Generational Dynamics
	Forecasting America's Destiny ... and the World's
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A beautiful mind? The world is paralyzed into a "Nash equilibrium"

You may have seen the 2001 movie "A Beautiful Mind" the mathematician who won a Nobel Prize in Economics in 1994, even though Nash himself was nutty as a fruitcake.

He won his Nobel prize in the field of game theory. Game theory is a branch of mathematics where you study games like "rock, paper, scissors." Each player makes a "move" and then, based on the rules, the player gets a payoff (positive or negative). And, as documented by the World Rock Paper Scissors Society (serving the needs of decisions makers since 1918), even this extremely simple child's game can be played with very complex strategies.

A "zero-sum game" is one in which the sum of all the players' payoffs is zero. Poker is a zero sum game, because if you win then someone else loses.

There are obvious examples of games in international relations. One country may invade another if it thinks it can win -- territory, resources, etc. Two countries may be enemies, but still not go to war, since each believes that both countries will have negative payoffs in the case of a war, no matter who wins. A war is seldom a zero-sum game.

This brings us back to John Nash. His concept of the "Nash Equilibrium" is as follows: In many games, you reach a point where each player has to play the same "move" over and over again, or lose. In other words, no deviation in strategy for any single player is profitable.

When you apply this definition to international relations, you can easily get a bunch of examples that appear to follow the Nash Equilibrium concept:

• No two countries with nuclear weapons have ever gone to war with each other. I first started hearing about this in the 1980s with respect to Pakistan and India. They'd had wars before, but stopped having wars when they both got nuclear weapons.

  This is like a "Nash Equilibrium" because a war between any two such participants would lead to the use of nuclear weapons, which would result in negative payoffs for both sides.

• Since 1990, the number of wars in the world has fallen sharply. The United Nations gives itself all the credit for this, but from the point of view of Generational Dynamics, there's a different explanation. These have been generational unraveling and crisis eras for countries that fought in World War II, and during this period even a small war could spiral out of control into a crisis war that could engulf other countries, thanks to various defense treaties.

  International leaders understand this intuitively, even if they don't understand the generational theory behind it. So, for example, there's been no repeat (so far) of the 1950s Korean War, since everyone realizes that a repeat would spread to China and Japan as well.

  If you look at the wars that have occurred since 1990, you see that each one had no chance of spiraling into a bigger war. The Balkans wars of the 1990s refought the wars that started WW I 80 years earlier, but this time there were no interlocking treaties. The same is true for the Rwanda genocide of 1994. The American wars in Afghanistan and Iraq were so unequal that they could never spiral into larger wars.

• The status of Taiwan has been kept ambiguous for decades, in an equilibrium that keeps the peace between China and the U.S. The "One-China Policy" states that there is only one China, and that mainland China and Taiwan are part of that China. However, a date for "reunification" of China has never been set, since doing so would generate an international crisis and war.

  Thus, we have a "game" being played by (among others) China, Taiwan and the U.S., and the game is in equilibrium, because none of these countries can recognize any change in status of Taiwan without provoking a war.

  But here's the problem: The assumption behind John Nash's concept of equilibrium is that the rules of the game are not allowed to change as the game progresses. In the case of international relations, the rules change all the time -- thanks to the rise of new generations.

  And when new generations rise, then the equilibrium can no longer be maintained, and it's no longer possible for each player to follow the equilibrium strategy.

  Taiwan poll results to question: "Do you feel Taiwanese, Chinese or both?" (Source: WSJ)

  The adjoining graph, which I've discussed before in reference to the Taiwan issue, shows what I mean by this.

  This graph shows that the number of people calling themselves "Taiwanese" keeps going up as the island enters a generational crisis era, following the civil war between Mao Zedong and Chiang Kai-shek that ended in 1949 with Chiang's flight to Taiwan.

  This example shows how generational changes can disturb a Nash equilibrium by changing it so that there's no longer an equilbrium. Specifically: If the people of Taiwan increasingly demand independence, then China may decide that there's a negative payoff by doing nothing, since they would lose Taiwan. So the idea of invading Taiwan comes back into play.

