Several influences molded me as a writer over the years: A fascination with classical history and mythology, a love of science fiction and fantasy, years of world travel laden with ample adventures of my own, and a deep sense of wonder about the systems of Nature, most particularly (though by no means exclusively) about the human sphere of Nature, fed by a highly analytical and imaginative mind and abundant sources on which to draw.
At around the age of 18 (in 1977 or 1978), I wrote a short psychedelic vignette called “River Palace” which was the first seed of what would later become A Conspiracy of Wizards. A couple of years later, while living in Berkeley, I started an unrelated novel in which crystalized talismans of the five elements of classical natural philosophy had magical properties that were amplified when brought together, an idea that found its way into A Conspiracy of Wizards.
Most of my 20s was dedicated to world travels and adventures and the keeping of journals laden with descriptions and contemplations. Many of the real-world, visceral descriptive passages from those journals found their way into A Conspiracy of Wizards. During this time I also read prolifically and broadly, trying to catch up on as many classics of literature and of more recent intellectual discovery as I possibly could.
One year into my career as a sociology grad student in Connecticut, having become an aficionado of Chaos Theory in the late 1980s and believing it to be a critical piece of the puzzle of the story of our existence, I wrote a vignette about Chaos and Order being the parents of the universe, and immediately knew that this would be the nucleus of the novel I had always dreamed of writing.
During my grad student career in Connecticut, I was working on my novel at the same time that I was soaking up the spectrum of social theory, designing my world and weaving bits and pieces of my gradually emerging synthesis of the social theoretical landscape into it and the story-line. I incorporated into the novel a variety of epistemological theories (including, for instance, Thomas Kuhn’s “The Structure of Scientific Revolutions,” most visibly in the scene of Algonion in the ice sphere), Marxist theory, microeconomic and game theory, and network analysis and epidemiology. I also incorporated my previously acquired knowledge of international relations and world history to create a more complex and in many ways “realistic” world than is found in most novels of any kind, let alone fantasy fiction. The geopolitics and geopolitical and military strategies found in the novel are, I think, particularly elaborate and faithful to the forms found in the real world.
Two years into my status as “All-But Dissertation,” not actually writing my dissertation, I left the program and my position as a college lecturer to work full time on my novel. In many ways, I realized, I had been in the Ph.D. program primarily to inform my novel. Before moving out west, I took a couple of months to do a car trip around New England and the Maritime Provinces of Canada, during which, while camping and hiking in beautiful Acadia National Park in Maine, I fully fleshed out the story of Cholumga (derived from “Chomo Lungma,” Tibetan for “Earth Mother” and the Tibetan name for Mount Everest), the giantess trapped in the hollow mountain. I did this in part by telling the story to a young girl and her mother who I ran into while hiking, as we sat on a bluff overlooking the gorgeous autumn colors. (Also from Acadia comes the imagery of Algonion arriving at the sea as he is escaping Lokewood.)
In late 1996, I moved to a cabin in the mountains of Northern New Mexico for a year (in Cabresto Canyon, between Questa and Red River, north of Taos) to write the first draft of the novel, simultaneously focusing my informal studies more on World Mythology and World History (both long-time interests of mine, along with International Relations), including studying Joseph Campbell’s analyses of mythological motifs. The multi-hued beauty of Northern New Mexico and the Four Corners region, around which I took frequent car-and-camping trips, filtered into the imagery of the novel. I then finished the millennium in Albuquerque, teaching and taking classes, working through some of the issues and challenges with my novel, developing it further, and developing other ideas as well (such as a series of vignettes about the institutionalization of time travel, including reunions of multiple selves across time, branching historical trajectories, and the colonization of the past). I began to submit excerpts of the novel to agents and publishers, trying to line up a publication deal, but without success.
While living in the cabin in the mountains of northern New Mexico, I used to wander into the forest and visualize various characters in particular locations dedicated to each, having conversations with them to flesh out who they were. It was a form of intentional, self-induced semi-hallucination, powerful enough that occasionally a character would “say” something that would surprise me! This was a technique for discovering each character’s own authenticity rather than populating my world with contrived characters with less of a life of their own.
I believe it was also while I was in New Mexico that I saw (on video tape borrowed from the Taos library, since I had no television reception in my cabin) a National Geographic special on the rain forest canopy ecosystem, the imagery of which inspired the imagery of Algonion’s largely airborne trek through Lokewood in search of the Loci imps, one of my descriptively favorite passages.
