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How one economist tries to interpret the Realist perspective
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2022.01-D.Quah-Economist-interprets-Realist-perspective.md

How one economist tries to interpret the Realist perspective

by Danny Quah (Jan 2022)

There is a link below to the video recording of "Is US-China Conflict Unavoidable?", an IEA World Economic Order working group discussion with speakers John Mearsheimer and Susan Thornton, and discussants Jisi Wang, and Yongding Yu, from Tue 04 Jan 2022.

The event was moderated by Dani Rodrik, with participation by other members of the IEA Working Group on World Economic Order.

All the discussion was greatly interesting; and I hope those interested get to watch it all. But, for what it's worth, my own challenge was to try and see how the Realist perspective might have economic expression:

  1. My economic instincts certainly align with Realists when they think in terms of objectives and constraints. Equilibrium will emerge not from wishful thinking but when, subject to restrictions implied in the equilibrium actions by all others, everyone's goals come as close as possible to being achieved. Nothing to object to here.
  2. But Realist theorists and practitioners both, seem to me, seized with obsession over two Zeros: First, that choices are only ever 0/1, either/or, all/nothing. Either America is the number 1 nation in the world, or America is flat on its back and in ignominous decline. The fact is, most sensible criticisms of the arc of US policy adopts neither extreme position.
  3. In economics, and I suspect in most people's thinking, the idea is a natural one of taking a weighted average between different non-exclusive outturns, and putting a bit of weight on each of them. Should your society have more guns or butter? Well, take a bit of both. This is simply a pragmatic approach to decision-making. Having a 0-1 perspective, however, means you are either Team All-Guns or Team All-Butter.
  4. For me the important fact is that most of the world is actually NOT a number 1 nation in the world --- and they get along perfectly fine, without falling ever further behind all others. The UK contains 60mn of the 80% of humanity who live in neither the US nor China. The British are free and prosperous, and make their own sovereign decisions. They regularly punch above their weight in international policy-making. Sure the British face economic and political challenges, but no worse than do Americans.
  5. Mearsheimer's response is, the only reason the British are able to do this is that the US extends its security umbrella to them. Perhaps so, but this is not an implication of theory, it is simply an additional implicit assumption. Moreover, it as an implicit assumption that does a lot of heavy lifting in driving the Realist narrative.
  6. (I recently had some interesting conversations with European Realists who adopt the same implicit assumption to ASEAN that American Realists seem to take to the EU: they don't get why ASEAN thinks there is such a thing as ASEAN Centrality. As far as they're concerned, ASEAN is not in chaos only because Europeans and Americans stand ready to intervene.)
  7. The second Zero is that the world is a zero-sum game: China can only ever gain if the US loses. (This is different from a zero-one proposition that outcomes are binary, or only ever either-or.) This assumption is one that Economics sees much less sympathy. A lot of economic ideas turn on win-win outcomes - not even but routinely under the assumptions that everyone looks out only for their own self-interests. Trade is one example, but pretty much everything surrounding economic exchange stems from economists seeking outcomes that benefit everyone. Like Realists, economists take as given that everyone acts purposefully to advance their own self-interests. The difference is, economists then look for and find non-zero sum outcomes. Economists do not proceed linearly from (i) "looking out for self interests" to (ii) "you will only ever gain if I lose". Indeed, in economics (ii) is almost never the consequence of (i) but of some other assumption.
  8. If we are to build a sensible new world order, we must recognize how even when every nation looks out for only their self-interest, the world overall does not have to be a zero-sum game.

https://www.iea-world.org/activities/world-economy-working-group/

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