Book review: City of Gold: Dubai and the Dream of Capitalism by Jim Krane.

This book describes how a nearly barren piece of land became a prosperous city. Dubai sounds like what you’d expect if Bill Gates had taken over a small desert tribe and turned it into a real estate development company.

Part of its success is due to having the right amount of oil given its population size. Most non-industrialized countries that find enough oil to affect their economy are corrupted by dependence on it and by political fighting over who profits from it. Dubai found enough to finance a good deal of growth, but quickly saw that oil revenues would decline before long. Also, it had few enough people that the ruling family could afford to buy off any potential opposition.

But Dubai’s development started before it had much hope for oil money, and is partly due to the ambitions of a few people who ruled it. There must be a fair amount of luck involved – it seems to be an accident that Dubai is ruled by competent businessmen who are uninterested in politics (one ordered his reluctant brother to become the ruler). British rule over the region early on also helped ensure political stability.

The book’s description of Dubai’s legal system is confusing. How did a tribe with no tradition of private property make investors feel safe? I’ve read elsewhere that importing a British judge and British common law to the financial district is part of the explanation. The rest of Dubai seems to manage with virtually no legal system. I’m still puzzled about how Dubai provides enough predictability to attract large investments.

He describes Dubai’s lack of democracy as “an embarrassment”. But most of the book suggests that Dubai has been doing better than a democracy could. It makes much faster decisions than a democracy, and it forces bureaucrats to compete for performance scores that would be too easily gamed if voters were in charge.

Dubai’s ambitious expansion has made it resemble a financial bubble for much of the past 55 years, but most of its gambles have succeeded. This makes me wonder how to distinguish similar expansions from bubbles in the future (or in China, the present).

Dubai is an important model for how seasteads might develop, and will compete with any seastead.

The author has a modest pro-Dubai bias, but reports some serious problems such as workers being unable to leave because their passports has been confiscated, and wasteful subsidies of energy and water prices.

He claims that until 2008 the region “hadn’t experienced a financial shock for more than three decades”. Was the 1982 Kuwaiti stock market crash in a different region? It’s not obvious where to get enough financial data to say how the shock from that affected Dubai.

Iraq policies

Since mideast military policy appears to be one of the most important issues in this presidential campaign, I’m mentioning the best criticisms I’ve seen of the leading candidates’ plans:
Obama Imitates Olmert points out the problems with expecting air power to help the U.S. retain some control over Iraq (i.e. if Obama will withdraw troops from Iraq, he ought to give up hope of influencing whatever violence is left behind).
The amount of money that the U.S. has apparently needed to pay the enemy to stop fighting raises serious doubts about McCain’s hope that Iraq is being stabilized in any sustainable way (HT David Brin).

Support U.S. troops by paying attention to their views on the presidential candidates and voting accordingly.
Ron Paul has received the most donations from people identified as current and retired military personnel of any presidential candidate, followed by Obama and McCain. That suggests withdrawal from Iraq may be more popular with the military than it is with other voters. McCain’s strength might be a response to his military experience and/or his opposition to torture. (HT Andrew Sullivan).

Dying to Win

Book review: Dying to Win: The Strategic Logic of Suicide Terrorism by Robert Pape
This book presents carefully researched evidence that suicide bombers are motivated primarily by a desire to force democracies to withdraw troops from the territories claimed by the bombers, that they use rational strategies to achieve their goals, and that suicide bombers are acting mainly out of a sense of duty (like kamikazes) rather than the insanity of ordinary suicides or a desire for rewards in the afterlife.
The book’s style is fairly dry and slow to read.
He sounds like one of the most objective voices on this subject, although his objectivity is hard to verify. He is so careful to minimize partisan comments that his index only lists one entry for George Bush and none for Clinton. One place where this disappoints me is when he reports that no al-Qaeda suicide attackers came from any country described by the U.S. State Department as sponsoring terrorism. Since this covers a period including nearly 4 years of Clinton’s term, it suggests that the problem of falsely connecting governments such as Saddam’s with al-Qaeda is a more pervasive problem than just one dishonest president (although the State Department used a broader definition of terrorism than the suicide terrorism that the book deals with). I’m disappointed that Pape doesn’t analyze this enough to determine how much of this problem preceded Bush.
His use of the word nationalism to describe al-Qaeda’s aims doesn’t sound quite right, but it is close to the territorial, tribalistic motives that his evidence points to.
It’s only in the last few pages when he departs from reporting research and recommends strategies that he becomes unconvincing. His support for a fence over all of the U.S. – Mexican border seems unrelated to the rest of the book. Does he think stopping people from carrying bombs across the border will help (i.e. that it would be hard for a terrorist to make or buy a weapon after crossing the border)? Or does he hope to stop terrorists from crossing the border (which his book implies would require turning away nearly everyone from Islamic countries with U.S.-backed governments)?
He says “the idea that Islamic fundamentalism is on the verge of world domination … is pure fantasy”. His book provides some evidence for that conclusion, but it involves extrapolating from a small sample of terrorist campaigns to conclude al-Qaeda will stop at achievable goals. I’m uncomfortable with the way he dismissed such an important source of disagreement with excessive confidence and with limited analysis. (I’m also annoyed that he exaggerates the degree of alarmism of his opponents).

