Continuing Conflict

A relatively small but growing literature in economics examines conflictive activities where agents allocate their resource endowments between wealth production and appropriation. To date, their studies have employed a one period, static game theoretic framework. We propose a methodology to extend this literature to a dynamic setting, modeling continuous conflict over renewable natural resources between two rival groups. Investigating the system’s steady states and dynamics, we find two results of general interest. First, Hirshleifer’s “paradox of power” is self-correcting. Second, if productive activities cause damage to disputed resources, the introduction of a small amount of conflictive activity enhances social welfare.Conflict, Dynamics, Paradox of Power, Renewable Resources

Conflict and Renewable Resources

The economic literature on conflict employs a static game theoretic frame- work developed by Jack Hirshleifer. We extend this literature by explicitly introducing conflict dynamics into the model. Our specific application is based on two stylized facts. First, conflict often arises over scarce renew- able resources, and second those resources often lack well-defined and/or enforceable property rights. Our stylized model features two rival groups, each dependent on a single contested renewable resource. Each period, the groups allocate their members between resource harvesting and resource appropriation (or conflict) in order to maximize their income. This leads to a complex non-linear dynamic interaction between conflict, the two populations, and the resource. The system's steady states are identified and comparative statics are computed. As developed, the model relates most closely to conflict over renewable resources in primitive societies. The system's global dynamics are investigated in simulations calibrated for the historical society of Easter Island. The model's implications for contemporary lesser developed societies are examined.Conflict, Dynamics, Renewable Resources

Dynamic Winner-take-all Conflict

This paper develops a model of dynamic conflict featuring probabilistic winner- take-all outcomes and compares its behavior to a model in which combatants emerge with a share of the conflict spoils. While these two models generate the same behavior in a one-shot game, we find that in a repeated conflict setting the winner-take-all model generates richer dynamics than the dynamics generated by the share model. Differences include outcomes that illustrate the rise and fall of great powers, the endogenous extinction of combatants, and frequent changes in the relative dominance of combatants. The model's behavior is compared to real world military, business and political conflict outcomes.Anarchy, Fog of War, Paradox of Power, Winner-take-all conflict

Free trade and arms races: Some thoughts regarding EU-Russian trade

As NATO expands eastward, Russia has expressed growing concerns over what it sees as a threat to its national security. At the same time Russia is transitioning to a market economy, with the aim of becoming a free trade partner with the West. The question of concern to European nations is; how will Russia allocate the wealth it gains from freer trade with the west? Will the new found wealth make Russians feel more confident and secure, allowing for a reallocation of wealth towards consumption goods, or will the newly created wealth be allocated towards a new round of military build up? We examine these questions by modeling for the first time the effect of free trade between two potential political rivals, on their respective accumulation of weapons. Our model includes a rich setup in which utility maximization, the economics of trade and comparative advantage, production of weapons and consumption goods, depreciation of weapons stocks, technological spillover from production to national security, and the accumulation of capital are represented in an infinite horizon setting. The paper adopts a neoclassical two goods model of trade in which each actor specializes in producing the good of its comparative advantage and engages in trade. In the model, each country derives positive utility from consumption and its own stock of weapons. The impact of the foreign country`s weapons stock on the home country`s utility is negative (in the case of rivals). At each point in time, each actor chooses how to allocate its resources between the production of consumption goods and defense expenditures. Applying dynamic optimization, we find that whether free trade leads to a rise or a decline in each country`s stock of weapons relative to no trade depends on the relative marginal utilities of the consumption goods and weapons. The implications of these results to the trade and conflict debate are considere

Resource scarcity and conflict: An economic analysis

As time passes, renewable resource scarcities are becoming more common throughout the world. There is increasing evidence that these scarcities are a causal factor in civil unrest and violent conflict, especially in developing countries. We present a simple model of renewable resource dynamics, population dynamics and conflict. Conflict is triggered by per capita resource scarcity. We examine the role and nature of conflict on the bio-economic system. We find that conflict is Nature's way of protecting vital renewable resources from human exploitation. Conflict, as modelled, increases the death rate of the human population, damages the resource, and diverts resources away from harvesting the natural resource. These effects speed the return to a peaceful steady state, at the same time however if conflict results in resource destruction it may destabilise the system leading it towards collapse. On the policy front we find that increasing harvesting efficiency, fertility, and preference for the resource all increase system vulnerability to conflict. Policies directed at raising system carrying capacity, increasing resource growth rate increasing birth control all serve to stabilise the system and reduce its vulnerability to conflict

On conflict over natural resources

This paper considers a game theoretic framework of repeated conflict over natural resource extraction, in which the victory in each engagement is probabilistic and the winner takes all the extracted resource. Every period, each contesting group allocates its capabilities, or power, between resource extraction and fighting over the extracted amount. The probability of victory rises with fighting effort, but a weaker group can still win an encounter. The victorious group wins all of the extracted resources and converts them to power, and the game repeats. In one model, groups openly access the resource. In a variant of the model, the stronger group can access a larger part of the resource than its rival, while in a second variant of the model the advantage of the dominant group is made more decisive than in the first two models. Our models generate outcomes that mimic several aspects of real-world conflict, including full military mobilization, defeats in one or repeated battles, victories following defeats, changes in relative dominance, and surrender. We examine comparative dynamics with respect to changes in the resource attributes, resource extraction, initial power allocation, fighting capabilities, and power accumulation. The policy implications are evaluated, and future research avenues are discussed.Game theoretic model Dynamics Simulations Policy