Abstract

The theory of public goods is mainly about the difficulty in paying for them. Our question here is this: Why might public goods not be provided, even if funding is available? We use the Afghan Army as our case study. We explore this issue using a simple model of a public good that can be provided through collective action and peer pressure, by modeling the self-organization of a group (the Afghan Army) as a mechanism design problem. We consider two kinds of transfer subsidies from an external entity such as the U.S. government. One is a Pigouvian subsidy that simply pays the salaries, rewarding individuals who provide effort. The second is an output/resource multiplier (the provision of military equipment, tactical skill training, and so forth) that amplifies the effort provided through collective action. We show that the introduction of a Pigouvian subsidy can result in less effort being provided than in the absence of a subsidy. By contrast, an output/resource multiplier subsidy, which is useful only if collective action is taken, necessarily increases output via an increase in effort. Our conclusion is that the United States provided the wrong kind of subsidy, which may have been among the reasons why the Afghan Army did not fight.

Rohan Dutta is an associate professor of economics at McGill University. David K. Levine is a professor of economics at the European University Institute, a professor of economics emeritus at Washington University in St. Louis, and a research fellow at the Federal Reserve Bank of St. Louis. Salvatore Modica is a professor of economics at Università di Palermo, Dipartimento SEAS. We thank Andrea Mattozzi. We gratefully acknowledge support from the MIUR PRIN 2017 n. 2017H5KPLL_01. 

"We paid their salaries...What we could not provide was the will to fight."
—President Joe Biden

INTRODUCTION

The speed with which the Afghan Army collapsed and the Taliban took over Afghanistan came as a surprise to many, but not to economists or individuals versed in game theory. By backward induction, if you plan to surrender anyway, then sooner is generally better than later (unless you are indifferent between present versus future payoffs). This article, however, explores a deeper question: Why would a well-equipped army that outnumbered their opponents by three or four to one in manpower and with decades of training plan to surrender to an apparently much inferior opponent?

The quote from President Joe Biden's speech following the fall of Kabul is revealing: What Biden and many others fail to understand is that there is a causal connection between paying the salaries of the Afghan Army and the fact that they lacked the will to fight. Our goal in this article is to explain why that is so and why it need not have been so.

Insofar as nation building is measured by the national defense, the place to start is to understand that national defense is a public good. Many Afghans would prefer not to be ruled by the Taliban, but most would prefer that someone else do the fighting. This problem of free riding is endemic to public goods problems, and economists and other social scientists have analyzed these problems for over a century. We recognize three ways of overcoming the free-rider problem. The most familiar one involves collective action through formal systems, usually Pigouvian taxes or subsidies, which are widely recommended by economists to achieve, for example, reductions in carbon emissions to combat global warming. A second, less formal means of providing public goods is through voluntary provision: People contribute to a public good either because the personal benefit of the public good is sufficiently great to outweigh the cost of contributing or because they are altruistic and desirous of helping society (e.g., by funding public radio and television in the United States [NPR and PBS]). There is little evidence, however, that voluntary public goods provision can provide public goods on a large scale—for an entire country, for example, as in the case of an army.

We wish to focus on a third means of public good provision: providing incentives informally or "socially" through means such as peer pressure, resulting in various forms of ostracism of those who fail to contribute. Although economists have not studied this to the extent that they have studied taxes and subsidies, we know, particularly from the work of Coase (1960), Ostrom (1990), and Townsend (1994), that these methods work in practice. Indeed, the effectiveness of large-scale lobbying organizations such as farmers show that peer pressure can be effective even on a very large scale. After all, all farmers want the benefits of farm subsidies but prefer that other farmers bear the cost of lobbying.

