislav] Petrov for whom we should build a statue because he saved the world. We have like so many examples of—

COYNE: We have examples.

RAJAGOPALAN: —things could have devolved. The Cuban Missile Crisis, things could have very quickly devolved into a mess, and they didn’t precisely because—

COYNE: Again, is it because the existence of nuclear weapons on the other side, or is it luck? There’s numerous issues with nuclear deterrence, and one of the main ones is command and control, which is that the nuclear arsenal is controlled by human beings and a set of technological systems. Again, we take the absence of nuclear war to say that’s because the nuclear weapons have existed.

There’s, as you put it, near misses, numerous near misses that could have had significant human impacts that had nothing to do with actually making war; it was human error. Not even human error in some cases. In some cases, you have these examples of birds flying that affected the satellites that set off the trip wires that America was attacking the Soviets or vice versa.

RAJAGOPALAN: That’s going to happen even if, say, the liberal part of the world unilaterally says we won’t enter the arms race. That could happen.

COYNE: Oh, certainly.

RAJAGOPALAN: There’s an illiberal bloc. If they start piling up weapons, you could have a bird go land on that thing—

COYNE: You could, yes.

RAJAGOPALAN: —and cause a massive problem. I think that is symmetric.

COYNE: The point being that this is an argument that you can make to limit the existence of these weapons, that the risk of an accident happening is perhaps low probability, but so severe that they need to be restricted. That’s the logic behind government efforts to restrict them, historically.

RAJAGOPALAN: Sure. The trouble here is, again, the symmetry that you are setting up doesn’t quite exist.

COYNE: What do you mean? Say more.

RAJAGOPALAN: There are certain countries that believe in liberalism. They wouldn’t want to set things off by error. They would say, “We are only stockpiling certain arms so that we’re in a defensive position. We’re not going to intervene or be the first one to attack.” 

The whole world doesn’t belong to that order. There is a whole number of nations, some rogue, some just exercising their sovereignty who belong to a completely different camp where they do think that their version of imperialism is a valuable project. They don’t mind cracking a few eggs, the way you put it. They’re okay killing a number of people domestically and in foreign countries for their imperial purposes. 

The way you set it up, it only works if the whole world is like that, in which case, again, then you don’t need these arms races. Part of the arms race is certainly about [how] we can’t persuade everyone to follow liberal means and ends.

COYNE: Here’s how I would respond to that. I assume you count the U.S. government as a liberal government. I don’t know. 

RAJAGOPALAN: Largely.

COYNE: Yes. There’s something when it comes to nuclear weapons called “first use.” “Secondary use” is, I will only retaliate if you retaliate.

RAJAGOPALAN: Exactly.

COYNE: First use is, I don’t rule out being the initiator. The U.S. government has a first use or has refused to say we will not use weapons first. They say, we can’t say that. Does that make the U.S. government an aggressor or defensive? There’s other governments, by the way, that people would consider to be illiberal that have said we won’t be first user. I don’t know. My point being that, again, we come back to this question, are these things defensive or offensive?

How to be liberal in an illiberal world?

Now, you raise a great point. Let’s move beyond nuclear weapons for a moment. Not because I don’t want to talk about that, because I don’t want to lose your broader point. Which is how do we act as liberals in a world where there’s illiberal people? This is a big question, by the way, domestically and internationally. The point you’ve touched upon—I think this is why I just want to highlight and then we can come back to what we were talking about—is so important.

Here’s how I think about this. If we are truly committed to liberal values, then the barrier for giving them up should be quite high. If the barrier is, well, there’s other illiberal people in the world, so I have to forego my liberal values, then you’re not a liberal. You’ve given up the game before it starts. You’re saying there’s threats out there that could threaten liberalism, so, therefore, I have to forego liberalism to protect against those potential threats.

RAJAGOPALAN: Yes and no because I don’t think it’s binary. There’s a difference between saying, hey, the U.S. should really say we’re not going to engage in first use and take a more defensive position, and it’s completely different from saying that [the] U.S. should not get into an arms race at all. These two things can be quite far apart. I would say the latter will still put America in the, somewhat, liberal camp, and the former may not—

COYNE: Maybe.

RAJAGOPALAN: —so clearly put it in the liberal camp.

COYNE: It might. Here’s the challenge then, another challenge. How far do the obligations of whatever government we want to talk about, let’s stick with the United States, how far does that extend? Is it the U.S. government’s obligation to defend the world? If it is, then you have to defend the world. In which case you are no longer defending America. You are the world police. That’s what the United States government has been, certainly since World War II. You can argue before.

RAJAGOPALAN: No, I’m imagining a far lower burden or standard, which is, let’s just say the U.S. has an obligation to defend itself. I think it is still going to end up in a very similar arms race and stockpiling, in a very similar military-industrial complex, as you would imagine if they were not.

COYNE: I certainly think they would. Now, what’s the cause of that? The cause of that is politics. Because then the question becomes, what does it mean to defend oneself? I’m not saying this to be esoteric. It’s important. This goes back to what we were talking earlier about rhetoric and the use of language over time. We have [something] called the Department of Defense today. Before it was called the Department of Defense, it was called the War Department.

The War Department is a much more accurate name. Defense implies largely passive actions. It suggests I am defending against a threat. The challenge becomes, which again is a big question—I don’t have the answer. Again, I admitted where I stand in terms of my default position, and I feel comfortable with that position. Much, I would argue, of what the United States government does is not defensive, it is offensive. That includes its nuclear policy. It is offensive because it is threatening other countries in the name of getting them to do what we want. I understand there’s a purpose behind it, and that might work. That is the purpose of it. It’s not to defend America.

Now, part of this is, what does it mean to defend America? People, to my way of thinking, have twisted globalization, capitalism in a way where they say, no, because American businesses are trading over there or because we have waterways where there are ships that are going—

RAJAGOPALAN: It’s like the Houthis attacking American ships and so on.

COYNE: Exactly. That now it falls on the government to defend. Then the whole world is a battlefield. The whole world becomes the U.S. government’s interest. That might be true. You can take that position, but then think about what that means. That again means that we basically are the world’s government. Then you have to ask yourself, how comfortable are you with that? You can address that ethically and morally.

You and I, as economists and political economists, the way I would come at it would say, okay, well, wait a second. I have a set of tools that I apply to government policy, and we can apply that policy domestically to domestic policy. How confident am I that I can scale that up to the world and the government’s going to do what I want them to do? That’s, in some sense, the fundamental public choice critique of these things, which is that the argument was the original public choice people I’m talking about, so let’s say 1950s. They were saying, look, economists, we’re assuming that government’s going to do what they want them to do, and the public choice economists said, “well, slow down for a second. Maybe. That’s something that needs to be demonstrated rather than asserted.”

