Literature Review: Balancing, Bandwagoning and Walt

• Walt, Stephen M. 1985. "Alliance Formation and the Balance of Power." International Security 9: 3-43.
• Walt, Stephen M. 1987. The Origins of Alliances. Ithaca: Cornell University Press.

Walt (1985, 1987) draws a contrast between balancing (allying against a threat) and bandwagoning (allying with the threat). He contends that balancing should be more common than bandwagoning and supports his contention with a survey of alliances in the Middle East. This conclusion is not surprising from the perspective of the argument here. Threats arise from differences in position on issues on which the threatening nation pursues change. Because alliances require agreement between the allies over some set of issues, nations will generally not ally with nations that threaten them for the lack of areas of agreement. Balancing alliances have the common interest in resisting the threatening nation to bring the allies together.

Bandwagoning alliances could form for two reasons: (1) because both parties face a common threat from a third nation or (2) because the threatening nation receives concessions to deactivate the threat. The former leads to a symmetric alliance; the latter, to an asymmetric alliance. An example of the former from Walt's 1987 cases would be Jordan's alignment with Egypt on the eve of the Six Day War. Balancing alliances can also be either symmetric or asymmetric. NATO is an example of an asymmetric balancing alliance.

From: Morrow, James D. 1991. "Alliances and Asymmetry: An Alternative to the Capability Aggregation Model of Alliances." American Journal of Political Science 35(4): 904-933.

Literature Review: Balance of Power and Power Transition Theories of Alliances, Morgenthau, Organski, Kugler, and Bueno de Mesquita

• Morgenthau, Hans J. 1973. Politics among Nations: The Struggle for Power and Peace. 5th ed. New York: Knopf.
  
• Organski, A. F. K. 1968. World Politics. 2d ed. New York: Knopf
• Organski, A. F. K., and Jacek Kugler. 1980. The War Ledger. Chicago: University of Chicago Press.
• Bueno de Mesquita, Bruce. 1988. "The Contribution of Expected Utility Theory to the Study of International Conflict." Journal of Interdisciplinary History 18: 629- 52.
• Singer, J. David, Stuart Bremer, and John Stuckey. 1972. "Capability Distribution, Uncertainty, and Major Power War, 1820- 1965." In Peace, War, and Numbers, ed. Bruce M. Russett. Beverly Hills: Sage.

The balance of power and power transition theories of alliances argue for different conceptions of the fundamental role of alliances than the capabilities aggregation model and the security-autonomy trade-off model of alliances. In the balance of power theory (Morgenthau 1973), nations form alliances to offset growing powers and restore the balance. Alliances in a balance of power system should be nonideological and last as long as the immediate threat. This view is the capability aggregation model. Prospective allies are just capabilities that can be added through alliance, and once the threat to the balance has been countered, the alliance is unnecessary and should be broken.

The power transition theory (Organski 1968; Organski and Kugler 1980) postulates an international system dominated by one nation. This dominant state forms a large alliance from the lesser powers that share its ideology. Nations not in this satisfied coalition may form alliances dedicated to the overthrow of the existing international system. Alliances in a power transition system should be ideological and long-lasting.

From the perspective of the argument of this paper, the theories are both correct and incorrect because, as Bueno de Mesquita (1988, 641-42) points out, they make different assumptions about the distribution of capabilities in the system. Balance of power theory assumes an international system composed of a number of major powers with relatively equal capabilities. The role of minor powers is ignored because they do not possess sufficient capabilities to shift the balance of power. In the international system postulated by balance of power theory, only symmetric alliances can be formed because all possible allies have equal capabilities. Alliances are formed only to gain security (i.e., nonideological) and do not persist because they are symmetric. Power transition theory, however, assumes a system with one dominants tate holding a preponderance of power. Any alliance that the dominant state forms is asymmetric. (Symmetric alliances are those in which both allies receive security or autonomy benefits. Asymmetric alliances are those in which one ally gains security and the other autonomy.) Alliances in a power transition system are formed to advance the autonomy interests of the dominant state or challenger (i.e., ideological) and persist because they are asymmetric.

Both theories are right in the sense that given their assumptions about the international system and their focus on relations among equals or between the dominant state and all others, their conclusions about alliances follow. However, widening our analysis of alliances shows that those conclusions are not general. The argument presented in Morrow (1991) also explains why both theories should be able to find supporting evidence in the historical record. Scholars generally see the nineteenth century as a balance of power period, while the power transition model fits the twentieth century better (e.g., Singer, Bremer, and Stuckey's 1972 results on the effects of systemic concentration of capabilities on war). The alliances examined in Morrow (1991) reflect this observation; symmetric alliances are formed more frequently in the nineteenth century (26 symmetric alliances versus 16 asymmetric alliances) than in the twentieth century (62 to 60). But in both centuries, asymmetric alliances last longer on the average than symmetric alliances.

From: Morrow, James D. 1991. "Alliances and Asymmetry: An Alternative to the Capability Aggregation Model of Alliances." American Journal of Political Science 35(4): 904-933.

Literature Review: Alliances and Thies

• Thies, Wallace J. 1987. "Alliances and Collective Goods: A Reappraisal." Journal of Conflict Resolution 31: 298-332.

Thies (1987) examined a host of pre-World War II alliances that depended on conventional armaments producing deterrence as well as impure public benefits such as damage-limiting protection in times of conflict. Based on a visual examination of some income and military spending data, Thies (1987) concluded that most of these alliances demonstrated behavior more in keeping with the joint product model for which allies are motivated by private excludable defense benefits.

