First Quiz

1. First Quiz ‘’As has sooftenbeenthecase in politicalscience, theemergence of a newsubjectarea [International PoliticalEconomy] was a reponsebothtorealworldchangesandtotrends in theorizingwithinandoutsidethediscipline.’’ (Ravenhill,2011,19) Discuss Duration : 40 Minutes

2. Week 5 Cooperation and Conflict in the Global Political Economy

3. 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

4. Globalization • Global interdependence, or mutual dependence, arises when there are costly effects or high benefits to interaction among states • With increasing interdependence, questions of collaborationand coordinationbecome increasingly important

5. Cooperation vs. Collaborationvs.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.

6. 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 of Gains (relativevs.absolutegains)

7. The Need for Intl Cooperation (2) • Governments may be tempted to free ride, or adopt protectionist policies, depending on • Domesticprotectionistlobbypressures • 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

8. 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 inclusiveclub) will alsoshape the challenges in cooperating

12. 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, StagHunt , Battle of Sexes, Mixed Situations)

14. ‘FreeRidingTemptation’ : The Prisoner’s Dilemma (1) – (Note:most preferred is 4 )

16. TheNashEquilibrium • 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.

17. Pareto-Optimal • Outcomeswherenoactor can be betteroffwithoutmakingothersworseoff. • InPareto-deficientsituations, otheroutcomescouldincreasesomeactors’ welfarewithoutdecreasingthat of others.

20. 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 (particularlyappliestolargeeconomies) • Collective management of resources (i.e.OPEC)

21. StagHunt

22. The Stag Hunt (1)

24. 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 potentialpolicymistake of an individualcountrythatmightcause global destabilization)

26. Battle of the Sexes (1)

29. 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 developingcountriestochoosemutuallycompatiblemacroeconomicpolicies) • Choice of international monetary system (the US & GB in 1940s; Eurozone; China-Russiaalternativecurrency)

30. To be continuedafterthe break

31. 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

32. 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

33. 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 (targetsuncertainty problem) • Help states craft and choose among different responses (targetsdistribution problem) • Facilitates cooperative behaviour (targetsassurance problem)

34. 5 Approaches on Formation/Evolution of Institutions • Neo-realism • Neo-realist institutionalism • Neo-liberal institutionalism • Cognitivism • Radical Constructivism

35. 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

40. 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

42. 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

44. 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

46. Social act on the international stage: Each actor’s perception is an interpretation about others intention

47. 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

48. 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