Was Stalin Necessary for Russia's Economic Development?

Some of the he-was-a-baddie-but-at-least-he-modernized-the-place say "yes"*. New research by a team of Russian economists says "no":

This paper studies structural transformation of Soviet Russia in 1928-1940 from an agrarian to an industrial economy through the lens of a two-sector neoclassical growth model. We construct a large dataset that covers Soviet Russia during 1928-1940 and Tsarist Russia during 1885-1913. We use a two-sector growth model to compute sectoral TFPs as well as distortions and wedges in the capital, labor and product markets during the two periods. We find that most wedges substantially increased in 1928-1935 and then fell in 1936-1940 relative to their 1885-1913 levels, while TFP remained generally below pre-WWI trends. Under the neoclassical growth model, projections under these estimated wedges imply that Stalin's economic policies led to welfare loss of -24 percent of consumption in 1928-1940, but a +16 percent welfare gain after 1941. A representative consumer born at the start of the Stalin's policies in 1928 experiences a reduction in welfare of -1 percent of consumption, a number that does not take into account additional costs of political repression during this time period. The projected performance under both Tsarist' and Stalin's wedges is much worse than the economic performance of Japan, which in 1885-1913 had similar levels of per capita GDP and distortions as Tsarist Russia, but experienced a rapid acceleration of non-agricultural TFP during the interwar period. Relative to this benchmark, the welfare loss of Stalin's policies are about -31 percent of consumption.

Via Cheap Talk, who notes that one of the economists -- Sergei Guriev -- has just left the country under duress from public officials.

The story that Russia's development was impossible or unlikely absent Stalin's repression always seemed unlikely to me. Other places have developed without those levels of repression (e.g. Japan, as the authers note, but not just), or have had repression without growth. The repression-growth relationship is not strictly positive and linear, in other words, so any story about Stalin and development has to be particular to Russia. And, frankly, I've yet to hear one that's had any solid theory behind it. (Perhaps someone could point one out to me in the comments.) I've heard mumblings that "Russia was a backwater hellhole" -- this was more or less Marx's view, although it's not true that Marx believed that socialism could not work there -- but every place is a backwater hellhole before they develop. Yes, Tsarism was bad, but plenty of regimes were bad in the 19th century.

I'd never really considered the possibility that all those supposed gains under Stalin didn't actually happen and in fact made things worse. It puts a new spin on the Cold War races for economic, military, and technological superiority.

I'm not sure I fully believe the two-sector growth model the authors use, which is pretty standard as these things go, but even the descriptive evidence is useful.

P.S. Here are some pictures of Soviet life in the 1950s.

*Terry Eagleton is of this sort, in his execrable recent book which manages to both misunderstand Marx and his critics at the same time. One relevant bit is quoted here.

Cultural Amnesia: We Must Invest in STEM or We Will Lose the Future!

[E]ven in the lower grades I found evidence of a much stronger emphasis on science than we give in the US. It is quite probable that within a generation Russia may have twice as many well-trained scientist as we. Russian resources are separated by vast distances. Her climate is exceedingly difficult. Transportation problems will always be most serious. But much of her soil is rich in the elements which when combined with a severe climate produce a most vital type of human being.

This could have be said by almost any politician in the US today, with the possible substitution of China for Russia. But, via Brad DeLong, it was actually said by Henry Wallace in 1952. There was a lot of threat inflation concerning the USSR in the 1950s and 1960s, and much of it was related to the knowledge economy and how that translated into national security ("missile gap", etc) combined with a sense that the US had underestimated the USSR in the 1940s. Not all of this was unreasonable, as Tony Judt recounted in a wonderful 1997 essay in The New Republic on the Chambers/Hiss affair (it's collected in Reappraisals but I can't find it online), but it got blown out of all proportion: without Hiss (and Chambers' special pumpkin) there wouldn't have been McCarthyism, and in the end McCarthyism mostly served McCarthy. In a similar, now we know that many of the principles that dominated US foreign policy from 1960-1990 -- brinksmanship, domino theory, MAD -- were simply unnecessary dangers, as the Soviet Union was not nearly as capable as the US leadership imagined it was.

