The Predictioneer’s Game: Using the Logic of Brazen Self-Interest to See and Shape the Future

11

THE BIG SWEEP:

THE HISTORY OF WORMS,

OR BALI HIGH, BALI LOW

PERHAPS A GOOD place for us to close is with an example that looks way back in time and one that projects way forward in time. First, I’ll evaluate a problem that is almost nine hundred years old, using only information possessed by the relevant decision makers at the time—popes and kings—to illustrate how game theory can capture and predict tectonic shifts that alter society over the course of hundreds of years, in this case the period between 1122 and 1648. Then we’ll take a look at ourselves one hundred to two hundred years from now.

But first, let’s go back to 1122 and see how we could have predicted then the essential end of the Catholic Church 526 years later.

The Catholic Church is not what it used to be. In the good old days, especially before 1648, the Catholic Church was to European politics what the United States is today: the hegemonic power, the big cheese, the capo di tutti capi. That was not always true. Before the tenth or eleventh century, it was big, but not that big. The pope was the bishop of Rome and not much more. Between about 1087 and 1648, the political clout of the Church rose and then fell. This happened, in my opinion, mostly because of a deal it struck with the Holy Roman Emperor in 1122 and with the kings of France and England at about the same time.

The pope has a great job. He lives in terrific digs right in the heart of Rome. He has a fabulous art collection, the best supply of Italian food anyone could want, and even his clothes, we must admit, are pretty cool—his hats are out of this world. He travels wherever he wants in grand style, and he is adored by millions of people. Still, it’s not as good a job as it once was. The best time to be pope was between the papacies of Innocent III (1198-1216) and Boniface VIII (1294—1303). Those were the days when popes really had it all—fame, glory, riches, sanctity, power. After that, they went into a long downward spiral, punctuated most noticeably by the Treaty of Westphalia that ended the Thirty Years’ War.

The Treaty of Westphalia in 1648 formally made kings sovereign within their territorial boundaries. They could choose (or let the people choose, an idea whose time had not yet come) the religion for their domain. The closer a kingdom was to Rome, the more likely it was to remain Catholic. As one got farther from the pope’s reach, however, Protestants did better. Westphalia enshrined the idea that foreign powers should not interfere with any country’s internal policies. This really limited the Catholic Church’s ability to dictate policies as it had done for centuries. Although the Treaty of Westphalia made these points explicit, they had been in the works for a long time. And the real action that made such conditions feasible started at least five centuries earlier, when the sale of bishops’ positions was resolved by the Concordat of Worms.

Historians have a quite different take on the development of modern sovereign states than I do. My view is shaped by the game that was set up at Worms. The standard account is that the Catholic Church promoted economic growth (banning usury only because it was sinful) and managed reverent kings who deferred to the popes’ choices of bishops, which gave the Vatican localized control over much of Europe. My perspective is that the Church actively tried to hinder economic growth in the secular realm and that kings only really deferred to papal choices for bishops where and when they were forced to for economic reasons. My view looks at the Church as a political power more than as a religious institution. Please understand, I am not questioning the sincerity of Catholic religious beliefs today, or at any time in the past. I am just recognizing that in addition to its religious mission—maybe because of it—the Catholic Church played power politics.

I contend that, eventually, economic growth made the pope all but irrelevant politically, and it was that very growth—and the contest for it—that made the terms of the Treaty of Westphalia ultimately possible. I will show how each of these developments was dictated by the strategic implications of Worms and, therefore, that each was predictable. Worms established a way for popes to sustain substantial power for a long time, but it also made inevitable that the Church would ultimately become subservient to the state. In that sense, the pope of 1122 (Calixtus II) did what was good for him and his immediate successors, but at the price of selling out the political prospects of popes centuries later.

The agreement reached at Worms resolved the investiture struggle over bishops. Before Worms, the Holy Roman Emperor and Catholic kings sold bishoprics within their domain. Naturally, the pope objected to this practice. He wanted greater control over bishops. They were, after all, supposed to be his emissaries. Under the concordat, the pope gained the right to nominate bishops, and the king the right to approve or reject the nominees. When a new bishop was installed, the king gave up control over the symbols and trappings of the bishop’s office, including its income. In exchange, the bishop promised military assistance and loyalty to the king as sovereign of the territory occupied by the bishopric. In this way, the king transferred back to the church, and to the bishop as its agent, the right to the tax revenues from the see. During the vacancy between the death of the old bishop and the consecration of the new one, the revenue from the bishopric went to the king. This revenue could be substantial. The longer the bishop’s office remained vacant, the longer the king received the revenue instead of the church. But rejection of a papal nominee was bound to irritate the pope, and that could be politically and socially costly to the king. The pope could excommunicate the king, or he could interdict the bishopric. That meant that no one in the bishopric could receive any of the sacraments. This was tantamount to fomenting civil war against the king in that deeply religious age.