RAJAGOPALAN: Because they’re people too.

COYNE: Exactly. Now, I’m saying let’s leverage that up to the world. Go back to where we started our conversation with “After War” and nation-building, all the different forces that are involved. Now, you’re not just talking about domestic interest groups, domestic voters and so on. Internationally, globally, what does that look like? What does that look like when we account for all the political failures? This is what I was saying earlier about endogenizing politics.

If that is the case, that the government can pull this off, then that’s great from the standpoint of making the world a better place. Then we need to think about what the implications of that are, the implications of that for our own theories of the world. They might be wrong. One thing it might suggest is that the whole project of limited government to the extent you believe that—why are we worried about that? In fact, it should be just the opposite. Unlimited, unconstrained is better, but we shouldn’t pretend you can have the rule of law.

Again, let’s go to Hayek in “The Road to Serfdom.” He’s talking about economic planning. You can’t have the rule of law in government. Why not? Because you need to grant discretion to people. Why do you need to grant discretion? Because we live in a complex world. You can’t ex ante tie the hands of government because things are going to happen. That’s with economic planning.

Now, let’s say you have to go abroad and bring order and peace and all those nice things around the world. You can’t tie the hands of those with discretionary power. You’re going to intervene upon people that have no political say. This is the self-determination point. We come back again to the case we were talking about earlier. Some people might have wanted them to stay. This is your fascinating point about should we make them citizens? The Supreme Court in the United States has made the determination that the Constitution doesn’t follow the flag. When the U.S. government intervenes, constitutional rights don’t follow.

They have no voice. No, voice is too strong. Their voice is extremely limited. You have one group of actors that is making decisions that influence people, and they can shift costs. This is just the logic of political externalities. What do we expect them to do? Do we expect them to be kind hearted and take into account all the interests of all these people and be do-gooders or not?

Then we talk about interest groups. We come back to your question that you raised earlier. Can we have even a defense sector at all without the military-industrial complex? Yes and no. It obviously requires the use of resources. From that standpoint, there’s going to be some of that, by definition, to the extent you have government doing this. Just like when you have government doing education, it’s going to pull resources into education. Those resources have to come from somewhere else. That’s logically true.

The magnitude and the nature of it certainly will shift. Until the permanent war economy in the United States emerged after the world wars, the structure was very different. There would be ebbs and flows in the production of weapons. You get the military-industrial complex in the wake of the World Wars, and what happens, of course, in the wake of World War II and the rise of the Cold War was, well, now we have this situation where we have to prepare for future wars rather than being responsive.

Consequences of War Back Home

RAJAGOPALAN: Let me parse out a couple of things.

COYNE: Yes, sure.

RAJAGOPALAN: So far, we’ve been talking about the consequences for people outside of the United States, right?

COYNE: Yes.

RAJAGOPALAN: A big part of your research is also what are the consequences back home. This is your book with Abby, which is “Tyranny Comes Home,” a whole bunch of other books, actually. I have a whole list of your books. It’s a long page full of your books. Let’s see. You have “The Political Economy of Terrorism, Counterterrorism and the War on Terror,” “In Search of Monsters,” “Manufacturing Militarism” and “Defense, Peace and War Economics” and I think “Tyranny Comes Home.” I think these are the broad ones that touch upon what happens back home.

Two questions. One is, how entangled is the problem of what happens back home? The view is, “Oh, there’s going to be a little bit more war expenditure.” The old view was, “Oh, American soldiers are going to go abroad, and they’re going to come back or maybe not come back because they’ll lose their lives.” That was the version 1.0 of what happens back home. Version 2.0 is, we’re going to have lots of public debt and things like that. 

Version 3.0 is now what you are telling us, which is, hey, some of this equipment doesn’t just make it into the hands of rogue governments. It also comes back to local police departments and local SWAT teams and so on. Then the version 4.0 is now all the surveillance-state technologies. Whatever gets generated and deployed abroad necessarily finds its way back home. Can you walk us through these different stages and where we are now?

COYNE: Sure.

RAJAGOPALAN: I think we’re past the surveillance stage now.

COYNE: Yes. Well, I should note that, again, just like several of the things we’ve talked about, what you’re getting at is a fundamental issue in political economy that people have realized for a long time. You go to Alexis de Tocqueville on “Democracy in America.” One of the things that Tocqueville pointed out in that book was that war is the greatest threat to a self-governing democracy. What was his concern? His concern was that war-making requires centralization of power in political institutions in order to marshal physical resources, but also people and policy in order to carry out war-making.

One of the great points that I think Tocqueville makes is this distinction between hard despotism and soft despotism. Hard despotism is the iron fist. It’s authoritarianism. You can see it. It’s observable, and that’s terrible, of course, but at least you can see it. You know it’s happening. Whether you can do something about it or you want it or not is another question. 

Soft despotism, though, is the equivalent of death by a thousand cuts. It’s all these small little rules, regulations, changes in political power on the margin, which we’re kind of like, “Oh, that might be annoying, but whatever. I can live my life,” until you get to the point where you get this culmination through time and, all of a sudden, you’ve ended up in [an] authoritarian-type situation. You might even call it a democracy still, but it’s much harder to recognize until you’re in it.

Why does that matter for what we’re talking about now? I think those things relate to each other, which is, you think to yourself, “Okay, foreign policy is foreign. That’s why I call it foreign policy. You intervene over there.” These are all the things you and I have been talking about. Can you neatly separate stuff you do over there from stuff you do here? I think the answer is no. Again, that’s, I don’t think, a controversial point. Go back to what you and I were just talking about a few moments ago. At a minimum, you need to redirect private resources. You can’t avoid that. Again, we tend to think about, when we think about things like the military-industrial complex or war production, certain very compartmentalized things. There’s the big five defense firms, for instance. That’s important, but I don’t think people realize the magnitude of the defense sector.

RAJAGOPALAN: Literally, Washington, D.C. with thousands of defense contractors. They’re our neighbors.

COYNE: Well, again, we think about America as a liberal, economic, free-market society. The largest employer’s the Pentagon; it’s bigger than Walmart as an employer. It’s enormous. It is an economy unto itself. Then you think beyond those top five firms, you’ve all these individual contractors, but you also have office supplies, accounting firms, insurance firms, stuff you need to operate this thing. People don’t consider those things to be part of the military-industrial complex, but they are.

All of these different entities are receiving government contracts and resources that come either from taxpayers now or taxpayers in the future. Of course, they like that. It’s a source of revenue for them. All of those entities become entangled with government. They redirect, partially, their entrepreneurial alertness from gazing to the private sector to gazing to the public sector because that becomes a source of revenue. That undermines the dynamism of the market economy. 

