That is the subject of my latest Bloomberg column, here is one excerpt:
Economists typically define rationality as the effective use of means to achieve ends — spending your money for maximum enjoyment, for example. That is fine for some purposes, but it fails when it comes to understanding those political leaders, Putin included, who are obsessed with power.
The economic framework doesn’t work well when power is the end itself. While no one can truly know what’s in the mind of Putin, he has ruled Russia for 22 years, a pretty good sign that he cares about power. Putin also grew up in an era — as a KGB agent behind the Iron Curtain — when power was the currency of status.
So how does the quest for power make Putin difficult to deter?
Deterrence, by its nature, attempts to limit the power of the deterred person. If a person cares about many things, not just power, they will respond to deterrence by seeking less power and spending more on other things, such as quiet contemplation or time with family. If a person cares mainly about power, however, the induced response to deterrence is to try to seize back more power.
In other words, trying to make power “more expensive” for Putin is not guaranteed to work. The price of enjoying power might go up — say, because of threatened sanctions — but the thirst for renewed power goes up too, precisely because some power has been taken away.
Deterrence does not always work in international affairs, or in other situations with power-mad individuals. Napoleon and Hitler faced high costs from their blunders, but still they proceeded with ambitious and ultimately foolish military plans. Many revolutionaries try to seize power and die doing so.
…It is a common economic trope to insist that “incentives matter.” While true, it does not necessarily follow that deterrence therefore works. Putin isn’t looking to retire and spend more time on one of his luxurious yachts. The full consequences of that fact are just now becoming clear.
Note that as a powerful leader crosses the “will be allowed to retire peacefully” line, as Putin certainly has, he has to become obsessed with power all the more, even if the demand for traditional goods and services does not fade away. Without ongoing power, the life of that leader simply will end and all consumption will fall to zero, therefore cementing in a kind of power addiction all the more.