The king’s right to the see’s income during a vacancy represented a property right that belonged to the king as sovereign over the territory of the see, and not to the king as an individual. The king could not sell the future right to control the regalia, nor could this right be inherited except by ascent to the throne. The right belonged to the king’s successor, who might be his child or might be from an entirely new line. The king held the right to this income, then, as the kingdom’s agent and not as his personal, private property. This was a significant departure from feudal practice. It established the sovereign claims of the monarch on behalf of his citizen-subjects within the territory of each bishopric in his domain. It was the beginning of the state as we know it.

Although the actual game set up at Worms is a bit more complicated than the model I present, the game tree in figure 11.1 is close enough to capture the essentials. The pope chooses to nominate a bishop. The nominee is either someone especially to the pope’s liking, or someone more to the liking of the king. The king, in turn, can agree to the pope’s nominee or reject him. If the king rejects the nominee, then he earns more money but annoys the pope, who must then nominate someone else to be bishop. If the king agrees to the pope’s nominee, then the king earns less money because the bishopric does not remain vacant for long, but he improves his relations with the pope. So as long as the pope and the king agree on a nominee, both benefit, although in different ways. On acceptance of a bishop, earnings from the see benefit the pope, and, depending on who the bishop is, the pope either has a loyal ambassador, or the pope relies on a person more loyal to the king than to the pope, a potential fifth-columnist within the pope’s circle. On agreement, the king has an acceptable bishop to work with, and if there is some delay between the death of the previous bishop and the installation of the new one, the king also gets some extra income. Figure 11.2, on the next page, shows a simple version of this game.

FIG. 11.1. The Game Set Up at Worms in 11 22

The pope’s choice looks pretty easy to make. If he nominates someone expected to be loyal to him—a relative or a member of his papal court—and the king accepts, the pope gets his best choice as bishop and he gets the income from the see, eliminating the vacancy as quickly as possible. The problem is that the king might say no to this proposal. Okay, you think, so maybe the pope should nominate someone loyal to the king. Then at least he gets the income. But the king could turn that offer down too. Here lies the kernel of the undoing of the Catholic Church 526 years later. Let’s look at the king’s choices with a numerical example to illustrate how this works. The scale of the numbers is not important here as long as the order of the size of the value to the pope and to the king under different conditions is right.

Setting aside for the moment the matter of income, let’s say that the pope values a bishop who will be loyal to him at 5 points and a bishop loyal to the king at only 3. Not getting the king to agree on a bishop at all is worth 0 points to the pope. This order of values makes clear that the pope prefers his own guy to the king’s man, but he prefers the king’s choice of bishop to no bishop at all. Let’s say that the king places a value of 5 on a bishop who is related to him and a value of 3 on a bishop whose loyalty is expected to be with the pope. The value of having no bishop at all is 0 for the king, just as it was for the pope.

Now comes the fun part. How much is the income from a bishopric worth? I will assume that a poor diocese produces an income worth 1 additional point for whoever gets the income. A moderately wealthy see’s income is worth 4 points, and a really rich bishopric produces an income of 6. The game tree shows the pope’s benefits first and the king’s below the pope’s at each place where the game tree ends.

In Chapter 3, when we looked at the banker’s game (Paris or Heidelberg), I promised a more interesting game later, and here it is. To solve the game, the pope has to look ahead to figure out what the king is likely to do. The king’s decision depends very much on how valuable the income is from the bishopric. When the diocese has a small income—just 1 extra point—the king can get 3 points by agreeing to the pope’s choice of a bishop loyal to the papacy, but only 1 point—the value of the income—by rejecting that nominee. Now, the king would of course do even better if the pope chose one of the king’s relatives to be bishop—then the king would receive 5 points in value by accepting the nominee. The Concordat of Worms, however, stipulates that the pope moves first, nominating a candidate to be bishop. The pope has worked out that if he nominates someone loyal to him he will get 6 points, 5 for the bishop and 1 (in the case of this poor see) for the income. That is more than he can get by nominating a relative of the king. So in a poor bishopric, the pope picks someone he likes, forcing the king’s hand. The king agrees to the pope’s choice, and all is right with the world. This is the world that historians think prevailed because they noticed that kings almost never turned down a nominee to be bishop.

FIG. 11.2. A Numerical Example of the Game Set Up at Worms

The historians, however, are mistaken, in my opinion. If we look at differences in the income from dioceses in France, for instance, during the reign of Philip Augustus (1179—1223), we discover that the pope overwhelmingly chose people from his own court in poor dioceses, but he chose relatives of the king in moderately well-to-do bishoprics. That is exactly what the game set up at Worms back in 1122 leads us to expect, and that is the key fact that will make the pope want to limit the economic growth that kings can tap into.

When the income is worth 4 points instead of 1, the king gets more value by rejecting a candidate to be bishop who is a papal loyalist than from agreeing to the nominee (4 points versus 3). But if the pope chooses a relative of the king to be bishop, the king is better off saying yes to the candidate than saying no, even though this means giving up the bigger income. The king receives a value equal to 5 points if his relative becomes bishop and only 4 from the income earned in a moderately well-off bishopric. So in wealthier sees, an attentive, politically savvy pope switches his strategy and gives the king someone the king wants. Then the pope earns 3 points for the choice of bishop and another 4 in income. That is the best he can do when he knows the king has an incentive to reject a candidate for bishop that the pope really wants.