By the way, this is one of the long-standing critiques, which we can talk about in a little bit if we have time and it interests you, of markets from the left. That’s one of the Marxist critiques, Lenin and others, but we can come back to that later on. 

On top of that, this then comes back to the issue of the Constitution and constitutional constraints. There’s two views on this, broadly two views, and I’ll lay them out. Again, where people fall down on this, I’ll leave up to them. One goes something like this. This is scholars, legal scholars like Adrian Vermeule, Eric Posner. During the Bush administration, when people were getting up in arms about the war on terror and civil liberties, they wrote a book called “Terror in the Balance.” I think it came out in 2005. They had something called the Liberty-Security tradeoff. It looks like a PPF. There’s liberty on one axis, security on another and then it’s a PPF. They say, “Look, in order for government to provide you with more security, you need to give up liberty.” For them, it’s a very simple tradeoff. It’s a one-to-one tradeoff, basically. The only way to get more security is more liberty.

They say, look, these civil libertarians over here, they’re worried that you’re giving up liberty and government’s going to not give it back to you. That’s just silly. It’s silly because government in America works well because we have these checks and balances. What do we want during a crisis situation, a war situation? We want the commander in chief to have centralized discretionary power. They do stuff. They give you more security, they take away your liberty. What’s the concern? They’re going to overshoot, or it’s going to be sticky, and they’re not going to give it back to you. Well, don’t worry, we have Congress and the courts. Through time, they’ll push you back up to the optimal spot on the liberty security PPF, if you will. That’s their argument. 

So that’s one way of framing it. Here’s another way of framing it. Well, due to a variety of political frictions and pathologies, there’s going to be a tendency to overshoot and for it to be sticky. That is for government to grab power during times of crisis, to manufacture crises, to overstate what those crises are in order to get more power. Then once they’ve done so, they’re going to hold onto it tightly.

RAJAGOPALAN: Yes, because I’m still taking off my shoes and putting shampoos in tiny bottles. That has not gone away.

COYNE: That’s right. This is the point. One potential problem with the Liberty-Security PPF view of things, it’s a very smooth frictionless way of viewing the world. It’s almost like, okay, you have a dial, a liberty security dial, and you turn it toward security, you get more security. 

By the way, another critique is you could give up liberty and not get security. You can make the argument that expanding liberties gets you more security. If you believe things like, well, trade association makes social relations more dense, raises the cost of conflict. This is something like a variation of the capitalist peace hypothesis. If that’s true, you can increase liberties and get more security. That’s a possibility. Then after you just turn it back optimally to the right balances as if you know that. As if there’s some kind of social welfare function of the right tradeoff. Again, this is where I think the public-choice type insights and the Austrian insights, the epistemics—we have to endogenize politics.

What does it mean to know the right balance of security and liberty for society? Then assuming you can know that, what gives you confidence that political institutions are actually going to generate that outcome?

RAJAGOPALAN: Yes, and the third is, it’s not so clear even who we are talking about, because this is entangled down to the office supplies guy and the person who’s providing janitorial services to these defense firms or whatever it is. Because there is something going on that we normally don’t include within the set of the people who’ve taken our liberties away and will give it back. That entanglement is a little bit messier to the extent that we don’t even know how many people really are involved. If you want a number for the list of people employed by the Pentagon, I’m sure you can get some number or at least a range.

COYNE: You can’t, yes.

RAJAGOPALAN: On contractors, there’s nothing.

COYNE: No. For anyone interested, there’s one wonderful study by two journalists at The Washington Post. They did this during the war on terror. It’s called “Top Secret America.” You can find on The Washington Post website. It’s Dana Priest and William Arkin, I think are their names. They tried to do a stocktaking of who has security clearance. They couldn’t find it.

RAJAGOPALAN: That’s terrifying, actually.

COYNE: Exactly. Again, are these people providing security or not? My own view is that much of what falls under the purview of supposed defense and security is nothing but. It is not providing any of those things. At best, it is feathering the nests of certain select individuals and interest groups. At worst, it’s making us less safe. That’s my own view. I don’t want to say it’s zero, but it’s a cheap and easy way to justify any government behavior. That’s what you hear. If you don’t support and justify in a carte blanche way, give them a blank check, then you’re anti-security.

RAJAGOPALAN: Anti-American.

COYNE: Anti-American. Then, of course, now the popular thing is to go back to Hitler, as you were saying. You’re Chamberlain, and you just want to give into the bad guys, and you’re okay with Hitler. These are all very cheap ways of arguing and bad ways of arguing because it doesn’t take seriously the threats that are posed. This comes back to your fundamental point: Any change in policy is going to have some change on the fabric of society. That’s the way I tend to think about it.

This is the point William Graham Sumner, the great classical liberal sociologist, made: You can never just do one thing. It’s not a light switch. You can’t flip government on and off. You can’t just turn the dial. That doesn’t mean you can never make an argument or support government doing something, but you need to take that into account. Am I comfortable giving this up for good? Then we come back to your point about the stages, and I haven’t thought about [it] in those terms, but I think you’re onto something which is—

RAJAGOPALAN: They’re gotten from all of the stuff I read for you.

COYNE: I don’t lay it out in compartmentalized categories, but you’re right. Look, there’s the fiscal issue. People have long pointed this out. Adam Smith pointed this out. James Madison pointed this out, of course. There’s the issue of the effects on the domestic economy. Again, many people still to this day make the argument for beneficial effects through stimulus. I think that’s a horrible argument. Military Keynesian-type arguments, but I won’t say more just because I don’t want us to get off track. 

Then there’s the effect on the Constitution, and there’s the long-lasting effect in our daily lives. One of the things Abby and I did in “Tyranny Comes Home”—and the impetus behind that book was something very simple. It was just me observing the world, which is Edward Snowden stuff breaks. I was fascinated by this, and I knew about Daniel Ellsberg with his revelations about Vietnam. Ellsberg, of course, is an economist by training, a famous economist. Oh, yes. There’s something called the Ellsberg Paradox in game theory. The reason he got access to the papers, by the way, is he worked for the RAND Corporation on game theory associated with the Cold War, and that’s when he saw these papers and that the U.S. government was lying about the severity of the—

RAJAGOPALAN: Oh, that’s so cool.

COYNE: —war. By the way, he has a wonderful book called “The Doomsday Machine” about nuclear weapons if anyone’s interested. It goes back to our discussion earlier, but I’ll stop there so I don’t digress too much, but I was like, okay, so I know there’s this thing called the NSA, and the NSA started, I think in its current iteration, I think in 1952 or 1950s. And so I just started looking up the NSA—Wikipedia level here.

