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Practical [military] men, who believe themselves to be quite exempt from any intellectual in-
fluences, are usually slaves of some defunct economist1
Yet, in the U.S., the Pentagon has recently completed a draft Nuclear Posture Review
that claims thousands of nuclear weapons are still necessary for extended deterrence.
Nuclear hawks and nuclear optimists abound, proclaiming that nukes are still
needed. They claim that nuclear deterrence makes the world a safer place. Who is
right? Who is wrong in this debate? Is nuclear deterrence still necessary in the world
today? Does nuclear deterrence really work?
In the brief that follows, we discuss nuclear deterrence as a major component of na-
tional defense strategy from its foundational roots in economic game theory and ra-
tional choice theory. From this vantage, nuclear deterrence as a major component of
U.S. national defense strategy leaves a lot to be desired.
Every gun that is made, every warship launched, every rocket fired signifies, in
the final sense, a theft from those who hunger and are not fed, those who are cold
and not clothed. This world in arms is not spending money alone. It is spending
the sweat of its laborers, the genius of its scientists, the hopes of its children.
The most obvious weakness to allocating so much of the world’s capital to national
military preparedness is that it often fails to protect nations from the war and de-
struction it is supposed to prevent.
Mutual Assured Destruction (MAD) and its variants such as Massive Retaliation and
Minimal Deterrence 3 are all based on economic game theory developed by John von
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THE ECONOMIC GAMES BEHIND NUCLEAR DETERRENCE
Neumann (1903-1957) and Oskar Morgenstern (1902-1977) in their 1944 work on Sub-
jective Expected Utility theory (SEU) in Theory of Games and Economic Behavior.
Sometime in the early 1950s after the first Teller-Ulam design thermonuclear weapon
was invented (“the H-bomb”), von Neuman proposed a First Strike on the Soviet Un-
ion using thermonuclear weapons. He advocated this because his economic game
theory calculations indicated that this move was the best strategy. Although many in
the military agreed with von Neumann that a First Strike was necessary, President
Dwight Eisenhower (1890-1969), intimately familiar with the uncertainties of war,
rejected this strategy and asked for an alternative strategy. Herman Kahn (1922-1983),
a RAND analyst at the time, came up with an alternative strategy - the game of nu-
clear deterrence. 4 Kahn’s version of nuclear deterrence was called Mutual Assured
Destruction (MAD). Today, nuclear deterrence comes in many flavors.
MAD, Massive Retaliation and Minimal Deterrence are all economic game strategies
of deterrence through counter-force.5 As the force being used is nuclear weapons,
these games are collectively described as a game of nuclear deterrence. It was origi-
nally designed as a two-party game, to be played by the U.S. and the U.S.S.R. The
assumption was that if both sides in a two-party game have adequate deterrence,
then neither side will strike first if by launching an attack, the attacker would be de-
stroyed in a counterattack. This game has three assumptions: (1) approximate parity
so that neither side has an advantage for First Use, (2) both sides have enough infor-
mation that they can make informed, rational decisions as the game progresses, and
(3) the players are rational. Nuclear optimists add another assumption: (4) the game
can be played indefinitely through time.
Provided these assumptions hold, the MAD version of nuclear deterrence was
thought to place the parties in a Nash Equilibrium where neither party would ration-
ally choose First Use of nuclear weapons. 6 The world would be safe from nuclear war.
All that was required is that both sides possessed nuclear weapons, could survive an
initial attack, and could counterattack. Nukes make the world safer. Defense Secre-
tary Robert McNamara (1916-2009) first described ‘Assured Destruction’ to the
American public in the early 1960s.
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THE ECONOMIC GAMES BEHIND NUCLEAR DETERRENCE
The first assumption of the rational choice theory is that the system being analyzed is
linear. That is, the system is not complex and does not exhibit emergence. 8 This sim-
plifying assumption to real life enables the analyst to calculate a probabilistic forecast
(normal distribution) of a optimal decision state in all instances.
The second assumption of the rational choice theory is that the system being ana-
lyzed is subject to stationarity. That is, past history of the system can be used as data
input to develop a model for how the system may behave in the future. Again, this
greatly simplifies the process for calculating forecasts of future system states.