Now imagine a really wealthy diocese where the income is worth 6 points. The income from the diocese is worth even more to the king than getting along with the pope. The Church can no longer compete with the monarch for political control—the king just doesn’t care about bishops anymore. He just wants the income, and so he rejects any and all nominees. The Concordat at Worms breaks down and we are in a new world in which kings keep incomes in their territory and popes can pick whomever they want as bishops. That, of course, is essentially the situation for the modern Catholic Church. It remains a major religious body, but it is not a major political-military player.

We can see that Worms set up a system that creates some interesting incentives. The higher the income from a see, the harder it is for the pope to get his preferred candidate as bishop. Valuable sees require the pope to make sacrifices. He has to agree to a bishop who in a pinch is more likely to support the king than the pope—or else the pope loses income. This gives the pope a reason to stymie economic growth outside the Church’s domain. In fact, shortly after 1122, the Church adopted a series of new programs that were likely to hinder economic progress outside the Church. Was that a coincidence? We cannot know, we can only see that changes introduced by the Church—and by kings—after 1122 were consistent with their new incentives created at Worms.

For example, in the First Lateran Council (1123), a gathering of Church leaders to agree on important new rules, we can see that the role of celibacy for the clergy was made more important. The council prohibited the clergy from marrying or having concubines. The Church was clear about the motivation behind the stricter celibacy rules. They seem not to have been designed to promote purity so much as to clarify the Church’s claims on property. The new rules improved the odds that the property of the clergy would belong to the Church rather than to heirs. At the Second Lateran Council (1139), more serious changes were instituted. This council dealt with questions of inheritance and usury. On the inheritance of the private property of deceased bishops, the Church raised the stakes and ensured that they, and not any secular venue, would be the beneficiary:

The goods of deceased bishops are not to be seized by anyone at all, but are to remain freely at the disposal of the treasurer and the clergy for the needs of the church and the succeeding incumbent. … Furthermore, if anyone dares to attempt this behaviour henceforth, he is to be excommunicated. And those who despoil the goods of dying priests or clerics are to be subject to the same sentence.¹

By imposing excommunication on violators, the Church raised the risks that families or monarchs ran in trying to seize the “personal” property of deceased clerics. That put the money right where the Church wanted it: in its coffers.

The council went on to make usury “despicable and blameworthy by divine and human laws,” and cut off usurers from the Church, depriving them even of a Christian burial unless they repented. “Usury” in those days just meant lending money with the expectation of making a profit, not necessarily a big profit as the term implies today. Before 1139, usury had been forbidden to the clergy, but it had not been elevated to a mortal sin for ordinary people. The effect of banning moneylending for profit was to raise the price of money and to create a potential shortage of would-be lenders.

Just as modern-day central banks increase interests rates to slow growth, so the twelfth-century Church raised interest rates by denying heaven to those who lent money for profit. Though the Church used scripture to justify its action, there was a widely held view among Church canonists—the Church’s lawyers—that there was no doctrinal ban on usury in early Catholic teachings or scripture. As they noted, Jesus threw the moneylenders out of the Temple. He thought it wrong to engage in such business in the Temple, but he did not argue that the business was wrong. He just wanted it taken outside. And of course we should remember that the Church had not used scripture to ban usury in its preceding thousand years.

Enforcing the ban on moneylending for profit (and why else would someone lend money?), however, proved to be a difficult problem. The sin of usury required intent: the moneylender had to intend to make a profit, so whether the moneylender did or did not actually make a profit was beside the point. The Church recognized how hard it was to determine whether a lender intended to make a profit.

To deal with intent, the Church wisely shifted enforcement from its lawyers to its theologians. They reasoned that while human law might fail to recognize a usurious loan, God knew whether a lender intended to make a profit no matter what subterfuge was used to mask the return. Therefore, anyone having made such a profit and failing to make restitution or to show sufficient contrition before death was condemned eternally.

To facilitate restitution for usury, and to heighten the threat of damnation associated with lending, the Church established new institutions. The Fourth Lateran Council (1215), for instance, made annual oral confession mandatory. The Church distributed confessor’s manuals with specific instructions for dealing with merchants and others likely to have engaged in usury. Through the confessional, the Church provided a means by which those otherwise damned for usury could save their souls. The path to forgiveness, however, generally included making financial restitution to the Church rather than to those from whom a profit had been made. While the threat of eternal damnation was powerful indeed in the twelfth century, still, moneylending continued.

Of course, merchants and others continued to devise clever schemes to hide what they were doing. They not only manipulated exchange rates but also wrote misleading contracts and created false stock companies (sound familiar?) to hide their true financial arrangements. The risks (including eternal damnation) had been raised, so naturally the expected rate of return had to rise too. The consequence was to make loans costlier and thereby to diminish money for investments and growth relative to what it otherwise would have been.

