Microeconomics · Intermediate · 55 min
Preview — Section 1
You wake before dawn in a hotel room overlooking Lake Geneva. It is November 19, 1985, and in four hours you will sit across a mahogany table from the American delegation. Ronald Reagan will not be there, but his people will: arms negotiators who have spent careers thinking about exactly this problem. Your job is to represent the Soviet Union at the first superpower summit in six years.
The numbers on your briefing sheet are staggering. The United States currently deploys roughly 23,000 nuclear warheads. The Soviet Union holds approximately 39,000. Together, both nations are spending the equivalent of hundreds of billions of dollars annually to maintain and expand arsenals that, if used, would end human civilization. Both governments know this. Both delegations know this. The Americans know you know they know this.
Here is the situation as your advisors have laid it out:
If both sides agree to genuine, verifiable cuts, both nations save enormous resources, reduce the probability of accidental nuclear war, and stabilize a relationship that has been lurching toward catastrophe since 1979. Every economist in Moscow agrees this outcome is superior.
But there is a problem. If you propose genuine cuts and the Americans agree publicly while secretly maintaining hidden capabilities, the Soviet Union is exposed. If you propose genuine cuts and the Americans simply refuse, you have shown weakness at the table. And if you hold your position while the Americans propose cuts, they gain the propaganda victory of appearing as the peace-seeking party while you absorb the blame for the impasse.
Your senior advisor leans over and whispers: "Whatever they offer, we cannot afford to be the only side that disarms."
The Americans are almost certainly having the same conversation in their hotel across the city.
You have two choices:
Option A: Come to the table with a genuine proposal for deep, verifiable cuts in both arsenals, staking your credibility on mutual cooperation.
Option B: Hold your current position, make no meaningful concessions, and wait to see what the Americans reveal first.
What do you do?
It is 6:47 a.m. in Geneva. Your briefing sheet shows the Soviet Union holds roughly 39,000 nuclear warheads; the Americans hold 23,000. Both sides are spending hundreds of billions annually on arsenals that, if used, would end civilization. Your advisors have laid out the math: if both sides cut genuinely, both nations save resources and reduce the risk of accidental war. But if you propose real cuts and the Americans quietly maintain hidden capabilities, the Soviet Union is exposed. You cannot verify what they will do behind closed doors. In four hours you sit down at that table. What do you do?
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