From: Conybeare, John A. C., and Todd Sandler. 1990. "The Triple Entente and the Triple Alliance 1880-1914: A Collective Goods Approach." American Political Science Review 84: 1197-1206.

Literature Review: Arms Race and Michael Horn

• Horn, Michael Dean. 1987. "Arms Races and the International System." PhD dissertation. Rochester, NY: Department of Political Science, University of Rochester.
• Richardson, Lewis F. 1960. Arms and Insecurity. Pacific Grove, CA: Boxwood Press.
• Huntington, Samuel P. 1958. "Arms races: prerequisites and results." Public Policy 8: 41-86.
• Wallace, Michael D. 1979. "Arms races and escalation: some new evidence." Journal of Conflict Resolution 23: 3-16.
• Morrow, James. 1989. "A Twist of Truth: A Reexamination of the Effects of Arms Races on the Occurrence of War." Journal of Conflict Resolution 33(3): 500-529.

Horn (1987) offers an independent means of determining when two countries are engaged in an arms race. His relatively straightforward measure has two qualifications for definition as an arms race. First, that the growth rates of a country's military expenditures are on average higher in the period preceding a dispute than in the whole period under study (for him, the Correlates of War period from 1816 to 1980). Second, in order to be classified as an arms race, the growth rate must be higher in the second half of the period than in the first. In this, he attempts to include the criterion of acceleration which is so vital to the Richardsonian distinction between stable and unstable arms races (Richardson, 1960, pp. 74-75). Only when growth is speeding up or seemingly out of control is there an arms race.

He finds that of longer arms races (he looks at Huntington's twelve-year period, cf. Huntington, 1958) over one-half end in war (Horn, 1987, p. 56). Experimenting with a shorter time period, Richardson's suggested six years (Richardson, 1960) yielded no significant relationship. He concludes from this that an arms race over the longer period is indicative of a continuing conflict of interests and/or hostile relationship between countries, but the shorter measure could easily catch incidental or shortterm conflicts that never reach the level of war.

He determines that arms races are considerably rarer than others have thought, but they do have some relation to the escalation of disputes to war, though his findings are less robust than Wallace's (Horn, 1987, p. 60; Morrow, 1989, p.502).

From: Sample, Susan G. 1997. "Arms Races and Dispute Escalation: Resolving the Debate." Journal of Peace Research 34: 7-22.

Literature Review: Arms Race, Michael D. Wallace, Erich Weede, Michael F. Altfield, and Paul F. Diehl

• Wallace, Michael D. 1979. "Arms races and escalation: some new evidence." Journal of Conflict Resolution 23: 3-16.
• Weede, Erich. 1980. "Arms Races and Escalation: Some Persisting Doubts." Journal of Conflict Resolution 24(2): 285-287.
• Wallace, Michael D. 1980. "Some Persisting Findings: A Reply to Professor Weede." Journal of Conflict Resolution 24(2): 289-292.
• Altfield, Michael F. 1983. "Arms Races? — And Escalation? A Comment on Wallace." International Studies Quarterly 27(2): 25-231.
• Diehl, Paul F. 1983a. "Arms Races and Escalation: A Closer Look." Journal of Peace Research 20(3): 205-212.
• Diehl, Paul F. 1983b. "Arms Races and the Outbreak of War, 1816-1980." PhD dissertation. Ann Arbor, Ml: Department of Political Science, University of Michigan.
• Diehl, Paul F. 1985. "Arms Races to War: Testing Some Empirical Linkages." Sociological Quarterly 26(3):  331-349.

In 1979, Michael Wallace published a pathbreaking study in which he found a very strong relationship between the existence of an ongoing arms race between two countries and the escalation of a militarized dispute between them to war. Looking at 99 militarized disputes among the major states between 1816 and 1965, he found that 23 of the 26 disputes that escalated to war were characterized by an ongoing arms race (Q = 0.98 and phi = 0.80). In other words, if an arms race was going on between two countries, there was an 82% chance that a militarized dispute between them went to war. On the other hand, only about 4% of the disputes that occurred when both countries were not arming at abnormally high rates escalated to war (Wallace, 1979).

Wallace's conclusions were an empirical challenge to many long-held assumptions about politics among nations, including some of the foundations of deterrence theory. However, as Weede asserted, Wallace's results were not inconsistent with the para bellum hypothesis: 'according according to most realist or conservative thinking in the West... the most dangerous occurrence is not a runaway arms race but the status quo powers losing the arms race' (Weede, 1980, pp. 286-287). In other words, if a revisionist power strives to overturn the balance of capabilities, it is likely that both the revisionist and the status quo states will show high growth rates, but the relevant change is that of the power balance, not the rate of arming. In answer, Wallace used the ratio of expenditure growth rates between revisionist and status quo states to determine who 'won' the race.

There was some small difference in escalation between a 'victory' on the part of the status quo state or the revisionist one, but the relationship is much weaker than Wallace's original test (Wallace, 1980). A further test, using a static measure of comparative capabilities (the ratio of absolute military expenditures between the revisionist and status quo states) rather than the dynamic ratio of growth rates, achieved even weaker results for the para bellum hypothesis (Wallace, 1981). These findings lend support to Wallace's conclusion that it is the arms race itself, rather than the power balance, which is dangerous.

The two supports of Wallace's study, the disputes he used and the index he employed, both suffered massive criticism. The problem with the sample was that the strength of the findings seemed dependent on the division of the obviously multilateral World Wars into dispute dyads, hence overweighting the arms races that preceded those wars. If a small number of arms races make up the bulk of the supportive findings, it is evident that the certainty with which one is able to make general conclusions about the relationship between arms races and war is undermined.