If we look at last wills and testaments after 1215 we discover a great increase in deathbed confessions of usury. These confessions were frequently accompanied by wills that make penance by leaving money to the Church to make up for the dying sinner’s usurious past. This was a great boon to Church income and took a great deal of money out of the secular economy. It must have left relatives pretty unhappy, but how could they argue against the greater good of eternal salvation?

During the twelfth century the Church also adopted new rhetoric that limited growth even as it promoted wealth within the Church’s lands. At the same time that new mendicant orders like the Cistercians built and operated wind and water mills and other labor-saving devices to improve efficiency, the Church began to promote the view that idle hands are the work of the devil. The Church discouraged the spread of machines and other labor-saving technology in the secular realm (though not within its own domain). Certainly by discouraging the spread of labor-saving technology, the Church was reducing labor productivity and thereby economic growth in the lay sector. This, as we saw, could only improve the pope’s chances of getting the bishops he wanted.

Kings, of course, did not sit idly by while the pope worked to strengthen his hand and weaken theirs. The decades immediately after the Concordat of Worms saw a dramatic flowering of political institutions in England, in France, and elsewhere on the Continent. Whether intentionally or not, many of these new institutions and programs challenged the pope’s influence and secured a higher economic growth rate for the king’s subjects, and thus higher tax revenues for the king—higher, that is, than they would have been if the pope’s policies had been left unchallenged. Consider, for instance, the series of legal reforms introduced by Henry II (you know, The Lion in Winter) in England during the mid-twelfth century. These reforms became the foundation of English common law.

Henry moved to protect property rights and rights of inheritance. These actions made it easier for peasant families to predict whether they would continue to benefit from the land they worked after the head of the family died or whether the lord of the manor would take away their opportunity to farm the land. Henry’s writs greatly shortened the judicial process for determining rights of access to the land and made for a more smoothly operating agricultural system. His new rules proved highly popular and effective in securing the property rights that are essential to economic growth, and they enhanced the king’s credibility as the person who would ensure order and justice in matters of property. Before the writs, tenant farmers were reluctant to invest in their land, but once Henry’s writs protecting property rights were in place, more effort was made by those working the land to produce more—for their own benefit as well as for the benefit of the lord of the manor.

Henry did not limit himself to improving property rights for ordinary people. He also acted to impose restrictions on Church rights, a bold move indeed. Through a writ called utrum, he asserted the king’s primacy in determining whether a dispute belonged in his secular courts or in the church’s ecclesiastical courts. Prior to Henry there was a presumption in favor of the jurisdiction of the ecclesiastical courts. Utrum reversed this presumption among litigants in England, a presumption that had been in place since the time of William the Conqueror a century earlier. Finally, Henry also moved to protect the patronage system that gave landowners the benefit of choosing clerics for appointment in their personal churches. This ran directly counter to the efforts of the church to take all such influence away from the secular domain, as is evident from the rulings in Lateran II (1139) and III (1179).

Henry’s effort to strengthen his hand against the church was further reinforced by his use of the jury system to replace trial by ordeal. Trial by ordeal decided innocence or guilt through the presumed intervention of God. Two common ordeals, both supervised by the Church, involved submersion of the accused in deep water or forcing the accused to hold a red-hot piece of iron for a prescribed amount of time. Failure to stay submerged for the prescribed time was taken as proof of guilt, as was the inability to hold the red-hot iron. As Henry’s legal adviser observed at the time, guilt or innocence had more to do with the thickness of one’s calluses or the ability to hold one’s breath than anything else.

The shift to a jury system helped weaken Church institutions and income. Trials by ordeal were supervised by the clergy, who were well compensated for their participation. For instance, two priests are known to have been paid ten shillings for blessing the ordeal pits near Bury St. Edmunds in 1166. At the time, a worker’s daily wage was about one penny, and a villein and his entire family could be purchased for 22s.² So 10s for a blessing was a significant amount of money. At 12 pennies to the shilling, the blessing cost the equivalent of 120 days of labor for an ordinary worker. That amounts to over $5,600 at the current U.S. minimum wage just to get the ordeal pit blessed (it’s about double that when evaluated relative to the income of the average American worker rather than those earning just minimum wage). With the stroke of a pen, Henry cut Church income substantially and increased his own by introducing the jury system.

The administrative structure of the modern state also began to emerge in the twelfth and thirteenth centuries. The king’s right to levy taxes for reasons other than necessity gradually developed in exchange for political concessions to his subjects, most notably in 1297 when Edward I accepted Confirmatio Cartarum. Edward, in “confirming the charter,” acquiesced to the changes that had been wrought by Magna Carta eighty years earlier (King John had agreed to and then promptly reneged on the deal). These new tax revenues gave the king the ability to muster an army without having to rely on the intricate rights and restrictions implied by the feudal order. Consequently, the bishop’s military guarantee to the king “through the lance,” granted at Worms, diminished in importance. The pope, in contrast, continued to rely on feudal commitments to raise an army.

King’s courts at fixed locations in England and in France replaced the itinerant justice of an earlier time, thereby centralizing judicial control in the hands of the king, further diminishing the role of the Church as an adjudicator of disputes and further emphasizing the king’s territorial sovereignty. Additionally, kings began to claim that they ruled by divine right, thereby challenging the pope’s special position as allegedly chosen by God. In the jockeying for control, both kings and church evolved new institutions and methods to foster or stymie economic growth and wrest political control.

