First Quiz
‘’As has so often been the case in political
science, the emergence of a new subject area
[International Political Economy] was a reponse
both to real world changes and to trends in
theorizing within and outside the discipline.’’
(Ravenhill,2011,19)
Discuss
Duration : 40 Minutes
Week 5
Cooperation and Conflict in the Global
Political Economy
Lecture Plan
• Globalization & the Need for International
Cooperation
• Game Theoretic Approach
– The Prisoners’ Dilemma
– The Stag Hunt
– Battle of the Sexes
• Solutions for Cooperation
• The Formation of Institutions
• Institutional Design
Globalization
• Global
interdependence,
or
mutual
dependence, arises when there are costly
effects or high benefits to interaction among
states
• With increasing interdependence, questions
of collaboration and coordination become
increasingly important
Cooperation vs. Collaboration vs. Coordination
(J.L.Stoner,2013)
Collaboration: Working together to create something new in
support of a shared vision. The key points are that is is not an
individual effort, something new is created, and that the glue is
the shared vision.
Coordination: Sharing information and resources so that each
party can accomplish their part in support of a mutual objective.
It is about teamwork in implementation. Not creating something
new.
Cooperation: Individuals exchange relevant information and
resources in support of each other’s goals, rather than a shared
goal. Something new may be achieved as a result, but it arises
from the individual, not from a collective team effort.
The Need for Intl Cooperation (1)
• There are economic benefits to the integration
of world markets but the domestic cost of
adjustment can be an obstacle or opposition
to global integration
– Challenges of
• Free Riding
• Overcoming Uncertainty/Fear
• Bargaining over Distribution
vs.absolute gains)
of
Gains
(relative
The Need for Intl Cooperation (2)
• Governments may be tempted to free
ride, or adopt protectionist policies,
depending on
– Domestic protectionist lobby pressures
– Flexibility of economy to adjust (i.e.labour
market)
• Governments may experience “inhibiting
fear”
– economic liberalization may lead to economic
instability and subsequently political
instability
The Need for Intl Cooperation (3)
• Coordination is required to negotiate the
distribution of gains and losses from
international cooperation (the “where to
meet” problem)
• The type of good (private vs public vs
inclusive club) will also shape the
challenges in cooperating
Game Theoretic Approach
• Useful analytical tool to examine interdependent
decision-making
• Typical problems of international cooperation can
be modeled by different “games”
• “Games” describe
– Choices available to actors/players
– Actors’ evaluations of potential outcomes
– Information actors have when they make choices
• Many types of games are utilized (Prisoner
Dilemma, Stag Hunt , Battle of Sexes, Mixed
Situations)
‘Free Riding Temptation’ : The Prisoner’s Dilemma (1) –
(Note:most preferred is 4 )
The Nash Equilibrium
• An outcome in which none of the players can
improve his or her situation by changing their
individual strategy.
• Only if both switch their strategy together,
both players will secure a better outcome.
(optimal situation)
• However, this collectively (Pareto) optimal
situation is unstable because each actor can
improve his or her own situation by
individually shifting strategy.
Pareto-Optimal
• Outcomes where no actor can be better off
without making others worse off.
• In Pareto-deficient situations, other outcomes
could increase some actors’ welfare without
decreasing that of others.
The Prisoner’s Dilemma (2)
• Key point: actors face a structure of
interaction that prevents them from reaching
a cooperative solution even though such a
solution would be optimal for all actors
• IPE examples:
– Reciprocal trade liberalization (particularly applies
to large economies)
– Collective management of resources (i.e.OPEC)
Stag Hunt
The Stag Hunt (1)
The Stag Hunt (2)
• Key point: actors share a single most-preferred
outcome but have difficulty in reaching such an
outcome due to the anticipation of possible
mistake or unintentional move by other actors
• IPE example:
– Financial globalization ( fear of potential policy
mistake of an individual country that might cause
global destabilization)
Battle of the Sexes (1)
Battle of the Sexes (2)
• Key point: there are two equilibrium outcomes
that are Pareto-superior to other outcomes.
Coordination is required in order to reach either
outcome
• IPE example:
– International coordination of macroeconomic policies
(i.e. efforts of developing countries to choose
mutually compatible macroeconomic policies)
– Choice of international monetary system (the US & GB
in 1940s; Eurozone; China-Russia alternative currency)
To be continued after the break
Cooperation may not arise or fail due
to:
– Actors’ incentives to cheat
– Actors’ sensitivities to distribution issues
– Lack of confidence in the other actor’s behaviour
Solutions for Cooperation (1)
• Repeated games/interactions may increase
chances of individual actors cooperating
– May be undermined by
• Low expected net value of cooperation
• High expected costs of defection by others
• Difficulty in gathering information
Solutions for Cooperation (2)
• Institution or regimes for cooperation
– Consists of
• Principles and norms
• Rules and procedures
– 3 major functions
• A channel for the enforcement of agreements
(targets uncertainty problem)
• Help states craft and choose among different
responses (targets distribution problem)
• Facilitates cooperative behaviour (targets
assurance problem)
5 Approaches on Formation/Evolution of
Institutions
1) Neo-realism
2) Neo-realist institutionalism
3) Neo-liberal institutionalism
4) Cognitivism
5) Radical Constructivism
The Formation of Institutions (1)
• Neo-realists ( Waltz, Mearsheimer)
– Regimes and international institutions have no
significant role in international relations
– Collaboration only sustainable if states highly
value future interactions, have symmetric
resources and are highly interdependent
The Formation of Institutions (2)
• Neo-realist Institutionalists (Kindleberger,
Gilpin,Krasner)
– Institutions have distributional consequences
– Institutions can help control actors’ behaviour
– Role of hegemonic powers in the development of
institutions
– Overemphasize tensions arising from the differences
in the distribution of benefits between actors
– Downplay the possibility that actors might prioritize
absolute over relative gains
The Formation of Institutions (3)
• Neo-liberal Institutionalists (J.Nye, Keohane)
– Institutions can lower costs of choosing,
organizing, negotiating and entering into an
agreement
– Actors create institutions because they are useful
– Existing institutions may constrain future
institutional developments
The Formation of Institutions (4)
• Cognitivists (E.Haas)
– Emphasize the role of expert consensus and the
interplay of experts and politicians
– New knowledge and cognitive understandings may
affect the calculation of interests
• Radical constructivists (A.Wendt)
– Norms and values are dominant causal forces
– Institutions can alter how actors conceive their basic
interests and thus constrain their behaviour
Social act on the international stage: Each actor’s
perception is an interpretation about others intention
Institutional Design (1)
• Institutions can be characterized by:
– Membership
– Stringency of rules
– Scope
– Extent of delegation of power from member
states to institutional bodies
– Centralization of tasks within the institution
Institutional Design (2)
• Variation of institutional design along these
dimensions affected by:
– Type of problems that institutions should address
– Potential participants (the number of these actors,
their relative power, their financial and “social”
capital)
– Information and knowledge available to actors
– Outside or pre-existing institutional context
Ravenhill: Global Political Economy 4e