The index that Wallace used to determine the existence of an arms race was also challenged. On theoretical grounds, it has been attacked as placing too great an emphasis on the last two years of military spending before a crisis, therefore capturing war preparations rather than an independent arming process. A further problem is that the index is multiplicative - the final index score for the dyad is arrived at through multiplying individual country scores together (Altfeld, 1983). It is conceivable that heavy unilateral buildups could be mistaken for arms races. Certainly in the former case, but possibly in the latter as well, conclusions drawn about the relationship between arms racing and dispute escalation might be overstated. A truly complete study would demand that the index be replicated, but that has yet to be done...

Diehl's work (1983a, b, 1985) on the subject of the relation of arms race and dispute escalation is an independent alternative to that of Wallace (1979, 1980, 1982, 1983, 1990). Although he criticizes Wallace at length, he does remain focused on the real issue by offering an alternative means of testing the identical proposition. Unlike Michael Wallace, he found little connection between arms races and dispute escalation. Fewer than 30% of the disputes that he finds occurring during an arms race escalate to war. The corresponding correlation coefficients are very different: Yule's Q drops from 0.98 to 0.42, and phi is an unimpressive 0.13 (Diehl, 1985, p. 338).

Diehl objects to Wallace's findings on both grounds: that his dispute sample was overweighting the World Wars, and that reliability and validity of his index were questionable. Therefore, he offers both a new index and a new set of disputes. In doing this, the criticisms of Wallace's work fail to be compelling because it is impossible to determine the extent of the effects of each weakness. We can certainly guess that both the dispute set and the index are flawed, but without being able to compare them to anything it is impossible to tell whether or not the assertion is true, or, more importantly, what particular influence these factors have had on the conclusions Wallace has drawn. Without such a comparison, it is impossible not to consider the possibility that Wallace has just found a superior means of dividing dangerous from non-dangerous arms buildups.

From: Sample, Susan G. 1997. "Arms Races and Dispute Escalation: Resolving the Debate." Journal of Peace Research 34: 7-22.

Literature Review: Tinderbox Hypothesis, Michael D. Wallace, Paul F. Diehl, and Mike Horn

• Wallace, Michael D. 1979. "Arms races and escalation: some new evidence." Journal of Conflict Resolution 23: 3-16.
• Wallace, Michael D. 1982. "Armaments and escalation." International Studies Quarterly 26: 37-56.
• Diehl, Paul F. 1983. "Arms races and escalation: a closer look." Journal of Peace Research 20: 205-212.
• Horn, Mike. 1984. "Arms races and the likelihood of war." Presented at the annual meeting of the International Studies Association, Atlanta, GA, March 27-31.

Wallace (1979, 1982) presented the first attempt to develop a comprehensive list of arms races and test the arms race hypothesis. He constructed his list of arms races by examining the military expenditures of participants in serious disputes, specifically those involving at least a threat to employ force prior to those disputes. Wallace's arms race index attempted to capture not only the growth in military expenditures of an arms race but also the underlying conflict between the racing parties by searching for arms races prior to serious disputes. However, this procedure would miss any arms race that did not end in a serious dispute, and consequently cannot provide a complete test of the arms race hypothesis. Instead, Wallace tested whether arms races made escalation to war more likely, or what could be termed the "tinderbox hypothesis." The tinderbox hypothesis states that arms races do not necessarily cause wars, but they do create an inflammable situation between the racing nations where even the slightest spark can

push a blaze to war.

Wallace found impressive results supporting the tinderbox hypothesis: 23 of the 28 disputes preceded by an arms race escalated to war. However, Wallace's determination of arms races and his accumulation of the results suffer from two methodological flaws: His arms race index may have been misleading, and he decomposed multilateral disputes into separate dyads (see Weede, 1980; Altfeld, 1983; and responses by

Wallace, 1980, 1983).

Diehl (1983) and Horn (1984) reanalyzed the tinderbox hypothesis using the same data as Wallace but different arms race indices, and without decomposing each dispute into separate dyads. Both required both sides' average growth in military expenditures to exceed certain thresholds over a set period of time prior to the dispute. Dichl (1983) found that only 3 of 12 disputes preceded by an arms race escalated to war. Horn (1984) found that at most 60% (9 out of 15) of 6-year arms races and 46% (6 out of 13) of 12-year arms races ended in war. These reanalyses suggest that the tinderbox hypothesis is only partially true; disputes preceded by arms races do escalate to war more often than other disputes, but they do not overwhelmingly escalate to war.

From: Morrow, James D. 1989. "A Twist of Truth:  A Reexamination of the Effects of Arms Races on the Occurrence of War."  Journal of Conflict Resolution 33(3): 500-529.

Tiberiu Dragu. 2010. Is There a Trade-off between Security and Liberty? Executive Bias, Privacy Protections, and Terrorism Prevention

Tiberiu Dragu. 2011. "Is There a Trade-off between Security and Liberty? Executive Bias, Privacy Protections, and Terrorism Prevention." American Political Science Review 105(1): 64-78.

Model:

• Privacy is given as exogenous.
• Terrorists maximize their utility with respect to terrorist activity a.
• Anti-terrorist agencies maximize their utility with respect to effort against terrorism e.
• The terrorist activity levels and the effort against terrorism jointly determine the probability of a successful terrorist attack.
• Solve the problem the way you would a Cournot problem.

Assumptions:

• Privacy shifts the best response functions. 
• Increasing privacy decreases costs of attack for the terrorist. The marginal cost also decreases in privacy.
• Increasing privacy increases costs of attack for the anti-terrorist agency. The marginal cost also increases in privacy.
• The terrorist organizations costs increase in a and are convex.
• The anti-terrorist organization costs increase in e and are convex. 

