Iran's Nuclear Program and the Political Time Horizon

Supporters of an expansive role for government often argue that we need government to make us take account of the long run consequences of our actions. As best I can tell, this is precisely backwards. One way of seeing why is to think about the incentive, in a private market, to make investments that pay off in the far future, possibly after the investor is no longer alive—for someone sixty years old to plant hardwoods that will take forty or fifty years to mature. The reason doing so is in his direct self interest is that he can sell the land with the trees on it to someone else in ten or twenty years, when he is still around to spend the money; the price he can sell it for will reflect the fact that the trees are that much closer to mature. Working through the logic of the situation, it is straightforward to see that the investment is worth making as long as the expected return is at least as high as any alternative investment.

For this to work,  the investor has to be reasonably sure that when he wants to sell the trees they will still be his. If he believes that, each year, there is a ten percent chance that someone will steal his trees or that the government will decide they are an essential national resource and confiscate them, the investment will only pay if the return is at least ten percent per year more than the return on a safe investment. To put it differently, long run planning in the private market depends on secure property rights.

Politicians have insecure property rights in their political assets. If Obama does something that is politically costly now but that produces highly desirable results twenty years from now, it will be the president in office then who will get the credit. One way of interpreting Obama's repeated claim that anyone who liked his insurance could keep it, a claim he surely knew was false and knew the voters would eventually discover was false, is that he steeply discounted a political cost that would only come due after his final election. Long term effects matter to politicians only to the extent that voters can predict them and care about them—and a voter, knowing that his vote is very unlikely to change the outcome of an election, has no incentive to be well informed about such things. A politician in office can claim that whatever the voters do not like about the present is  the price for getting something they will like in the future, but there is little incentive for the politician to care whether it is true. Josef Stalin could not plausibly tell the people he ruled that they were living well, but he could and did tell them that their current hardship was the price of catching up with and surpassing the capitalist West. It was only long after his death that that particular lie finally caught up with his successors.

Which brings me back to the subject of this post. Doing anything substantial about the Iranian nuclear program—for instance making war on Iran—would be politically very costly for this administration or previous administrations. It makes sense instead to do whatever relatively easy things they can to slow the development of an Iranian atomic bomb in the hope of postponing its appearance until someone else is in the White House. And when someone else is in the White House, the same logic applies.

I suspect the Iranians are smart enough to have figured that out.

I should probably add two further points. The first is that I think the Iranians are trying to develop nuclear weapons because it seems to me an obviously sensible thing, from their point of view, for them to do. Further, I can see no other reason why they would have put large resources into developing a nuclear industry. The second is that I am not arguing that the U.S. should have attacked Iran. My own view is that U.S. foreign policy throughout my lifetime has been too aggressive, rather than not aggressive enough. My point is merely that even if we should have done it, we probably wouldn't have, and that current negotiations are much more likely to produce an illusion of progress that Obama can use to bolster his ratings than real progress.

I hope, however, that I am wrong.