Supply and demand...for anarchy?
Scott Sumner has got me spotting supply and demand mistakes all over the place. This post combines that theme with the question of ' the price of anarchy ', outlined by Gravity and Levity last week. Niall Ferguson has blended both of them into a particular detail of his FT article on "lucky" Barack Obama . It would take a long time to critique the whole article, but here's the salient point: Iraq is likely to become more unstable as US troop levels are reduced. Now on the surface, that sounds obviously correct. But how about if we turn it around to make the real causality clear: US troop levels are being reduced as Iraq becomes more stable. The thing about supply and demand, like any equilibrium system, is that any change tends to create a pressure to counteract itself. In this case, the reduced "supply" of anarchy has increased its price, thus reducing the production returns on its complementary good, the US Army. Thus the army's supply curve shif...