History of the U.S. Security State

Of course, like any government bureau, they don’t just fall from on high. At some point a new bureau’s created, but they’re usually outgrowths or rebrandings of earlier ones. I started tracing back the NSA to all its various iterations, and I then started reading a lot of books and doing research. What we did in “Tyranny Comes Home” is to trace the U.S. security state all the way back to the war in the Philippines in the early 1800s into the early 1900s. That sounds crazy because, of course, we don’t have technology to engage in surveillance.

Plus there’s this guy by the name of Ralph Van Deman, who I had never heard of, most people haven’t. His informal name is the father of U.S. military intelligence. He’s in the Military Intelligence Hall of Fame. There’s such a thing. Again, I didn’t know until I read about it. But he innovated in the Philippines. Because, of course, when the U.S. intervenes, the people in the Philippines were under the mistaken assumption that the U.S. was going to grant them independence. The U.S. said, “No, we’re going to stay here and govern you.” That led to an insurgency.

Of course, then you had to squash the insurgency. Now, one way you squash an insurgency is brute force. That can be effective, but what Van Deman innovated was to surveil people. It was very rudimentary by today’s standards, but he collected enormous amounts of information on people: personal finances, their sex lives, their personal relationships with other people and their issues. He used it against people to manipulate them to get outcomes that he wanted. It was what it was.

What happens? The occupation winds down. Van Deman comes back, and what does he do? He has human capital now, and he says, “I think we should set something up like this at home,” this surveillance apparatus. It worked really well. Now, at first, this is viewed as crazy or just indifference. People are like, “What are you talking about?” In the U.S. government I mean. He’s just hanging around until the First World War.

The First World War starts, and then all of a sudden he starts saying—and his memoir, which is unpublished, but it’s available online for free, you can read about this. You can read about him trying to lobby to get people in the U.S. government to set up an apparatus here. Eventually, he’s able to do it. It’s like eight people. It’s a small little group. He had complete control over it, and he starts collecting information on people. For a while they had set up a fake business in New York where they are collecting basically every communication coming in and out of the United States.

Western Union, we think of Western Union today as money orders and payday lending type stuff. Western Union started as a communications company. Basically, what they did is tapped into Western Union and other communications companies. They were monitoring—without any warrants, without any approval by Congress or any judiciary oversight—all the communications. Then this starts evolving like bureaus do.

RAJAGOPALAN: The only thing that’s basically changed is your point is the transactions costs of—

COYNE: Correct.

RAJAGOPALAN: —collecting the material and the data and the surveillance, right?

COYNE: Yes. You read the Church Committee, you get the Pentagon Papers, and one of the things that came out of that is that the CIA, the FBI, they were all overstepping their charters and constitutional constraints that were supposed to limit them. What the Church Committee, named after Senator Frank Church, what that committee revealed is that—and this is their language, you can read these reports online. There’s volumes, so they’re dense. You have to go through them, but they have these passages in there where they basically say, “Look, we’ve become a dictatorship. These agencies are acting like a dictatorship would act.” What do you get? You get the FISA Court that comes out of that. The FISA Court was supposed to oversee government surveillance. Now, there’s problems with that. It’s nonadversarial because, of course, you can’t let people know who you’re going to surveil.

RAJAGOPALAN: Everything is in a sealed envelope. Even within the court, nothing becomes public.

COYNE: There’s a debate. There’s two views, and again, people can come down where they want. Almost everything gets passed by the FISA Court. One view is that they’re so good at their job that only things that people know will pass by the government will get brought. Another is it’s a rubber stamp that’s just approving anything government wants. Whatever side you come down on.

RAJAGOPALAN: The third is, they may not even think of themselves as rubber stamps, but everyone’s so nervous the moment you throw around national security and defense and war, that the bar is immediately lowered.

COYNE: Sure. Good point. Very good point.

RAJAGOPALAN: Which even judges who serve in the FISA Court, when they’re elsewhere, don’t quite behave like that.

COYNE: Yes, that’s a good point.

Capitalist Peace Hypothesis 

RAJAGOPALAN: Now you’ve made your case pretty well for the war does come home. It has these terrible unintended consequences and intended consequences abroad. 

Now, let’s think about what is the alternative. The standard is there’s peace. We don’t want war. The economist’s view on this, on both sides—so there’s one side, which is the more you trade and the better and larger trading partners you have, the more you’re going to have a peaceful liberal—

COYNE: Correct.

RAJAGOPALAN: —world order. This is everyone down from Smith to Schumpeter to pretty much now.

COYNE: Montesquieu talked about it as well.

RAJAGOPALAN: Lots of liberal economists have talked about this. The counter to this is somewhat of the Marxist–Leninist view that, “Hey, peace is not exactly that compatible with free trade and capitalism.”

COYNE: Correct.

RAJAGOPALAN: Because a part of the impetus to capitalism is all these big businesses and monopolies which want to have an imperial footprint abroad, and the interest to politics is going to be such that there’s going to be more war than there is going to be peace. Let’s assume that we are, for the moment, talking about the Schumpeterian side—Schumpeter, Kenneth Boulding, all of them are on the free trade and liberal—how well has that panned out? Is that truly the alternative?

COYNE: Just to clarify, and you laid it out well, but I just want to make sure the distinction’s clear to people listening so that they understand. The question ultimately becomes, is imperialism using the military a fundamental part of capitalism or not? J. Hobson who wrote a book called “Imperialism” which influenced Lenin. Vladimir Lenin, I think in 1960, wrote a book called “Imperialism, The Highest Stage of Capitalism.” Rosa Luxemburg—

RAJAGOPALAN: He’s the one who really sets this out.

COYNE: Their position ultimately is that capitalism and imperialism are intertwined. By imperialism, they mean the use of military force to intervene and so on.

RAJAGOPALAN: And colonize.

COYNE: And colonize, yes. Because it allows them to extract surplus value and exploit people. It is the same class analysis applied internationally that is applied domestically. Then the other side, as you put it nicely, is that there’s nothing inherent in markets that leads to that. The way Joseph Schumpeter defined imperialism in his essay, he associates imperialism with the state. That’s important, I think.

How has it worked out? Again, it depends how you analyze the question. There is a large literature on what’s called the capitalist peace hypothesis. It’s an empirical literature so it’s looking at war between countries that trade. My reading of the current evidence is that it falls down on the side of finding support for the capitalist peace hypothesis. Now, I don’t want to pretend like every empirical study finds that. It’s become so dense like all these literatures that now it’s like fine grain data, let’s break down trade in certain goods rather than just trade flows in general.

