9/11 for Our New Arrivals

This fall marks the arrival of the Class of 2024 on college campuses. This is the first cohort in which most members were born after the attacks of 9/11. A strange milestone. To honor the memory of those who died, and to help inform young adults of the events of that day, Keith Hennessey has crafted a study guide, available here. Keith was working on the Hill at that time and acknowledges that the passengers of Flight 93 may have saved his life. I had the good fortune of meeting Keith a few years later when my time at the Council of Economic Advisers overlapped with his time at the National Economic Council.

9/11 + 6

On a day like this, we should not only remember but attempt to relive the events--not by watching abbreviated video clips or listening to "officials," but by understanding what it was like on that day from the people who were there.

I have occasionally returned to this website, which has a number of first person accounts of what it was like to be in New York six years ago today. The two stories on this page are interesting and worth another reading.

The Counterinsurgency 411

Former Marine Captain Nathaniel Fick gives us an ominous welcome in Sunday's Washington Post Outlook:

Welcome to the paradoxical world of counterinsurgency warfare -- the kind of war you win by not shooting.

The objective in fighting insurgents isn't to kill every enemy fighter -- you simply can't -- but to persuade the population to abandon the insurgents' cause. The laws of these campaigns seem topsy-turvy by conventional military standards: Money is more decisive than bullets; protecting our own forces undermines the U.S. mission; heavy firepower is counterproductive; and winning battles guarantees nothing.

Read the whole thing. Follow it up with some Q&A.

The Beginning of the End in Gaza

This may be the irreversible beginning of the end. Talk of further isolation of Gaza effectively makes hostages of the 1.5 million residents there. Fuel will go first, then food and water. The story:

But he pledged that the leadership loyal to Mr. Abbas would not abandon Gaza and that it would maintain contact with international agencies and Israel to ensure that food, fuel and other supplies continued to reach the 1.5 million Palestinians there.

“If what happened in Gaza represents chaos and mutiny, the West Bank represents law and order,” Mr. Erekat said. The West Bank, he said, will be ruled by “one authority and one gun.”

Another aide to Mr. Abbas, Nabil Abu Rudeina, said he believed that the United States would support the new government and that America and Israel would agree to lift the embargo imposed on the previous governments led by Hamas, which is defined as a terrorist organization by Israel and much of the West.

Dor Alon, a private Israeli energy company that supplies all of Gaza’s gasoline, said it was stopping deliveries, Israel Radio said, though it would supply fuel for Gaza’s electrical power station.

The Israeli infrastructure minister, Binyamin Ben-Eliezer, who oversees fuel supplies, told Army Radio: “We should simply increase the isolation of Gaza. I want to stop everything until we understand what is going on there.”

Other reports said Dor Alon did not deliver the gasoline on Sunday because its trucks found nobody to receive it on the Palestinian side. Gaza is believed to have about a two-week supply of gasoline left.

What is of concern is that the usual relief entities are not in a position to help, again because of the status of Hamas on the international stage. Here's Tony Snow in this morning's press briefing:

Q Have we cut off all funding to Gaza, and has all fuel been cut off?

MR. SNOW: What we have said is that we continue to try to work on providing humanitarian aid for the Palestinian people, but we also have made it clear that we will not be supplying directly to Hamas. I think when -- but, Helen, what I would do is, again, for the specific questions, because Secretary Rice is going to be addressing all these things in detail within the next hour.

Q I know, but my specific question is are we going to starve these people, the Palestinians --

MR. SNOW: Again, it has always been our policy to be providing humanitarian aid directly to the Palestinian people, and it continues to be.

I don't see how humanitarian aid gets through if we are delivering it. Will any Arab country intervene to prevent further disaster?

What Did Ron Paul Say?

From the Spin Room after last night's GOP "debate" in South Carolina, Byron York captures Ron Paul's reaction:

For a man who had just grabbed the spotlight in a nationally televised presidential debate, Ron Paul seemed a little, well, defensive. A few minutes after the debate ended here at the University of South Carolina, Paul, a Republican congressman from Texas, ventured into the Spin Room to talk to reporters, only to find that they wanted to know whether he really blamed the United States for the September 11 terrorist attacks.

