Friday, November 08, 2013

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.


At 6:51 AM, November 09, 2013, Blogger Fred Mangels said...

I agree that Iran has every reason to want to develop nuclear weapons, especially considering all the threats they've received from us over the years.

Problem is, the consensus among nearly all intelligence agencies- Israel being a possible exception- is they abandoned their nuclear weapons program over ten years ago.
They've said from the beginning of this recent flare up they want to develop nuclear power, not weapons.

That the mainstream media generally continues to ignore those intelligence assessments and Iran's claims of wanting peaceful nuclear power is rather convincing to me that Iran is telling the truth and that we're being fed a pack of lies by the War Party.

At 7:45 AM, November 09, 2013, Anonymous Handle said...

Fred Mangels is probably referring to the infamous 'leaked' 2007 Iran-NIE, the judgments in which were not shared by any other country at the time (neither ally nor neutral nor adversary, e.g. Russia) and which have been conclusively demonstrated as false in every subsequent US produced Iran NIE.

Iran has one of the largest reserves of clean and cheap natural gas in the world. Natural gas is easy to pipeline though hard to ship overseas, lowest of emissions of any fossil fuel, can provide excellent on-demand base-load and peak-load power, and requires the lowest capital expenditure per electrical-plant capacity. Even in the event of catastrophes, gas-events are relatively much safer than other critical failures in other kinds of plants.

It can also be used directly to produce hydrogen (steam cracking), which is the major input to many key and valuable chemical industries such refining, and, importantly, the production of fixed-nitrogen for fertilizer and explosives.

No rational businessman or policy-maker, in any other country, would use any other fuel at all if they had the kind of natural gas wealth that Iran has. Indeed, other regional gas power have no need for nuclear energy.

Their argument about the need for nuclear energy is therefore an obvious sham and the only people who believe it are motivated by an urge to avoid the problem of a nuclear-armed Iran by simply ignoring reality.

Furthermore, even if you buy Iran's arguments (or it's secondary argument that it has a right to make its own reactors for purposes of research and for creating medical isotopes - something even the US doesn't do because we get them from Canada), then we've still got another problem.

Because there are many types of Uranium-burning reactors, light vs. heavy-water, etc.

Ever weaponizable concentrations of Uranium-235 are not feasible to put on a ballistic missile warhead, but that's what Plutonium is most useful for.

So Iran could build reactors that are capable of making Plutonium as a by-product of electricity generation, or they could build reactors that could not be so used.

Previous negotiations have offered the Iranians the dropping of sanctions in exchange for an agreement never to build a plutonium-capable reactor. But they have been absolutely insistent on contracting with the Russians to build only Plutonium-capable reactors. Someone has to be willfully blind to ignore the message of implication of this fact.

So, in short, we have the Iranians, under tremendous international, economic and political pressure, continuing to enrich and stockpile as much Uranium as possible, building plutonium-making reactors, and refusing to budge on anything.

We also have dozen of other IEs (except that infamous outlier that was modified and leaked for political reasons), from the US and many other countries, that all say Iran is working feverishly on being able to make an plutonium warhead Atomic-BM, getting as far up the chain as possible so that 'final implementation and testing' could be done within months of the Ayatollah's order.

And even with all this, even if it were true that the Iranians have no current intention of making nuclear weapons, surely their efforts cannot be reasonably interpreted in any other way than to say they are certainly working hard to preserve an option to quickly become a nuclear-power in quick time, should they ever decide they want to do so in the future.

Making your country indefinitely 'a few months away from being a nuclear power' is not that different from actually being a nuclear power, with all the geopolitical consequences that go along with it. China, for example, knows that Japan maintains large plutonium stockpiles and preserves just this capability should it's confidence in the US umbrella ever waver in the face of a looming conflict with the Chinese.

So, in summary, let's not fool ourselves about any of this. I predict that the Iranians get their nukes within a decade.

At 5:25 PM, November 09, 2013, Blogger Power Child said...


OT here, but earlier you wrote about Obama's campaign website working so much better than Apparently, Obama has addressed that very topic. David Henderson over at Econlog reports.

At 12:56 AM, November 10, 2013, Blogger Joseph said...

There is a strong possibility that they're pretending to have nuclear ambitions in order to extract concessions in return for slowing down the development. So far, it's been working.

At 7:09 AM, November 10, 2013, Blogger Nick Zbinden said...

Do you know about Bruce Bueno De Mesquita argument why Iran will probebly not actually develop a nuke?

At 2:17 PM, November 10, 2013, Anonymous Anonymous said...

1) you forget that foreign policy is not exactly the choice of one man. the people in the state department and DoD also contribute to foreign policy, especially the kind of advice and information which the president sees. my point here is that while the president may indeed only look at what the weekly polls say, the career foreign policy people have other incentives. this could be making a name for themselves by implementing and executing a long term foreign policy which does pay off.

2) presidents are NOT driven purely by the weekly polling numbers. often presidents have a world view or philosophy for foreign affairs they want to implement because they think it will be a good thing for the world (in economics we call this other regarding social preferences). so for example Bush wanted to spread democracy through out the middle east because he thought that oppressive middle eastern regimes were the root of unrest and resentment which eventually lead to terrorism. think of weekly polling not as the main objective but rather as a constraint on how far the president may go.

3) you may be surprised, but foreign policy is not a really big concern for voters. the biggest concern for voters is inflation, unemployment and disposable income.

At 9:04 AM, November 11, 2013, Blogger Nancy Lebovitz said...

More general question: What do you think of sanctions? If they're enforced by governments, they're definitely an example of restricting free trade.


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