Results:

• The probability of a terrorist attack does not necessarily decrease when privacy decreases. 
• The expected utility of the anti-terrorist agency always increases when privacy decreases, even if the probability of terrorist attack increases when privacy decreases.

Andrei Shleifer and Robert W. Vishny. 1993. Corruption

Andrei Shleifer and Robert W. Vishny. 1993. "Corruption." Quarterly Journal of Economics 108 (3): 599-617.

• Corruption
• Corruption is the sale by government officials of government property for personal gain.
• Corruption without theft occurs when the government sets a price p for a good, such as a license, but the the official charges a price greater than p, turns over the official price to the government and keeps the excess.
• Corruption with theft occurs when the official makes a sale for the good at any price and doesn't turn p over to the government.

• Market forces at work
• Profit maximizing incentives of government officials: those who would pay most to be an official get to be an official + those who can pay the most are those that can collect the most bribes = maximal bribes collected 
• Buyers want to be more competitive in the market. When there is corruption without theft, buyers can reduce the cost of goods that officials sell through bribery.
• Role of agency organization
• If there is just one agency selling different complementary goods, a joint monopolist, then it can strategize so that the low price of one good spurs the demand for a complementary good. The agency extracts greater rents this way. 
• When different agencies with different jurisdictions operate independently when selling complementary goods, each agency will sell its respective good at the monopoly price. The cost becomes exorbitant for the buyer who must buy all complementary goods in order to operate and fewer goods will be purchased in comparison to when there is a joint monopolist. 
• When agencies have overlapping jurisdictions (redundancy), then there is competition and there will be minimal to no corruption because buyers can just find the agency that charges the lowest price. 
• The role of secrecy in corruption
• Agency efforts to avoid detection of its corruption and subsequent punishment causes corruption to be more distortionary than taxation. Government officials will use their power to induce substitution into the goods on which bribes can be more easily collected without detection, such as banning certain imports.
• The menu of goods in available in a country is determined by corruption opportunities rather than tastes or technological needs.
• A cap is put on the number of people who are involved in giving and receiving bribes in order to maintain secrecy, which contributes to a hostility to newcomers, which inhibits change and innovation. Economic growth suffers as a result.

Edward A. Parson. 1993. Protecting the Ozone Layer

Edward A. Parson. 1993. "Protecting the Ozone Layer." In Institutions for the Earth: Sources of Effective International Environmental Protection. Peter M. Haas, Robert O. Keohane and Marc A. Levy, eds. Cambridge: MIT Press, 27-73.

This chapter traces the history of international action on the ozone layer and national ratifications and responses, and analyzes the determinants of the international agenda and action, in particular the influence of international institutions on the outcomes. 

• Late 1970s: 
• United States regulators ban CFC aerosols except for a few essential uses since aerosol sprays were regarded as a frivolous and expendable use. Other countries that did similarly include: Canada, Sweden, and Norway. 
• First significant international initiate of ozone took place: a UN Environment program-sponsored (UNEP) Washington meeting in March 1977, with representatives from thirty-three nations and the Commission of the European Community (EC).
• Late 1970s and early 1980s:
• Anti-regulatory pressure from industries encouraged deadlock on discussions regarding controls. Growth and new application markets for chlorofluorocarbons (CFCs) reversed the declines in CFCs that followed the aerosol bans. U.S. and world production surpassed their pre-ban levels in 1984.
• Research into substitutes for CFCs stopped in the early 1980s.
• Late 1980s:
• Research into substitutes for CFCs resumed. Hydrofluorocarbons (HFCs) and hydrochlorofluorocarbions (HCFCs) were more difficult and expensive to manufacture. HFCs caused no ozone depletion. HCFCs and HFCs both contributed 
• Bills introduced in the United States in during 1987 called for unilateral CFC cuts by the United States and trade restrictions against countries who did not reciprocate. 
• The end of international negotiations in Montreal in September 1987 results in, among other things:
• 50 percent cuts from 1986 levels of production and consumption of five principal CFCs by 1999, with interim controls consisting of a freeze in 1990 and a 20 percent cut in 1994.
• several restrictions on trade with non-parties; bulk imports of restricted substances from non-parties were prohibited in 1990; bulk exports were prohibited from 1993; imports from non-parties of products containing controlled substances were banned (with the possibility of opting out by formal objection) from 1992. 
• parties pooling information about the effect of CFCs and agreeing to meet at regular 4-year intervals. 
• In 1988, the EPA, European industry council, the Imperial Chemical Industries, and a major CFC producer Dupont all endorsed a phaseout of CFCs. 
• In May 1989 in Helsinki, 80 nations signed an endorsement of phaseout by 2000.

• Determinants of agenda and international decisions:
• Information and the certainty of the science
• Lack of information resulted in innocuous measures. 
• Science defined key elements of the negotiating agenda.
• Public and media attention
• United States leadership on the issue from early 1986
• Assessment panels provided a channel for science to feed directly into the negotiation process from a forum with the stamp of international objectivity and authoritativeness.

• Altering state behavior: what did the institutions do?
• Institutions advanced the process by building concern and improving the contractual environment. 
• International institutions developed capacity to cut CFCs where it did not formerly exist and provided incentives to laggards. Trade sanctions were decisive in some countries' decision to join and in the energetic compliance by non-parties such as Taiwan and Korea. 
• International institutions limited spurious scientific disagreement as a tactic to obstruct negotiations, increased the general level of concern and urgency, and provided formal standing for Tolba (executive director of the UNEP), enabling him to exercise strong personal leadership.
•  Institutional changes concerning meetings, expert assessment, and treaty review ere of decisive importance for realizing stronger controls in 1990s. 