Is there a lesson to be learnt? Towards the end of the Cold War we heard a lot about institutional superiority -- "end of history" and all that. Some of it was hyperbole, but there is some shred of truth in it as well. We genuinely believe that some form of democratic capitalism produces better outcomes than other systems, and we genuinely believe that societies which have norms of liberté, égalité, et fraternité, even if they are imperfectly applied, fare better than those which do not. Maybe we should take our own rhetoric seriously, for once: maybe we should worry a lot less about scores on science exams of 13 year old Chinese, and focus instead on translating the principles of liberté, égalité, et fraternité into practice.

P.S. the whole speech by Henry Wallace linked above is well worth reading, and could possibly be useful in an Introduction to International Relations course. There's a lot packed into a short document: commitment problems, asymmetric information, perception/misperception, etc.

UPDATE: Thanks to Noah Smith for driving traffic here. For new readers I should note that, contrary to what Smith wrote, as a quantitative social scientist I have nothing against math and science education. To say the least. I do have an issue with politicizing math and science education as a national security imperative, however, particular when done in a zero-sum "either we win the future or the Russians Chinese win the future" way. I thought I'd made that clear, but perhaps not.

Links

Some of these I may blog properly later, but time is scarce these days.

-- Ikenberry responds to Walt.

-- Good discussion of Herbert Simon and complex social systems.

-- Bernanke on how central banking has changed post-crisis, including on the interplay between regulatory and monetary policies.

-- Problems with Basel III implementation. This is what Jamie Dimon is referring to when he says Basel is "anti-American".

-- Vladislav Surkov, "Putin's Rasputin".

-- Interactive description of the eurozone crisis, as a series of weighted, directed networks. (ht Alex)

-- US attacks China's "Great Firewall" at WTO.

-- Ambrose Evans-Pritchard says world power is swinging back to the US. I hadn't realized it had gone.

Trade Developments

Some of this is already old news, but there were some developments on trade over the past week.

-- The US looks set to ratify FTAs with Columbia, South Korea, and Panama. I've been pondering a longer post about the value of FTAs, which I'll try to get to in the future. For now it's just worth noting that these deals are pretty small beer.

-- Russia's going to try to get into the WTO. Again. This is potentially important for Europe (and Russia); not so much for the US.

-- Obama's going after China on violating WTO rules by not reporting subsidies -- 200 of them, apparently -- some of which are probably WTO-illegal. I think this is important. China's trade policies are incredibly distorting, and the global economy needs a rebalancing. Adjustment is occurring, but perhaps not quickly enough. Going through the WTO is much better than risking a trade war by unilaterally imposing tariffs in response to currency manipulation.

-- So, of course, Congress is also risking a trade war by considering unilateral tariffs in response to Chinese currency manipulation.

And some new research:

Why Do Some Countries Get Better WTO Accession Terms Than Others? 

Krzysztof J. Pelc

International Organization 65 (4)

The process by which countries accede to the World Trade Organization (WTO) has become the subject of considerable debate. This article takes a closer look at what determines the concessions the institution requires of an entrant. In other words, who gets a good deal, and who does not? I argue that given the institutional design of accession proceedings and the resulting suspension of reciprocity, accession terms are driven by the domestic export interests of existing members. As a result, relatively greater liberalization will be imposed on those entrants that have more valuable market access to offer upon accession, something that appears to be in opposition to expectations during multilateral trade rounds, where market access functions as a bargaining chit. The empirical evidence supports these assertions. Looking at eighteen recent entrants at the six-digit product level, I find that controlling for a host of country-specific variables, as well as the applied protection rates on a given product prior to accession, the more a country has to offer, the more it is required to give. Moreover, I show how more democratic countries, in spite of their greater overall depth of integration, exhibit greater resistance to adjustment in key industries than do nondemocracies. Finally, I demonstrate that wealth exhibits a curvilinear effect. On the one hand, institutionalized norms lead members to exercise observable restraint vis-à-vis the poorest countries. On the other hand, the richest countries have the greatest bargaining expertise, and thus obtain better terms. The outcome, as I show using a semi-parametric analysis, is that middle-income countries end up with the most stringent terms, and have to make the greatest relative adjustments to their trade regimes.

Using Social Science in Russia

In Russia, social scientists use competing metrics to try to influence policy:

Social science was part of that from early on; one factor in Mr. Putin’s selection as president was a survey that showed that Russians’ most-admired figures were fictional tough guys — the undercover spy Max Otto von Stirlitz and the homicide detective Gleb Zheglov, said Igor V. Zadorin, who headed the Kremlin’s in-house sociology department at the time. ...