“Who did that?” Paul snapped. “Who blamed America?”

“Well, your critics felt that you did.” “No, I blamed bad policy over 50 years that leads to anti-Americanism,” Paul said. “That’s little bit different from saying ‘blame America.’ Don’t put those words in my mouth.”

“But the policies were bad American policies?”

“We’ve had an interventionist foreign policy for 50 years that has come back to haunt us,” Paul continued. “So that’s not ‘Blame America’ — that’s demagoguing, distorting issues…That’s deceitful to say those kinds of things.”

James Joyner at OTB has the best commentary I've seen on this issue in this post. I'm not surprised at Paul's reaction to the spin, and I think the "American Idol" format is in part responsible, even though this one flowed better than the last. If this were really a "debate," Paul's point should be debated, not dismissed.

Reading and Listening

Yesterday, when I got to my office, I thought this econoblog was going to be the best thing I'd read all day. It's Brad DeLong and Arnold Kling having a pretty contentious and articulate debate about the legacy of the New Deal. Read the whole thing.

But then, realizing that I would have to introduce Neal Katyal at his public lecture last evening, I started reading this article forthcoming in Vanity Fair. And maybe I haven't been keeping up with current events, but I found parts of it truly shocking. The public lecture was fantastic (read about it here), on a par with Katyal's appearance on the Colbert Report.

9/11 Conspiracy Theories

CNN's Reliable Sources ended its program this morning with the results of a poll suggesting that many Americans believe that the U.S. government was active or complicit in perpetrating the attacks on 9/11.

[Update: here's the excerpt, now that the transcript is available:

KURTZ: I want to put up some pretty eye-opening poll figures from a Scripps Howard survey about 9/11 conspiracies. Thirty-six percent of those surveyed suspect the U.S. promoted or acquiesced in the 9/11 attacks; 16 percent believe explosives, not airplanes, toppled the World Trade Center; 12 percent believe it was a cruise missile that hit the Pentagon.]

One of the slickest productions of the conspiracy theorists is the video "Loose Change" (see the main website here). In its various editions, it has been viewed over a million times. If you choose to view it, then you should also take a look at a viewer guide put together by some others seeking to debunk the conspiracy theories. There are other sites to visit that debunk the conspiracy theories: 911Myths.com and 9-11 Research are two that I have found particularly helpful (the latter also includes a viewer guide to "Loose Change").

Here is the way the last site describes what it is doing:

Young filmmakers Dylan Avery, Korey Rowe and Jason Bermas created the film Loose Change, which challenges the central dogma of the official story of 9/11. Loose Change covers a great deal of material, moving from one point to another in rapid succession. It presents a long list of claims supporting the conclusion that 9/11 was engineered by insiders, but does so with a mixture of strong and flawed arguments.

[...]

Because of its flaws, the film is an easy target for debunkers defending the official story that the attack was the work of Islamic fundamentalists. One example is the the very detailed debunking of the entire video entitled 9-11 Loose Change Second Edition Viewer Guide: And debunking of various 9/11 conspiracy theories. Unfortunately, many people -- perhaps a vast majority of Americans -- are likely to dismiss the film's vitally important conclusions because of the many errors it makes along the way. Not surprisingly, Loose Change is being exploited by apologists for the official story to reinforce the stereotype that has long been used to by the mainstream to media to bludgeon the 9/11 Truth Movement: that all challenges to the official story are the product of irrational "conspiracy theorists."

That last sentence is critical.

The Disconnect Between Terrorism and Economics

Robert Samuelson wonders why the economic impact of terrorism and its aftermath has been so small:

To be sure, terrorism has exacted some steep costs. Airlines and tourism suffered after Sept. 11; in the wake of last week's foiled bomb plot, that could happen again. Spending for the war in Iraq was vastly underestimated. But terrorism's damage has paled before the larger effect, which is not much. It hasn't destroyed prosperity or cross-border flows of goods, money and people.