Also while in New Mexico, I further developed my sociological paradigm, focusing it more on Richard Dawkins’ “Meme Theory,” which provided a lynchpin to the synthesis I had been developing. This has since found its way into the novel, particularly in the Kindle e-book version, in my newly rewritten description of the Vaznallam mindscape and the fractal geometry of their mental representation of the Sadache cognitive landscape, which is the imagery presented in a series of expository essays I’ve written on the fractal geometry and evolutionary ecology of our shared human cognitive landscape (and, along with it, our social institutional and technological landscape).
In December of 1999, I set out for Mexico to find a spot in which to continue to work on the novel, living modestly off investments, which were doing well at the time. I ended up in Mazatlan, where I developed the routine of waking up before dawn to write from my balcony, watching the morning light spread over the city and the bay while I was writing. I stayed in Mazatlan for over two years, taking several car trips to various regions of Mexico while there, all of which also contributed something to the imagery of the novel. During that time I got married and toward the end of my time in Mazatlan finished the current hard copy version of the novel and began seeking unsuccessfully to publish it.
We moved up to the Denver area in the summer of 2002 (and had our wonderful daughter, Scheherazade, in 2003), and I embarked on a combination of teaching, law school, a run for the state legislature, public policy research and analysis, and a variety of civic engagement, not touching the novel other than to self-publish it in 2005. The combination of my failure to do anything to market the novel and my realization that I had not, in fact, finished refining it prior to publishing it, that I had not ironed out all of the rough spots, that I had not perfected my own vision of what the novel should be, culminated in my decision in the summer of 2013 to do one more set of revisions and refinements, and to republish it as an e-book.
The ebook version of the novel is now available, via the links provided at the top and bottom of this narrative.
(This essay is an elaboration of Collective Action (and Time Horizon) Problems).
Imagine that I offered each person in a group the following deal: You can agree to give me $30, and in return I’ll give $10 to each and every person in the group, including you. I’ll give the $10 to everyone, whether they paid $30 or not, for each person that does pay $30.
Each person is faced with an offer to pay $30 dollars in return for, to him or her individually, $10, a bad deal for that individual (a loss of $20). But since everyone else in the group also each gets $10, for any group with a membership of more than three people, it is a bigger return to the group than cost to the group. If there are 10 people in the group, and everyone makes the deal, they each pay $30 and each get $100 in return, for a net gain of $70. However, if one doesn’t pay, he or she gets $90 outright (9 people taking the deal times $10 to each person in the group) while each of the others only get a net gain of $60 ($90 minus the $30 paid in). The individual incentive is not to pay in, even though everyone is better off the more people who do, with everyone coming out ahead if 3 or more people pay in. Those who don’t pay in, however, always do better than those who do (the “free rider problem”).
This dynamic is a major underlying force in the generation of social institutions, which to a large degree exist to overcome this collective action problem. There are many scenarios woven throughout our collective existence in which people benefit from some form of cooperation (even those forms that establish the rules for competition, such as the enforcement of property rights in service to the functioning of markets), but are tempted by individual incentives to cheat or fail to act cooperatively. Our laws, our contracts, our governments, our social norms, our ideologies, all are laden with mechanisms that have evolved with the purpose of creating mutual commitment mechanisms, enforced either externally by social institutions or internally to one’s own psychological make-up. Combined, they form social institutional technologies which are robust sets of memes self-replicating and spreading throughout our shared cognitive landscape (see the essays linked to in the first box at Catalogue of Selected Posts).
It has always been a dynamic at the heart of intertribal and international relations, in which sovereign societies must strategically interact in a world with limited international legal enforcement mechanisms. With increasing political, economic and cultural globalization, and information, communication and transportation technologies make the world ever smaller and more tightly integrated, examining these dynamics is one critical component of understanding the shared geopolitical landscape in which we live.
“The War of the Woods”:
Imagine that long ago, two countries, Apestonia and Pulgalandia, had a forest on their border. Both countries desperately needed the wood in the forest, because it was both their primary building material and their fuel. Each country was faced with the choice of either dividing the forest evenly, or attacking the other and trying to get more of the forest for themself.
There are 1000 acres of forest between the two countries. If the two countries agree to draw their border right through the middle of it, they can each have 500 acres of forest, which they both desperately need.
But if one attacks quickly while the other one is planning on sharing the forest evenly (and so isn’t prepared for war), the one that attacks will capture 700 acres of the forest, 300 acres will be burnt or destroyed during the fighting, and the other will get zero acres. Since they are militarily evenly matched, if they both attack each other at the same time, 400 acres of forest will be destroyed in the fighting, and they’ll each end up with 300 acres of forest.