S. J. Liebowitz and Stephen E. Margolis. 1995. Path Dependence, Lock-In, and History

S. J. Liebowitz and Stephen E. Margolis. 1995. "Path Dependence, Lock-In, and History." Journal of Law, Economics, and Organization 11(1): 205-26.

1. First-degree path dependence- sensitivity to starting points exist but has no implied inefficiency
2. Second-degree path dependence- sensitive dependence on initial conditions and imperfect information leads to outcomes that are regrettable and costly to change. Outcome is not inefficient in any meaningful sense and the paths taken cannot be improved upon given the assumed limitations on knowledge.
3. Third-degree path dependence- sensitive dependence on initial conditions leads to an outcome that is inefficient, but the outcome is remediable.

Some deficiency in information is required for lock-in to an inferior technology to occur. In order for third-degree lock-in to occur, there must be agents who know enough to make correct choices but who fail to take advantage of the implied profit opportunities, and at the same time, adopters who generally know nothing more than the payoff going to the next adopter.

Path dependence literature elevates the importance of a historical chronicle relative to other methods of explanations—outcomes depend critically on insignificant and unpredictable events rather than on underlying conditions such as endowments and technology.

Roger G. Noll. 1989. Economic Perspectives on the Politics of Regulation

Roger G. Noll. "Economics Perspectives on the Politics of Regulation," In R.D. Willig and R. Schmalensee, eds. Handbook of Industrial Organization, Vol. 2, North-Holland (1989): 1254-1287.

This chapter surveys the research on the political causes of regulatory policy.

Public interest theory - the view that, as a matter of positive theory, the normative goal of curing market failures animates the choice of regulatory policies.

• Assumptions:
1. Regulation is adopted only in the presence of genuine market failure
2. At the time, regulation is the best available policy instrument
3. Regulation does not persist once it begins to impose costs greater than the efficiency gained.
• How regulation can act to the benefit of the public:
1. Government regulation corrects market failures. 
2. Information pertinent to identifying market failures is most cheaply acquired and disseminated by government. 
3. Governments may be able to correct market failures with lower transaction costs than direct negotiation between producers and sufferers. 

Agency relationships mediate the relationship between the policy preferences of citizens and the policy outcomes pursued by agencies.

• The degree to which agents comply with the preferences of principals depends on: 
1. The extent to which principals and agents have conflicts of interest
2. Tthe costs and accuracy of methods for principals to monitor the performance of agents
3. The power of the principals; enforcement mechanisms for redirecting the incentives of the agent. 
• If a single interest group is effectively organized, the result is Stigler's simple "capture"—the one organized group will tend to be monopoly or cartel that is protected by regulators. 
• Theoretically, regulation will depart from efficiency only when it is necessary to create and divide rents among represented interest. Departure of regulation from efficiency is constrained by:
1. Political entrepreneurs who can effectively pay the organization costs of an unrepresented group.
2. Technological change and rising incomes that can cause previously unrepresented interests to eventually have sufficient stakes in a particular domain of regulation to become represented in it.
• Difficulties in controlling the behavior of regulatory agencies: 
1. Agencies can engage in shirking
2. Agency officials may have their own political agenda 
3. Agency personnel may b motivated by personal career objectives 
4. Agencies may be populated by professionals who have a narrow or uninformed perception of how to achieve public interest objectives.

W. Kip Viscusi, John M. Vernon, Joseph E. Harrington, Jr. 2000. Introduction to Economic Regulation

W. Kip Viscusi, John M. Vernon, Joseph E. Harrington, Jr. "Introduction to Economic Regulation," in W. Kip Viscusi, John M. Vernon, and Joseph E. Harrington, Jr. Economics of Regulation and Antitrust, 3rd ed. (Cambridge, MA: MIT Press, 2000), pg. 297-336

Regulation - a state imposed limitation on the discretion that may be exercised by individuals or organizations, which is supported by threat of sanction.

Variables controlled by regulation:

1. Price
• Imposition of a single price
• Specification of a price structure
2. Quantity
• With price regulation
• Without price regulation
3. Number of Firms
• Restrictions on entry and exit
4. Quality
5. Firm investment

Theory of Regulation - why is there regulation? / Hypotheses about empirical regularities 

1. Public Interest Theory - also known as normative analysis as a positive theory (NPT) - government regulates to correct market failures.
• Inconsistent with empirical evidence where firms supported or lobbied for regulation and where industries are regulated despite lack of market failure.
2. Capture Theory - the agency that should be regulating the industry is "captured" by it, instead, so regulation promotes industry profits rather than social welfare.
• Does not explain regulation not supported by firms.
• Performs better at explaining the timing of deregulation bank branching restrictions in the banking industry than NPT.
3. Economic Theory of Regulation - interest groups control regulation. 
• Stigler/Peltzman model: legislators balance desires of the interest groups and consumers to determine appropriate action.
1. Regulatory legislation redistributes wealth.
2. The behavior of legislators is driven by their desire to remain in office, so legislation is designed to maximize political support. 
3. Interest groups compete by offering political support in exchange for favorable legislation.
• Becker model: regulation is used to increase the welfare of more influential groups. Those who stand to gain the most and who suffer the least from free rider issues hold the most sway.

Torben Iverson. 2005. Capitalism, Democracy and Welfare

Torben Iverson. 2005. Capitalism, Democracy and Welfare. Cambridge University Press. Chapters 1 and 3.