Since 2001 the world economy has expanded more than 20 percent. For the United States, the gain is almost 15 percent; for developing countries, more than 30 percent. World trade -- exports and imports -- has risen by more than 30 percent. Outstanding international debt securities have jumped almost 90 percent, to $13.6 trillion (through the third quarter of 2005).

The figures are interesting, but the question is misplaced, for (at least) two reasons.

First, there is an issue of scale. Think of the total impact as the product of (number of terrorists) x (damage per terrorist). The product is small because the number of terrorists who are specifically looking to do damage to us outside of our presence in the Middle East is very small--small enough to overcome the fairly large amount of damage each terrorist can do. In their propaganda war, the terrorists market themselves based not on total damage, but on the sensational amount of damage that they can do with such a small presence (i.e., not that they hit every key building in New York, just that they were able to hit the most symbolic ones).

Second, the terrorists do not appear to have the reduction of prosperity, commerce, or international trade as their key objectives. If they did, they wouldn't focus their attention primarily on the U.S., Western Europe, and Israel. They would expand their reach to other major economies, like India and China. They also wouldn't be so fixated on passenger air travel--they would expand their reach to international shipping, for example. And perhaps most importantly, they would focus their attention on key strategic, as opposed to symbolic, assets: ports, bridges, and tunnels.

If the terrorists changed their focus, or if they recruited more people willing and able to die for their cause, they could do a lot more economic damage.

Mass Murder on an Unimaginable Scale

Today's big news:

LONDON - British authorities said Thursday they thwarted a terrorist plot to simultaneously blow up 10 aircraft heading to the U.S. using explosives smuggled in hand luggage, averting what police described as "mass murder on an unimaginable scale."

What's so unimaginable about that? Ten airliners stuffed to capacity is about 5000 people. How is that unimaginable? 9/11 was about 3000. Genocides go in the millions. To call that "unimaginable" shows a lack of imagination.

Other early reports are describing the plot as follows:

The plot had been in the works for months, and its goal was horrific. One after another, planes would have exploded in the sky, sending hundreds of men, women and children to their deaths.

Counterterrorism officials said Thursday the plan thwarted in London appears to bear the fingerprints of al-Qaida, and may even have been "the Big One" they have been dreading since Sept. 11, 2001, particularly as the five-year anniversary of the attacks on the United States approaches.

Horrific, certainly. "The Big One," not even close. I'll give three reasons:

1. The death toll wouldn't be much higher than 9/11.
2. Property damage would be much smaller than 9/11. A new commercial airplane goes for about $250 million. So 10 airplanes are $2.5 billion and change. That's not much compared to 4 airplanes, two skyscrapers, and a chunk of the Pentagon, to say nothing of the economic impact of 9/11 associated with the loss of the ability to generate economic activity in New York City after 9/11. (See this report for a discussion.)
3. Most importantly for terrorists, there would be little to no sensational video. To match 9/11, they would need to be on a par with airplanes smashing into buildings, those buildings collapsing, and innocent people jumping from those buildings to their deaths. How are they going to get that with detonations over the Atlantic? Would they risk the mission by waiting until the planes were on approach over the Eastern Seaboard? I doubt it.

So let's be grateful that the plot was thwarted and try our best to get through the added burden imposed on us, but let's not confuse this with "mass murder on an unimaginable scale" or "The Big One."

The Usual from Tom Friedman

Catchy intro, stuff I didn't know, good description of the problem, and then ... I'll get there. The heart of today's column is:

In May, Israeli papers were filled with pages about how cool it was that Israel had produced a cutting-edge company that Warren Buffett wanted to buy. It was being discussed everywhere, pushing the Tel Aviv stock exchange to an all-time high.