The third assumption of the rational choice theory is a philosophical premise about
reality that stems from Enlightenment thinking. There are two parts to this assump-
tion: (a) reality can be adequately modeled rationally with the tools of mathematics
and analysis; and (b) since humans will behave rationally in any economic situation,
this rational behavior can therefore be modeled. Thus, there are built-in assumptions
about the knowability of human behavior, how humans will make decisions in times
that are both ‘normal’ and in times of crisis, and that limits of the Real are ‘defined’
by what is ‘rational’ (i.e. knowable through the tools of mathematics and science). For
example, the use of backward induction in game theory requires that all future play
will be rational (i.e. subject to economically calculated utilities). 9
The fourth assumption of rational choice theory is a belief in certius paribus. That is
the system being analyzed can be ‘walled-off’ from other, interacting systems and the
decision-space adequately described, all things being equal when , of course, every-
one knows that this is merely a simplifying assumption to make the analysis easier.
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THE ECONOMIC GAMES BEHIND NUCLEAR DETERRENCE
are small. But, when the consequences of a decision involve the future of life on the
planet, the use of this simplifying analytical technique is mere habituated intellectual
deceit; hubris of the most pernicious nature.
The offshoot of this way of thinking about uncertainty and the calculation of prob-
abilities is that gaussian normal distribution curves rarely accurately represent prob-
abilities in real life. Neoclassical economics and game theory is based on the assump-
tion that a normal distribution fits the time series data best. Normality prevails. In-
stead, Keynes and Benoit Mandelbrot (b.1924) argued that there are many situations
where w=0 and a Cauchy-Lorenz distribution more accurately describes reality
where the mean (expected value) and variance (standard deviation) are infinite
(undefinable). 11 No one can calculate the probabilities of these outcomes with any
degree of certainty.12 Neoclassical economists and decision theorists often assume
w=1 (a point value for U may be derived) and that Gaussian distribution curves ap-
ply. Only if w=1 can one specific probability distribution apply to the decision-space
being modeled; i.e the rational actor theory.
Keynes, along with Mandelbrot, and more recently Nassim Nicholas Taleb (b. 1960),
argue that in real life w~0; the weight of the evidence in real situations is often 0 or
very close to 0 in many areas of decision making. That is, many real life systems do
not exhibit finite distributions and no expected precise estimate of probability may be
attached to a decision about this system with any degree of confidence. This does not
indicate that certain outcomes will not occur (are uncertain), only that their occur-
rence is unpredictable. It also suggests that a set of possible outcomes for a system
may never be fully complete. That is, the system may exhibit results that are un-
knowable to some degree with any amount of analysis, no matter how much money
is spent to gather evidence w. Whether for engineering or budgetary purposes, that
we fudge our models to enable decision-making does not belie the fact that the future
behavior of many of these systems (in post-modern science, the decision maker is
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THE ECONOMIC GAMES BEHIND NUCLEAR DETERRENCE
always part of the system being analyzed) is unknowable with any degree of cer-
tainty.
Taleb believes decision-makers ignore black swans because humans are more com-
fortable seeing reality as something structured, ordinary, and comprehensible (i.e.
rationally explainable). Taleb calls this blindness to the Real the Platonic fallacy and
argues that it leads to three explanatory distortions when developing models of real-
ity in time: (a) narrative fallacy: using retrospective historicity to ‘explain’ the past.
That is, the past occurred this way because of x, y, and z; (b) ludic fallacy: modern
probability theory, utility theory, rational choice theory, and game theory that as-
sumes a normal Gaussian distribution probability curve mistakes simple models of
reality with the Real; (c) statistical regress fallacy: believing that the structure of the
probability of x occurring that actually exists in reality can be fully developed and
described from a set of data.
Taleb also believes that people are subject to the triplet of opacity, through which his-
torical descriptions of reality is distilled even as current events are incomprehensible.
The triplet of opacity consists of (a) an hubristic illusion of understanding of current
events; (b) a retrospective distortion of historical events to ‘fit’ current socially ac-
ceptable ways of describing reality; (c) an overestimation of what constitutes ‘factual
information,’ combined with an overvaluing of the value of ‘expert knowledge’
(typically rendered by ‘experts’ possessing certain credentials, experience, or notori-
ety)) concerning the subject being discussed.
These philosophical musings, based on solid mathematical and recent empirical stud-
ies, describe some common conceptual hicups for game theorists where theory wan-
ders down alleys of infinite regress or traps decision-makers in an intractable loop
that folds back on itself with self-referentiality.