Both workers and employers have interests in supporting the welfare state and providing workers with unemployment/social insurance and/or redistribution. Social protection solves market failures in the formation of skills. Workers have little incentive to invest in skills when they are at constant risk of losing their jobs and thus being unable to reap the benefits of their investment; employers have little incentive to invest in employee skills and training without institutions that prevent poaching and discourage unions from exploiting the potential holdup power that specific skills confer. Thus, social insurance encourages the acquisition of skills in the labor force, which in turn enhances the ability of some firms to compete in international markets.

Generally, portable skills do not require extensive nonmarket protection. The implication is that countries that focus on giving people general skills that are easily transferable should have less income redistribution because the cost of losing their jobs is relatively low (wage is based only on general skill and not special training and is therefore lower; also, the chances of finding a job after being laid off is high). Countries that focus on giving people firm or industry-specific skills complement increased costs to job loss with stronger social welfare programs. The result is that general skill systems are more likely to generate wage inequality and poverty traps because they limit opportunities and incentives for skill acquisition at the low end of the academic ability distribution.

Women should expect to experience greater wage inequality in firms/industries/countries that focus on specific skills rather than general skills. Positions that require specific skills are difficult to fill and, thus, cause firms to be more sensitive to interruptions. Women, saddled with the joy of carrying progeny around in their stomachs and family care, are at a greater risk of dropping out of the labor market than men. The result is that firms that require specialized training for its employees have less of an incentive to hire women. The weak position of women in the private labor market in specific skills countries is generally mitigated by public policies designed to give them greater employment opportunities and provide them goods such as daycare services. 

Laurence R. Helfer. 2009. Regime Shifting in the International Intellectual Property System

Laurence R. Helfer. 2009. “Regime Shifting in the International Intellectual Property System.” Perspectives on Politics 7(1): 39-44.

A multitude of international regimes with intersecting interests allowed states to forum shop. Forum shopping led to contradictory or inconsistent rules that gave countries an excuse to shirk in upholding agreements; it also allowed states to dictate the terms and norms under which interests were considered. They later, under the guise of harmonizing agreements, used those norms they established, rules endorsed by states, and legal experts in other international venues  to advocate for their policy preferences in forums they had chosen to avoid earlier.

Thomas Bernauer. 1995. The Effect of International Environmental Institutions: How We Might Learn More.

Thomas Bernauer. 1995. "The Effect of International Environmental Institutions: How We Might Learn More." International Organization 49(2): 351-77.

• Current deficiencies in researching international environmental institutions:
1. Dependent variables (institutional effect, effectiveness, efficiency, etc.) and explanatory variables (institutions and their features) are ill-defined and rarely married to a coherent theory.
2. Analysts have focused on whether the existence or operation of institutions per se has an effect on actor behavior and other outcomes. Virtually no work has offered generalizable and empirically substantiated knowledge regarding which institutional design variables are critical to the success or failure of institutions under specific conditions.
• The research strategy proposed:
• The outcome to be explained when researching international environmental institutions is measured in terms of goal attainment. Goal attainment is defined as the difference, over time or across cases, between actor behavior or the state of the natural environment along dimensions identified by institutional goals, on the one hand, and certain endpoints defined by institutional goals, on the other. 
• The effect of an institution is measured in terms of the extent to which existence or operation of the institution contributes, ceteris paribus, to variation in goal attainment. 
• The effect of variation along specific dimensions of institutional design (such as decision-making rules, membership and access conditions, and the compliance system) is analyzed. 

Jeffrey T. Checkel. 2001. Why Comply? Social Learning and European Identity Change.

Jeffrey T. Checkel. 2001. “Why Comply? Social Learning and European Identity Change.” International Organization 55(3): 553–88.

Dependent variable: Compliance, the extent to which agents abide by and fulfill international rules and norms rather than socialization.

The author focuses on persuasion to operationalize the roles of communication and social interaction implicit but undertheorized in constructivist compliance studies. It also broadens the rationalist compliance approach that focuses on instrumental action and strategic exchange. In some cases, social actors comply by learning new interests through noninstrumental communication and persuasion.

Rationalists

For rationalists, state compliance stems from coercion (sometimes), instrumental calculation (always), and incentives--usually material, but possibly social as well. The choice mechanism is cost/benefit calculations, and the environment is one of strategic interaction in that it is premised on a unilateral calculation of verbal and nonverbal cues.

Constructivists

Many constructivists, especially those drawing from social movements scholarship, see the causal pathway to compliance in a similar way; that is, state compliance is a function of coercion (social sanctioning) and instrumental calculations (strategic social construction). However, a small group of constructivists, as well as cognitive regime theorists and students of the European Union, have suggested an alternative causal pathway, where state compliance results from social learning and deliberation that lead to preference change. In this view, the choice mechanism is non-instrumental, and the environment, to extend the earlier analogy, is one of social interaction between agents, were mutual learning and the discovery of new preferences replace unilateral calculation.

Case Studies

Checkel presents the cases of Germany and Ukraine as examples of norm socialization and persuasion, respectively. His cases suggest three different ways institutions influence the compliance process.

1. Institutional legacies can frustrate the plans of national agents to comply, such as in Ukraine.
2. The structure of domestic institutions seems key in explaining variance in the mechanisms through which compliance occurs. All else equal in German and Ukraine, the insulated nature of Ukrainian institutions increase the likelihood that compliance would be attained through persuasion and learning; likewise, pluralist German institutions made it more likely that social sanctioning would play a more important role in the compliance process.
3. Preexisting norms were key in affecting agent willingness to comply with the injunctions of emerging European understandings. The presence of such cognitive priors hindered compliance (many elites in the German case), whereas their absence promoted it through persuasion and learning (the noviceness of so many agents in Ukraine).