People listening can Google this stuff and look it up if it interests them. The broader point I want to make, which is a conceptual point, again, part of this is definitional, but I think it’s an important one. I am of the position, there is nothing inherent in markets that leads to imperialism. This is why I highlighted Schumpeter’s definition of the state. What is necessary in order to get that imperialism is the state. Why? Because the state controls the military. This is an argument against cronyism, political capitalism, which is once you allow these entanglements, this is going to be an outgrowth of that.

The leftist argument, while I think it’s wrong in attributing imperialism to being an inherent feature of capitalism, they certainly raise a good point, which is that through history, for-profit producers have been able to leverage the political–military instrument for their own narrow interests. Then what we need to think about is what is the root cause of that. The root cause is the ability of those producers to—

RAJAGOPALAN: To capture the state.

COYNE: —be able to capture the state. Then what leads to that? Perhaps it’s what you and I were talking about earlier. You create this massive thing because you need to defend either domestically or internationally. By the way, the project of empire, to go back to our earlier point, by definition, requires a massive apparatus. You can’t do it without it. You can’t keep it small. Then you’re going to open the door to, “Now we need to do stuff. Now we need to contract with firms.” 

Of course, one of the key insights of public choice of people like George Stigler was once you open the door to that, it’s not like businesses are going to sit there and just be passive actors. They are going to proactively try to influence, manipulate, and shape and capture policy to feather their own nests. Is that defending the American people? Does it bring peace to the world? Again, let’s go back to the East India Company. You can make the argument that in some cases they brought about order, you can also make the argument that they undermine—

RAJAGOPALAN: They didn’t bring about order, for sure.

COYNE: No. They certainly did. Everyone brings about some type of order. Authoritarian regimes bring about certain type of order. This is why it’s so important to unpack. This is why spontaneous order is so important. What is the source of the order? This is what I was saying earlier—demand curve slope downwards. I can, in principle, raise the cost enough to get people to do what I want, and that will generate some order. It might even look peaceful, but at what cost, and what are you giving up? You’re giving up the spontaneous order that would’ve emerged.

RAJAGOPALAN: Fair enough. I think there are two parts to the capitalism peace literature. One is, does capitalism actually lead to more war? Let’s say either it does not, or if it does, it’s because of all this entanglement between the cronies and the states and so on. There’s a second part to that. Does capitalism actually foster peace? How is the evidence on that side?

COYNE: Yes. Then this is harder to measure empirically, I think. Actually, here’s how I’ll put it. Does capitalism foster peace at the nation–state level and then the underlying mechanisms? This is why I want to say it’s harder to measure. And I’ll call it, does capitalism foster peacemaking? Peacemaking is—going back to where you and I started—if there’s a situation of conflict, and we can resolve that peacefully or through violence, does trade create an environment where the peaceful means, that’s why peacemaking is—

RAJAGOPALAN: More likely to be chosen.

COYNE: —more likely. Yes. Trade, by definition, requires some baseline level of peace. I have to respect you as a person. I have to respect your property. I have to respect not taking from you. If I could just take from you, I wouldn’t need to trade with you. There has to be some baseline in place. You can make the argument that trade reinforces those things. I talked about Montesquieu earlier. Montesquieu makes the argument that commerce fosters a shared vision—this is my language, not his—that allows us to overcome our prejudices against other people because I start to see you in a different way than I would other otherwise because I’m interacting with you.

More recently, Deirdre McCloskey, of course, she talks about markets being an ethical moral school or environment. Our colleague Virgil Storr talks about markets as a social space. Virgil Storr and Ginny Choi in their books talks about how markets foster morals. Of course, P.T. Bauer, the development economist, talked about this as well.

RAJAGOPALAN: Yes. Kenneth Boulding, I think has a lower bar than Montesquieu in the sense that we don’t need to go as far as shared values. There’s a lower level which is just, there’s an incentive or there’s a greater likelihood that you would prefer to have peace, because that’s what’s required for this cooperation, which is then required for free trade.

COYNE: Yes. You still need the baseline shared, what Boulding would call a “shared image,” which you and I might think about as expectations. I have to view you as in a certain way, but I also have to anticipate that you view me in a reciprocal way, or we can’t get the trade off the ground in the first place.

US and China 

RAJAGOPALAN: Now, when it comes to the current moment of, say, U.S. and China, is Boulding wrong in the sense that U.S. and China are trading partners with an enormous flow of trade? This is not a minor one- or two-good flow of trade. They find themselves adversaries on opposite sides. Or is, in fact, Boulding right that it is because of this trade that they are only adversaries and not enemies in a full-blown war? What is a good way to think about that?

COYNE: Yes. One is, I don’t know, and part of the reason I don’t know is when we talk about China and the U.S., who are we talking about? I have no doubt that there are people in the U.S. government that view people in the Chinese government as adversaries, perhaps, and vice versa. There’s a lot of things to think about, but a couple I’ll highlight for the sake of time. 

And this is the way the world is, I realize nation-states exist, but it’s the only reason I’m skeptical of empire and war-making in general. It’s collectivism. So many of these conversations are collectivism writ large. It’s China does this, America does this, they’re adversaries. Think about how many people reside between America and China. People, citizens, it’s an enormous amount of people, of human beings. Do I view some individual in China as my adversary? I certainly don’t think that way on a daily basis. I haven’t met them all, so I’m sure I’d have an adversary, but I also think I’d have friends there, and I do have friends that are of Chinese origin. 

What does that mean? It means that when we simplify things down into friendship and adversary, as defined by small group of elites characterizing millions and billions of people, that, in some sense, is going to be reinforcing. What I mean by that is that if Americans are told repeatedly by their government, and they believe their government is looking out for their interests and is providing defense, that they’re an adversary, all those people, then in some sense it’s a self-fulfilling prophecy from the perspective of Americans and vice versa.

RAJAGOPALAN: Does the case have to be made at that granular level?

COYNE: I think so.

RAJAGOPALAN: Is the case just have to be, “Hey, we don’t trust the CCP, and the CCP has some quite terrible motivations and quite sophisticated instruments to carry out those motivations, and we happen to find ourselves on opposite sides, whether it comes to values or the means to justify the ends and so on.”

COYNE: Point well taken. I do think it needs to be made at that granular level. Here’s the reason why. The granular level is mythological individualism, and it’s, where’s the individual? I was talking about people, ordinary Chinese citizens. You’re talking about people in the government, but there’s people there. I’m very comfortable saying, sure, they have terrible policies, terrible instruments. As long as we employ a symmetry of assumptions, which is so too does the United States. Then the burden needs to be made that, number one, those people are going to deploy those instruments against us. And number two, the people that control those same instruments in our government are not going to deploy them in a way that harms us.