That is where Israel’s head was on the eve of this war — and it explains something I sensed when I visited Israel shortly after the fighting started. Nobody wanted this war, and nobody was prepared for it. Look closely at pictures of Israeli soldiers from Lebanon. There is no enthusiasm in their faces, and certainly no triumphalism. Their expressions tell the whole story: “I just don’t want to be doing this — another war with the Arabs.”

Israeli soldiers were napping when this war started — that’s why they got ambushed — for the very best reasons: They have so much more to do with their lives, and they live in a society that empowers and enables them to do it. (Unfortunately, the Buffett company is in northern Israel and had to be temporarily closed because of rocket attacks.)

Young Israelis dream of being inventors, and their role models are the Israeli innovators who made it to the Nasdaq. Hezbollah youth dream of being martyrs, and their role models are Islamic militants who made it to the Next World. Israel spent the last six years preparing for Warren Buffett, while Hezbollah spent the last six years preparing for this war.

Okay, I'm with him. The last paragraph, in particular, is very good. But how does he finish the column? With my emphasis added:

Israel wins when Warren Buffett’s company there is fully back in business — not when Nasrallah is out of business. Because that will only happen, not by war, but when Arabs wake up and realize that he is just another fraud, just another Nasser, whose strategy would condemn the flower of Arab youth — who deserve and need so much better — to another decade of making potato chips, not microchips. Nasrallah can win in the long run only if he can condemn the flower of Israel’s youth to the same fate. Don’t let it happen, Israel.

And as it often happens, Friedman ends his column with a conundrum. I'd like to know what observations Friedman has made of Arab societies that would generate the presumption that Arabs will receive this wake-up call and come to this realization, to say nothing of a presumption that it would happen with enough haste to spare citizens of Israel the terrorist attacks from the likes of Hezbollah.

That's Why They Call Them Counterfactuals

This remark by John Kerry has been getting some attention in the blogosphere:

U.S. Sen. John Kerry, D- Mass., who was in town Sunday to help Gov. Jennifer Granholm campaign for her re-election bid, took time to take a jab at the Bush administration for its lack of leadership in the Israeli-Lebanon conflict.

"If I was president, this wouldn't have happened," said Kerry during a noon stop at Honest John's bar and grill in Detroit's Cass Corridor.

Bush has been so concentrated on the war in Iraq that other Middle East tension arose as a result, he said.

First, we state the obvious. Governor Granholm is a capable executive with a track record that merits her re-election. I hope she plays a role in national politics soon. Kerry helps her re-election bid not by association but as a foil.

Second, we read through to the end of the article and find something deeply puzzling. Consider:

Hezbollah guerillas should have been targeted with other terrorist organizations, such as al-Qaida and the Taliban, which operate in Afghanistan and Pakistan, Kerry said. However, Bush, has focused military strength on Iraq.

"This is about American security and Bush has failed. He has made it so much worse because of his lack of reality in going into Iraq.…We have to destroy Hezbollah," he said.

If he is going to use both "targeted" and "destroy" to describe the U.S.'s posture toward Hezbollah, then he must be talking about military strikes. Hezbollah did not launch an attack on American soil--why target them militarily? And if they were to be targeted for what they did do recently to the Israelis--kidnap two soldiers--then why wouldn't Saddam Hussein be targeted militarily for what he did to the Israelis--paying the families of suicide bombers who killed innocent Israeli citizens (to say nothing of what he and his revolting sons did to innocent Iraqis)?

I don't think we can have it both ways. Either the international community is willing to step in with its full range of economic and militarily tools to prevent violence against civilians or it isn't. And if it isn't, why should we expect a better outcome than what we are seeing in the Middle East?

In Praise of Hernando De Soto

Last Wednesday and Thursday, the Rockefeller Center welcomed Hernando De Soto as its Class of 1930 Fellow. He gave a public lecture, visited a class, and met with several groups of students and faculty. Here is how I introduced him at the public lecture:

In remarks delivered at the Rockefeller Center’s dedication in September 1983, Rodman Rockefeller noted that his father was interested in the "conversion of intellectual excellence to the realities of public life," and he charged the center to promote this same vision to Dartmouth students. This is a challenge that we take seriously at the Center, and we rise to that challenge today as we open our fall term public programming by welcoming Hernando de Soto as the Class of 1930 Fellow.