• Since the end of World War II, when American became Policeman of the World, America has signed a large number of mutual defense treaties with other countries. These include agreements with Japan, South Korea, Israel, Taiwan, the ANZUS agreement with Australia and New Zealand, and the NATO agreement with all of Europe.

  The purpose of these agreements was to create an equilibrium -- where there would be a negative payoff for any invader to these countries, the invader would also be attacking America.

  Unfortunately, history shows that this use of interlocking treaties can backfire and make war even worse. That's what happened in World War I, which was triggered by the assassination of a politician. The resulting war might have been restricted to Eastern Europe, but it spread to Western Europe because of a mass of interlocking treaties that forced one country after another into the war, including Germany's invasion of France.

  Conflict risk level for next 6-12 months as of: 9-Feb-2006
  W. Europe	1	Arab Israeli	3
  Russia Caucasus	2	Kashmir	2
  China	2	North Korea	2
  Financial	3	Bird flu	3
  Key: 1=Low risk 2=Med 3=High 4=Active

  That's one of the reasons for my little "conflict risk" graphic. The graphic shows six different regions, and these regions were chosen, among other reasons, because a regional war in any one of the regions would lead to a world war, often because of interlocking treaties.

  It's kind of ironic. The purpose of these interlocking treaties was to protect small nations and to prevent war. Instead, in the end, all they do is guarantee larger wars, as they did in World War I.

• Today, as the Israeli war in Gaza and Lebanon keeps expanding, we see both sides of the Nash equilibrium. The international community is frozen in place, for fear of making things worse, with each nation afraid of being blamed if something goes wrong. As a result, the world is hoping, praying that the equilibrium prior to the recent war can be restored.

  This is another great example of how the equilibrium is disturbed by new generations, and what's happening today was entirely predictable. Here's what I wrote on page 73 of my 2003 book, Generational Dynamics: Forecasting America's Destiny:

  The future in the Mideast

  What will be the causes and the timing of a new Mideast war?

  The causes will be among those listed by Huntington in [The Clash of Civilizations].

  The timing will be determined by the last crisis war, which occurred in the 1936-49 time frame.

  Few analysts seem to have any idea of what's in store in the Mideast. They all look at the 1967 and 1972 wars, as well as the late 1980's intifada, because that's as far back as they can remember, and they say, "Any new war won't be any worse than those."

  That's completely wrong. Those were mid-cycle wars, led by veterans of the extremely violent and bloody 1940s wars who were willing to compromise before allowing that much violence to occur again. Those veterans are dying off now, and the next war won't have their influence. Today we're repeating the steps of the early Palestinian-Jewish confrontations in the late 1930s, leading up the extremely violent and bloody wars of the late 1940s. History shows that there's no guarantee that the state of Israel will survive the new wars.

  When will the generational change take place?

  There's an incredible irony going on in the Mideast today, in that the leaders of two opposing sides are, respectively, Ariel Sharon and Yasser Arafat.

  These two men hate each other, but they're the ones cooperating with each other (consciously or not) to prevent a major Mideast conflagration. Both of them fought in the wars of the 1940s, and neither of them wants to see anything like that happen again. And it won't happen again, as long as both of these men are in charge.

  The disappearance of these two men will be part of an overall generational change in the Mideast that will lead to a major conflagration within a few years. It's possible that the disappearance of Arafat alone will trigger a war, just as the election of Lincoln ignited the American Civil War. (It's currently American policy to get rid of Arafat. My response is this: Be careful what you wish for.) Most likely, the disappearance of Arafat will lead to increased violence, but not a full-fledged war for a few months.

  Furthermore, as I've pointed out many times, the median age in the Gaza Strip is 15.6, indicating the Gaza is being controlled more and more by a population of young people with no concept of the nuances of international geopolitics.

It's worth taking a moment to see what attitudes were like following the end of World War II. There had been two horrible world wars, and it was generally accepted that we might well be headed for a third world war, this time with the Communists.

So there was no Nash equilibrium after World War II. There was no paralysis, no fear of doing something to solve the world's problems; instead, the great fear was that doing nothing would lead to disaster.

