Mulligan on Ransom, 'Gambling on War: Confidence, Fear, and the Tragedy of the First World War'

Author: 
Roger L. Ransom
Reviewer: 
William Mulligan

Roger L. Ransom. Gambling on War: Confidence, Fear, and the Tragedy of the First World War. Cambridge: Cambridge University Press, 2018. 338 pp. $84.99 (cloth), ISBN 978-1-108-48502-9; $27.99 (paper), ISBN 978-1-108-45435-3.

Reviewed by William Mulligan (University College Dublin) Published on H-Diplo (July, 2019) Commissioned by Seth Offenbach (Bronx Community College, The City University of New York)

Printable Version: http://www.h-net.org/reviews/showpdf.php?id=53871

While historians acknowledge the significance of economic issues in the causes, course, and consequences of the First World War, Niall Ferguson’s The Pity of War: Explaining World War I, published in 1998, was the last major single-authored overview of the war by an economic historian. Amid the surge of publications during the centenary commemorations of the war, Roger L. Ransom’s book provides the perspective of an economic historian. Like Ferguson’s work, this study ranges well beyond economic factors to explore military operations, revolution, and, most important, critical foreign policy and strategic decisions. Ransom draws on work from behavioral economics to examine why the war broke out and why it did not end much sooner in a compromise peace. In addition to bringing economic theories to bear on examinations of decision-making, he also looks at how the distribution of economic resources determined the course and outcome of the war.

Daniel Kahneman’s Thinking, Fast and Slow (2011) and Richard Thaler’s Misbehaving: The Making of Behavioral Economics (2015) have drawn popular attention to behavioral economics, which challenges the rational choice model, which argues that economic beings act rationally to maximize their wealth and any deviations can be explained by imperfect information and misperception. The rational actor model has also been influential among political scientists, and Ranson draws on Jack Levy’s work in this field. Historians, particularly students of high politics, have perhaps always been aware of the limits of rationality, but Ransom brings the theories of behavioral economics to bear on the analysis of key decisions. In particular, he draws on “prospect theory,” which posits that individuals are risk averse in choices involving gains and risk prone in choices involving losses. In international politics, it follows, the risk of a decline in power and prestige is more likely to bring about aggression than the prospect of expansion. Moreover, the impulse to act to avoid future losses is compounded, Ransom argues, by overconfidence in the remedy to avert these losses. In the cost-benefit analysis of war, leaders tend to discount costs and overestimate benefits. Ransom characterizes this willingness to speculate on future gains as the unleashing of what John Maynard Keynes called the “animal spirits.”[1]

Otto von Bismarck, German chancellor, kept these “animal spirits” in check in the decades after 1870, although the Franco-Prussian War, according to Ransom, set Europe on the path toward the First World War. I have been one of many to dispute the strong connection between the Franco-Prussian War and the causes of the First World War (The Origins of the First World War [2017]), but it remains a powerful framework for understanding international politics in the late nineteenth century. Fear of great power decline and overconfidence in offensive military plans led political and military leaders to favor war as an option in 1914. Following David Stevenson’s Armaments and the Coming of War, 1904-1914 (1996) and David Herrmann’s The Arming of Europe and the Making of the First World War (1996) on arms races in Europe before 1914, Ransom argues that these races created opportunities that encouraged German leaders to strike before Russia grew too powerful to contain.

The decision for war in July 1914 was the first German gamble. Ransom argues that the German army came close to achieving victory. However, once the western front had settled into stalemate by December 1914, economic determinism—the greater resources of the Allies vis-à-vis the Central powers—suggested that German leaders should have pursued peace negotiations, as General Erich von Falkenhayn proposed in late 1914. Ransom, drawing on more behavioral economic theory, argues that the fallacy of sunk costs prevented both sides from exploring a negotiated compromise settlement. This is a variation on the well-known argument that the scale of casualties in the first few months meant no government could willingly entertain any other outcome than decisive victory; otherwise they betrayed the fallen. There is a good deal to be said for this argument, but it also raises questions about how contemporaries understood victory and peace. In fact, there were several peace initiatives during the war. In addition to the “sunk costs” argument, these initiatives faltered due to lack of political support and fear of future war. For example, British and French politicians consistently rejected a compromise peace as they feared they would have to fight Germany again in the not too distant future. Conceding any gains to Germany would, they feared, bolster the militarist authoritarian element in German politics, heightening the risk of a second war. While German leaders entertained far-reaching territorial and economic gains in Europe, Allied war aims were arguably more radical as they implicitly required constitutional change in Germany as part of the establishment of a liberal internationalist order. The outbreak of war in 1914 immediately radicalized European international politics by creating cultural and ideological chasms between the great powers.

