At a meeting last month, the issue of how to deal with a nuclear North Korea was brought up. The general conclusion was that we’re in quite the bind. When a country goes nuclear, you are extraordinarily limited in your military options for that country; if we were to attack North Korea, eventually they would be backed into a corner where using their nuclear weapons was their only option for defense. Diplomacy also seems to be failing us as Kim Jong-il has a rich history of simply ignoring every sanction and breaking every deal made with him to stop proliferation. Sanctions seem to be an option, but Kim will likely use the threat of using his weapons to force us to appease him with aid (as he does already) and North Korea is already so broke and desperate that Kim may be forced sell a nuke to some terrorist organization just to keep the country afloat.
So what is the solution? In that same meeting I proposed an option based on the Coase theorem. Basically what the Coase theorem states is that if anyone is doing something that creates an externality (and using nuclear weapons is one of the biggest negative externalities around) you can prevent them from doing that action by compensating them for not doing it. Kim is getting some sort of benefit from having these nuclear weapons. He is extorting the US and world community for aid. He is getting more respect. This benefit to Kim and North Korea can be monetized (expressed in terms of money). Essentially, the benefit for having nuclear weapons to North Korea is worth to Kim some price, and to stop him from having these weapons, we must simply compensate him that price.
So why not buy the nukes from North Korea? We already mentioned about how North Korea is incredibly poor (see for yourselves) and most of the benefit from having the nuclear weapons is simply to extort aid from the world community. Furthermore, we already discussed the danger of Kim selling a nuke to some terrorist organization; if he’s so hot to sell the weapons, why not buy them ourselves?
The fact of the matter is we need a solution to the nuclear North Korea problem. War doesn’t seem to be an option (and even if they weren’t nuclear, after Iraq I don’t think it would really be on the table). Diplomacy isn’t working even with Chinese pressure, and I don’t see that changing anytime soon. Kim and North Korea obviously need the money as their country is incredibly poor. The price of paying for these nukes is easily offset by the savings we gain in a) not having to engage in another arms race, b) not having to fight another war, c) being able to trade with North Korea (as opposed to not trading if we were to institute sanctions), and d) the increased value of assets in the world economy due to the absence of a nuclear threat.
A Coaseian solution to our problems is one that is both effective and efficient. We risk no American lives in the process and our citizens, as well as those in South Korea, Japan, and other allies can sleep easier knowing a madman no longer has nuclear weapons.