Laundry list---statute makes the threat credible.

One of the major contributions of Schelling’s work was to help us understand why it is that some threats are more believable than others and how we might finesse those threats that do not seem credible to make them more believable. In summarizing his thoughts on this subject, Schelling said,

We have learned that a threat has to be credible to be efficacious, and that its credibility may depend on the costs and risks associated with fulfillment for the party making the threat. We have developed the idea of making a threat credible by getting ourselves committed to its fulfillment, through the stretching of a ‘trip wire’ across the enemy’s path of advance, or by making fulfillment a matter of national honor and prestige…. We have considered the possibility that a retaliatory threat may be more credible if the means of carrying it out and the responsibility for retaliation are placed in the hands of those whose resolution is strongest…. (Schelling, 1980/1960, 6).

Below I lay different strategies Schelling put forwards as ways to make cheap talk into credible commitments and discuss their relevance to regulatory nukes.

3.4.1 Surrendering Control

The problem of making credible threats can be a substantial one. In the days of the Cold War, Schelling noted a disadvantage facing the United States in trying to make its threats believable. On one hand, he noted that the leaders of the then-Soviet Union could act unstable: he pointed to Nikita Khrushchev’s erratic behavior and hot temperament. He argued that this instability worked to his threats all the more believable (Schelling, 2008/1966, 39). One could believe shoe-thumping Khrushchev would use his weapons; his behavior made his threat of “We will bury you” all the more compelling. On the other hand, the electorate of the United States demanded leaders that were more stable. Schelling noted, that when it came to making threats, “it [did] not always help to be, or to believed to be, fully rational, cool-headed, and in control of oneself or one’s country” (Schelling, 2008/1966, 37). Stated in another way, it is believable that a hot head or an unstable person might do the unthinkable because what is unthinkable for cooler more rationale heads is not unthinkable for them. Put into today’s terms, there is little doubt that the behavior of Kim Jong Il has made the North Korea’s nuclear program much more troubling and that the specter of Mahmoud Ahmadinejad controlling weapons in Iran is far more threatening due to his extreme behavior. A driver of Schelling’s work is to find ways that leaders could pose credible threats in other ways.

3.4.1.1 Surrendering Control by Deterrent Threats

Making the credible threats is often difficult because “[t]he distinctive character of a threat is that one asserts that he will do, in a contingency, what he would manifestly prefer not to do if the contingency occurred, the contingency being governed by the second party’s behavior” (Schelling, 1980/1960, 123). One way to make the threat credible is to allow the potential target control its own destiny. Schelling compares this sort of strategy to an automatic trigger. To the extent that one controlling a weapon can allow the target to control when the weapon is used based on his actions, it takes the guess work of whether the threat to use the weapon is credible out of the equation. An automatic trigger often works “because it makes aggression tantamount to suicide” (Dixit and Nalebuff, 1991, 156).

Of course, one cannot create such an automatic trigger and be sure that just because the risk is left in the hands of the potential target that the weapons will never be used. As illustrated in the cult classic Dr. Strangelove, one can never really be sure that an automatic trigger will not be accidentally launched. Additionally, there is always the potential that the target will fail to act in predictable ways—or in other words, in ways that the person making the threat would see as rational. But, to the extent possible, when we take on a commitment, we will want to minimize the chances of an accidental launch by laying a trip-wire “that is plainly visible, that cannot be stumbled on, and that is manifestly connected to the machinery of war” (Schelling, 2008/1966, 99).

This sort of strategy relies on deterrence. According to Schelling,

Deterrence involves setting the stage—by announcement, by rigging the trip-wire, by incurring the obligation—and waiting…. The stage-setting can often be nonintrusive, nonhostile, nonprovocative. The act that is intrusive, hostile, or provocative is usually the one to be deterred; the deterrent threat only change the consequences if the act in question—the one to be deterred—is then taken…. To deter, one digs in, or lays a minefield, and waits—in the interest in inaction…. Deterrence tends to be indefinite in its timing. “If you cross the line we shoot in self-defense, or the mines explode.” Whenever you cross the line—preferably never, but the timing is up to you. If you cross it, then is when the threat is fulfilled, either automatically, if we’ve rigged it so, or by obligation that immediately becomes due. But we can wait—preferably forever; that’s our purpose” (Schelling, 2008/1966, 71-72).

It is not unusual to see regulatory nukes packaged as deterrent trip-wires; this requires drawing a clear line in the sand. In the context of regulatory nukes, this relates directly to the clarity of the commands found in statutes and rules. Of course, a clear statute provides a more defined line in the sand because the agency cannot renegotiate its position. Rather, a clear statute takes an enactment of Congress or a Hail-Mary Pass that relies on an agency or a court reading a statute in a way that seems to contradict the words found in the congressional enactment.