In 1980, Mr. de Soto returned to his native Peru after a successful career in Europe, armed with a question: What makes some countries rich and other countries poor? And it was the research that he and his think tank (the Institute for Liberty and Democracy) conducted to answer this question that has ultimately transformed the developing world.

In Peru, de Soto observed an energetic and industrious people relegated to poverty by a legal system that marginalized and excluded them from his nation’s formal economy. "They have houses but not titles; crops but not deeds; businesses but not statutes of incorporation." It was not the lack of entrepreneurial energy, or even the lack of assets, that made them poor. It was their confinement to an extralegal status. Overhaul that legal system, and you will provide an opportunity for a whole nation to lift itself out of poverty.

This revolutionary concept—that the lack of formal property rights was a key source of poverty in poor countries—has become Hernando de Soto’s life’s work. His writings and his advocacy embody a liberal and expansive view of humanity—that the capacity to meaningfully improve one’s lot in life is widely and broadly distributed. He has traveled the globe to help governments take the steps necessary to permit economic freedom to flourish.

His work has not gone unnoticed. As just a few of his accolades, in 1999, Time magazine chose de Soto as one of the five leading Latin American innovators of the century. Forbes magazine highlighted him as one of 15 innovators "who will re-invent your future." The Economist magazine identified his Institute for Liberty and Democracy as one of the top two think tanks in the world. His two books, The Other Path,and The Mystery of Capital,are becoming the guidebooks to legal reform in pursuit of economic development around the world.

Hernando de Soto should be an inspiration to us all. He shows that someone who researches carefully, who writes clearly, who speaks thoughtfully, who advocates passionately, who works tirelessly—such a person can make a difference. There is no one more concretely engaged in the "realities of public life" than he. For a man whose time is so precious, we are delighted to have him with us this evening.

He is quite simply one of the most remarkable people that I have ever met.

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Vandalism (sic) in Gaza

In an article with the title, "Exuberant Palestinians Rush to Gaza as Last Israelis Depart: Some Jewish Synagogues Vandalized In a Day Mostly Free of Violence," The Washington Post provides an account of what occurred to synogagues in Gaza today, after the last Israelis left:

In some of the former settlements, Palestinians scuffled occasionally amid the rubble, prompting police to intervene with batons and warning shots. But the day was largely free of violence, although the former synagogue buildings that the Israeli government decided to leave intact were vandalized with hands and hammers. At least four of the roughly two dozen were set ablaze early in the day.

Take a look, via Powerline, at what happened. To suggest that a picture is worth only a thousand words fails to consider how empty those words can sometimes be.

Terrorism, Security, and America's Purpose

This conference is excellent. Listen to the live feed on your computer, and you will get one indication of why the New America Foundation is emerging as the think tank for the next generation.

Terror Threats and Signaling

Guest-blogging over at AndrewSullivan.com is Walter Kirn, who takes the occasion of his first post to question our nation's response to terrorism:

I'll start with something that's been bugging me but that I haven't had a forum to write about: this idea, almost universally agreed upon, that Americans mustn't let terrorism change our way of life. I disagree. Our way of life had its problems before Osama appeared, and we probably could have stood to change it then, but now that we have the added impetus of being collectively attacked in ways that we never dreamed about in past years, I think it's high time that we did a few thing differently that maybe we should have done already ... Like, say, spread out a little geographically.

Reading a bit between the lines of Walter's post, the lesson we are not learning is that we need to separate out two distinct phenomena. The first is that the quality of life in a world with terrorism is substantially worse than the quality of life in a world without it. At this point, that issue is settled, and pretending that we live in the other world doesn't make us better off and it doesn't help us win. The second is that, even in a world with terrorism, we can make ourselves better off by reacting optimally to our (new) environment. I discussed two ways in which society will evolve--in response to the newly inflated price of congestion and anonymity in an age of suicide [sic] bombers--in this earlier post.

