Trying to Understand the Possible Responses to Russia

BV, an SUU alum, army veteran, current reservist, and student from this class about 10 years back texted:

So...how bad do you think this Ukraine thing will get? 

[Mutual friend] quit the army effective 2/11 and I'm in a non deployment unit ...so I think the worse that could happen on my end is a stateside deployment assisting actual fighters leaving. 

I guess what I'm getting at is that I trust the government and army to make the worst decisions regarding this.

Quoted with permission.

That's not very hopeful now, is it?

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This is a good point to review the prisoners' dilemma. (I have mentioned that on this blog a few times over the years, if interested go to this page, and then do a CTRL+F to search for the term in the posts).

The quick explanation of the simplest explanation is:

• 2 players are playing a game
• They each have 2 strategies
• Outcomes for both players are determined by interaction of those 2 strategies.
• They choose their strategy in isolation from the other player.
• There are lots of games like this. The prisoners dilemma describes situations where if both players make their best choice, they both get their worst outcome.

Sounds like starting a war, and how to respond to it, right?

Anyway, economists have worked out the conditions under which the worst outcome is the equilibrium of the game: players will end up at it without trying to.

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BV's last paragraph is why we stay on top of these things in macroeconomics.  Prisoners' dilemma situations are very common in macroeconomic policy. 

In the real world, people often describe this as "______ happens".

As macroeconomists, we need to be aware that weird outcomes or sometimes inevitable, and often difficult to foresee.