Those who have ever said to their boss, “If you do that, I’ll quit,” or to their kid “If you do that, you can’t watch TV for a week,” and then backed down when the transgression occurred, will quickly learn the importance of making credible threats. They will also learn that it is especially effective if you can commit to your threatened behaviour in advance. Learning these lessons puts you well on your way to becoming a game theorist. 

Game theory is a seemingly arcane and complex branch of mathematics and economics that has, at its core, a solid body of common sense. Canada lays claim to impressive game theorists, occupying positions in our top universities and those of the United States. But we also lay claim to a distinguished group of game players in Ottawa — our federal Liberals. 

The Liberals have unique opportunities to hone their game theory skills. As a party that expects to be perpetually in power, they can afford to think ahead not just to the next election, but to the long future over which they expect to reign. Seeing the recent budget as one of these unique opportunities can help explain its otherwise inexplicable character. 

In the months since the horrific events of Sept. 11, Canada has joined the United States, Britain and others in an ambitious and apparently successful attempt to root out the terrorists from their home in Afghanistan. While Canadian servicemen and women have contributed to this effort with distinction, our overall military contribution has been small. This has been the inevitable result of the size and limitations of our armed forces, limitations stemming from a long series of budget cuts for the armed forces. 

These cuts have resulted in lousy salaries for military personnel; helicopters that aren’t airworthy; transport aircraft that cannot be relied on to make it to the battle zone; and only a few thousand battle-ready soldiers who actually carry guns. 

The dismal state of funding of our armed forces was in part the result of the need to trim expenditures in the battle against deficits and debt. The United States under Bill Clinton also substantially reduced expenditures on the military in an effort to get their deficit under control. 

In these extraordinary times, however, Ottawa has decided it is necessary to deviate sharply from the course it has charted since 1995 and had reinforced just months ago, when the Finance Minister said that massive new spending would “risk the country’s hard-won victory over deficit financing.” Ottawa charted a new course with a budget that proposes to increase spending by nearly 10% next year, the largest increase in decades. Sept. 11 and its economic aftermath, Mr. Martin now says, make necessary a dramatic about-turn in spending plans. 

With such a significant increase in spending, you might expect big dollars for the armed forces to fill the gaps and correct past deficiencies, to say nothing of increasing the size and capacity of our forces. But the budget provides nothing like that. The armed forces are getting only $300-million over and above the direct expenditures incurred to allow them to take part in the war in Afghanistan. This amount represents only 2% of the increased spending promised in the budget, and a fraction of one per cent of total federal program spending. 

While inexplicable on its face, game theory can provide an explanation for this pitiful increase. 

Suppose (economists’ favourite word after “other” and “hand”) you are the leader of a perpetual party in power in Ottawa. You expect the United States to become engaged in future conflicts, wars and military adventures ranging from small to large. And you realistically expect that either the United States will apply pressure for Canadians to assist in these efforts or Canadians themselves will spontaneously choose to do so. 

But suppose, and here’s the kicker, that you are not all that interested in participating in these future efforts. You would prefer to commit yourself to not participating. 

Game theory would direct you to resolve this dilemma by limiting the resources allocated to the armed forces. You reduce manpower, expenditures, quality and quantity of equipment as much as the electorate will stand for. When Uncle Sam comes asking for help you can say, “Yes, we’ll give you as much help as we possibly can, keeping in mind our other commitments. We’re sorry we can’t provide more help, but you see, our armed forces are rather small.” 

By starving the armed forces, the Liberals can commit to withhold significant future military assistance. The implicit threat is credible and, from a game theory point of view, effective. 

That should not be a surprise. If the perpetual party in power in Ottawa decides in advance that it doesn’t really want to help out much on these occasions, not funding the military is just common sense.