Here's what Hannah Arendt wrote in the preface to her 1950 book, The Origins of Totalitarianism:

"Two world wars in one generation, separated by an uninterrupted chain of local wars and revolutions, followed by no peace treaty for the vanquished and no respite for the victor, have ended in the anticipation of a third World War between the two remaining world powers. This moment of anticipation is like the calm that settles after all hopes have died. We no longer hope for an eventual restoration of the old world order with all its traditions, or for the reintegration of the masses of five continents who have been thrown into a chaos produced by the violence of wars and revolutions and the growing decay of all that has still been spared. Under the most diverse conditions and disparate circumstances, we watch the development of the same phenomena -- homelessness on an unprecedented scale, rootlessness to an unprecedented depth.

Never has our future been more unpredictable, never have we depended so much on political forces that cannot be trusted to follow the rules of common sense and self-interest -- forces that look like sheer insanity, if judged by the standards of other centuries. It is as though mankind had divided itself between those who believe in human omnipotence (who think that everything is possible if one knows how to organize masses for it) and those for whom powerlessness has become the major experience of their lives.

On the level of historical insight and political thought there prevails an ill-defined, general agreement that the essential structure of all civilizations is at the breaking point. Although it may seem better preserved in some parts of the world than in others, it can nowhere provide the guidance to the possibilities of the century, or an adequate response to its horrors. Desperate hope and desperate fear often seem closer to the center of such events than balanced judgment and measured insight. The central events of our time are not less effectively forgotten by those committed to a belief in an unavoidable doom, than by those who haven themselves up to reckless optimism."

It's amazing what the survivors of World War II did. They carefully set up worldwide organizations -- the United Nations, the World Bank, the World Health Organization, the Food and Agriculture Organization, etc. -- whose purpose was, most of all, to prevent another world war. They accomplished huge things. They set up country boundaries, set up world monetary policies, as well as trade and commerce policies. They made sure everyone would be fed. They attacked all of the miseries of the World Wars -- poverty, famine, disease and war -- so that nothing like World War II would ever happen to their children or grandchildren.

But the people who set up those organizations and did those great things are gone now, and the people left behind don't have the skills to make them work effectively.

Today we're much closer to World War III than we were in 1950, but there's no will today to do something to prevent it. What we're seeing is that nations around the world are trying not to disturb the equilibrium, trying not to make things worse, with the result that nations around the world are becoming paralyzed into inaction.

So, for example, the Darfur genocide has continued, and the U.N. has been ineffective in stopping it, and can't even vote to call it a genocide. Attempts to stop Iran and North Korea from developing nuclear weapons are ineffective, and only illustrate how ineffective the U.N. Security Council is. America is unable to stop arguing long enough to agree on an immigration bill, and Congress is so ineffective that and Congressional calendar this year is just 97 days. Even China is paralyzed, with the the People's National Congress unable to pass a law to end the country's mass riots.

Today, most of the world is in a kind of Nash Equilibrium: Almost any invasion of one country by another would end up attacking other nations' interests, resulting in a spiral to world war.

But, as the Mideast situation shows, this equilibrium is very fragile, because generations keep changing, and population keeps growing, and technology keeps changing, and so forth.

If only the world would stop changing, then the Nash equilibrium could be maintained. But you have young generations in Gaza, Lebanon, Sri Lanka, al-Qaeda, Kashmir, Chechnya, etc., who are UNSATISFIED with the current equilibrium and with the NEGATIVE PAYOFF they're getting from doing nothing. These young generations are using terrorism to destroy the equilibrium, since being a victim of terrorism is a negative payoff for doing nothing.

There are a number of regions of the world experiencing this tense kind of equilibrium -- the Mideast, China, North Korea, Kashmir, Chechnya, Sri Lanka, etc. Once the terrorists succeed in making it too costly NOT to have war, then war will begin in one of these regions. And it doesn't matter who's first -- my guess right now is that it will be the Mideast, but that could change -- then the equilibrium is destroyed for all these regions, and world war ensues.