The Bush administration’s abuse of innocent Muslims hasn’t been getting as much coverage as it deserves, so I’m encouraging you all to spread the word about this account of the government’s continuing abuse of Muslims that it admitted months ago were innocent (thanks to Andrew Sullivan).
What is Congress doing about this boost to Al Qaeda’s recruitment efforts? Trying to restrict the habeas corpus rights of the victims so that we don’t hear about them.

Two years ago a DARPA project was canceled after some demagogues attacked a straw man which bore a superficial resemblance to the actual project. Now Robin Hanson (who had some involvement with the project) has written a defense of the straw man, i.e. an argument that futures markets might be of some value a predicting specific features of terrorist attacks (although not nearly as valuable as more natural uses of futures markets such as predicting the effects of changes in Homeland Security budgets on the harm done by terrorism).
He has a somewhat plausible argument that there is useful information out there that might be elicited by markets, particularly concerning the terrorist choice of method and targets. An important part of his argument is that in order to be useful, the markets might only need to distinguish one-in-a-thousand risks from one-in-a-million risks. One weakness in this argument is that it makes mildly optimistic assumptions about how reasonably people will respond to the information. There is clear evidence much spending that is advertised as defense against terrorism is spent on pork instead. Markets that provide a few bits of information about which targets need defending will raise the cost of that pork-barrel spending, but I can’t tell whether the effect will be enough to meet whatever threshold is needed to have some effect.
The section on moral hazard seems to contain a rather strange assumption about the default level of trader anonymity. The “reduced” level he talks about seems to be about as much as the U.S. government would allow. It isn’t clear to me whether any anonymity helps make the prices more informative (does anyone know of empirical tests of this?). The optimal level of anonymity might vary from issue to issue according to what kind of trader has the best information.
The proposal to hide some prices is more difficult than it sounds (not to mention that it’s far from clear that the problems it would solve are real). Not only would the exchange need to delay notifying traders of the relevant trades, but it would need to delay notifying them of how the trades affected the traders’ cash/credit available for trading other futures. Which would often deter traders from trying to trade when prices are hidden (it’s also unclear whether the trades that would be deterred would add useful information). In addition, I expect many of the futures that would be traded would be about targets and/or methods covering some broad range of time; it’s unclear how to apply a condition about “attacks to occur within the next week” to those.
The proposals to deal with decision selection bias sound politically difficult to implement (unless maybe Futarchy has been substantially implemented). But there isn’t much risk to experimenting with them, and elected officials probably don’t have the attention span to understand the problem, so there probably isn’t much reason to worry about this.


Liberty Magazine has an interesting article on Dubai called Freedom Blossoms in the Arabian Desert about the remarkable prosperity and freedom in that city.
A quick internet search shows reports such as this Report on International Religious Freedom and this report on Sunshine and censorship: Press freedom in UAE suggest the Liberty article exaggerates how free it is, suggesting it’s more like another Singapore than a Hong Kong. But even with that caveat, there’s still plenty of room to hope that it’s providing an opportunity for the Muslim world to escape the political systems that have kept it primitive.

The cover describes Stratfor (the intelligence company Friedman founded) as a “Shadow CIA”. By this book’s description of the CIA, this implies it has a lot of details right but misses many important broad trends. The book tends to have weaknesses of this nature, being better as a history of Al Qaeda’s conflict with the U.S. than as a guide to the future, but it’s probably a good deal more reliable than CIA analysis.
It describes a few important trends that I wasn’t aware of. The best theory the book proposes that I hadn’t heard before is the claim that the U.S. government is much more worried about Al Qaeda getting a nuclear bomb than the public realizes (for instance, the Axis of Evil is the set of nations that are unable or unwilling to prove they won’t help Al Qaeda get the bomb).
The explanation of the U.S. motives for invading Iraq as primarily to pressure the Saudi government is unconvincing.
The book’s biases are sufficiently subtle that I have some difficulty detecting them. It often paints Bush in as favorable a light as possible, but is also filled with some harsh criticisms of his mistakes, for example:

It is an extraordinary fact that in the U.S.-jihadist war, the only senior commander or responsible civilian to have been effectively relieved was Eric Shinseki, Chief of Staff of the U.S. Army, who was retired unceremoniously (although not ahead of schedule) after he accurately stated that more than 200,000 troops would be needed in Iraq

The person selected, Tom Ridge, had no background in the field and had absolutely no idea what he was doing, but that was not a problem problem since, in fact, he would have nothing really to do. His job was simply to appear to be in control of an apparatus that did not yet exist

But it’s hard to place a lot of confidence in theories that are backed mainly by eloquent stories. It’s unfortunate that the book is unable or unwilling to document the evidence needed to confirm them.

There’s a fair amount of agreement between this book and Imperial Hubris, but I’ve revised my opinion of that book a bit due to the disagreements between the two. The claims by Imperial Hubris that we don’t need to worry about a new Caliphate seem unpersuasive now that I see there widespread disagreement with that claim and weak arguments on both sides. The two books disagree on who’s currently winning the war, but I see no sign that defeat for either side is anywhere near close enough to be predictable.