During the Revolutionary War, George Washington secured American independence not by decisively defeating the British Army in conventional battle but by preserving his army and capitalizing on individual victories, thereby prolonging the conflict until Britain’s political will to continue collapsed. The conflict was ultimately decided by the differential willingness to endure pain. In modern terms, Washington succeeded not by maximizing victory, but by exploiting asymmetry in what can be termed a marginal propensity for pain (MPP).
This concept draws from the traditional economic idea of the marginal propensity to consume (MPC), which measures how individuals respond to incremental gains. By contrast, the MPP measures how much stress a nation is willing to absorb before altering course.
In advanced economies such as the United States, stress is transmitted rapidly through prices and markets. An example of this is the ongoing war with Iran, which shows no signs of ending as it heads toward its third month amid a US blockade and uneasy cease-fire. The war has already effectively closed the Strait of Hormuz, a critical energy artery for the global economy, leading to higher prices. But if this disruption were to persist for weeks or months more, then it would drive gasoline prices even higher, which in turn would likely amplify inflation expectations and tighten financial conditions. In the United States, these pressures are immediate, visible, and politically binding. As a result, even modest increases in energy prices can quickly translate into policy pressure, as the Trump administration tries to boost the president’s approval ratings and help Republicans in the November midterm elections.
Iran operates under a fundamentally different constraint structure. Stress is not transmitted primarily through consumer prices, but through the regime’s capacity to maintain internal control. Pain manifests in the balance sheet of the state, through currency depreciation, reduced oil revenues, and pressure on state capacity. Here too, real-time indicators can be identified. Sharp currency depreciation, declines in oil export volumes, and protests are three examples of rising stress. Yet these variables evolve more gradually than gas prices and inflation expectations in the United States. And crucially, they do not immediately compel a policy adjustment. We saw this most recently with Iran’s brutal crackdown on protesters in January.
This results in a structurally higher MPP: Iran can absorb larger shocks over longer periods without altering its strategic posture. The table below details these alternatives.
This asymmetry has direct implications for how the United States should approach negotiations with Iran over the Strait of Hormuz. The actor that can sustain pressure within its governing system for longer, without strategic adjustment, is more likely to shape the ultimate outcome. The equilibrium is not determined by exerting greater pressure on an adversary with a higher MPP alone, but by also recognizing the limits of one’s own endurance. Iran’s advantage is not that it experiences less economic stress, but that its threshold for politically binding pain is materially higher. As a result, it can absorb levels of disruption that would force earlier policy adjustment in a market democracy.
Improve endurance, not just pressure
The United States should continue to exert sustained pressure on Iran. Measures that constrain Iran’s economic capacity, such as restrictions on oil exports or maritime disruption, can increase the slope of Iran’s marginal propensity to suffer by accelerating the transmission of stress into the regime’s core balance sheet. However, pressure alone is insufficient. The United States should simultaneously strengthen its own endurance.
To date, the United States has demonstrated a degree of resilience. Financial markets have remained orderly, even amid elevated energy prices. Equity, credit rates, and foreign-exchange markets have continued to function without systemic disruption, reflecting both strong underlying liquidity and effective expectation management. Targeted actions, such as coordinated releases from strategic petroleum reserves, early diversification of supply chains, and the reinforcement of the US dollar’s role as the global safe-haven currency have helped absorb external shocks and limited their transmission into politically binding pressure.
This dual approach, external pressure combined with internal resilience, effectively extends the United States’ own MPP curve. Going forward, maintaining this resilience will be critical. The Trump administration will need to be more transparent than it has been with both financial markets and voters about the economic disruptions they will face. Such clear communication will play a central role in sustaining confidence and preventing localized stress from becoming systemically binding.
At the same time, the United States should avoid the trap of prolonged, incremental escalation. Gradual increases in pressure favor the actor with higher endurance. They allow Iran to absorb shocks, adapt, and continuously test the outer limits of US tolerance without triggering a decisive response. But, as the chart above shows, if conditions in Iran hit a breaking point, the picture will change rapidly. For example, if there is a currency devaluation followed by hyperinflation, the regime could fracture from within or a desperate citizenry could revolt at a scale far beyond the protests seen early this year.
This leaves two viable strategic paths for the United States. The first is a decisive escalation that overwhelms Iran’s capacity to absorb stress, forcing a rapid adjustment. The second is a structured diplomatic outcome that minimizes cumulative losses while preserving the free flow of commerce through the Strait of Hormuz. What is not viable is a prolonged, incremental escalation against an adversary structurally better positioned to absorb sustained pressure.