The opposite argument is coming from a liberal set of social scientists, who say the data shows the public is demanding a more open and competitive political model.

The economist Mikhail E. Dmitriyev — whose research group was originally founded to shape Mr. Putin’s economic platform— began warning of a “pretty abnormal” spike in dissatisfaction he observed in political focus groups, first among middle-class Muscovites and then appearing in other large cities.

This brings to mind Fabio Rojas' post from the other day. In this case social science is being used to undermine democracy, but only by making Russia's "competitive autocracy" more responsive to citizens. Which is supposedly a key element of democracy. Interesting stuff.

Burmese Junta Dissolved

Man, the world is moving fast right now:

Myanmar’s ruling generals will preside Monday over the first meeting of Parliament in more than two decades, a move that they say completes the country’s transition to a multiparty democracy.

Officially, the opening of the two-chamber Parliament in the capital, Naypyidaw, will mean the dissolution of the junta that has ruled Myanmar since 1988, when the country was known as Burma.

But it does not appear to be the dawn of unfettered democracy. A quarter of the seats are reserved for the military, and a military-backed party controls more than 80 percent of the rest, allowing the generals to effectively retain their power, albeit in a less hierarchical system.

Maybe call it the Russian model? Looks like oligarchy to me.

The military government, meanwhile, is aggressively selling off buildings, factories and state-run companies, mostly to allies and family members of the country’s military leaders. The rush to privatization vaguely resembles the vast sell-off in Russia after the Soviet Union collapsed. ...

David I. Steinberg, a Georgetown University professor and a longtime observer of Burmese politics, predicted that the new political system would lead to more freedoms and openness, but that it would be a “slow and tortuous” process. He declared himself “cautiously pessimistic.”

The Cold War Is Really and Truly Over (Right?)

I knew it was gonna be awesome when Medvedev started a Twitter account. Even better when he started an English version. Is this lost in translation, or just perfection of politicians' pablum?

Improvements due to a high oil price could lead to unjustified tranquility.We have seen this before. We must not allow this to happen again.

Yes. We must be very careful to avoid "unjustified tranquility". We cannot let ourselves be tranquil again. We have seen this before.

Snark aside, Russia cannot depend on oil revenues forever. This is true, and Medvedev's whole thing on this North American trip has been about boosting information technology (and hamburgers?) in Russia. Just a funny way to say it is all.

Oh, and spies.

The New Cold War

Russia is laughing at us:

Even in Russia, the recent blizzards that have hit Washington have been noticed. Though not always sympathetically. Were Congress and other powerful institutions really closed, not to mention the schools? Did panicked residents actually strip stores of food, making the bare shelves resemble something from the Soviet era?

All because of the snow?

Russia, mindful that it trails the United States in many measures, tends to leap at any chance to promote its supremacy, and when it comes to wintry hardiness, there is, of course, no contest.

This is one cold war that Russia wins.

In their reports sent home, Russian journalists in Washington seemed to have a hard time suppressing their grins. Mikhail Solodovnikov of Russian state television did his segment wandering outside the Capitol without a hat, as if to demonstrate how positively temperate the place was. (It is practically against the law in Moscow to venture outside hatless in February.)

Of course, a big part of the freak-out in the States is the fact that these are rare events so our infrastructure isn't made for it. In the NC Triangle, even a couple of inches of snow is debilitating because we have few snow plows and don't salt the roads. Similarly, D.C. can handle a couple of inches but not a couple of feet. The fact that Moscow deals with this sort of thing all the time makes it much easier for them to deal with. Or does it?

In truth, while Russians have more experience with winter, they are not necessarily much better at cleaning up after it. First-time visitors to Moscow can be surprised at how the snow and ice are often allowed to linger.

The reasons vary. One is that local officials here are less responsive to public complaints than their American counterparts. So Russians complain less, publicly. That makes it hard to imagine a scandal like the one that engulfed Mayor John Lindsay of New York in 1969 over complaints of a failure to plow streets in Queens.

Russians, accustomed from Soviet times to having the government take care of things, do not always feel responsible for shoveling sidewalks. The country, for better or worse, does not have a very litigious culture, so people do not fear slip-and-fall lawsuits.

In general, Russians approach winter as they do many hardships, with an it-is-what-it-is fortitude.

