Tragedy of the Public Good: Why the U.S. Shouldn’t Quit NATO … – Bloomberg

It has been a nervous year, Tom Lehrer once remarked, and people have begun to feel like aChristian Scientist with appendicitis. That was 1965, and he was speaking of the escalation in Vietnam and the Dominican Civil War. With President Donald Trump steering foreign policy, Americans surely know how he felt.

The latest news is that Defense Secretary James Mattis has told NATO allies that if they dont start carrying their weight, the U.S. is going to moderate its commitment to the region. Now, as an abstract matter of principle, Im firmly behind this. Only five NATO countries actually hit their targets, and three of them are a lot poorer than the sponging grifters that have cut their militaries back while enjoying the safety of the U.S. security umbrella.

The freeloading countries dont even send a fruit basket to Washington to say thanks. In fact, as a rightish American whos spent a bit of time abroad, I can personally attest that many of those NATO members citizens feel free to disparage our massive military budget, as if their smaller budgets were some sort of moral sacrifice rather than an unearned benefit paid for by U.S. taxpayers.

There, I got that off my chest. I hope we all feel better.

Nonetheless, even for me, Mattiss statement is a sort of gulp moment. The Europeans arent the only people who benefit from the American security umbrella. The fact that the worlds biggest rich economy is willing to spend so much of its GDP on the military doesnt just mean that other countries dont have to; it also means that other countries dont bother, because they cant possibly catch up.

There are downsides to this. Countries with a big hammer will inevitably end up using it in ways that turn out to be stupid. (See: Iraq.) It also, inevitably means that the security umbrella of the world will be used in ways that the country that owns it likes. (See complaints by every country except the U.S., many of them justified.) But for all that, you can certainly imagine a country with an America-sized military advantage doing much worse things with it. Many worse things. In fact, when you think about alternative histories, were pretty far into the happy zone of the spectrum. Not all the way to utopia, mind you. But a lot better than youd imagine, if youd never heard of the United States of America and you were plotting out your science fiction novel with a dominant, heavily armed nation.

A more evenly multi-polar world would look like -- well, perhaps youre acquainted with a little tiff known to historians as World War I. You may even have read about the exciting sequel they made when the first production turned out to be so great. That was terrifying enough when the nastiest stuff in the worlds arsenal was toxic gas. It gets even more terrifying when you have bombs that can flatten a city or worse.

Unfortunately military spending is the ur-example of what economists call a public good. These provide a benefit to everyone, and once the benefit has been created, it cannot be taken away from anyone.

Imagine a public health campaign that eliminates HIV, wiping it off the face of the planet. Thats an enormous benefit to the world. But if I pay to get rid of HIV, I have no way to charge you for the benefit I provided. Once Ive gotten rid of HIV, you benefit from my investment, whether you pay me back or not.

Public health, defense, crime control -- these are classic public goods because for some people to get the benefit, everyone has to. Unfortunately, the optimal self-interested strategy is therefore to let other people pay for the stuff, while you free ride. If everyone practices the optimal strategy, no one gets the benefit. Enter government, which has to secure these things, if were going to have them, and force everyone to pay the bill.

Thats fine for crime, because its effects are local and the cost of management relatively moderate. If the Topeka City Council figures out a way to wipe out crime, theres probably very little spillover effect in San Luis Obispo, and zero cost to San Luis Obispoans. But in the case of plagues and national defense, we can run into a problem, which is that the effects are very large, and the investment required can be huge. Imagine that we didnt treat national defense as a federal responsibility, and handed it to the states. Maine and Texas would have gigantic militaries; places like Connecticut and Oregon might have sizeable Coast Guards. But the rational military budget for a place like Nebraska would be pretty close to zero. Because border states are of limited size and financial capacity, the militaries of those places would probably be smaller than everyone would like, even as the proud people of Montana labored under gruesome taxes to protect Coloradans from the fearsome Canadian horde.

In fact, you see this problem with NATO. Of the five countries that are actually pulling their weight, only two can be said to be doing so for reasons that arent strictly rational self-interest (the U.S. and Britain). The other three -- Greece, Poland and Estonia -- border non-NATO countries and are pretty worried about future conflict with a military power that meets or exceeds their own. The problem is that neither Poland nor Estonia could ever even remotely hope to repel a Russian invasion. If the U.S. gets fed up with its NATO partners and withdraws, Germany would be depending on the Poles to fend off any Russian aggression -- or hoping that Russia got sick of all the winning after they took Poland and stopped there. (See: World War II.)

Military capacity takes time to build up; even the famous mobilizations of the 20th century were built around a core of officers who had spent their lives thinking about little things like the best tactics to repel invasions, and how to transport large numbers of troops and supporting items to the front while keeping them in condition to fight, and how to get people to overcome their self-interest to pick up a gun and run into harms way.

Only the U.S. has consistently invested so much in this buildup. Because the U.S. has decided to provide this public good of military protection to much of the world, other countries have let those skills atrophy. If the U.S. actually decided to become isolationist, other countries might quickly become willing to assume its military roles, but would not immediately be able to. Pouring money into the defense budget now will not create the majors and lieutenant colonels and generals you need; those arise only if you invested in lieutenants years back.

All of humanity now benefits from this public good: a world in which major wars are pointless. No government except the U.S. can possibly provide that. (Even if you think youd fancy a world policed by China better, its economy does not yet throw off enough surplus to play lone superpower, and neither does Russias.) Multilateral institutions can step into the breach somewhat, but multilateral institutions dont have the same taxing power that a territorial state does, and it shows. All NATO can really do is complain that members arent meeting their targets. The U.S., as the member picking up the tab, can threaten to pull out if other states don't contribute more. But following through on that threat would hurt us as well as them.

Given those two choices, Ill grit my teeth and pay the taxes and practice my frozen smile for my next trip to Europe. But if Trump makes the other choice, then I, like everyone else in the world, will have to live with the result.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

To contact the author of this story: Megan McArdle at mmcardle3@bloomberg.net

To contact the editor responsible for this story: Philip Gray at philipgray@bloomberg.net

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Tragedy of the Public Good: Why the U.S. Shouldn't Quit NATO ... - Bloomberg