Here’s a table that summarizes these choices and outcomes:Pulgalandia Apestonia Cooperate(don’t attack) Don’t Cooperate(attack) Cooperate
(don’t attack) Apestonia: 500 Acres
Pulgalandia: 500 Acres Apestonia: 0 Acres
Pulgalandia: 700 Acres Don’t Cooperate
(attack) Apestonia: 700 Acres
Pulgalandia: 0 Acres Apestonia: 300 Acres
Pulgalandia: 300 Acres
Each country faces the following logic: “We don’t know what the other country will do. If they decide to cooperate (not attack first), we will get 500 acres if we also cooperate, but 700 acres if we don’t (if we attack unprovoked). Therefore, if they cooperate, we are better off not cooperating (attacking). If they decide not to cooperate (to attack), then we will get zero acres if we cooperate (don’t attack), but 300 acres if we don’t (if we attack). Therefore, no matter what the other country does, we are better off attacking.”
However, if both countries follow that logic, they each end up with 300 acres, though if they had cooperated and split the forest, they would have each ended up with 500 acres. So, while each country has an incentive to attack, if they can find a way to commit one another to cooperation, they both benefit.
So, even though they have a conflict over the forest, they have a shared interest in finding a way to commit one another to cooperating for mutual benefit. This is often the case, with war being costly in blood and treasure, and peaceful coexistence (and even mutually beneficial exchange) being far more conducive to general prosperity.
Historically, real tribes and countries have faced this challenge. Some have said, “Okay, let’s agree to cooperate, and to make sure no one cheats, we’ll exchange hostages.” And then each country would send an important member of their own society (often the ruler’s daughter to be raised by the other ruler as his or her own) to go live with the other society, so that if either cheats, that hostage can be killed in retaliation. Later, countries sent the children of royalty to marry the children of royalty in other countries, sort of as “permanent hostages,” but also to bind the countries together so that they can act more cooperatively.
In the modern world, we’ve developed a much more elaborate system of international diplomacy, with embassies in each other’s countries, and treaties, and international organizations (like the United Nations). The European Union, whose roots go back to post-WWII efforts to create economic ties that would diminish the chances of resumed warfare, is perhaps the most advanced example of emerging international political economic consolidation
Not just internationally, but within nations, overcoming this collective action problem is a big part of why we’ve created many of the social institutions we’ve created. Our Constitution, our laws, even our religions, have developed in many ways to help make it easier for people to commit one another to mutually beneficial actions even when they have individual incentives to cheat or act in non-cooperative ways.
With modern technologies, modern weapons (such as nuclear weapons), modern transportation and communication technologies, an increasingly global economy, increasingly global environmental and natural resource issues, all nations in the world face many collective action problems. Our increasing political globalization is a complex tapestry of conflict and cooperation woven within this underlying logic.
So far, we’ve assumed that the countries were equally matched, and looked at the cost-benefit analysis of each when considering whether to attack the other or to live in peace. But what if they weren’t evenly matched? What if one was militarily stronger than the other? How would that change things?
If Apestonia were more powerful than Pulgalandia, then Apestonia would capture more forest than Pulgalandia would if the two went to war. If Apestonia were to attack first, perhaps it would capture the whole forest against the weaker Pulgalandia, losing only a small portion (let’s say a tenth) in battle. This outcome can be seen in the lower-left square of the two-by-two table, in which Apestonia attacks first and captures 900 acres, while Pulgalandia ends up with zero.
Conversely, if Pulgalandia attacks first, it will gain the advantage of surprise, but will still be facing a superior force, and might manage to capture and control 300 acres against Apestonia’s 500, 200 being lost to the destruction of war. This outcome is summarized in the upper-right square.Pulgalandia Apestonia Cooperate(don’t attack) Don’t Cooperate (attack) Cooperate
(don’t attack) Apestonia: 800 Acres
Pulgalandia: 200 Acres Apestonia: 500 Acres
Pulgalandia: 300 Acres Don’t Cooperate
(attack) Apestonia: 900 Acres
Pulgalandia: 0 Acres Apestonia: 600 Acres
Pulgalandia: 100 Acres
If they both attack each other at the same time, more forest will be lost to the destruction of battle, and neither will have the benefit of surprise, but Apestonia will still come out ahead. This is reflected in the lower-right square.
Because of the difference in power, when they negotiate a peace in which neither attacks, Apestonia can demand more of the forest than Pulgalandia. This is reflected in the upper-left square.
The logic that the two countries face is still similar to the logic that they faced when equally powerful. Neither knows what the other will do. Apestonia says to itself, “If Pulgalandia cooperates (doesn’t attack), we can get 800 acres for also cooperating (not attacking), or 900 acres for attacking. If Pulgalandia doesn’t attack, we are better off attacking. If Pulgalandia does attack, we can get 500 acres for not attacking first (only reacting to their attack), and 600 for attacking first, so, again, we are better off attacking. No matter what Pulgalandia does, we’re better off attacking.