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THE ECONOMIC GAMES BEHIND NUCLEAR DETERRENCE
Thus, in the real world, models based on stationarity (which almost all models are)
may not necessarily be used with a high degree of confidence to predict future sys-
tem states, especially if such system states are projected to occur over significant ti-
meframes (from the perspective of the system being modeled). Where the rubber hits
the road with stationarity is the growing realization that due to physical changes in
the environment being modeled, the assumption of stationarity itself is invalid. That
is, for certain decision-sates we are living in a non-stationarity world today. "This is
something completely new -- to make decisions not on facts or statistics about the
past, but on the probabilities for the future."13
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THE ECONOMIC GAMES BEHIND NUCLEAR DETERRENCE
new understanding of physical reality suggests is that for certain complex systems,
game information sets may be lacking crucial data to accurately represent probability
distributions of expected outcomes.
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THE ECONOMIC GAMES BEHIND NUCLEAR DETERRENCE
riskiness of this strategic approach is that, over time, the prospects of global war are
heightened, not lessened. If that is the case, the continued care and feeding of
doomsday machines a form of potential assisted suicide. Playing this unwinnable
game must stop.
Some recommendations to get out of this perpetual war-making machine, which to-
day, has become a Doomsday Machine,19 will require:
inventing a new, less dangerous game to play (hopefully one that does not re-
quire nuclear weapons). For example, is deterrence even a valid notion today;
ENDNOTES
1John Maynard Keynes, quoted in Justin Fox, The Myth of the Rational Market: A History of Risk,
Reward, and Delusion on Wall Street (New York: HarperCollinsPublishers, 2009), xvi.
2 Defense budgets in 2008 were: United States - $607 billion, China - $85 billion, France - $66
billion, Britain - $65 billion and Russia - $59 billion. The world total represents an increase of
45% in military-related budgets (in constant dollars) over the past 10-years (Stockholm Interna-
tional Peace Research Institute).
3 Massive Retaliation assumes a nuclear war can be fought that is not a Total War and that one
side could ‘win’ before both sides were totally destroyed as anticipated by MAD. Limited Deter-
rence assumes nuclear weapons can be used surgically to destroy just enough of an opponent
that they give up their aggression. MAD is still the pure and final form of nuclear deterrence.
4 Deterrence as a game strategy for national defense, invented after WWII, is based on the
premise that by possessing weapons and a force structure capable of inflicting unacceptable
damage on an aggressor and making certain that all opponents are aware of this strength, it is
possible to achieve peace as opponents will surely make the rational decision not to attack a
superior force. Nuclear deterrence is seen as a limit case for deterrence strategy. Mutual As-
sured Destruction is the extreme case of nuclear deterrence. However, the failure of deterrence
for national defense may not be adequately addressed. For example, in von Clausewitz’s no-
tion of Total War, if nuclear weapons exist, it is most likely these weapons will be used, and
when used, it is most likely their use will be for mutual assured destruction, not limited use.
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5These flavors of nuclear deterrence are problematical in that current scientific studies suggest
that even limited nuclear exchanges of 100 Hiroshima-sized bombs, would have global impli-
cations with significant cooling of the earth's surface and decreased precipitation in many
parts of the world that potentially could lead to global famine. See Ira Helfand, MD, “An As-
sessment of the Extent of Projected Global Famine Resulting From Limited, Regional Nuclear
War,” Royal Society of Medicine (2007).
6 This follows from von Neumann’s minimax theorem that as long as the two rational players’
interests are completely opposed, they can settle on a rational course of action going forward
in a zero sum game. An equilibrium is forced by an interplay between self interest and mis-
trust and a strategy can be devised for playing the game where there are no regrets, no matter
what each player ultimately choses for game moves. See William Poundstone, Prisoner’s Di-
lemma (New York: Doubleday, 1992), 97.
7 Rational Choice theory also underlies the myth of rational markets and the efficient market
hypothesis, formulated first at the University of Chicago in the 1960s. The hypothesis is that
capital markets are ‘rational’ in that they properly price the value of financial instruments at
any point of time. Of course, the recent meltdown of financial markets in 2008 has exposed the
fallacy of this hypothesis and its lack of empirical backing (Fox, xv).
