Israel, Hamas, War and Peace

Warning. I do not pretend to have expertise on political events in the Middle East. I attempt to illustrate how an economic model developed by Jack Hirshleifer can be used to discuss them.

War continues between Israel and Hamas, with both sides rejecting international calls for a cease-fire. I can understand the Israeli position; if Canada or Mexico were firing missiles into the U.S. I would expect the government to react. I do not understand the Palestinian position if Hamas represents it. Why lob missiles into a country that is wealthier, has more military might, and in the past has shown a willingness to use it?

Jack Hirshleifer wrote a paper titled "Appeasement: Can It Work" that was published in the American Economic Review. I link to his UCLA working paper with the same title here. The paper uses game theory and preference theory to examine decisions made by the western powers (Britain and France) and Hitler's Germany.

Hirshleifer begins by using game theory to compare strategies for the western powers under four different models of Hitler's preferences: peace-loving, aggressive, aggressive but appeasable, and peace-loving but bluffing aggression. The correct response by the western powers, with one exception, was to oppose Hitler.

The exception was the aggressive but appeasable Germany. Hirshleifer introduces preferences to further evaluate this alternative, considering a reduction in western standing measured in income as a superior good and then as an inferior good to Germany. Consumption of a superior good increases as wealth increases, implying that a wealthier Germany would devote more resources to diminishing western income. Consumption of an inferior good decreases as wealth increases, implying that a wealthier Germany would devote fewer resources to decreasing western income.

To summarize his conclusions, Hirshleifer offers the following proposition,

If the opponent's preferences are hostile and non-appeasable, the best strategy is to keep her so poor that she cannot afford to engage in deprivation. If the opponent is hostile but appeasable, the best strategy is to make her so affluent that she will no longer desire to exercise her deprivation option.

To quote Dr. Emmitt Brown, "back to the future." Through Palestinian blundering or Israeli policy, Palestine is about as poor as can be imagined. According to our model, Palestinians should not be able to threaten Israel, but outside interests seem to play a big role.

Iran is using Hamas to fight a proxy war with Israel. I can see no benefit to Palestinians in general but a benefit to Hamas leadership whose hate or lust for power is so great that they would sacrifice the welfare of their people.

The modern western powers seem to be operating under the premise that hostility is an inferior good to Palestinians, and that they can buy peace for Israel by making Palestinians wealthier. In this case, the wealth may be through national pride gained through land and other concessions by Israel.

Despite enormous simplifications made in this model, the conflict between Israel and the Palestinians seems very complex. My guess is that hostilities between Israel and the Palestinians will not end until the Palestinians are freed from Iranian influence.