Similarly, Pulgalandia is better off attacking no matter what Apestonia do. They say to themselves, “If Apestonia doesn’t attack first, we get 200 acres for also not attacking, but 300 for attacking, and if Apestonia does attack first, we get zero acres for not having attacked at the same time but 100 acres for having attacked at the same time. Either way, we’re better off attacking.”
But they both know this, and both know that they’d be better off not attacking one another. So, just as before, they need to invest in some way of committing one another to cooperation.
But the pay-offs can look different as well. It may be that, while the weaker Pulgalandia has incentives to attack no matter what the stronger Apestonia does, Apestonia gets a stronger benefit from cooperation. In the chart below, Pulgalandia still is better off attacking no matter what Apestonia does, and Apestonia, knowing that, knows it has to attack to get 550 rather than 500 acres. This is reflected in the table below:Pulgalandia Apestonia Cooperate(don’t attack) Don’t Cooperate (attack) Cooperate
(don’t attack) Apestonia: 800 Acres
Pulgalandia: 200 Acres Apestonia: 500 Acres
Pulgalandia: 250 Acres Don’t Cooperate
(attack) Apestonia: 650 Acres
Pulgalandia: 100 Acres Apestonia: 550 Acres
Pulgalandia: 200 Acres
But the most Pulgalandia can possibly get is 250 acres, if they attack before Apestonia does. Apestonia can just say, “look, we’ll give you 300 acres, 50 more than you can possibly get by attacking us. We’ll keep 700, which is more than we can get in any other way. If you attack, even while we are planning on cooperating with you, you lose 50 acres. You have no reason to attack, and we’re both better off than we can otherwise be.”
This is reflected in the table below, in which neither country has any incentive to do anything other than cooperate:Pulgalandia Apestonia Cooperate(don’t attack) Don’t Cooperate (attack) Cooperate
(don’t attack) Apestonia: 700 Acres
Pulgalandia: 300 Acres Apestonia: 500 Acres
Pulgalandia: 250 Acres Don’t Cooperate
(attack) Apestonia: 650 Acres
Pulgalandia: 100 Acres Apestonia: 550 Acres
Pulgalandia: 200 Acres
This is an illustration of how power is exercised among nations (or factions within a nation), even without having to exert any military force at all to do it. Nations know their relative power to one another, and when they negotiate treaties and deals they negotiate agreements that favor the more powerful. When the United States was formed, the more powerful (populous) states made sure that their power was reflected in the new government (by having representatives in Congress proportional to their population). When the United Nations charter was drafted, the most powerful nations insisted on forming a “security council,” that had far more power over the organization than other nations did.
Weak nations sometimes have the power of threatening to create problems for stronger nations, and thus get concessions to keep them calm. But nations also sometimes have leaders or governments that cease to act rationally, like the current government of North Korea seems to not be acting rationally.
Of course, if, in the end, the United States, worried about an irrational nuclear armed North Korea, gives them large amounts of aid to keep them from causing problems, then it will have turned out that North Korea’s “craziness” was pretty smart after all…. Strategies that “trump” rational considerations can be very rational strategies, including various ways of binding oneself to a limited range of options in order to increase one’s own bargaining power, or behaving in ways which make an opponent question one’s rationality in order to make them more accommodating for fear of erratic responses.
The scenarios presented above are highly simplified, leaving out many factors, such as uncertainty (real actors in such situations don’t know what the exact outcomes of various combinations of choices will be), more complexity in available options (not just binary choices), more interacting actors (not just two), more conflated issues being bargained over (not just a single resource), more costs and benefits to be considered (not just the amount of that single resource gained or lost), factional conflict across levels (different interest groups and political parties vying for different outcomes due to differing material interests and political ideological orientations), less centralized decision-making (not a single ruler making unlimited autocratic decisions, but rather in various ways collective decision-making processes impinging on the negotiations between actors constituted in that way), and various intrusions of emotional and irrational considerations, that even rational actors have to take into account.
But the complexity of the real world does not mean that abstraction from it is not a helpful tool in understanding underlying dynamics. Rather, it is a way of isolating individual dimensions of those underlying dynamics, gradually adding in enough of the complexity to begin to capture a deeper and subtler understanding of how our social institutional landscape really functions.
Social institutional innovation, like technological innovation, has an evolutionary quality to it: New instruments fumblingly addressing new challenges or opportunities sometimes grow up into highly elaborate systems that take on a life of their own. Market economies in general are an archetypical example of this phenomenon: From places where people came together to exchange their wares, markets have evolved into highly complex and robust networks of global transactions, implicated in a velocity of wealth production and transmission that would have boggled the minds of ancient merchants. Therefore, as we stand on the threshold of inventing new kinds of market instruments which trade in artifacts of administrative regulation, even those of us anchored to the dusty tomes of law and economics might benefit from stretching our imaginations a bit, and contemplating what may lie beyond the horizon.
