Anatole Kaletsky — Greece is Playing to Lose

Kaletsky doesn't understand game theory and Yanis does. The game that Syriza is playing with the eurocrats is all or nothing. Either the eurocrats cave or else one of two things happens. They kick Greece out of the EZ or Syriza is replaced by a new government, which, won't be imposed on the troika but will be elected by Greeks in a new election, the winner of which will be Golden Dawn, as Syriza has already warned.

There is a similar scenario developing in the Ukraine. The US is determined to escalate right up to the point of intervening militarily, which would risk WWIII. Game theorists in Russia can be sure that either the US will pull back from this or risk blowing up NATO, since Ukraine is in no one's vial interest but Russia's and no one doubts that Russia will give it all its got. 

This is similar to hand to hand combat. The person not afraid to die will usually win, even if mismatched.

As Kaletsky says, "Game theory suggests that some of the most unpredictable conflicts are between a weak, but determined, combatant and a strong opponent with much less commitment. In these scenarios, the most stable outcome tends to be a draw in which both sides are partly satisfied." This is why Merkel and Hollande are correct and the neocons are wrong.

The neocons may be able to convince American leaders that Ukraine is worth risking WWIII, but they will never convince the Europeans. It will be the beginning of the end of NATO. In fact, this was clear as soon as the Baltics were admitted to NATO. Europe now has put its future in the hands of loose cannons on Russia's border. And recall that Russia did send regular troops into South Ossetia while the West looked on fuming because they knew it was not significant enough to start a war with Russia over.

Never pick a fight unless you are ready to fight and give it all you've got. Both Syriza and Russia understand this. Does Europe and America?

Project Syndicate
Greece is Playing to Lose
Anatole Kaletsky | Chief Economist and Co-Chairman of Gavekal Dragonomics and Chairman of the Institute for New Economic Thinking