Ah, I see: Russians are laughing at us because we'd rather stay home and warm rather than wreck our cars and break our necks trying to navigate treacherous roadways and city streets. We also expect our government to provide public goods, hold them accountable when they don't, and aren't masochistic.

I guess I can live with that.

The Russian War on Drugs

Well, vodka anyway:

The price of the cheapest half-liter vodka bottle will nearly double to a new minimum of 89 roubles ($2.95), according to the alcohol regulator's website www.fsrar.ru...Russia has moved to triple the excise duty on beer and is considering drastic limits on where and when beer can be sold, such as banning the sale on street side kiosks. ...

In 1985, the last Soviet leader Mikhail Gorbachev declared a war on the traditional evil of alcohol abuse, ordering dramatic cuts in the production of wines and spirits and introducing strict controls on public consumption of alcohol.

The campaign triggered a surge in illegal production of low-quality home-brewed booze and the curbs dealt a blow to the popularity of Gorbachev, the author of the liberal Soviet reform known as Perestroika.

Via Reason, who explains why this is doomed to failure:

Because the average Russian drinks like an unemployed Foster Brooks, the Kremlin has decided to create a black market in booze from neighboring countries like Estonia, Latvia, and Lithuania, by levying an enormous tax on beer and vodka.

The story is interesting in its own right, not least because Gorby's ill-conceived alcohol battle was one of the missteps in the 1980s that led to the USSR's demise. But mainly I just wanted to re-post this video of some of Boris Yeltsin's greatest hits:

Russian Government Advocates Punching Russian Policemen

No, seriously:

[H]ere’s one you don’t see very often: the Interior Minister of a country suggesting the people should literally hit back at the police. As reported in the Washington Post, Interior Minister Rashid Nurgaliyev stated:

May a citizen hit back at a policeman who has attacked him? Yes he may; if he is not a criminal, if he is walking along quietly and breaking no rules.

Moreover, the Power Vertical quotes a Russian MP, Andrei Makarov, as suggesting:

You can neither modernize nor reform the Interior Ministry. You can only abolish it. The whole police force needs to be decommissioned and cleansed with help from civil society and human rights groups.’

While such a comment might not be unexpected from an opposition deputy (to the extent that any even exist in Russia these days), what is particularly interesting is that Makarov is actually a fairly prominent member of Russia’s ruling party, United Russia.

I'd like to link to a particular N.W.A. song here, but instead here's a video of Argentinean legislators throwing chairs and punching each other (it starts at about the 1:30 mark).

Visit msnbc.com for breaking news, world news, and news about the economy

My Job Market Search Will Not Include Russian Universities

St. Petersburg (Russia) State University has decided to rescind academic freedom:

Word spread this month among the faculty members of St. Petersburg State University: According to a document signed on Oct. 1, they have to submit their work to administrators for permission before publishing it abroad or presenting it at overseas conferences.

The order, which was circulated internally and made its way onto a popular Internet forum, says professors must provide their academic department with copies of texts to be made public outside Russia, so that they can be reviewed for violation of intellectual property laws or potential danger to national security.

Many professors are (understandably) upset. But it's all an overreaction, says the university's vice rector:

He said he did not believe that the order would interfere with professors’ efforts to publish abroad. “One of the psychological problems we’re encountering is that some of our colleagues, instead of reading the documents carefully to understand what will be examined, and for what purpose, are speaking out against any kind of control,” Dr. Gorlinsky said.

Umm, yeah. They are speaking out against any kind of control. It's sort of a touchy subject for academics. Especially Russian professors, who seem to remember Russian history:

Some professors reacted with alarm, saying the model recalled the Soviet era’s notoriously bureaucratic “first division,” which reviewed documents before they were released to the outside world.

Vyacheslav Y. Morozov, an assistant professor in St. Petersburg State University’s international relations department, estimated that 70 percent of the scholars in his department published and spoke abroad regularly, and worried that the new demands could make that impossible.

“It might be a model for the defense establishment, but I don’t think anything like that exists in the universities,” Professor Morozov said. “Maybe in China. Maybe in Iran.” ...

Several St. Petersburg professors said they worried that the rule would be applied selectively to penalize specific faculty members, either because they were in conflict with administrators, or because their work was critical of the Russian government.

I wonder what the penalty will be for violating the rule? A cup of Polonium tea?

Who's Been Sleeping in Putin's Bed?