There is a time and a place for making things harder on ourselves than we might otherwise have them, particularly in wartime when we need to signal to our enemies that we are a more determined foe and stronger adversary than they think. (Consider the now famous example of James Stockdale as a POW in Vietnam.)

Effective signals necessarily make life more difficult (in the near term) than it would have to be, but not everything that makes life more difficult is an effective signal. To be an effective signal, the action has to be associated with some characteristic that is hard to observe and that would change our enemies' assessment of us. We want to signal our resolve to protect our Constitutional republic and our society based on liberty. Like anything else, we want to economize on the signal--to pick the signals that give us the most protection from or intimidation of the enemy at the lowest cost.

Walter mentions an example of poor signaling near the end of his post:

There's a price for supersaturating small areas with people, wealth, and technology, and now we're paying it by trying to secure in thousands of ways targets that are inviting as they come. This folly of rebuilding the World Trade Center proves that we'd rather be proud and stubborn than safe. Here we go piling up the blocks again just to show how bloodied but unbowed we are instead of learning our lesson and reshaping things.

He is right. Our enemy doesn't care how proud and stubborn we are, or even how much sorrow we feel for what happened on 9/11. What we do at Ground Zero should, first and foremost, honor the victims of 9/11 (and only 9/11). If there are new office buildings to be built, they ought to reflect the needs of the post-9/11 world. The best idea I have read about the non-memorial part of Ground Zero is to insist that the United Nations relocate its headquarters to those new buildings. Putting the UN there doesn't make the re-building an effective signal per se--it just stops the building of a large office tower there from being a childish dare to hit us again without being much better protected than we were before.

What are some affirmative signals that we could be sending? I would start by taxing every product whose revenues flow back to terror sponsors, with the revenues redistributed progressively back to the taxpaying population through the income tax. Given our current enemies, that means a pretty large tax on oil. I'm sure we could come up with other suggestions.

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We're Still Going

The reported death toll from this morning's explosions in London is listed as "at least two," but that seems likely to rise. Prime Minister Blair asserted that it was "reasonably clear" that these attacks were designed to coincide with the opening of the G-8 summit in Scotland. He also captured the essence of what terrorists are about with this statement:

He added that it was "particularly barbaric" that the attacks had occurred during a summit intended to aid people in developing nations.

I'm glad to see that the plan is to continue with the summit, even if the Prime Minister cannot attend all of it. An AP story also reported the following:

Recent intelligence indicated that London was considered a prime target for Islamic extremists, in part because al-Qaida was having difficulty getting people into the United States, the official said.

If true, it's good to see that homeland security is also stepping up to its challenge, at least in part.

My prayers and condolences are with the people of London this morning.

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London Calling

Congratulations to London for its winning bid to host the 2012 Olympics. The Samwick family plans to attend, and we'll be live-blogging it on our cell phone, PDA, wristwatch, or whatever the latest gadgetry turns out to be.

I think Londoners are some of the best sports fans anywhere. Judging the English based on the conduct of soccer hooligans would be a bit like judging Americans based on the end zone of an Oakland Raiders game. I recall being in London during the 1994 World Cup, when England failed to qualify but the U.S. and Ireland were in and doing well. I drank for free that week in every pub.

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Congestion and Anonymity

At Dartmouth, as at many other institutions, incoming first-year students are assigned an optional reading assignment over the summer. In the spring of 2002, the Dean of First-Year Students asked me if I would assign the book and give a public lecture on it during Orientation Week in September. I was happy to oblige, and, being an economist, I naturally thought of Capitalism and Freedom by Milton Friedman as the one book from my field that I would have all college students read. But I figured that Free to Choose, which was co-authored with his wife, Rose, and covers many of the same insights, would be a more inviting title. So that's what I assigned to the Class of 2006--a primer on how to use basic economic insights to study all manner of social interactions. The slides from the presentation are here.



