In the last posting, this blog presented a game. It’s called the dollar auction in which literally
a dollar goes up for auction. The
scholar who introduced this game, Martin Shubik, reports
that he made, on average, $3.40 playing the game and acting as the
auctioneer. He even reports making up to
$20 in one playing of the game. The
auction is conducted as any auction with one difference: not only does the highest bidder pay his/her
bid, but the next highest bidder must pay what he/she bid while walking away
with nothing.
The reader is
invited to look up that posting if he/she missed it. It’s entitled, “In for a Pound.” It leaves the reader with a preview of this
posting and suggesting the dollar auction has something to say about the
nightmare the Vietnam War proved to be.
It also gives insight into the financially disastrous experience the
initial Concorde supersonic passenger aviation program was.[1]
In terms of
Vietnam, Laszlo Mero[2] points
out that President Johnson’s early speeches on the war were full of idealistic,
but rational messages. The emphasis was
protecting democracy, advancing freedom, and promoting liberty. A war that advances these ideals can be
rational if the costs are reasonable.
But as time passed, the American
public became more informed as to what the politics of South Vietnam were –
corrupt and lacking in these idealistic attributes – and the costs became
evermore significant. The idealistic calculation
to most Americans became skewed toward withdrawal. Consequently, Johnson’s rhetoric became “in
for the pound” sort of argument. He said
withdrawal would damage the national honor, would be a step away from halting
Communism, and/or it would project weakness.
In short, as in the dollar auction, the nation, in the estimation of the
policy makers, had invested too much to walk away.
This reminds one of marginal analysis
which this blog has described at various times.
Should one do X (continue the war)?
Rational thought calls for a marginal analysis. One is reasonable in continuing – or even
starting – something if one anticipates that the extra benefit from doing it
exceeds the extra cost involved. How
much more will it cost to continue the war?
What can one expect will be the reward in doing so?
The first of these questions is
relatively easy to determine. War
expenses are well understood – heaven knows, unfortunately, the nation has had
sufficient experience to have such an understanding. But how about the second question? What was known at the time that assisted
policy makers to answer that question?
The recent film, The Post, dramatizes the fact that it became known among policy
makers that the US could not win the war – either in terms of an outright
capitulation of the enemy or a withdrawal due to attrition of their resources. That was the central message contained in the
Pentagon Papers.
Ergo, it was irrational to continue
the war, much less escalate it. Yet, escalation
was the policy of the Johnson administration.
The “in for the pound” arguments prevailed much to the tragic results in
terms of human life and national – both to Vietnam and the US – resources. Since then, it is amazing to this writer how
much the relationship between the two countries has become as positive as it
has. Perhaps a rash of rational thought
has broken out.
As for the Concorde example – a
cooperative venture between France and Britain – it was to develop and institute
intercontinental passenger service using a supersonic jet – it traveled twice
the speed of sound. Here, another aspect
of these calculations comes into play.
It is rational for the developers of the program (functioning as an auctioneer
in this example) to provide estimates of future costs as being lower than is
the case. Lower initial costs lures
consumers – France and Britain – into the program, but as the project evolves,
the costs first become more realistic and then become exorbitant.
Mero writes of how TV programmers are
aware of this phenomenon and front-load programs with few commercials (low
costs to the viewer) and then, as the viewer invests his/her time and interest
into the program, loads those commercials toward the end of the program. By that time, the viewer is so invested that
he/she is very unlikely to leave the program due to any annoyance the
commercials provide.
Likewise, as France and Britain sank
their investment dollars (pounds or francs), they fell victims to “in for a
pound” thinking. Withdrawal was
tantamount to admitting foolishness with the nation’s treasure. That is not a formula for success in the
political thicket of democracies which both France and Britain were and are. Therefore, before the Concorde was abandoned
(the service lasted from 1969 to 2003), a lot was lost down that rathole. One can figure the project was abandoned as
more and more of the initial politicians departed the scene.[3]
This notion of the dollar auction can
be presented in civics and history classes.
The game can add insight into what otherwise can be quizzical. Vietnam is one example, but this dynamic reoccurs
often both at the national level or at the individual level and all levels in between. Secondary students are old enough to note
their own folly along these lines or of that of their parents, relatives, or
school officials.
“In for the pound” thinking happens
all the time. As Mero writes: “The principle of the dollar auction keeps many
people in unsatisfying jobs and unhappy marriages. Every fight is basically a dollar auction; if
it isn’t, it is not a fight but a thrashing.”[4] Surely, by secondary school years, a student
has had first-hand knowledge of a fight or two, perhaps even a thrashing. Hopefully, these are not physical (they
usually aren’t), but, surely, they are always emotional.
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