From FP Passport:

In a move towards great transparency and accountability, the Kremlin yesterday released figures detailing a recent order of new furniture. It sounds simple enough but, as is usually the case with Russian politics, it quickly became the stuff of legends -- or at least, Aesop's fables. The total value of the interior ministry's furniture tender, it appeared, was $755,900 (24.4 million roubles) and included a cherry wood bed with head and footboards coated in a thin layer of 24 carat gold. Though other items will be delivered to an address in the exclusive dacha district on the outskirts of Moscow where many senior officials live in state-owned homes, the gilded bed will be sent to the ministry headquarters.

Unsurprisingly, the news has received much criticism in a country where the economy shrank 10.9 percent in the last quarter. I think the question praying on all our minds is: who's going to be sleeping in the gold bed?

Good question, but maybe not the right one. If this is what happens after the government is made to be more transparent, imagine what was going on before. So the right question is "How many other gold beds are there that we don't know about?" Perhaps everybody is sleeping in gold beds.

Oh, who am I kidding. The gold bed must belong to this guy:

Obama's Summer Vacation

There is no doubt that Obama is media-savvy, so when he chooses a somewhat curious venue for a major speech, it is worth examining why. His speech at the New Economic School in Moscow on Tuesday is no different. A professor at that university speculates about Obama's reasons for choosing NES over more high-profile sites:

First, it is important that NES is a new institution, founded in 1992. Similar to the way Obama represented a new political paradigm for Americans who voted for him, NES also represents a new paradigm for the modern study of economics.

Second, Obama is the first U.S. president in many years to have built his political career not by dividing voters into separate ideological camps, but by searching for pragmatic and nonpartisan solutions. After 70 years of ideological domination by the state, the NES is continuing the traditions begun by such great Russian economists as Yevgeny Slutsky, Nikolai Kondratyev and Nobel Prize winner Leonid Kantorovich, whose work rose above ideological or national boundaries, as it should be in any scientific field.

More at the link, but maybe a more simple explanation is that Obama wasn't invited to a more prominent stage. After all, Obama has not shied away from grandiose settings for past speeches, and the Russians didn't seem interested in attracting a wide domestic audience for Obama.

Via Joshua Tucker at The Monkey Cage, who has more reactions to and context for Obama's trip to Russia.

Straight Outta Lagos

This was probably inevitable:

It probably seemed a good idea at the time. But Russia's attempt to create a joint gas venture with Nigeria is set to become one of the classic branding disasters of all time -- after the new company was named Nigaz.

That, of course, being a mash-up of "Nigeria" and Russian energy company "Gazprom" rather than a tribute to "the world's most dangerous group".

I so want to post some YouTube vids here, but alas: this is a family-ish blog. Instead, here's a link.

Via Blattman.

Gettin' Ugly in Ukraine...

From today's NY Times:

Steel and chemical factories, once the muscle of Ukraine’s economy, are dismissing thousands of workers. Cities have had days without heat or water because they cannot pay their bills, and Kiev’s subway service is being threatened. Lines are sprouting at banks, the currency is wilting and even a government default seems possible.

Ukraine, once considered a worldwide symbol of an emerging, free-market democracy that had cast off authoritarianism, is teetering. And its predicament poses a real threat for other European economies and former Soviet republics.

The sudden, violent protests that have erupted elsewhere in Eastern Europe seem imminent here now, too. Across Kiev last week, people spoke of rising anger about the crisis and resentment toward a government that they said was more preoccupied with squabbling than with rallying the country.

As the article makes clear, financial disaster in the Ukraine, a large land mass of almost 50 million people strategically located on Russia's doorstep, would not be good for Western democracy, capitalism or interests. If the Ukrainian government collapses under the pressure of financial turmoil, there is little doubt that Russia would seek to meddle in Ukraine's domestic politics, expand and entrench its influence and seek to move Ukraine away from the goals of the 2004 Orange Revolution. Free-market capitalism has taken a beating in the country over the past year or so and Russia would like to continue to whither its support. It would also likely step up to aid Ukraine with its debt issues.

In February, the International Monetary Fund refused to release the next installment of a $16.4 billion rescue loan to Ukraine because the government would not adhere to an earlier agreement to pare its budget.

Around the same time, Ukraine’s finance minister resigned, saying that the job had been “hostage to politics.”