It should be noted, however, that other explanations for the German and Ukrainian experience exist. Checkel does not debunk them.

Allan Drazen. 2000. Political Economy in Macroeconomics

Allan Drazen. 2000. "The Time-Consistency Problem" and "Laws, Institutions, and Delegated Authority," in Alan Drazen, Political Economy in Macroeconomics (Princeton, NJ: Princeton University Press): 101-165. Chapters 4 and 5.

Chapter 4: This chapter just gives examples of time-inconsistency in policy choices that might arise. They all arise from heterogeneous preferences/conflicts of interests. 

Terms:

1. Time-inconsistency is said to arise if, though nothing has ostensibly changed, the policy chosen for time t+s chosen at time t is different from the policy chosen for time t+s at time t+s. 

I. Introduction

• The puzzle: why does time-inconsistency arise if the fundamental characteristics of the policymaking environment does not appear to have changed?  
• A conflict of interests of some sort is necessary for time inconsistency to arise.
• Time inconsistent policy is interesting when it is chosen to maximized the welfare of those who are misled.

II. A Simple Model of Capital Taxation

• There are two time periods. 
• In the first period:
• The government announces the tax rates it will implement in period two.
• The individual being taxed has an exogenous endowment and chooses consumption level and capital accumulation to be used in the second period
• In the second period:
• The government implements a tax rate on the capital the individual saved in the first period and the labor the individual gives in the second period.
• The individual gets the payoff from government spending and from consumption, which are functions of the capital saved from the first period and the labor the individual supplies in the second period.
• Time-inconsistent solution: the tax policy the government announces for time period 2 while in period 1 is different from the tax policy the government actually implements at time period 2. Occurs whenever ex post capital elasticity is less than the ex ante elasticity.
• In the first period, the government will announce a tax vector with a low rate to encourage capital accumulation.
• In the second period, the government will carry out a tax that is different from the one announced in the first period and there is nothing people can do about it because they can't really change the capital supply anymore.
• Precommitment solution: the tax policy the government would announce in the first period when it has a mechanism to commit to it and not reoptimize in the second period.
• The precommitment solution is the same as the time-consistent solution that results when individuals take government preferences into account when they choose their income allocations and when governments take into account individual preferences into account when they choose their tax policies.

III. Explaining Time-Inconsistency in the Model of Capital Taxation

• People cannot operate for their own good when they are subject to pre-existing constraints or distortions.
• Sequential policymaking is a necessary but not a sufficient condition for the possibility of time consistency to arise. 
• What is essential to the phenomenon of time inconsistency is conflict of interests in the second time period (ex post heterogeneity).
• The dependence of utility on aggregate allocations induces a source of conflict among agents, which is crucial for the possibility of a time-inconsistency problem.

IV. A Basic Model of Monetary Policy

• The policymaker chooses optimal inflation taking expected inflation as given. 
• The conflict of interests which lie behind the possibility of time inconsistency:
• Mirroring the capital tax problem, heterogeneity of interests in a representative agent model results in conflict of interests. Each individual wants to minimize the error of his own forecast of future inflation, but would like everyone else to under-predict inflation so that the economy-wide average prediction implies low unemployment.
• Conflict not in the capital tax example: conflict of interests between policymakers with different objectives, reflecting perhaps a conflict of interests between the different constituencies they represent. Conflict occurs when the natural rate of unemployment that the fiscal authority finds optimal is not the same as the natural rate that the monetary authority finds optimal; the fiscal authority has an incentive to increase economic activity and thus drive up short-term inflation.

V. Equilibrium Solutions for All Models

• Optimum is achieved when the policymaker is led at time t+s to carry out the policy announced at t, rather than some other policy, and it is "common knowledge" that he will indeed carry out the policy.

VI. Commitment vs. Flexibility

• There might be gains to ensuring commitment, but in the real world, unforeseen and unforecastable events occur so that the optimal policy at time t+s cannot always be identified at time t. 
• Escape clauses allow for commitment and flexibility.

Chapter 5: This chapter provides solutions to time-inconsistency problems. This chapter concentrates on how the policymaking environment can make policy credible, that is, how institutions or the creation of external circumstances (broadly defined) can lead to the expectation that announced policies will be carried out.

I. Introduction

• When policymaking is viewed as a sequence of decisions, so that the government can reoptimize at every point, the problem of time consistency can be viewed as reflecting changes in incentives over time. Time t decisions lead to an evolution of state variables which give a policymaker the incentive to deviate at time t+s from his previously optimal policy.
• Example: the decision to impose taxes on capital in a time-inconsistent way reflects the accumulation of capital, an accumulation that was induced by the government's previous policies. Hence, with the policymaker's narrowly defined objective function unchanged over time, time inconsistency may be thought of as due to change in the environment brought about by the policymaker himself.
• Time inconsistency can be avoided if a policymaker at time t can choose policy in such a way that state variables at time t+s imply that it is optimal not to deviate at t+s from the previously optimal policy. 
• One way to make current policy credible is by building a reputation by engendering the expectation that certain policies will be followed in the future on the basis of actions that have been observed in the past. 