The eventual result of all of this competition was just what the game set up at Worms predicts. The Church worked to keep income high within the ecclesiastic domain and low elsewhere. Kings worked to achieve the opposite, seeking control over courts and taxes wherever and whenever possible. Eventually, secular wealth became so great that, as the game implies, kings stopped caring who the bishops were. Kings no longer felt a need to keep the pope happy, and the dominance of the Catholic Church was replaced by the dominance of sovereign states in a secular world.

Now that we have seen how we could peer ahead to the big picture five hundred and more years after 1122, let’s do the same for our own time. Let’s take a look at the inconvenient truth that won Al Gore the Nobel Peace Prize.

The world seems to be undergoing significant warming. The rise in temperature is melting ice in the North Atlantic and elsewhere, raising ocean levels and threatening to sink low-lying island nations and mainland coastal areas. The gathering of more ferocious storms promises years of destructive forces from wind and rain. Higher temperatures will push some temperate climates into the subtropical zone and some subtropical environments into the great stifling heat of the tropics.

First, let me provide a little background on the issue of global warming. After years of debate, including warnings in the 1960s and 1970s of an approaching new ice age, there now seems to be broad agreement within the scientific community that the earth’s temperature is on the rise. How much of the rise is due to human activity and how much to a normal cycle in earth’s climate is less easily agreed on, mostly because the cycle seems much longer than available weather data. We know, for example, that the High Middle Ages (what we used to call the Dark Ages) were a warm period accompanied by rapid economic growth. We know things got colder, at least in Europe, roughly from the Renaissance until probably sometime in the nineteenth century. And we know things are getting warmer again. We also know the increase in temperature is larger than seems to have been true at any time over the past thousand or so years.³ Of course, in the earth’s history a thousand years is a short time, though on the human clock it is pretty long. Scientists seem to concur that the extra rise in temperature is associated with industrialization and modern chemical-fertilizer farming, and that fossil fuel use is among the big culprits. Obviously, concern about global warming is strong enough that there are ongoing international efforts to bring it under control and even reverse it.

What can game theory tell us about efforts like Kyoto, Bali, and Copenhagen—that is, international conferences to regulate greenhouse gas emissions—to find solutions to the real threat of global warming? What can we learn that will help us carve out a better future for our species and our environment in the centuries to come? Frankly, we will see that agreements like the Kyoto Protocol and the efforts at Bali or Copenhagen to reduce greenhouse emissions, especially carbon dioxide emissions, are not likely to matter. They may even be impediments to real solutions. That is not to say that there is not good hope for the future. There is, because global warming produces its own solutions.

Back in December 1997, 175 countries—not including the United States—signed the Kyoto Protocol. The Kyoto signatories agreed to a benchmark year, 1990, against which to establish targets for greenhouse gas reductions. Greenhouse gas emissions had been rising dramatically in the years between the benchmark and the agreement. The protocols call for a 5.2 percent reduction in greenhouse gas emissions relative to their levels in 1990. That is about equivalent to saying there should be nearly a 30 percent reduction when compared to the then expected emissions levels in 2010. Some signatories were called upon to make much greater sacrifices than others. For instance, the European Union agreed to reduce its emissions by 8 percent. The United States was asked to reduce its greenhouse gases by 7 percent, Japan by 6 percent, and so forth. A few countries, such as Australia, were given permission to increase their emissions. No restrictions were imposed on developing countries like India and China (or Russia, assigned a 0 percent reduction), although they are now among the world’s largest greenhouse gas polluters. The United States declined to sign on because it objected to the exemption given to rapidly growing economies like China’s and India’s.

Kyoto produced a large market in which polluters and nonpolluters could buy and sell “pollution rights.” This market has helped to rationalize decisions at the level of individual firms, but it alone has so far failed to result in the magnitude of reductions envisioned by the Kyoto Protocol. As we will see shortly, enforcing the 1997 agreement has been virtually impossible.

One consequence of the difficulties encountered since 1997 was a meeting in Bali, Indonesia, in December 2007. The Bali meeting had more modest goals than Kyoto. It represents an interim step on the way to a 2009 deadline by which it is hoped there will be a new international agreement in Copenhagen. After considerable resistance, the U.S. representative at Bali agreed to significant concessions at the last minute. This made it possible to set out the Bali Roadmap for future climate control. Now the question is, will these efforts work?