Of the many topics in the book, the Friedmans' discussion of educational reform in general, and vouchers for primary and secondary school in particular, generated the most interest from the students. I'll share my views on that topic in a later post. To end the lecture, which took place a little over a year after 9/11, I tried to think of how to use the insights from the book to think about the War on Terror.



The core of economics is optimization under scarcity--it is the science of tradeoffs and how markets dictate the relative prices at which those tradeoffs can occur. An economist's analysis of the world after 9/11 would begin by asking, "What aspects of the way our society exists have seen their relative prices increase?" I offered two:

1. Congestion: Economies of scale often dictate that congestion is efficient. Examples include densely populated cities, tall office and residential buildings, busy highways, and transportation and communication hubs with near universal access. That same efficiency now makes them vulnerable as targets. A strategically placed assault can cripple many systems or kill many people all at once.
   
   



2. Anonymity: This has historically been one of the best protections afforded by large, competitive markets. I can purchase the goods and services that I need and sell my services without having to introduce myself personally to the other parties in the transaction. Very few of these counter-parties collect anything more than rudimentary information about me. In other contexts, I routinely drive on roads near cars whose drivers I do not know and travel on planes with people I've never met. I agree that some of the best transactions are the ones that are not anonymous, but the option to transact anonymously makes a lot of interactions more efficient. It also allows terrorists to strike with a greatly reduced risk of apprehension or reprisal.

After 9/11, we would have to find ways to go about our business with less congestion and less anonymity. Not zero--but definitely less. To become less congested, we would need to spread out our people and assets more evenly in the country and add some redundancies in our networks. Managing this process would be a job primarily for planners and engineers. I don't follow the relevant sectors well enough to know whether there have been changes in residential and commercial planning since 9/11, nor do we yet have good information on whether there has been a change in migration from more to less densely settled parts of the country.

To become less anonymous, we would need to increase our collection of real-time data and develop stringent privacy standards for how it is handled. Managing this process would be a job primarily for those who manage the access points to networks--whether for electronics, communications, transportation, or finance. And, appropriately, many of the most contentious issues would be adjudicated in courts. The Patriot Act, the creation of the Department of Homeland Security, and the recently passed Intelligence Reform are all attempts, at least in part, to redefine the concept of anonymity.

Some of what we are discovering in this ongoing process is that people differ in how price sensitive they are to changes in the relative prices of congestion and anonymity. Some people are very price sensitive--they would do with quite a bit less of each in response to small increases in their costs. Others are hardly price sensitive at all--they wouldn't change their behavior at all even in the face of large increases in their costs. For ordinary things we consume, a market would accommodate our different preferences. This is possible to some extent with congestion and anonymity, but because we are all interconnected in at least some of the things we do, a large amount of it must be negotiated in the political environment.



Thanks to Roland Patrick for suggesting that the lecture might make for a good post to the blog.



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More from Stratfor

I finished reading America's Secret War. In an earlier post, I took some issue with the author's claim that:

We went into Iraq to isolate and frighten the Saudi government into cracking down on the flow of money to Al Qaeda.

I don't think that the book "proves" that this was the purpose of the war. In that earlier post, I conjectured that the strategic benefit of Iraq would have to be evaluated based on how it hastened the arrival of democracy in Iran. I read the book with this alternative in mind. On pages 250-1, the book suggests that we were in a deal with Iran--to obtain access to Iran's intelligence on Al Qaeda, we toppled Saddam in favor of a government that would have a Shiite majority. Here are the relevant two paragraphs:

Iran wanted the United States to invade Iraq. It did everything to induce the United States to do so. Its strategy was to provide the United States with intelligence that would persuade the United States that invasion was both practical and necessary. There were many intelligence channels operating between Teheran and the United States, but the single most important was Ahmad Chalabi, the Defense Department's candidate for President of Iraq. Chalabi, a Shiite who traveled extensively to Iran before the war, was the head of the Iraqi National Council, which provided key intelligence to the United States on Iraq, including on WMD. But what it did not provide the U.S. was most important: intelligence on Iranian operations in Iraq or on Iraqi preparations for a guerrilla war. Chalabi made it look easy. That's what the Iranians wanted.



