economics

Professional economists may be dismayed, but scholars and students of international politics should be delighted by the decision to award this year's Sveriges Riksbank Prize in Economic Sciences (aka the "Nobel Prize in Economics") to Elinor Ostrom of Indiana University.  She is not only the first woman to win the economics prize, she's also the first political scientist.  She holds a Ph.D. in the subject from UCLA and is a past president of the American Political Science Association.

Ostrom's main research is pretty far from my own concerns, but I did list her book Governing the Commons on one of my "top-ten" lists earlier this year.  She is primarily known for her work on institutional solutions to collective action problems, most notably in the area of resources and environment.  Via a combination of "soft" rational choice theory and careful empirical work, she shows that common resources can be shared and managed through various institutional mechanisms, but also shows that there is nothing inevitable about this outcome, due to familiar dilemmas of collective action (that's why we call them dilemmas!), and the complex interactions of humans, institutions, and larger ecosystems.

Ostrom (and the co-winner, organization theorist Oliver Williamson) join a group of recent winners chosen more for theoretical insight and real-world relevance than for mathematical scholasticism.  Others in this same group would include economic historians Douglass North and Robert Fogel, behavioral economist Daniel Kahneman, game theorist/strategist Thomas Schelling, and economist-philosopher Amartya Sen.  Scholars with an international orientation have been doing pretty well in recent years too: Schelling was awarded for game-theoretic work on international conflict, Paul Krugman for his work on international trade, and Sen's work on poverty and famines has clear international implications.  Kudos to the prize committee for their eclectic approach to the award--if only more economics departments thought this way.

One more thing: need I mention that Ostrom received the award for work she had already done, as opposed to some other Nobel Prize winners I can think of?

Photo: Indiana University via Getty Images

In his Inaugural Address, President Obama declared that "We remain the most prosperous, powerful nation on Earth." He then outlined a number of ambitious foreign policy goals: forging peace in Afghanistan, lessening the nuclear threat, rolling back the specter of a warming planet, and, of course, defeating terrorism.

As if on cue, Robert Pape of the University of Chicago has a new article in the National Interest that casts some cold water on these lofty sentiments. Pape argues that the United States is in "unprecedented decline," and says that "without deliberate action, the fall of American power will be more precipitous with the passage of time." His argument is straightforward: economic power provides the wherewithal to meet global commitments and advance national interests. America's overall share of gross world product is falling while others’ shares are rising; ergo, our current position of primacy is deteriorating rapidly, in part because other states are rising but also because the Bush administration managed to mismanage foreign policy and fiscal policy simultaneously.

I agree that it's important to match ambitions to resources, but I think Pape overstates his case in three ways:

First, his analysis assumes that relatively small changes in a state's overall share of Gross World Product (GWP) will have dramatic effects on its global position. Thus, he sees a shift from 26 percent of GWP to 21 percent of GWP as an enormous decline in America's position, even when the No. 2 power (China) still has only 9 percent. This looks even scarier when expressed in terms of percentages (Pape estimates that the U.S. share of GWP has declined by 32 percent since 1990 while China’s has risen by 144 percent), because percentage increases are greater when one begins from a low starting point. Equatorial Guinea's share of gross world product is growing at an even faster rate than China's, but that hardly means we should see it as our next great peer competitor.

Second, Pape's analysis slights the effects of the current economic downturn on the other major powers. It's true that we're being hammered, but so are potential rivals like Russia and China and the political consequences may be substantially greater for them than for us. At the very least, a bit of skepticism about long-term trends is in order.

Third, Pape's purely structural analysis ignores the impact of geography on the prospects for anti-American balancing. He and I agree that states have engaged in various forms of "soft balancing" over the past fifteen years, in essence seeking to check U.S. unilateralism by coordinating their diplomatic positions in ways that made it costlier for the United States to act alone.  Pape now warns that "American relative power is declining to the point where even subsets of major powers acting in concert could produce sufficient military power to stand a reasonable chance of successfully opposing American military policies."

This is unlikely, especially if Pape is right and we really do face a long-term decline in our relative power position. If our power really does decline, then the major powers of Eurasia will have little reason to balance against us. More importantly, states tend to worry more about neighbors than they do about countries that are far away, even when the latter are very powerful. Given this tendency, it is hard to imagine the EU, Russia, China, India or Japan forging a powerful anti-American coalition; instead, some of these states will continue to want close ties with us to protect them from the others.

The real danger isn't anti-American balancing, therefore, it is the ability of other states to successfully "pass the buck" to a United States whose foreign policy elite continue to see America as the "indispensable nation" that has to get its fingers into every global problem. Other great powers have been happy to let Uncle Sam do most of the heavy lifting, while they concentrate on developing their economies (China) or maintaining generous welfare states (Europe). In this sense Pape is right to warn about our tendency toward overcommitment, and especially against any attempt to redress economic decline through increased military spending and even-greater international activism. Obama's challenge is to get other states to contribute more to achieving objectives we share, and that will only happen if we make it clear that we aren't willing or able to do it all ourselves.