To address the prospects for controlling greenhouse emissions, especially carbon dioxide, let’s start with some data that reflect the views of the big players on global warming. These are the governments and interest groups with the most at stake. In all likelihood, any agreement that can be reached will be settled primarily among these few stakeholders. They include the European Union, the United States—divided between the proportion of American public opinion that favors regulating carbon dioxide and other greenhouse gas emissions and those opposed—China, and India. It also includes other relatively large economies such as Russia’s, Japan’s, Canada’s, and Australia’s, plus the growing economy of Brazil. For good measure, I have also represented environmental nongovernmental organizations (labeled here as NGOs), since they had a significant presence at Bali, and pro-environment and less sympathetic multinational corporations. In each case I have estimated potential influence in negotiations over an agreement to replace the Kyoto Protocol, position (explained in a moment), salience for mandatory emission controls, and the extent to which the stakeholder is committed to finding an agreement (even if it is not the one they favor) or will stick to their guns under political pressure (holding out for the policy they believe in). This last variable, as you know, is new to the new model I have been developing and testing for a few years. This is the model that I promised earlier I would apply to this case, just as I applied it to forecasts about Pakistan and other crises in the previous chapter

I have rated the players’ positions on a scale from 0 to 100. A position of 50 is equivalent to continuing the greenhouse gas targets that came out of the Kyoto Protocol in 1997. These standards, as I previously discussed, called for rollbacks based on 1990 emission levels. Higher values on the position scale reflect tougher standards. For example, 60 is a 10 percent toughening of standards relative to the 1990 benchmark, 100 a 50 percent increase in mandatory greenhouse emissions reductions compared to 1990. Likewise, values below 50 reflect a weakening of the terms contained in the Kyoto agreement.

Ten years passed between the Kyoto negotiations and the new round of talks that began in Bali in 2007. There were intermediate discussions in 2000 and 2001, but these were not particularly dramatic. With that in mind, I have viewed the bargaining periods as fairly long, taking exchanges of ideas among the big players about how to deal with global warming as cycling around about once every five years. That means I have simulated the negotiated standards out for about 125 years. That is certainly a long time. We will want to take more seriously the predictions closer in than farther out, since a great deal can happen between now and 2130 (when none of us will be around to check on accuracy or praise success). Because so much can happen, I have simulated the data with random shocks to salience and to each stakeholder’s interest in building consensus or sticking to its guns. By randomly changing 30 percent of the salience values and 30 percent of the flexibility values in each bargaining round, we can look at a range of predicted futures to see whether the global warming simulations reveal strong trends. That will help us sort out how confident we can be about the toughness or weakness of future regulations of greenhouse gas emissions.

First let’s see what the big picture looks like. Then we will examine the simulations in more detail to get a sense of how optimistic or pessimistic we should be.

The heavy solid black line in figure 11.2 shows the most likely emission standard predicted by the game. The two heavy dotted lines depict the range of regulatory values that we can be 95 percent confident includes the true future regulatory environment according to the simulations. That range of values is pretty narrow, encompassing barely five points up or down through about 2050. After that, as we should expect, there is more uncertainty, but even as far into the future as 2130 the range is only about ten points up or down, so these are probably pretty reliable forecasts.

FIG. 11.2. The Withering Will to Regulate Greenhouse Gases

The most likely value—the heavy solid line—reflects our best estimate of what the big players might broadly agree to if the global warming debate continues without any significant new discoveries in its favor or against it. It tells us two stories. First, the rhetoric of the next twenty or thirty years endorses tougher standards than those proposed—and mostly ignored—at Kyoto in 1997. We know this because the predicted value through 2025 is above 50 on the scale. That’s the green part of the story. Second, support for tougher regulations falls almost relentlessly as the world closes in on 2050—a crucial date in the global warming debate. When we get to 2050, the mandatory standard being acted on is well below that set at Kyoto. By about 2070 it is down to 30, representing a significant weakening in standards. By 2100 it is closing in on 20 to 25. There’s no regulatory green light left in the story by its end.

Now let’s probe the details a bit. The figure shows us that there are some considerably more optimistic scenarios and also some considerably more pessimistic views that fall outside the 95 percent confidence interval. The most optimistic and pessimistic scenarios are depicted by the dotted lines at the top and bottom of the figure. The most optimistic scenario predicts no rollback in emission controls. It never dips below 50 on the scale. In fact, most of the time in this scenario the predicted level of greenhouse gas reduction hovers around 60, implying a 10 percent or so tougher standard than was agreed to in Kyoto. The pro-control faction in the United States is the driving force behind this optimistic perspective. Their salience rises from its initial level of 70 and remains remarkably high, hovering around 100. Because the issue becomes so salient to them, this U.S. group’s power (resources multiplied by salience) comes to dominate debate. Although their inclination to be tough might not be enough to satisfy diehard greens, keeping this group (mostly liberal Democrats) highly engaged is the best hope for tougher standards.

Only about 10 percent of the scenarios, however, look optimistic enough to anticipate even holding the line at the standard set in the Kyoto protocol. In contrast, there are dozens of scenarios in which the standard falls close to 0, indicating abandonment of the effort to regulate greenhouse gases. Typically in these scenarios, some mix of Brazil’s, India’s, and China’s salience rises while the salience of the pro-control faction in the United States and in the European Union drops well below their opening stance. They just seem to lose interest in greenhouse gas regulations. That decline raises its ugly head especially during global economic slowdowns, so global economic patterns are critical for us to watch as they can guide our choice of the scenarios that we should pay the most attention to. Without commitment to change by the European Union and the United States, it becomes much easier for the key developing economies to prevail with the support and even encouragement of the anticontrol American faction (mostly conservative Republicans).

