Spies in a Barrel: When To Reel In Espionage

How does counterintelligence affect international organization? To answer this question, we present a formal model of domestic response to espionage. In the model, the state can learn about a foreign agent’s activities from choices made in preceding periods. Foreign agents can moderate these actions to suppress the likelihood that they are discovered. States will only intervene when espionage exceeds a tacitly agreed threshold, and excesses emerge when agents cannot be incentivized to moderate espionage activities due the prospect of potentially lucrative intelligence. An executive’s choice to deter produces countervailing incentives between the intelligence community’s preferences and the executive’s audience cost. We find that egregious punishment of spies and blowback from the international community can make avoiding escalation less likely. We analyze these findings in the context of media revelations of Chinese espionage in the early 2020s. We conclude with suggestions for other application areas like counterterrorism and cyberwarfare.