RAJAGOPALAN: I’m not thinking of this in terms of who’s right or wrong or who will strike first. I’m trying to think of it more in terms of it’s, at the end of the day, individuals who are trading with each other, but the trade will flow between two nation–states based on certain tariffs and treaties that they’ve struck and so on so forth. The cliff notes version of the capitalism-and-peace argument is countries that trade and governments that trade don’t invade each other or don’t go to war against each other.

COYNE: Don’t go to war with each other.

RAJAGOPALAN: We’re finding ourselves somewhere in between with our largest trading partner, which is a very odd place to be. That’s the thing I’m going for.

COYNE: I follow you. I would argue that what is stirring the push toward conflict is not trade per se, but it is the political distortion of that trade. Analytically it’s difficult to tease out. Is it the trade itself that’s the problem, or is it politicians who are making the trade an issue? China is stealing from us. They’re stealing this, they’re stealing that. Now, look, one of the arguments—and again, I want to be fully transparent. I mentioned this before that now the capitalist peace stuff is getting more granular. Is it trade in strategic goods? How might that relate to China?

The chip stuff? Is it trade in chips that’s causing the issue? We can tease that out. It’s hard to tease out, but you might be able to tease that out. One could conclude from that that trade in certain goods makes warfare or conflict more likely. That’s within the realm of possibility. Then the question is, what do you do about it? That’s a tricky thing. What one solution—or it’s only tradeoffs, not solutions as Thomas Sowell told us—one avenue, I should say, is national economic industrial policy. That’s the logic behind the CHIPS Act.

RAJAGOPALAN: Which is exactly what we’re doing with the chips.

COYNE: Then the question becomes, what happens when you get economic nationalism and what are the causes and consequences of that? My concern with China is that the way the conversation is being structured is an ex ante, it’s a fait accompli. It’s they’re our enemy. What they do is bad. This is what I was saying about being self-reinforcing. Once you take that position, then you are setting it up so you’re going to get the outcome you want, but it doesn’t have to be that way. It’s unclear to me that it has to be that way.

RAJAGOPALAN: Again, I agree with you that I don’t think it has to be that way, but it is surprising to me as someone who has very long believed in countries that trade don’t tend to be adversaries, that we actually find ourselves in this situation. It’s more that I’m surprised that trade couldn’t solve it.

COYNE: Let me be clear. There’s different variations of all these theories. The strong version of the capitalist peace hypothesis is countries that trade will never go to war.

RAJAGOPALAN: Exactly.

COYNE: A weaker form of it might be they’re less likely to go to war. That’s the view I hold. The reason being I don’t view conflict between nations or war-making between nations as mono-causal. I think it asks too much of a theory to say zero–one kind of thing. So many other factors can lead to conflict that it’s not crazy to me. I view it as a tendency, a pattern prediction, to use a Hayekian view of it, which is that trade on the margin raises the cost of conflict.

RAJAGOPALAN: Which is maybe why we are in a cold war with China right now and not a regular one.

COYNE: Maybe it’s nuclear weapons like we were talking about before. 

Is Peace a Top-Down Process

RAJAGOPALAN: Who knows? If you have time, I want to switch gears. Another theme running through your work is this question of, can peace be brought top down, or do we trust bottom-up processes? This is, again, a very Virginia Political Economy idea. It’s not just to endogenize the politics. It’s also to think about what the emergent order is and how that comes about in a particular local context.

I think it’s quite clear when we look at, say, the examples of the Middle East and American intervention in the Middle East, that this top-down peace hasn’t quite worked out for us. Not recently. Not in [the] Philippines. Not anywhere. 

The question is, has bottom-up peace worked out well and where? Because when I look at Africa, and I actually had to make a list of this because things have actually gotten really bad in Africa in the last, say, two or three years. I would’ve never imagined that Ethiopia would devolve into this mess. You look at DRC, you look at Sudan, things are much worse. Burkina Faso, all of those, Mali. There are places like Ethiopia where if you take a seven-year window things are worse. Maybe in the last couple of years things are slightly better. Africa overall doesn’t seem to be doing very well on bottom-up emergent processes evolving into what Boulding would’ve called stable peace. What is a good way to think about this?

COYNE: To step back for a moment, many people would argue, by the way, that top-down peace has been effective and is necessary. That’s the standard view. That’s what we’ve been talking about, both [at] the nation–state and at the international level. It’s this overarching meta-peace. The way I’ve thought about it is, to use the Latin pax imperii, which is peace from the state. That’s top-down. The state needs to create the conditions of peace or peace itself.

Pax hominum, which is peace among the people. That term is what I use to talk about bottom-up peace. We’ve been talking a lot about Kenneth Boulding and rightfully so. Kenneth Boulding’s wife, Elise Boulding.She was a sociologist. She actually got her Ph.D. very late in life after raising a large number of kids. Actually, it’s an amazing career she had and drive she had to pursue her Ph.D. Then she was a professor of sociology at Dartmouth. I just want to mention her because she wrote a wonderful book in, I think it was published in 2000, called “Cultures of Peace.” I mention that because she invokes this language of peaceableness, and she didn’t like the term “peace” because it’s like Hayekian with “competition” as a state of affairs versus a process.

Peace for her is like a state of affairs. She says we think about peace either existing or not. It’s some fixed state. Linking this back to Kenneth Boulding, the process view I like because it says you can move between states. There’s phases. You’re not either in peace or out of peace. Even if you have a lack of violence at a point in time, as you pointed out with the examples you gave, you can move to a phase where there’s violence. Nothing’s guaranteed. We live in a world of openness and change. Now, here’s what Elise Boulding pointed out with this notion of cultures of peace. It’s interesting because she rejected the economic way of thinking, but in many ways, she’s more of an economist—

RAJAGOPALAN: she is rejecting it in a very hard rational choice way is how she’s rejecting it. She’s embracing it in a very Ostrom way.

COYNE: I was going to say, what’s fascinating is, in some sense, she’s more of a microeconomist than economists that talk about war because she starts with the individual. She says peace is everywhere. We just take it for granted because our lens is focused on the top-down level and society, whether aggregate measures of peace and violence. If we just look around the world, peace is everywhere.

That’s a fascinating way of thinking about things. Just think about your own life. I walk around the world. I’m with my family, my friends, my coworkers, strangers I interact with. There’s all these situations of conflict that emerge throughout the day. In some of those instances in the world, we observe violence. In so many instances, people navigate them peacefully. Now, that seems mundane. That seems like nothing. Actually, when you start thinking about it across people, it’s enormous and it actually what’s makes the world—

RAJAGOPALAN: I don’t think it’s mundane, I think it’s extraordinary and almost impossible.

COYNE: It is.

RAJAGOPALAN: The norm of peace, or peaceability, is what I mean by is almost impossible.

