from Vox – “New eBook: The economics of the Great War. A centennial perspective”

by Stephen Broadberry (Oxford University) and Mark Harrison (University of Warwick)

There has always been disagreement over the origins of the Great War, with many authors offering different views of the key factors. One dimension concerns whether the actions of agents should be characterised as rational or irrational. Avner Offer continues to take the popular view that the key decision-makers were irrational in the common meaning of “stupid”, arguing that “(t)he decisions for war were irresponsible, incompetent, and worse”. Roger Ransom, by contrast, uses behavioural economics to introduce bounded rationality for the key decision makers. In his view, over-confidence caused leaders to gamble on war in 1914. At this stage, they expected a large but short war, and when a quick result was not achieved, they then faced the decision of whether or not to continue fighting, or seek a negotiated settlement. Here, Ransom views the decisions of leaders to continue fighting as driven by a concern to avoid being seen to lose the war, consistent with the predictions of prospect theory, where people are more concerned about avoiding losses than making gains. Mark Harrison sees the key decision makers as acting rationally in the sense of standard neoclassical economic thinking, choosing war as the best available option in the circumstances that they faced. For Germany and the other Central Powers in 1914, the decision for war reflected a rational pessimism: locked in a power struggle with the Triple Entente, they had to strike then because their prospects of victory would only get worse.

Full post at https://voxeu.org/article/new-ebook-economics-great-war-centennial-perspective