“Homo Economicus” and the Sanctions Tax

| July 26, 2017
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One of my colleagues, David Houghton, has developed several “types” of leaders based on different characteristics, one of which is “homo economicus” (literally, the “economic person”)–in other words, a leader who makes national security decisions based on the criteria of profit and loss, expected utility and risk. By extension, we often assume that most citizens (and voters) in a country are similarly homines economici and likewise can be motivated by “economic” concerns. Thus, the general logic behind U.S. sanctions is that they are an effective alternative to the use of destructive military force by imposing real costs on the economy of another country which can persuade elites to pressure the government to alter course or creates the possibility of sustained pressure “from below” from the mass of the citizenry who have been negatively impacted.

In reality, sanctions have a much more mixed track record. The research of Gary Clyde Hufbauer, Jeffrey Schott, Kimberly Ann Elliott, and Barbara Oegg suggests that U.S. sanctions over the course of the 20th century were generally successful only when the proposed change was modest (e.g. the release of a political prisoner) and were far less effective when a major policy change was sought. This suggests, then, that target governments have the ability to extract a “sanctions tax” from their citizens to defray the costs of specific policies that people factor into their calculations of their economic well-being. In other words, homo economicus can in fact rationalize the penalties of sanctions if he or she views it in the context of a necessary tax.

My line of thinking has been prompted by the debate on Russian sanctions. Most U.S. experts, following a homo economicus model, and assuming that the basis of Vladimir Putin’s legitimacy was based on the delivery of higher living standards, concluded that a drop in Russian gross domestic product would have the impact of weakening support for his administration. There has been a rise in protest activity, primarily among the youngest generation of Russians who have only really known the Putin-Medvedev years, but the expected revolutionary situation has not yet materialized. Sometimes we are given an answer that “nationalism” is the reason, and while I understand and accept the power of nationalism to motivate, I have wondered if there is a de facto “sanctions tax” that Russians are willing to pay because they believe that maintenance of the country’s “great power” status is somehow tied to their own personal sense of identity and security. In other words, they believe that a Russia that ceases to be an agenda-setter becomes an agenda-taker, from the hands of other powers that do not have Russia’s interests at heart, and in turn their personal security and prosperity would suffer. In other cases around the world, where sanctions have been imposed because of questions of human rights or corruption issues, I wonder whether there is an implicit “stability tax”–that people are willing to accept a higher degree of venality or a curtailment of civil and political rights because they fear that the alternatives would bring chaos. Certainly the fate of post-dictator Iraq or Libya might help feed the willingness to pay a stability tax. (Ian Bremmer’s work on the J-curve phenomenon also helps to set up the economic logic of a sanctions/stability tax.)

If homo economicus thus rationalizes the burden of sanctions as a tax, it then raises the question as to whether sanctions are always going to be a useful alternative to other forms of compellence, starting with military force–or whether we need to rethink sanctions in terms of tax rates, that there is a sanctions tax that is too high to pay, and recalibrate accordingly.

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