COYNE: It’s impossible to fathom. It’s impossible to fathom in what way? Someone designing it. The minute you realize that point, you recognize the importance of bottom-up peace. It’s emergent. It’s not designed. It’s highly diverse. Even within our own lives, what works in our household to navigate things peacefully may not work in our workplace, may not work in our interactions with strangers. I think the first point is recognizing that. The second point then, which becomes more interesting and challenging, but also fascinating intellectually as an academic exploration, is how far can we push this logic? That means scaling up, but scaling out as well.

RAJAGOPALAN: First it doesn’t scale up quite as well or quite as easily. I think even their work alludes to that. I have a slightly different question. What’s going on all over Africa, whether it’s warring tribes to terrible dictatorships to militias running loose, does bottom-up peace only work in the shadow of some overarching—

COYNE: Yes, of the state.

RAJAGOPALAN: —state capacity, and without it, that norm is never quite going to take root and sustain? Is that a reasonable way of thinking about it? Just like we think of a lot of Coasean bargains that happen in private corporations, but in the shadow of the law, where at the end of the day if something goes wrong, a court is going to come down and give you an order, one way or another.

COYNE: That’s certainly one way to think about it. I don’t think that needs to be the case, and here’s why. Elise Boulding, I think she’s right on this, would argue that even in a place where that overarching top-down peace is dysfunctional or absent, you still can have instances of bottom-up peace. Even in the most violent societies, she argues, there are pockets of peace. They might be very localized. 

Her argument, the way I read it, and I think this is correct, is it’s not that you observe this and all of a sudden, oh, you’re going to get the good outcome scaled up. It’s that it’s an existence–proof type argument, a possibility. Now, here’s the thing, the challenge you have—which is the challenge with any kind of “shadow of the state” argument, doesn’t just have to be with peace with anything—is where does that come from? 

If you believe in a self-governing society in the Ostrom sense, Tocquevillian sense, then the state itself emerges out of the self-governing relations of the people that live under that state. It’s not exogenous and outside of that. Many states throughout human history are that’s the conquest theory of the state. That wouldn’t fulfill the Tocquevillian–Ostromian notion of self-governance the way they conceptualize it. 

That might be fine, but if you want a truly self-governing society and a self-governing government, then it needs to be grounded in bottom-up processes. You can’t separate the two. It’s certainly possible that you can make the argument that once you have someone come in, wherever that comes from—conquest, they’re invited in, whatever—and they impose some order, then you’re going to get some emergence within that.

That goes for anything. That would be like saying once you impose order, you’re going to get certain economic activity that emerges. Of course. Can economic activity emerge absent the state? Certainly, it can. What the scale and scope of that is, that’s the interesting question. That is separate than the possibility of it. Then that’s going to be a function of norms, of technology and so on.

RAJAGOPALAN: I think also of some low-level state power.

COYNE: Meaning what?

RAJAGOPALAN: Look, even in the worst places in the world, like right now in Palestine, the argument is not that there are no pockets of peace or kindness. You see no one’s fighting over bread and rioting amongst each other, killing each other. It’s not that kind of anarchy. You have some local governance system on how people manage to provision water even in the worst conditions and so on.

I’m not denying that, but that’s not what we really mean by peace when we think of it in terms of war and peace and enough peace to get you social cooperation that you are not constantly in the state of vulnerability and distress. That’s the question. What is that minimum level of state power that is required such that the norms that are emerging bottom-up can actually turn into something else that looks a little more sane, like what we have here in Virginia?

COYNE: Is it sane or insane? I don’t know. 

RAJAGOPALAN: On peace, I think we’re doing fine, Chris.

State Capacity and Peace

COYNE: What you’re asking is the great question about state capacity. I don’t know what that baseline is, but here’s the thing: No one else does either. What we know—and push back if you think I’m misstating this and I’m off—my reading of the state capacity literature is we know categories of behaviors that correlate with good outcomes. We don’t know what the right amount of state capacity is because, of course, the argument for state capacity is, once states have capacities, they can do what? Public good-type stuff. What happens when you get too much state capacity? It’s bad.

RAJAGOPALAN: That’s the thing. That’s where I want to push back because a lot of the war and peace literature, if I may characterize it as that is, hey, when you have a lot of state capacity, like America imposing its full military strength on Afghanistan, you may have the upper level of peace, but you don’t have these bottom-up processes. Guess what, without that, the bottom-up processes will also eventually not bubble up into something else. My worry is, when we worry about too much state capacity and that infringing on liberty, are we throwing the baby out with the bath water? Or don’t we need a minimum threshold to make this entire thing hang together?

COYNE: Yes. I’m not sure we’re throwing out the baby with the bath water. One thing to think about is when you go over—in this hypothetical example—to Afghanistan, what are you doing domestically to liberty? That’s the first thing. That’s what you and I were talking about earlier. Then the second thing is, what are you doing over there? It’s unclear to me that we have many examples where you go abroad and you impose an overarching minimal threshold, whatever that means. I guess I don’t know what that means.

What even does the optimal minimal threshold of state capacity mean? Again, we’re going to have to talk in broad terms. And this is how economists talk, by the way. This is why the language I think is very slippery, because they’ll set things up rhetorically to get the outcome they want. What state capacity do you want? Government needs to provide public goods. To my way of thinking, that doesn’t answer anything. 

What’s a public good? How much of the public good needs to be supplied? Then how are you going to supply it? What gives you confidence that the real-world government is going to supply the public good in the quantities and qualities that are necessary, and whose preferences count? Remember that the challenge is, how do we have public finance, public administration, without a social welfare function? There’s no given social welfare function that tells the government the optimal amounts, and you have the incentives of government.

RAJAGOPALAN: I’m talking at an even lower level than that. I don’t disagree with you on the public goods question, but the lowest version of this is you have the state capacity to quell a riot. You have the state capacity to quell fighting militias. At that point, let’s say you are not providing clean water. There were local governments in Afghanistan. There are local governments in Myanmar who managed to provide some basic public goods provisions. There are societies that cooperate. It’s very bottom-up. Do they have amazing roads, and highways and railways? No, but they manage to solve a base-level collective action problem. 

COYNE: I think those things have to emerge endogenously.

RAJAGOPALAN: Sure. I’m saying those things are still not able to quell militias. And oftentimes when I see the South Asian version of this, you repeatedly get military coups in Pakistan and now in Bangladesh, you have it in Myanmar. What people are really asking for and willing to tolerate is, “Hey, we won’t have crazy riots, and we won’t have militias roaming around.” They’re willing to make the trade and have the stationary bandit instead of the roving bandit. I think we need to concede to that level of state capacity without which I don’t think any bottom-up process really has a chance.

