Analysis of Trump on Climate change & other Compacts

Dropped on:June 3, 2017
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Nullification of A Compact by Marc Zegan on Facebook:
Donald Trump’s decision to exit the Paris Climate Accords represents a profound, but unsurprising misunderstanding of the nature and effective resolution of an important class of collective action problems.  This misunderstanding was evident in the President’s characterization of the Accords as a “transaction,” when most pointedly, like other durable multi-party agreements, the accords are a compact–a far different entity from a transaction. It is not surprising that Trump would understand such an agreement as a transaction because his world view is framed entirely through the lens of a business executive who, for five decades, has ruthlessly and with guile pursued his narrowly conceived self-interest.  This transactional perspective also explains why Trump is determined to undo our collective alliances and to exit treaties–whether they be on trade or the environment–that have multiple signatories.

Throughout his career Trump has framed his self-worth in terms of his ability to get leverage over his negotiating partners by any means possible, and a willingness to default on his obligations to contractors and lenders when he can exploit gaps in the enforceability of the contracts he has entered into. In economic parlance, Trump looks for bargaining situations in which he can extract economic rents, and business situations in which he can take advantage of asymmetries of information, resources and power that allow him to free-ride on the efforts of others.  Trump understands viscerally, that in a two party negotiation asymmetries of power and information give leverage to the stronger party.  By contrast, in multi-party arrangements it’s far easier for weaker parties to free-ride, extracting excess benefits as the price of their willingness to participate in an agreement that at the margin still benefits the larger actors.

As a developer, it’s no wonder that Trump hates such behavior.  He knows full well the rents that the last owner to sell a property can extract from a developer trying to assemble a parcel, and nothing upsets Trump more than the notion that someone might be able to gain leverage over him in a deal.  Accordingly, he looks with disdain at alliances such as NATO, where allies free ride to some degree on the alliance, securing benefits disproportionate to their relative contributions, trade agreements that incorporate asymmetric benefits, and climate accords that do the same.  He’s correct in his assessment that in bi-lateral arrangements, the U.S. can extract and enforce larger concessions from its counter-parties than it can in many multi-lateral compacts.  This insight, however, does not mean that in the long-run bi-lateral treaties and accords always constitute, to use his favorite term, a better “deal.”

Compacts, unlike transactions, are durable agreements among several parties that establish common values and objectives, codes of behavior appropriate to these ends, and mechanisms for developing practices that strengthen the efficacy of these compacts over time.  A well conceived and executed compact incorporates all actors whose participation is necessary to achieving its underlying purpose, and those actors whose participation is beneficial to that end.  Put differently, an effective compact is one that that is well matched in size, obligations and membership to resolution of, or meaningful progress toward, resolution of the underlying collective action problem. (Compacts that subvert larger collective interests are badly formed, an insight that provides the basis for the clause in the Constitution that forbids two or more states from entering into an interstate compact without the approval of Congress.)
In such a compact, the relative stakes in achieving a collective solution may vary considerably.  Accordingly, actors with lower genuine stakes in contributing to a collective solution are positioned well to extract concessions (by playing “weak threat” positions) in order secure their participation, and to meet their obligations in the breach during the life of the agreement.

That parties with lower stakes in the outcome can exploit weak threat opportunities for defection, does not mean that a multi-lateral agreement is ill-advised.  If the benefits to the more deeply invested players on net exceed the costs, and if better alternatives to resolving the underlying problem are not practically available, then such agreements hold merit.  Yes, they should be fiercely negotiated; yes they should have strong monitoring provisions, and as strong mechanisms of enforcement as are practical, but some degree of distortion within the agreement is an acceptable price when it yields a greater good.  This is what Trump profoundly fails to understand.  He fails to grasp this basic truth because it violates his core belief that success is defined by getting over on the other guy.  Not only is that poor business practice, it’s a naive and foolish means of conducting foreign policy.

As he looks for points of reference in his quest to Make America Great Again, Trump would do well to recall that our path toward nationhood began not with the Mayflower Transaction, but the Mayflower Compact.  His withdrawal from the Paris Accords is both ill-considered and unAmerican.  Ultimately today’s action is one that will be seen as a defining moment in the utter failure of his Presidency.

#ParisAccords #ClimateChange #GlobalWarming

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