The primary vector for Chalabi's information was not the CIA, but OSP under Abe Shulsky. OSP could not have missed Chalabi's Iranian ties, nor could they have believed the positive intelligence he was giving them. Bus OSP and Shulsky were playing a deeper game. These were old Cold Warriors. For them, the key to the collapse of the Soviet Union was the American alliance with China. Splitting the enemy was the way to go, and the fault line in the Islamic world was the Sunni-Shiite split. The United States, from their point of view, was not playing the fool by accommodating Iran's wishes on Iraq. Apart from all of its other virtues, they felt that the invasion would create a confluence of interests between the U.S. and Iran,

which would have enormously more value in the long run than any problems posed by the Iraqi invasion. From the standpoint of OSP--and therefore Wolfowitz and Rumsfeld--Chalabi's intelligence or lack of it was immaterial. The key was the alignment with Iran as another lever against Saudi Arabia. And there were more immediate threats as well.

Again, not proof, but an attempt to tell a coherent story in hindsight with still limited information on the government's internal decision-making. The excerpt also reflects the author's writing style, and the book makes for an interesting perspective on the War on Terror from its start through a few months ago.



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America's Secret War

STRATFOR describes itself as:

[T]he world's leading private intelligence firm providing corporations, governments and individuals with geopolitical analysis and forecasts that enable them to manage risk and to anticipate political, economic and security issues vital to their interests.

STRATFOR's founder is George Friedman, whose new book, America's Secret War, is getting some discussion in the blogosphere yesterday and today. (Start with Professor Bainbridge's link to Frank Devine's review of the book.)



The book's website contains some interesting Q&A with the author. His answer to the direct question that occupies Bainbridge and Devine is:

Q. Why did we go into Iraq?



A. We went into Iraq to isolate and frighten the Saudi government into cracking down on the flow of money to Al Qaeda. Bush never answered the question for fear of the international consequences. Early in the war, the President said that the key was shutting down Al Qaeda's financing. Most of the financing came from Saudi Arabia, but the Saudi government was refusing to cooperate. After the invasion of Iraq, they completely changed their position. We did not invade Saudi Arabia directly because of fear that the fall of the Saudi government would disrupt oil supplies: a global disaster.

I would like to see some evidence for the key proposition (which I highlighted in red). I'll read the book and search for corroborating evidence. Even if the Saudi's have changed their tune, that does not necessarily mean that achieving that result was the intent of invasion.



Before reading the book, I'm skeptical about the motive. I agree that reform (if not revolution) in Saudi Arabia is critical to peace in the Middle East, but the most pressing issue after the fall of the Taliban in Afghanistan was Iran. Specifically, the next interesting event would be whether the students would oust the mullahs in Iran. Our next step should have been something to tip the balance in favor of democracy and nuclear disarmament in Iran. Failing that (but hopefully only after giving it a chance to succeed), we would need to be ready for a military confrontation with the theocrats in Iran.



EagleSpeak argues, in response to the Bainbridge post, that this is what the invasion of Iraq has been:

As I have argued before, the invasion of Iraq, coupled with the invasion of Afghanistan and the turning of Pakistan completes what is essentially an encirclement of Iran. Further, as a look at a topographic map will tell you, Iraq provides far easier access to Iran's interior than other alternatives.



Saudi Arabia may contain sources of funding and even human assets for terrorism, but Saudi Arabia itself is not, in my view, a hard target to attack if American protection is removed. There is not much need to encircle it. Iran, however, is a much tougher nut to crack, from every direction except the west.

Completing the RealPolitik trifecta is a post at American Digest earlier this month, in which both theories are used to answer to the question, "Why are we in Iraq?"



And they call economics "the dismal science?"