Tuesday, December 18, 2012

Learning to negotiate again

The term is over, but lessons don't end. We were talking in Ec & Quant about negotiation and how having a good BATNA (best alternative to a negotiated agreement) makes for a strong negotiating position.

The President has a pretty good BATNA now in the congressional "hammers and sunsets" represented by the so-called "Fiscal Cliff." Which means the other side now has to negotiate, because their BATNA is much worse for them. In fact, they don't really have one. The Fiscal Cliff is way more of a cliff for the Republicans and their constituencies than it is for the Democrats and theirs.

Negotiation theory would predict a Democratic-leaning result, when one side holds so many of the cards. The result should be neutral or slightly stimulating for the economy, and the recovery should continue.

This is an interesting process to watch, for those of us interested in macro and/or negotiation.

As a result, the papers are full of macroeconomic analysis, some of it leaning conservative, some of it leaning liberal.

How hard is it for the parties to learn to negotiate again when protagonists have been stone-walling and demagoguing each other for so long?

I guess we'll find out before the New Year.

Addendum (Weds 19th):

Here is what may be John Beohner's attempt to formulate a better BATNA.

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