For example, when the IRS gives an entity tax exempt status, it also obligates it to a set of congressional enactments. Congress’ rules are much clearer in some instances than others. The absolute prohibition against endorsing candidates for public office is a clear line and a nice trip-wire. On the other hand, the prohibition against a nonprofit devoting a “substantial part of the activities” to influence legislation is less effective as a trip-wire. It is interesting, but perhaps not surprising given Schelling’s scholarship, that Congress received many complaints about what it meant by a “substantial part of the activities” and that it later passed what called a “safe harbor” that provides nonprofit organizations a more defined standard that relies on precise dollar values and defined percentages of an organization’s operating funds. When a trip-wire is set, it is not surprising that potential targets want to know exactly where it is set.

Just as the aptly named Peacekeeper Missiles suggests, the whole idea of deterrence is that it will not be necessary to launch the weapons. Sometimes, however, threats of deterrence are not heeded. When situations escalate and deterrent threats are tested, we might find a bluff or may find a mushroom cloud. In the context of actual conflict, this is the tripwire, the minefield, and the roadside bomb; this is the costs of coming into the opponent’s sphere, crossing the 38th parallel, and rising to occasion after a “you wouldn’t dare.” Sometimes, when it comes to regulatory nukes, just as in actual warfare, deterrent threats are not enough to assure deterrence. I discuss this point more below.

3.4.1.2 Surrendering Control By Compellent Threats

Sometimes threats just do not require a potential target to not cross a line in the sand but rather require the target to get out of the way in order to avoid harm. Schelling calls this use of threats and force compellence. According to Schelling,

Compellence … usually involves initiating an action (or an irrevocable commitment to action) that can cease, or become harmless, only if the opponent responds. The overt act, the first step, is up to the side that makes the compellent threat.… To compel, one gets up enough momentum (figuratively, but sometimes literally) to make the other act to avoid collision…. Compellence has to be definite: We move, and you must get out of the way…. The compellent threat has to be put in motion to be credible, and then the victim must yield (Schelling, 2008/1966, 72).

A few examples of compellent threats might be helpful. The story of Moses and Pharaoh is a story of compellent threats: Moses says time and again in so many words, “Let my people go, or else.” So, before water turned to blood, before the frogs, the lice, and the locusts, before livestock died, before the hail and the boils, before the period of darkness, and before the death of the first born children, Moses gave Pharaoh time to release the Israelites from slavery and thus avoid the threatened harm. Compellent threats can also take the form of something short of all-out war—holding some pain in reserve. For example, Schelling argues that when the United States dropped nuclear bombs on Hiroshima and Nagasaki, the bomb not only destroyed those cities but also provided the rest of Japan a threat: provide us unconditional surrender or else more bombs will come. Fights among children that can end with the word “uncle” or “mercy” are also a form of compellent threats. The same is true of prisoners of war who are tortured until they are broken. Under a compellent threat, the pain occurs and persists as long as a condition is not met, but once it is met, compellent threats provide an end.

In game theory literature, compellent threats are often represented by the game of chicken. Chicken is often represented as a game where two parties speed toward each other in cars. The name of the game comes from the label that accompanies swerving out of the way. Of course, as tough as it is to live with the shame of backing down, this is nothing to the harm of a collision. The payoffs of chicken are as follows:

<<TABLE 9 OMITTED>>

While this sort of contest has been popular by Hollywood depictions of hotheaded teenagers playing a high-stakes game in pricy cars, it has many applications. Schelling noted, “[I]t is a universal form of adversary engagement. It is played not only in the Berlin air corridor but by Negroes who want to get their children into schools and by whites who want to keep them out; by rivals at a meeting who both raise their voices, each hoping the other will yield the floor to avoid embarrassment….” (Dixit and Nalebuff, 1991, 116).

While the winner of a game of chicken is often determined by nerves and the extent to which a party is risk averse, a party can get a tactical advantage by relying on a credible commitment. The key to using credible commitments in the context of chicken is to credibly surrender control. “In strategy when both parties abhor collision the advantage goes often to the one who arranges the status quo in his favor and leaves to the other the ‘last clear chance’ to stop or turn aside” (Dixit and Nalebuff, 1991, 44-45).

Sometimes regulatory nukes come packaged by Congress as compellent threats. For example, regulatory nukes where the punishment will occur on a particular date unless a regulatory target has complied with the law fit this mold. We see this in several instances where Congress has instructed the Department of Transportation to hold back highway funds in the event that a state does not change its drinking law, require motor cycle helmets, or change its speed limit. The same is true of the REAL ID law that provides states a particular time period to meet a national identification standard if the state wants its citizens to enjoy the benefit of Transportation Security Administration workers to recognize the state’s drivers license as an adequate form of identification. In all of these, there is little ambiguity about what a regulatory target must do in order to avoid the regulatory nuke. The only question that remains is if the federal government or the state will flinch or whether we will see a collision.