For the purposes of this fanciful conversation, let’s refer to all present and future market instruments that trade in artifacts of political regulation or aspiration as Political Market Instruments (PMIs). The question posed in this essay, therefore, is: If the challenges involved in current tradable regulatory instruments are increasingly surmounted, and the range of PMIs is extended into other realms, such that the trading of such instruments becomes commonplace, what might such markets evolve into?
In order to explore this question, we need to consider what kinds of goods or services PMIs would commodify. Current and recent uses, including global warming abatement, renewable energy credits, and pollution reduction, are examples of a broader category of challenges called “collective action problems,” which have been discussed extensively, in various forms, in the economic, social scientific, and even mathematical literature (see . Global warming, for instance, invokes the need to create viable international accords through which a preferable global energy and GHG emissions regime can be developed, implemented, and enforced. The challenge emanates from the fact that nations individually bear the costs of contributing to such a regime, but collectively reap the benefits. Simplifying the matter somewhat for this initial discussion, all have an incentive to arrive at an optimal agreement and see it enforced, though all also have an incentive for not complying with the agreement to the extent that they can get away with non-compliance.
Here’s a simple thought experiment which illustrates the nature of collective action problems well enough for the average high school social studies student to understand. Imagine that I make the following offer to a group of thirty people, of which you are a member: For each of you that chooses to pay me $10, I will give each and every person in the group (including you) $1, regardless of whether those other members of the group chose to pay the $10 or not. To avoid discussing any complexities at this point, let’s say that the decision is made in secret, no member of the group ever knows what any other individual member chose to do, and all members agree that their only goal in this exercise is to maximize their own individual wealth. If each individual acts in his or her own rational self-interest, since accepting the offer costs him or her $9, no one would choose to do so. However, if everyone does accept it, each person is made $20 richer. No matter how many people accept or reject the offer, those who chose not to take it will always be better off than those who chose to take it. In other words, rationally doing what best maximizes one’s own individual wealth (in this scenario) leads to an outcome in which everyone does worse than they would have done had they been able to enforce a cooperative agreement.
Real world collective action problems are generally much more complex, in which, just as in market exchanges, there are a variety of comparative advantages (differing concessions or contributions which each is best positioned to make, such as Brazilians being better positioned to offer deforestation reduction, and Americans better positioned to offer industrial CO2 emissions reductions). And they occur on multiple overlapping and nested levels and regarding multiple issues, with myriad collective action problems coexisting intranationally, internationally (among nations as the actors), and transnationally (across national boundaries by non-state actors).
Social institutions arise primarily in response to such collective action problems (and, relatedly, in response to time horizon problems resulting from the devaluation of future consequences leading to insufficient foresight in decision-making processes), and utilize four distinct modalities in order to align individual to collective (and immediate to long-term) interests: Hierarchies, markets, norms, and ideologies. Hierarchies are systems of legitimate authority relying on formally codified and enforced rules. Markets are decentralized systems of multilateral exchange, usually facilitated by some form of currency. Norms are informal rules mutually enforced through decentralized social approval and disapproval. And ideologies are internalized beliefs and values enforced through self-policing and auto-sanctioned by cognitive dissonance (in the form of self-inflicted feelings of guilt or shame). Individual social institutions generally are comprised of some or all of these modalities, usually in combination, developing interdependently both within and across individual social institutions.
PMIs are essentially a hybrid institutional mechanism, comprised primarily of the hierarchical element necessary to regulatory regimes, and the market element which facilitates an efficient allocation of resources and burdens. Governments or international commissions imbue PMIs with their value by creating scarcity (in the case of compliance allowances) or subsidized demand (in the case of off-sets or RECs). The benefit of creating an accounting and exchange mechanism for political concessions and accommodations is the same as creating one for the exchange of goods and services: Like money, it frees actors involved in an exchange from what Edgeworth called “a double coincidence of wants,” that is, the necessity of two actors each having something the other wants more than they want what they themselves have. And, like money, it permits multilateral, geographically and temporally decentralized exchanges among a potentially unlimited number of actors, facilitating the achievement of collectively beneficial arrangements with greatly reduced transaction costs. PMIs are a mechanism for duplicating this innovation in the context of political rather than economic exchange.
Differences among nations, among their individual conditions and priorities, provide opportunities to make political exchanges which help both to facilitate such agreements, and to distribute responsibilities and benefits in accord with each nation’s particular circumstances. The expanded PMI model I am contemplating explores both the potential and the limitations of exchanging political concessions among multiple parties to arrive at mutually beneficial outcomes.
