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entirelyuseless comments on LINK: An example of the Pink Flamingo, the obvious-yet-overlooked cousin of the Black Swan - Less Wrong Discussion
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The article makes a good point: USA can lose very much in case of such war. If the world sees that nukes can destroy enemy army without turning whole country into a blasted radioctive wasteland like scaremongers say, then non-proliferation is a lost cause and US military might suddenly turns into a heap of useless expensive toys.
In my opinion the opposite is likely to happen if there is an actual war of this kind between India and Pakistan: once Pakistan uses nukes, India will be mostly ok as a whole, as you imply, but India will turn Pakistan into such a "blasted radioactive wasteland" in comparison, which will make anyone else terrified of such a war with the US. Apparently the Indian defense minister in 2003 said something like this publicly, saying something like "After we respond, there will be no more Pakistan."
India can target the Indus, pretty much gutting Pakistan. As long as they disrupt/poison the river enough they wouldn't have to target any settlements directly. If Pakistan developed the capacity to effectively target the Ganges (no small feat, and probably something best done with chemical weapons, not nuclear weapons), it would be possible to cause the displacement of a billion people over a couple of years. That would not be a good time to live in China, Europe, or Africa.
Of course, neither India nor Pakistan would want either of these things to happen. While India would survive an unilateral strike, Pakistan would not -- regardless of who struck the strike.