On Friday, the monetary fund projected that Ukraine’s economy would shrink by 6 percent this year, and said that it was continuing to work with the government to find a way to disburse the rest of the rescue loan.

Europe is failing to step up to offer Ukraine and other Eastern European countries a helping hand. Let us hope that the IMF and EU can put something together relatively soon to at least keep the Ukrainian economy afloat. 

Payback Time

Whew! And I thought the World Economic Forum would be boring this year. Instead, in separate appearances today, Russian President Puppetmaster Prime Minister Vladimir Putin and Chinese Premier Wen Jiabao took turns blasting the U.S.'s role in the current economic crisis:

The premiers of Russia and China slammed the U.S. economic system in speeches Wednesday, holding it responsible for the global economic crisis.

Both focused on the role of the U.S. dollar, with China's Premier Wen Jiabao calling for better regulation of major reserve currencies and Russia's Prime Minister Vladimir Putin calling over-reliance on the dollar "dangerous." ...

Mr. Wen's comments came just days after U.S. Treasury Secretary Timothy Geithner accused China of manipulating its currency for economic gain. The Chinese premier gently, but firmly warned that if Washington and Beijing chose confrontation, both would be losers.

It is certainly true that a confrontation between Washington and Beijing would turn ugly very quickly, but I was heretofore unaware that the proximate cause of the economic crisis was lax regulation of the dollar. All this time I thought that the relative strength of the dollar (esp. to the RMB and ruble) led to a structural misalignment that inflated financial markets and led to excessive risk-taking (and that the Chinese were actively complicit in this arrangement). Now I'm being told that the problem is that the dollar hasn't been "regulated" enough, although I'm not sure exactly what that means. Neither Russia nor China want the dollar to slip, and the dollar has held its value or increased against almost all of the world's currencies in recent times. So what are they talking about?

Once again, I think that these sorts of statements, like Mr. Geithner's from the other day, are best read as cheap talk intended for domestic political audiences; Mr. Wen and Mr. Putin both face political pressures at home which will only be exacerbated by the economic crisis. For them, scapegoating the U.S. is an easy and popular way to galvanize support. Of course, the same is true in the U.S., so I don't expect the Obama administration to curtail public denunciations of Chinese policies any time soon.

Big Win for Russia? Nyet.

(red line: U.S. stock index S&P 500; blue line: Russian stock index RTSI)

The Russia/Georgia conflict has gotten a lot of attention from IR scholars and public commentators. Some have noted that Friedman's "Golden Arches Theory of Conflict Prevention" has now been definitively disproved, others have questioned whether or not "democratic peace" theories should also be cast aside. Still others see a return to the Cold War on the horizon, and think that the redux may be a bit hotter than the original.

But not very many people are talking about the economic consequences of the conflict for Russia and Georgia. They are... not good. The Financial Times has been doing a lot of good reporting on the Russian side, and things are not going well:

An exodus of foreign capital is forcing Russian banks to slash lending as the international reaction to the country’s military standoff with Georgia starts to affect the real economy.

Bankers say Russia is facing its worst crisis since the August 1998 default. The Russian stock market has plummeted more than 40 per cent since May. A flight of capital estimated by analysts at up to $20bn (€14bn, £11bn) since the start of the conflict is drying up liquidity. The Russian Trading System index fell another 7.5 per cent on Tuesday to its lowest level since June 2006.

The rouble fell to its lowest point since the Russian financial crisis of 1998. Putin and Medvedev are in a public squabble over whether this trouble is related to the Russia-Georgia conflict, but I know of no neutral observer which doesn't think that some, not all, of the recent financial and economic trouble in Russia can be blamed on a lack of investor confidence caused in part by the Caucasian Conflict.

What's striking is that this is going on while the price of oil is still fairly high and while there are major concerns about the safety of U.S. bonds and securities. Russia, along with other commodity-rich countries, should be benefitting from the U.S.'s troubles. Indeed, some of them are, but Russia isn't. Georgia isn't doing very well, either.

What does it all mean? Daniel Drezner thinks that a more globalized world makes war more costly, and therefore less likely. Russia and Georgia both acted belligerently, and both are paying a big price, despite the fact that there have been no economic sanctions placed on either. It is true that wars are more costly if the opportunity costs (i.e. lost trade and investment) are greater, but is that enough to prevent wars that might otherwise occur? A wiser man that I will have to answer that question.