COYNE: Maybe, I don’t know if I’m willing to concede it. Again, what does that mean? It’s what Buchanan called the limits of liberty. It’s what Acemoglu and Robinson talk about the narrow corridor, or North and Wallis and Weingast talk about the doorstep conditions, and then the subsequent conditions to limit the state. What all of those things are saying is we need government to do what? Enforce order, protect private property rights and that’s it. Then constraints on those things so they don’t do too much. That’s the narrow corridor. 

That sounds nice to me, but I can push it back and flip it over and we can say, look you need these things or else you can’t get order. Give me an example where we’ve had those things without those things. Give me an example where constitutionally constrained governments have remained constitutionally constrained. Give me an example where we’ve remained in the narrow corridor. 

We certainly see instances of variation, meaning that not all states are the same in the actual world. What we have is historical cases with variation. Then if I say, “What’s the external validity? Tell me what to do in Syria right now, or tell me what to do in Afghanistan.” You’re going to get general talking points with nice words but no action items you can actually take realistically, that you can have any confidence it’s not going to lead to a worst outcome.

This is just a fundamental problem with development, with foreign intervention in general. Where does that leave us? I think it leaves us in a very messy world where we have to do one of two things. We have to admit we don’t know and default to the position of a hands-off position, recognizing that things may not emerge in a certain way that we would like. And I’m comfortable falling on that sword, if you will. I’m very comfortable with that. I’m very comfortable if you said to me, “What do we do about Syria?” I don’t know, and I would argue that other people don’t know either. I think they have opinions. I just read a wonderful op-ed, Tyler’s column in Bloomberg, his most recent one about net neutrality.

RAJAGOPALAN: Yes, I saw that.

COYNE: His argument is kind of a stock-taking like, let’s look back at net neutrality. And what’s his core point? What I took his core point to be is how wrong the experts were. We don’t know what we’re talking about with net neutrality. Now, one argument is that’s a one-off outlier. We didn’t know net neutrality, but lots of other things we know. If the experts don’t know what they’re talking about with net neutrality, I have very little confidence they know what they’re talking about with how to get any state capacity or even taking about it.

RAJAGOPALAN: Sure. I’ll concede all of that, but there is one looming cost, which is completely asymmetric relative to experts not knowing what they’re talking about when it comes to malaria nets or net neutrality, which is there are certain circumstances where a very large number of people are going to die. And a second part of what you’re saying is, I’m comfortable saying I don’t know, and I’m also comfortable saying do nothing because it’s not clear that doing something will guarantee the positive outcome you intended. A part of the do nothing in some of these cases means, “let lots of people die,” and I think that’s the part where people start getting very squishy and get very uncomfortable.

COYNE: Yes. Here’s what I would say to that. I’ve tried to address this in a couple places in my writing. Number one, we have the tradeoff point. We’re always making tradeoffs, so I recognize your point. Your point’s well taken. Number one, it goes back to some of the things we were saying. When we say do nothing, I don’t necessarily mean you just hum and walk down the street and forget about the world. You can get up and do something, but part of doing something can be to undo something. 

This is the unblocking reforms thing. I oftentimes think it’s disingenuous when people say you’re an isolationist. You don’t want to do stuff. I say, no, I want to remove things that block certain people from having better lives. But you’re not advocating for those things. Why not? Is it because you want to harm people? They’d say no, so that’s one. Number two is, how confident are you that the intervention is going to do what you want it to do? Number three, I fully admit that there are certain interventions that can work. It’s in my book, “Doing Bad by Doing Good.”

I made the distinction between the economically efficient use of resources and increasing certain targeted outputs. There’s technical outputs and there’s economic efficiency. Economic efficiency is, do we know if resources are being allocated to the highest valued use? You can’t know that outside the context of market prices, profit and loss. But we have technological knowledge, and we know how to make a table. If you say, “I want to get more tables to people,” in principle, we can do that. Whether that’s economically efficient is a different question. Now the question is, with political incentives, can you deliver that? We still need to endogenize politics, meaning that in many cases, we try to deliver the table, and it gets stolen.

Acemoglu and Robinson, in one of their books, I forget, have this story, it illustrates this point. It’s sad—about Afghanistan and building schools. Of course, they had to get lumber there, and they talk about this example of getting the lumber to the villages. You have all these nonprofits involved and then “local contractors.” I put that in quotes because a lot of them are warlords that are basically skimming stuff, and they’re basically saying each group is taking their cut along the way. So you get the money over here, it flows through the nonprofit, they take their overhead. It flows through this, they take their overhead.

Then it gets to the contractor. You have to either pay the contractor if they’re on the up and up, but then you have the warlords skimming off the top, and by the time the wood, the lumber, gets to the village, there’s not much lumber there. That’s not a technological issue. In principle, we know how to construct a building, and that’s the challenge. Again, we know in many cases that people are dying and maybe they will die under a horrible scenario. But the alternatives are not you throw resources at the problem and you solve it, or you do nothing. You need to take into account, number one, alternatives. Are there other ways to help them? What’s the full menu of options?

Number two, if you’re going to choose the more resources, what are the things like this example and what harms do we cause? There’s a wonderful paper in the American Economic Review, I think it’s called “Aid Stealing” several years ago. It’s an empirical paper, but it looks at what happens when Western countries—and we can assume that they’re well-intentioned, so I’m not impugning their motivations—when they inject aid into a civil war environment—food aid. Again, we’re not talking about creating development, and what they talk about is how it fuels more conflict. That’s the finding. Why? Because when you inject aid, people want to get their hands on the aid.

This goes back to the wonderful point you make in your papers with Alex that I raised earlier. What happens when you start doing stuff but the existing state capacity doesn’t exist? You create dysfunctional outcomes. That’s the challenge. You don’t have the state capacity to do stuff, so then you inject money or resources, either to get the state capacity or to substitute for the lack of state capacity, but the state capacity’s not there. You trap yourself in this circular flow. Notice what happens. You reinforce processes that are terrible, that are working against the very capacity you aim to achieve. You’ve actually made things worse.

In that case, would injecting the funds be better or withholding them be better? If you withhold them, what are you going to do when I say, “That makes me feel uncomfortable, you’re not helping people,” and you say to me, “If I go to help them, I’m actually going to make things worse.” That’s the really hard challenge. I understand both analytically, practically and certainly the emotional aspect, that’s a very hard thing to accept. I recognize that, but it’s also reality, and pretending it doesn’t exist I think is worse because then we run the risk of doing more harm and harming people that are the most vulnerable in societies.

RAJAGOPALAN: No, that’s very well put. Thank you, Chris. This was amazing.

COYNE: Thank you. I appreciate it, and it’s always wonderful to talk to you.

RAJAGOPALAN: Likewise.