8 Emergence “refers to ‘the arising of novel and coherent structures, patterns and properties
during the process of self-organization in complex systems.’ The common characteristics are:
(a) radical novelty (features not previously observed in systems); (b) coherence (meaning inte-
grated wholes that maintain themselves over some period of time); (c) A global or macro ‘level’
(i.e. there is some property of ‘wholeness’); (d) it is the product of a dynamical process (it
evolves); and (e) it is ostensive - it can be perceived” (Wikipedia).
9 Backward induction simply means reasoning backwards in time at t=n, from the end of a prob-
lem or situation, to determine a sequence of optimal actions at an earlier point in the game e.g.
t=n-1. In game theory, the idea is to carry this process backwards in time from the end game
until one builds a strategy that encompasses the best action for every possible situation (the
information set), at every point of time in the future.
10 The end state of a system is not sensitive to initial conditions i.e. the system does not exhibit
chaotic properties. Thus a natural distribution curve is a reasonable way to describe the poten-
tial states of the system over time with given probabilities.
11Cauchy distributions have fat tails that exhibit kurtosis (infrequent but extreme deviations
from the normal case). Also, the law of large numbers does not apply (measuring one instance or
a million instances will not improve a probability forecast), nor does the central limit theorem
(for large samples, the mean is normally distributed i.e. can be expressed by a gaussian distri-
bution).
12 There really is uncertainty in the world concerning the future – uncertainty that cannot be
reduced to statistical probabilities. Maybe this is what Secretary of Defense, Donald Rumsfeld,
meant by "unknown unknowns." For Keynes, this irreducible uncertainty and uncalculable
risk accounted for the instability of market economies and surprise outcomes of some game
strategies. Today, surprises are expected in some games due to work in behavioral economics.
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14 Bell’s Theorem proves nonlocality (correlation of our knowledge of the physical characteris-
tics of particles at a distance) in a quantum field. Essentially, two particles, at a distance, can
become entangled. Entanglement means that the state of one particle influences the sate of
another particle. This phenomena is described by Schrodinger’s equations. Locality is the prin-
ciple where influences ( “a set of knowable or unknowable parameters that are real numbers”)
are not propagated at infinite speed. In Nature, locality is violated. See Bernard d’Espagnat, On
Physics and Philosophy (Princeton & Oxford: Princeton University Press, 2006), 57, 64, 175, 436.
15From the branch of social science and mathematics that describes game theory - the study of
strategic decision making in situations involving uncertainty.
16A zero sum game always has winners and losers as the size of the pie is fixed; one person’s
gain is another’s loss. A non zero sum game is a game where either party’s interests are not
completely opposed as one player’s optimal strategy may also benefit the opposing player. In
this game all may loose and none gain. (Poundstone, 51-2, 97-99).
17A game state where it is impossible for the player to win the game. The only options are re-
starting the game or stopping and deciding to play another game with different rules.
18Even fighting limited wars with conventional weaponry is expensive. E.g. the total projected
economic cost of the 2003-present Iraq War is estimated at $3,000 billion.
19 Doomsday Machine, first coined by Herman Kahn in the 1950s was a hypothetical $10 billion
“device whose only function is to destroy all of human life.” See Herman Kahn, On Thermonu-
clear War (Transactional Publishers, 2007), 144. Assuming that the enemy knew you possessed
a doomsday machine, under the game of MAD, this should serve as a deterrence to attack. To
the best of our knowledge, the U.S. never set out to built a doomsday machine, and Kahn sug-
gested it was a dumb idea to do so. However, in the 1980s, the Soviets built a doomsday ma-
chine, Perimeter (Mertvaya Ruka, Dead Hand), in response to President Reagan’s proposed
Strategic Defense Initiative (SDI, Star Wars) missile defense shield.
The Soviets interpreted SDI as a First Strike system. Perimeter was designed to launch a nation-
killing attack on the U.S. automatically in response to sensor readings of radiation and impacts
on Soviet soil from U.S. warheads. First operational in 1985, the system is still live according to
some knowledgeable military sources. The Soviets kept Perimeter a secret from the U.S. and
did not consider it a deterrent to a First Strike by the U.S. Instead, Perimeter was thought of as
a fail-safe system for their own military to relax the need to launch-on-warning as even if Cen-
tral Command was wiped out, Perimeter would take over. Thus, survivability of command
structures were no longer important to retaliate. See Nicholas Thompson, “Inside the Apoca-
lyptic Soviet Doomsday Machine,” Wired Magazine 17.10 at
http://www.wired.com/print/politics/security/ magazine/17-10/m..
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