The simplest illustration of the PMI model involves three parties negotiating over three issues. Country A wants a concession from Country C, but has nothing to offer Country C in return. Country B wants a concession from Country A, but has nothing to offer Country A in return. And Country C wants a concession from Country B, but has nothing to offer Country B in return. No bilateral agreement can be arrived at among any combination of these three nations. But if it is worth it to A to make the concession to B in return for the concession from C, to B to make the concession to C in return for the concession from A, and to C to make the concession to A in return for the concession from B, then the three of them can negotiate a tri-lateral exchange that satisfies all of their needs. (In this case, the transaction costs are manageable, and PMIs are not required.)
Similarly, it may be possible at times for numerous nations to arrive at an agreement through such “circular exchange,” under circumstances in which no subset of that group could have arrived at any mutually beneficial agreement. At its most complex (and traditionally most difficult to accomplish, as discussed below), a PMI model aspires to facilitate a tangled web of multilateral exchanges of concessions of varying magnitude implicating numerous unrelated issues, such that the removal of any party to the negotiation or any concession being made would unravel the entire agreement. This frees the parties from the necessity of having bilaterally reciprocal interests, and permits the kind of decentralized, multilateral pattern of exchange typified by markets.
The basic premise of the PMI model is that the more parties and issues that can be conflated in a single negotiation, the more optimal the agreements that can be arrived at through a multilateral exchange of concessions on those issues among those parties. The logical conclusion would be that, therefore, conflating all issues and all parties into a single negotiation leads to the most optimal agreement possible. The limiting factor has been that the larger the number of negotiating parties and issues on the table, the higher the transaction costs of coming to a multilateral, multi-issue agreement. The PMI model, therefore, is currently useful to the extent that it can reduce transaction costs enough that the benefits accrued from the arrangement arrived at exceed the transaction costs spent to arrive at it, and to the extent that there is no other non-PMI-facilitated deal that any subset of the parties could have arrived at which would have given them a better benefit-to-transaction-cost ratio.
This is still an onerous obstacle. However, just as various innovations developed historically to reduce the transaction costs involved in economic exchange (money being the most critical one), the PMI model is not immune to future innovations which might reduce the transaction costs involved, and thus increase the range of its applicability. Such innovation begins with a precise analysis of the anatomy of the transaction costs imposed by political (or contractual) negotiations. The least intractable transaction costs involved in multilateral negotiations are coordination costs: Getting the parties to the table, so to speak. Coordination costs are most salient early in such negotiations, and have been greatly reduced, in international relations, by the proliferation of international institutions and treaties.
Bargaining costs, which involve determining the exact nature of the agreement and the precise division of costs and benefits, are somewhat more significant. Bargaining costs are incurred during the actual negotiation process, when the parties involved try to exchange their way to a multilateral agreement that is satisfactory to each and every one of them. At this stage, the negotiations most closely resemble a traditional bartering market, with all parties both sellers and buyers bartering around a single stall.
Finally, and sometimes most intractably, multi-party agreements are beset by defection (or enforcement) costs. Defection costs are those costs incurred by monitoring and enforcing the agreements arrived at during the negotiations. Improving the salience of the multi-party negotiations, and extending its range of applicability, necessarily involves finding ways to reduce all of the aforementioned transaction costs implicated by it.
The potential benefits of pursuing a PMI approach are myriad. As more activities or concessions are brought into a single market, coordination and bargaining costs are almost eliminated, and even enforcement costs are greatly reduced by creating a much larger shared investment in the integrity of the system. To the extent that successful multilateral political exchange agreements are implemented through it, it increases international interdependence, produces oversight commissions with enough authority to ensure the value of the PMIs, and thus provides an incremental back door into some limited though significant degree of global federalism. To the extent that political market solutions can be implemented, they have strong reverberating effects throughout our integrated social institutional and technological subsystems, creating new markets and new entrepreneurial opportunities, and increasing the ideological and normative association of the development and distribution of sustainable energy technologies with political and economic opportunity in general.
In fact, the development of commissions with the authority to ensure the value of PMIs is both a major benefit and a major challenge. Contractual arrangements within jurisdictions are made possible by a legal structure under which they can be enforced. International agreements are made difficult by the paucity of such enforcement mechanisms on the global level. But international commerce, more than perhaps any other historical force, has integrated sovereign nations into a single interdependent global system. Commodifying political exchange requires more oversight than commercial exchange, but also provides more incentives to create it than traditional international negotiations do, by creating more, and more distributed, opportunities to profit from international political exchange.