Since many of my twenty-, thirty-, and even forty-year-old readers will be around in 2050, I hope you will remember to take your dusty copy of this book off the shelf then and compare the greenhouse gas predictions to the reality with which you are then living. Perhaps you’ll even think to write to my children, or their children, just to say whether I got it right or wrong.

So far, there is little basis for believing greenhouse gases will be regulated away. Just in case you’re still a believer in a Kyoto-style regulatory regime, but one with teeth, figure 11.3 zooms in on the biggest of the big players, at least the biggest for now: the European Union, the two U.S. factions, China, and India. Americans who worry about global warming, like their European Union brethren, remain committed through about 2030 or 2040 to tougher standards than were announced in Kyoto. But after that, they join forces with those who put economic growth ahead of regulating carbon dioxide and other emissions. We’ll see shortly why that may not be so bad. The voice that dominates debate after 2040 or so is the voice of Americans who today are not convinced global warming is for real. The Chinese and the Indians support that American perspective, in the process convincing the other big players to adopt even weaker standards than those that were not enforced after Kyoto. Of course, there is little reason to think that these standards will be enforced either. I took a look at an enforcement issue, and believe me, it is not a pretty picture. No one among the real decision makers remains in favor of putting real teeth behind global climate change standards.

All of this may be leaving you rather depressed, but perhaps it shouldn’t. The likely solution to global warming lies in the competitive technology game that global warming itself helps along; it doesn’t depend on the regulatory schemes that are so popular among the world’s nations. These schemes, well-intentioned though they are, are also predictably vacuous. They are exercises in what game theorists call cheap talk. Promises are easily made but not easily enforced. Just look at the record of the signatories to the Kyoto Protocol.

FIG. 11.3. What Will the Biggest Polluters Do About Greenhouse Gas Emissions?

Although the Kyoto Protocol was agreed to in December 1997, it did not take effect until February 2005. That is rather a long time for moving from agreement to presumed action on a matter of long-term global survival. Of the 175 countries, including 35 developed economies, that ratified the agreement, 137 don’t have to do anything except monitor and report on their greenhouse emissions. Counted among those 137 are China, India, and Brazil. With their growing economies and their large populations, these countries are among the world’s great greenhouse gas emitters. They won the battle in the negotiations that led to the Kyoto Protocol. They preserved their right to continue to pollute with no punishment for failing to do otherwise. That’s what cheap talk is all about. How about Japan, one of the world’s big economies that signed on to Kyoto? Remember, Japan’s target is a 6 percent reduction from its 1990 emissions. The Japanese government has stated that it cannot meet its emission reduction target. Britain, while making progress on some dimensions, seems incapable of meeting its pledged reduction in carbon dioxide emissions from its 1990 level by 2010. The picture isn’t pretty.

To be sure, several European Union states seem to be on track, and Russia does too, but then outside the oil sector the Russian economy has not done that well, and the Russians are only required not to increase emissions. One sure way to reduce carbon dioxide emissions is to have the economy slow down. Of course, that raises difficult political problems because people tend to vote against parties that produce poor economic performance. That could be a problem in the European Union. It’s not likely to be an issue in Russia, where democracy seems to be a victim of increased oil prices. (A global economic crash, however, will bring the price of oil down, and that could jeopardize Russia’s march back to autocracy.)

Anyway, what all of this amounts to is a record of cheap promises. It is easy to get governments to sign on to deals that have no teeth, no clear way to keep track of violators and to punish them. Kyoto relies heavily on self-reporting, self-policing, and goodwill. That’s no way to make a global arrangement that gets its signatories to make the sacrifices needed to reduce greenhouse gas emissions.

If I sound downbeat, I am sorry. Actually, I am most optimistic for the future. My optimism, however, is despite—yup, despite—agreements like the ones struck in Bali or Kyoto or Copenhagen. These will be forgotten in the twinkling of an eye. They will hardly make a dent in global warming; they could even hurt by delaying serious changes. Roadmaps like the one set out at Bali make us feel good about ourselves because we did something. We looked out for future generations, we promised to do good—or did we? Unlike the pope and Holy Roman Emperor who signed on to Worms, universal schemes do not put big change into motion. Their all-inclusiveness ensures that they reflect the concerns of the lowest, not the highest, common denominator.

Deals like Bali and Kyoto include just about every country in the world. Such agreements suffer from the same wrong incentives and weak commitments as Arthur Andersen’s management did in auditing Enron. To get everyone to agree to something potentially costly, the something they actually agree to must be neither very demanding nor very costly. If it is, many will refuse to join because for them the costs are greater than the benefits, or else they will join while free-riding on the costs paid by a few who were willing to bear them. That is akin to the tragedy of the commons. We all promise to protect what we hold in common—such as the earth—and then some of us cheat on the sly to enrich ourselves, figuring our little bit of cheating doesn’t do any real harm. (Remember, defecting is the dominant strategy in the prisoner’s dilemma.)