Despite periods of profound despair, leaders on both sides believed they could win. Ransom charts how the “animal spirits,” in particular overconfidence, meant leaders continued to discount risk and gambled again and again. The German decision to launch unrestricted submarine warfare in January 1917 rested on wholly unfounded assumptions about British society and naval strategy. The spring offensives of 1918 proved to be Germany’s final gamble. Allied leaders also gambled to disastrous effect, with the Brusilov offensive of 1916 overextending the Russian army, the Nivelle offensive sparking mutiny in the French army in 1917, and General Douglas Haig’s Passchendaele plans foundering at the cost of seventy thousand lives of British and colonial soldiers. It is striking that generals and admirals pushed through highly risky plans in the face of civilian skepticism. Ransom suggests a possible explanation for this, related to economic behavioral theory, rather than more conventional arguments about civil-military relations in democratic and authoritarian states.[2] In situations of high risk, there is a propensity to act. Arguably, British and French forces should have sat tight in 1917 and awaited the arrival of American forces rather than expend lives in risky and ultimately futile offensives. The military had the capacity to act, and, as Peter Jackson argues in Beyond the Balance of Power: France and the Politics of National Security in the Era of the First World War (2013), their habitus predisposed them to look for violent solutions to political problems. However, during the war, the decision to gamble was not simply a means to avert defeat, as one expects according to the logic of “prospect theory,” but also to win. Returning to the status quo was no longer an option. This deprived the diplomats of one of their key assets: their capacity to forge compromise solutions in moments of political conflict.

Ransom downplays the role of political culture and institutions in shaping decision-making and the outcome of the war. He argues that economic resources determined the outcome of the war. In particular, he uses the Composite Index of Nationality Capability Score (CINC), based on criteria determined by the Correlates of War project. These focus on material factors, such as population, levels of urbanization, and military budget. They exclude what might be considered less tangible factors, such as political institutions, quality of military and political leadership, and army and civilian morale. Ransom’s account belongs firmly to the school of historians who have argued that Allied victory owed much more to economic resources than to the capacity of representative constitutional regimes to mobilize and sustain popular support for war over four years.[3] Within the debate about economic resources, he also emphasizes the complexity of the British economy and the financial depth of British and French resources, which enabled both countries to import war materiel, including food; to manage inflation; and to limit—at least in comparison with Germany, Austria-Hungary, and Russia—the impact of the war on civilian life. Given the disparity of economic resources, successive German gambles to win the war become more comprehensible, as the defeat of the Central powers was economically overdetermined and only a military strike could change this balance. Indeed, as Ransom shows, military operations did convert into relative economic gains: the German conquest of Belgium and northern France deprived the Allies of some of the greatest concentration of industrial capacity in the world. Submarine warfare damaged British shipping, but it also exacerbated Germany’s economic inferiority by bringing the United States into the war.

Relative economic power determined the outcome of the war, but Ransom has less to say about the specific decisions that brought about the ceasefire in 1918 and their relationship to economic behavioral models. As David Stevenson pointed out in With Our Backs to the Wall: Victory and Defeat in 1918 (2011), the Allies had incentives not to make peace in 1918 but to continue the war, occupy Germany, and win a decisive victory. For various reasons, Allied leaders feared they would be in a worse position if the war continued into 1919. Here, expectation of a deteriorating position led to restraint. Ransom concludes that the war undermined the global economy to such an extent that politicians in the 1920s could not find ways to stabilize the international order. Although he cites historian Margaret Macmillan’s favorable judgment (The Peacemakers: The Paris Conference of 1919 and Its Attempt to End War [2001]) on the peacemakers, he concludes that French military leader Ferdinand Foch’s comment that the peace was a mere ceasefire proved prescient. By shifting attention to the economic consequences of war and its destabilizing political effects, Ransom offers an implicit critique of those, like me (The Great War for Peace [2014]), who have stressed the successes of peacemaking by the mid-1920s.

The great strength of the book is the application of behavioral economic theories to decision-making in the First World War. It offers a variation on the argument that the war swept away the restrained political mores of the late nineteenth century. Once one power “speculated” by initiating aggression, others had to react, and this changed expectations of future behavior, creating a path dependency toward the Second World War. Equally the strength of any parsimonious model is also its weakness. It strips away the complexity and contingency of decision-making, highlighted in Thomas Otte’s The July Crisis: The World's Descent into War, Summer 1914 (2014) and Chris Clark’s The Sleepwalkers: How Europe Went to War in 1914 (2012). Nonetheless, Ransom’s account should encourage other historians to look at new methodologies, developed in the social sciences by behavioral economists, and to test the model in fine-grained accounts of other key moments of decision in the First World War and beyond.

Notes

[1]. John Maynard Keynes, The General Theory of Employment, Interest and Money (London: Macmillan & Co, 1936), 162.

[2]. Most recently, see Jay Winter and John Horne, introduction to part 3, in The Cambridge History of the First World War, ed. Jay Winter, vol. 2, The State (Cambridge: Cambridge University Press, 2014), 293-94. The other essays in this section present an excellent overview of the latest scholarship.

[3]. Stephen Broadberry and Mark Harrison, eds., The Economics of World War I (Cambridge: Cambridge University Press, 2009).

Citation: William Mulligan. Review of Ransom, Roger L., Gambling on War: Confidence, Fear, and the Tragedy of the First World War. H-Diplo, H-Net Reviews. July, 2019. URL: http://www.h-net.org/reviews/showrev.php?id=53871

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