Despite the potential for PMIs to improve international and transnational cooperation, they would face all of the challenges already encountered by existing regulatory instruments, and to a far greater extent. The determination of the relative value of seemingly unrelated political concessions would be difficult, but fully established markets are particularly good at accomplishing that (their respective market values would determine their exchange rates). Ensuring the integrity of the instruments (preventing leakage, ensuring additionality, etc.) would grow in magnitude of difficulty as the markets become more multifaceted and extensive (though that could also reduce the problem in the long run by bringing more measurements of more changes in more places into the system). The transaction costs involved in every incremental step in establishing such a market will be enormous.
One benefit of such a comprehensive system is that the universal scope and coverage essentially eliminates the problem of leakage, since there is nowhere for any abated public bad to leak to. Just as the concern about leakage has pushed focus on off-set markets from individual projects to sectoral and nation- or province-wide abatements, it would be one force pushing the expansion of PMI markets in general.
Another obstacle for PMIs, already contemplated in regards to existing instruments, is the perverse incentives they can create. If, for instance, we incorporate deforestation avoidance into international carbon markets, then their value is a creature of past deforestation. When a market values the cessation or reduction of the rate of a destructive activity, it implicitly retroactively values having initially increased the rate of that activity in order to necessitate its reduction. In the context of enduring markets for the abatement of past destructive activity, such perverse incentives pose a serious challenge that must be decisively addressed. Many things we might want to incorporate into future and more comprehensive PMI markets -such as improvement in human rights, military de-escalation, and reduced trade barriers, to name a few- would all have current positive value as the result of the negative value of past or continuing actions and policies. Designing mechanisms to prevent the incentive to create problems in order to trade in their correction would be a fundamental challenge for establishing authentic value-generating PMI markets.
It’s worth noting that in our current international political bartering system, this problem already exists. In the lead-up to international treaty negotiations, countries frequently amp up certain misbehaviors in order to have more to trade with. The increased robustness of PMI markets would only increase the robustness of the problem. And, presumably, at the time of establishment of any new abatement PMI, the baseline set for reduction targets would precede any amping up that may have occurred in anticipation of the creation of such markets.
Stretching our imaginations to the utmost, PMIs could trade in a vast array of political goods. As stated above, there are many public bads that we all have a shared interest in abating: human rights violations, military build-ups, trade barriers, and domestic criminal activities with international consequences (e.g., drug cartels), to name a few. And there are many public goods or broadly shared aspirations that there is either already a shared interest in encouraging, or a potential for some degree of international consensus: improved worker conditions and salaries; more political, economic, and cultural freedom; more open borders; and stronger guarantees of protection for foreign nationals abroad, to name a few. In each case, measures would have to be created (such as a “human rights abuse index”); a target would have to be set for abatement markets (either by reference to a baseline, or by some other aspirational standard) and a system for ensuring the integrity of instruments measuring incremental gains in public goods would have to be established; and monitoring, reporting, and verification systems would have to be in place. As such markets proliferate, the ability to identify and implement new areas amenable to new PMIs would continue to emerge.
Though the notion of trading in human rights abuse abatement, or organized criminal activity abatement, may seem odd, and could certainly raise some moral hackles, it is essentially the same idea as trading in GHG emissions abatement: creating markets for the diminution of some undesirable activity. Given the fact that the obstacles are daunting enough for GHG emissions abatement markets, and that the problems facing them grow exponentially as the scope and coverage is expanded to more issues and parties, the path from the present to this possible future would be a long and tortuous one, with many seemingly insurmountable challenges and as-yet-unforeseen technical innovations defining the way. Whether such a future will ever come to pass is far from certain, but that some future which currently appears equally improbable will come to pass seems almost inevitable (assuming continued human survival).
Such speculation may seem to be an unwarranted flight of fancy from our current vantage point, just as to the ancient Greeks, not unfamiliar with the wonders of the agora, contemplation of the exotic financial instruments being traded today would have appeared equally untethered from reality. The preceding discussion is not intended as a blueprint of how to implement an imminently practicable policy instrument, but rather as an added perspective regarding how to contextualize current innovations in terms of potential long-term historical significance. The question isn’t whether current institutions will evolve to surmount obstacles seemingly insurmountable today, but rather which institutions and in what ways. The lathe of trial and error which will produce those innovations is more productive when we experiment with an eye to future as well as present possibilities. I believe that in a comparison between taxes-and-subsidies and tradable instruments as means for internalizing externalities (specifically carbon taxes and carbon cap-and-trade regulation), while both should be used, each in circumstances most appropriate for it, a less obvious (and perhaps still very slight) added weight needs to be accorded to tradable instruments, due to their dramatic long-term potential for facilitating mutually beneficial cooperation, particularly in the Hobbesian paradise of international relations.
