Nuclear War is… Unpredictable

Published October 24th, 2022 by JMSCapitalGroup

Elon Musk recently expressed his concern that the Russian invasion of Ukraine may be leading the world down the path to nuclear war, and his belief that a settlement would likely need to include Russia retaining Crimea, which it illegally seized in 2014. We certainly understand his concern, but have no idea of the likelihood of a nuclear attack. Amy Nelson and Alexander Montgomery argue that the odds of a nuclear attack are incalculable, and that the world should be focused on reducing the likelihood of a nuclear strike rather than speculating on nuclear percentages.

Nelson and Montgomery note that one way to assess the odds of an event occurring involves a frequentist approach—if an event has happened frequently in the past, that gives you some information on how likely it will occur again. However, since there has not been a military use of nuclear weapons in over 75 years, there’s no basis to estimate how frequently such an event may occur in the future. Nelson and Montgomery also discuss a Bayesian approach, which involves establishing a baseline rate and then updating that rate as new information accrues. This approach also is flawed, as there’s no way to determine a baseline rate—Nelson and Montgomery cite the example of the Cuban Missile Crisis, during which President Kennedy assessed the probability of nuclear war as between 33% and 50%, while US National Security Advisor McGeorge Bundy gave his own probability as 1%. Most observers would agree that the odds of a nuclear strike have gone up since Russia invaded Ukraine, but it’s not clear at all how any number can be assigned to the chances of a nuclear event.

Nelson and Montgomery argue that rather than indulging in horserace coverage of the likelihood of Putin using nuclear weapons, we should instead focus on lowering the chances of such an event unfolding. It’s in Putin’s interest to publicly claim his right to and interest in using nuclear weapons if it decreases Western support for Ukraine and increases pressure on political leaders for a settlement favorable to Russia. Indeed, analyst Fiona Hill believes that Putin has been using Elon Musk to transmit the message that Russian demands need to be met for the world to become safer. The difficulty is that if Putin is rewarded for making nuclear threats, his incentive to keep making nuclear threats increases. Alternatively, Nelson and Montgomery suggest that NATO make it clear that it is not seeking regime change in Russia, but that NATO’s war response and aims may change should Russia use nuclear weapons. In order words, try to set up structural disincentives for Putin so that he believes the risk to him from using nuclear weapons outweighs the potential rewards. The carrot is reassuring Putin of his continuance in power; the stick is threatening that control should he order a nuclear strike. What the future holds is anyone’s guess—it’s hard to imagine Ukraine as willing to cede territory, and equally hard to imagine Russia withdrawing—but in the interim, providing disincentives for nuclear weapons may prove more useful than speculating on what Putin will or will not do.


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This material is not intended as an offer or solicitation for the purchase or sale of any financial instrument or investment strategy. This material has been prepared for informational purposes only, and is not intended to be or interpreted as a recommendation. Any forecasts contained herein are for illustrative purposes only and are not to be relied upon as advice.

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