Of course, while groups and societies can collectively self-organize social norms that induce provision of public goods, they may also choose simply to follow the "law of the jungle" and allow members to go their own way and free ride as they wish. The right choice depends on how valuable the public good is and how costly it is to organize and enforce collective decisions. Our starting observation is that the intervention of outside agencies—be they non-governmental organizations (NGOs) or the United States—changes the trade-offs for collective decisionmaking. Simply put, if the United States pays the salaries of the Afghan Army, then there is little benefit from the Afghans collectively organizing to encourage people to join the army and fight for their country. In practice, if the salary is sufficiently high relative to the outside option, people might join but will not fight when it is time to deliver. Indeed, General Wesley Clark, former NATO supreme allied commander, gives the following description of the motivation of Afghan soldiers: "People signed up with the Afghan military to make money...but they did not sign up to fight to the death, for the most part." Contrast this with J.R.R. Tolkien's description of Britain at the start of World War I: "In those days chaps joined up, or were scorned publicly." We think it is reasonable to assume that such peer pressure to defend the country did not exist in Afghanistan.

Here is the key point: The displacement of self-organization by subsidy can result in less provision of the public good than in the absence of the subsidy. In other words, subsidizing a public good—the Pigouvian approach—can reduce the provision of that good if it displaces self-organization. The reason is that self-organization is costly, and so the benefit of not organizing can exceed the cost of having less of the public good.

In this article, we examine a simple model of a public good that can be provided through collective action and peer pressure and examine the effect of subsidies. Our model follows Townsend (1994), Levine and Modica (2016), and Dutta, Levine, and Modica (2022) by modeling the self-­organization of a group as a mechanism design problem. The group establishes an output quota, it has a noisy monitoring technology for observing whether the quota is followed, and it can punish group members based on these signals. A key feature of the model is that if monitoring and punishment is to be used, it has an associated fixed cost that includes both the physical cost of monitoring and the costs of negotiating and finding an agreement as to what the mechanism will be.

In this setting, we consider two kinds of subsidies. One is a Pigouvian subsidy that simply "pays the salaries," rewarding individuals who provide effort. We show that this can result in less effort being provided than in the absence of a subsidy. The other is an output multiplier: the provision of training, equipment, and so forth, that amplifies the effort provided through collective action. Because such provision is useful only if collective action is taken, unlike with a Pigouvian subsidy, it necessarily increases output.

In Dutta, Levine, and Modica (2022), we showed more broadly how Pigouvian subsidies can have the perverse effect of undermining existing collective action. We pointed there to the case of NGOs. Bano (2012) did extensive field research in Pakistan. She documented how public goods, particularly welfare, were provided through voluntary efforts with socially provided incentives for contribution. Donor organizations—mostly NGOs—subsequently attempted to increase public good provision through subsidies in the form of salaries to those contributing to the public good. In a series of case studies, she showed how such subsidies led to the unraveling of the provision of social incentives and ultimately to decreased provision of the public good. In one of several cases, she indicates that "the Maternity and Child Welfare Association...almost collapsed with the influx of such aid."

The evidence now shows that similar considerations can be applied to the Afghan Army. We cannot know how strong the social pressure to self-organize resistance to the Taliban would have been without subsidies; but the fact is that by paying the salaries of soldiers, the incentive for collective action to encourage volunteers to join the army for the common good was reduced so much that provision of the public good—measured not by the number of soldiers, but by the number of soldiers willing to fight—was minimal. Hence, the Taliban, an army recruited through social incentives, predominates and once again rules Afghanistan.

The collapse of Afghanistan is often compared to the collapse of South Vietnam. In this context it is worth pointing out that the United States did not pay soldiers' salaries in South Vietnam but only provided subsidies in the form of training and equipment. What is less well know is that, as a result, the South Vietnamese Army (ARVN) did fight. The United States withdrew from Vietnam in 1973. In the next year the ARVN largely drove the Vietcong, the North Vietnam irregular army somewhat akin to the Taliban, out of South Vietnam. In 1975 the North invaded with a large regular army of similar strength to the ARVN, including a great many artillery pieces. The fighting lasted about four months, and the casualties on both sides combined were about 45,000 killed and 80,000 wounded. This is greatly different from Afghanistan, where a large superior well-equipped military refused to fight and was defeated in weeks by a small, lightly armed group of irregular fighters.

The bottom line is not entirely negative—either for nation building or for NGOs. It is not that help cannot be provided, but care must be taken that the help provided does not undermine the provision of effort through collective action and social norms. Hence, providing military training and equipment will generally result in greater defense, just as providing computers and training to charitable organizations can do the same.

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