1See, e.g., John Von Neumann and Oskar Morgenstern, Theory of Games and Economic Behavior (Princeton University Press 1944); John Nash, The Bargaining Problem, 18 Econometrica 155 (1950); Garrett Hardin, The Tragedy of the Commons, 162 Science 1243 (1968); and Mancur Olson, The Logic of Collective Action (Harvard University Press 1965)
2See, e.g., Kenneth Boulding, The Economics of the Coming Spaceship Earth, in Environmental Quality in a Growing Economy (Henry Jarrett ed., 1966).
3See, e.g., Garrett Hardin, The Tragedy of the Commons, 162 Science 1243 (1968); and Mancur Olson, The Logic of Collective Action (Harvard University Press 1965)
4I utilized this illustration as a high school social studies teacher, using classroom currency points.
5The actual results in my classroom experiment varied considerably, though there were always some students who accepted the deal and some who rejected it.
6See, e.g., Robert Axelrod, An Evolutionary Approach to Norms, 80 American Political Science Review 1095 (1986); and Elinor Ostrom, Governing the Commons: The Evolution of Institutions for Collective Action (Cambridge University Press 1990).
7Steve Harvey, Institutionalizing the Production of Supranational Public Goods: The Shifting Locus of Interest Group Lobbying in Europe (August 1994) (unpublished paper presented at the annual meetings of the American Sociological Association in Los Angeles, CA).
8F.Y. Edgeworth, Mathematical Physics, (Kegan Paul 1881).
9This is precisely what the famous Coase Theorem postulates. See Ronald H. Coase, The Problem of Social Costs, 3 J.L. & Econ. 1 (1960).
10See Douglas D. Heckathorn and Stephen M. Maser, Bargaining and the Source of Transaction Costs: The Case of Government Regulation, 3 J.L. Econ. & Org. 69 (1987).
13Admittedly, such discussions quickly run into the issue of cultural relativism v. universal human (and non-human) rights, and the related issue of “imperialism” or hegemony v. cultural and political self-determination, but this issue is implicit in all discussions of international law and international standards of conduct.
Which party is really committed to fiscal responsibility?The debate over the proposal by President Obama’s blue-ribbon commission on how to cut the deficit is revealing of something most rational people of goodwill already knew: Reason has fled the Republican Party completely, and a combination of fanatical ideology and rampant hypocrisy is all that now defines it. Though Republicans made their recent electoral gains by pretending to be responsible fiscal conservatives, the Republican rank-and-file is, ironically, less willing than Democrats to support the commission’s proposals, which rely mostly on spending cuts and secondarily on tax hikes, due to their ideological refusal to acknowledge that fiscal responsibility includes any responsibility to actually pay for a functioning government (I’ve been unable to find the poll; I believe I saw it on The Chris Mathews Show today, 12/4/10).
Secrecy in International Diplmacy is a Vital Ingredient.There are many situations in which shedding some sunshine on political maneuvers that have been hidden from public view serves the public interest, but, as is so often the case, revealing all secrets is not a universal and absolute good. JFK negotiated a peaceful end to The Cuban Missile Crisis in part by making a secret promise to remove American missiles (equally threatening to Russia as Cuban missiles were to America) from Turkish soil. The nuances, subtleties, and practicalities of international negotiations sometimes require a level of candor among our agents than complete and universal transparency allows. The traditional press, though always (for the last half-century or so, at least) far more inclined toward public disclosure than toward helping government keep secrets, has exercised a bit of self-restraint when a good case could be made for the maintenance of some secrets in service to the public interest. Some are offended by such a notion, but I argue that such a reduction of all things to plebiscite would be crippling to international relations. We formed a representative democracy for a reason; their are functions that require agents to be able to act with some latitude on behalf of their principal, and if we strip all of our agents of all such latitude, we will collectively suffer for it. The difficult challenge of holding our agents accountable to our interests, while empowering them to act with some independent (and even occasionally secretive) latitude, is not a trivial one, and errors will be made of both too much and too little public vigilance, too much and too little government empowerment and authorization. But the worst error almost always is the embrace of an extreme and inflexible absolute rather than some acknowledgement of the demands of nuance and subtlety to strike a well-reasoned balance.
While the decentralization of information production and access is, overall, a very powerful tool for human progress, it also poses some serious challenges to our collective welfare on a variety of fronts. One such front is reliability; a great deal of very unreliable information flows very rapidly along virtual networks. Another front involves striking the balance between complete public transparency and some enclaves of confidentiality, a challenge which involves dimensions other than international diplomacy (e.g., decreased confidentiality of personal information of various kinds is another, very different, dimension of this same problem). While some might make a bright line distinction between “public” and “private” information, the more useful distinction is between productive and counterproductive secrecy.