Sunday 20 April 2008

Economics of defense ... ministers

At Economic Logic they are discussing the appointment, in Spain, of a pacifist as defense minister. Odd?

May be not. As the economic logician points out
Spain has be burned by the Iraq adventure, and clearly it now wants to find a way to commit to a different course. But that is difficult, because once in power a government gets dragged into decisions it would not have taken beforehand, what we call time inconsistency. There are two ways to counteract this: find a commitment device, or appoint a decision-maker who is biased against what you want to prevent. This is why central bank governors are typically biased against against inflation. In this case, we have a pacifist.
I wonder if the Spanish armed forces will fully appreciate the logic!

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