To get people to sign a universal agreement and not cheat, the deal must not ask them to change their behavior much from whatever they are already doing, whether that is cleaning up their neighborhood or making it dirtier. It is a race to the bottom, to the lowest common denominator. More demanding agreements weed out prospective members or encourage lies. Kyoto’s demands weeded out the United States, ensuring that it could not succeed. Maybe that is what those who signed on—or at least some of them—were hoping for. They can look good and then not deliver, because after all it wouldn’t be fair for them to cut back when the biggest polluter, the USA, does not.

When an agreement is demanding, lots of signatories cheat; when it isn’t demanding, there is lots of compliance with what little is asked for, but then there is also little if any beneficial effect. Sacrificing self-interest for the greater good just doesn’t happen very often. Governments don’t throw themselves on hand grenades.⁴

It really isn’t easy being green, just as Kermit the Frog has been telling us for years. Who will monitor green cheaters? The answer: interest groups, not governments; and interest groups are rarely a match for governments. Who will punish the cheaters? The answer: practically no one. The cheaters-to-be were among the rule makers when they agreed to the universal protocol. Cheating is an equilibrium strategy for many polluters, a strategy backed by the good faith and credit of their governments. Why will governments back cheaters? The answer: incentives, incentives, incentives!

Who has what incentives? There is a natural division between the rich countries whose prosperity does not depend so much on toasting our planet and the poor countries who really have no affordable alternative (yet) to fossil fuels and carbon emissions. They have an incentive to do whatever it takes to improve the quality of life of the people they govern.

The rich have an incentive to encourage the fast-growing poor to be greener, but the fast-growing poor have little incentive to listen as long as they are still poor. As the Indian government is fond of noting, sure, they are growing rapidly in income and in carbon dioxide emissions, but they are still a pale shadow of what rich countries like the United States have emitted over the centuries when they were going from poor to rich.

If the poor listen to the rich they could be in big political trouble. And when the fast-growing poor surpass the rich, the tables will turn. China, India, Brazil, and Mexico will then cry out for environmental change because that will protect their future advantaged position, while the relatively poor of that day, one or two or three hundred years from now, will resist policies that hinder their efforts to climb to the top. The rich will even fight wars to keep the rising poor from getting so rich that they threaten the old political order. (The rising poor will win those wars, by the way.)

There is also a natural division between politicians whose constituents care about the planet more than they care about their short-term quality of life—those are few and far between—and politicians whose constituents say they care about the planet but in reality often vote growth, not green. If you doubt it, take a look at the election record of green parties around the democratic world. Moreover, who will endure the political and economic costs when poor countries trot out starving children—children who would not be starving if their families could just keep on burning cow dung! We are quicker to be softhearted than we are to be green, and really, is that so bad?

So how might we solve global warming and make the world in five hundred years look attractive to our future selves? We twenty-first-century folk know of well over a hundred chemical elements and a long list of forces of nature. In Christopher Columbus’s time, people pretty much only knew rain, wind, fire, and earth. They also knew hardly anything about exploiting rain, wind, and fire, but we sure do, and surely we will know more in the future. Rain, wind, and fire—they can and will solve global warming for future generations. I interpret the figures above to suggest that the reason mandatory emission standards will not be so high in 2050 is because few will care to fight that fight. It won’t matter. New wind, rain, and solar technologies will be solving the problem for us.

Climate change due to global warming will add to our supply of rain, wind, and fire, and if it raises the oceans, kicks up fierce storms, and bathes us in massive quantities of BTUs, then it also adds to our urge to exploit these ancient forces just as their increased power makes us worry more. As climate change would generate more of these sources of energy, it would also create a beautiful synergy which would in turn prevent global disaster. How could this be?

There is an equilibrium at which enough global warming—a very modest amount more than we may already have, probably enough to be here in fifty to a hundred years (as suggested by the game’s analysis)—will create enough additional sunshine in cold places, enough additional rain in dry places, enough additional wind in still places, and, most important, enough additional incentives for humankind that windmills, solar panels, hydroelectricity and as yet undiscovered technologies will be the good, cheap, evenly distributed, and clean mechanisms to replace the fossil fuels we use today. Global warming, in other words, induces a self-solving dominant strategy in which everyone elects some mix of wind, rain, and fire technologies (and maybe even some fossil fuels in moderation) precisely because the abundance of these forces, and the attention drawn to them, will make them affordable solutions to arrest further warming—long before we all roast, drown, or are blown beyond the moon, beyond the stars, and all the way to Oz.

I am optimistic for the long future. We have already warmed enough for there to be all kinds of interesting research going on into using wind and rain and solar fire. Already there are serious discussions of solar panels and cosmic ray catchers in space and more and more windmill farms will sprout up on earth. Today such pursuits take more sacrifice than most people seem willing to make. Tomorrow that might not be true, and at that point, I doubt it’ll be too late.

And, looking out five hundred years, we’ll probably have figured out how to beam ourselves to distant planets where we can start all over, warming our solar system, our galaxy, and beyond with abandon.

Remember, we’re looking out for numero uno.