Survival of rationalism between hostility and economic growth

This article examines the interaction of country pairs who have historicall y been and are potentially hostile. Hostility is described as a function of arms stocks versus bilateral trade. Armament intensifies the current level of hostility whereas trade reduces the possibility of militarized disputes . We argue that welfare-maximizing decisionmakers have to seek methods othe r than accumulation of arms to increase the security of their nations, and we highlight the strategic nature of trade in overcoming enmity. Rational g overnments, who consider bilateral trade as a factor that reduces the level of enmity, allocate resources more efficiently between arms imports and co nsumer goods. The model predicts that understanding the use of trade as a d iplomatic tool will lead the economy to grow significantly The model is des igned as a non-cooperative dynamic game and solved numerically using an ada ptive learning algorithm called a genetic algorithm.