II. Laws, Constitutions, and Social Contracts

• There are important differences between promises which have no legal backing and laws (including widely accepted norms) in analyzing solutions to the time inconsistency problem.
1. Laws have penalties attached to them so that there are explicit costs to breaking the law. Similarly, social norms have recognized costs associated with not following them.
2. Explicit laws or widely recognized social norms make noncompliance more visible and hence more costly. 
• Since laws make policies credible only to the extent that the penalties which enforce the laws are themselves credible, enhancing credibility depends on choosing the optimum structure of penalties to do this. 
• Laws (and institutions more generally) can enhance credibility by raising the cost and lowering the benefit from deviating from a given policy. 
• Effective commitment follows from the extreme difficulty in changing a law once it is given constitutional status.
• Constitutions can make policy more credible because it does the following:
• Restrict government's use of authority. 
• Set out the basic processes of policymaking—laws about how collective choices should be made.
• Treat issues that are more fundamental than others, such as basic rights of liberties.
• Provide stringent amendment procedures than other laws.
• Unwritten agreements that have force because they are generally agreed upon go by several names: social contracts, social conventions, social norms.
• Social norm - a pattern of behavior that is customary, expected, and self-enforcing. 

III. Delegation of Authority

• Delegation from a principal (the government) to an agent (the agency/authority) might occur for the following reasons:
•  The agent may have greater expertise and experience regarding a policy area.
• Governments are required to handle a large number of issues, each of which may be extremely complex, making it impossible for a single policymaker to make all decisions. The number and complexity of issues makes delegation essential.
• The principal and agent can sign an incentive contract to eliminate agent bias in policy choices and ensure optimal outcomes. The contract institutionalizes the incentives for compliance; the cost of changing an institutional structure is higher than changing a policy in itself.

IV. Fiscal Structures for Time Consistency

• A government can bequeath to its successor government a specific debt structure, such as setting maturing debt in each period equal to tax revenue net of government spending, to eliminate the incentive for its successor to change tax rates and thus try to reduce its debt obligations. 

Barbara Koremenos. 2001. Loosening the Ties that Bind: A Learning Model of Agreement Flexibility

Barbara Koremenos. 2001. "Loosening the Ties that Bind: A Learning Model of Agreement Flexibility." International Organization 55(2): 289-325.

Koremenos develops a model of the optimal duration and renegotiation provision of international agreements based on the idea that the distributional consequences of a new agreement may not be known with certainty at the time the parties first negotiate the agreement.

I. Introduction

• Uncertainty in the international environment leads states to choose particular duration and renegotiation provisions. The provisions, in turn, affect whether or not states conclude international agreements and whether or not they renege on them.
• Koremenos develops a model in which the parties to an agreement learn over time about its costs and benefits to them. This learning reduces their uncertainty about the agreement’s effects, with the result that they may eventually become sure enough of these effects to be willing to extend the agreement indefinitely.
• Key factors identified by her theory that affect the choices of duration and renegotiation:
1. The degree of agreement uncertainty - the variance of the distribution of gains from an agreement
• The greater this uncertainty, the more likely states will want to limit the duration of the agreement and incorporate renegotiation.
2. The degree of noise in the environment - the variance of confounding variables whose effect on outcomes may be confused with that of an agreement.
• The greater the noise, the more difficult it is to learn how an agreement is working; incorporating limited duration and renegotiation provisions becomes less valuable in high noise level situations.

II. Model: Learning about the Workings of an Agreement

• An agreement is an experience good in which knowledge of its effects is determined only by using it and observing outcomes.
• Model assumptions:
1. States care about the future—discount factor is not zero.
2. States are risk averse.
3. There is uncertainty about future states of the world.
4. The costs of making agreements completely contingent are sufficiently large that the parties never choose to do so.
5. There are costs to negotiating and renegotiating agreements
6. There are costs to reneging on agreements.
7. States have shared a priori beliefs about information they do not possess and revise their beliefs according to Bayesian logic as their interactions evolve.

III. Basics of the Model

• There are two prospective parties to the agreement.
• The division of the gain agreed upon in the initial agreement reflects the relative bargaining power of the two parties.
• The basic problem facing the parties to an agreement in this model is to sort out the effects of the agreement from other random fluctuations in outcomes.
• The states face a choice between an agreement of indefinite duration and one finite-duration agreement followed by an agreement of indefinite duration. In the simple two-period case, formally, the choice becomes one two-period agreement with no renegotiation or two one-period agreements with renegotiation in-between to realign the distribution of gains.
• Renegotiation takes place whenever a finite duration agreement comes to an end and reflects information gained in the previous period, but not changes in bargaining power.

IV. Two-Period Game

• Period 1: players engage in a Nash demand game in which they choose the expected division of gains; if they choose the same expected division of gains, they continue on to negotiations. Otherwise, no agreement.
• Period 2: players enter agreement-type choice stage and choose among the following strategies:
• No agreement
• One two-period agreement (the analog of a nonrenegotiated agreement)
• At the beginning of the of the second period, they have to choose whether to abide by the duration provision stipulated in the agreement.
• If one party reneges on the agreement before the two periods are over, the parties negotiate a new agreement.
• Two one-period agreements (the analog of a renegotiated agreement)
• They must decide whether to proceed with the renegotiation in the second period.
• An agreement is only achieved when the two players play the same strategies in round two. (Except for when they both play 'No agreement'. Obviously.)
• Outcomes determined by nature and observed by players.

V. Hypotheses

1. All else equal, for risk-averse parties an increase in agreement uncertainty increases the value of renegotiation and therefore makes the parties more likely to choose a renegotiated agreement / two one-period agreements over a nonrenegotiated agreement (one two-period agreement).
2. All else equal, for risk-averse parties an increase in noise decreases the value of renegotiation and therefore makes the parties more likely to choose a nonrenegotiated agreement (a two-period agreement) over a renegotiated agreement (two one-period agreements).

VI. Expanded Model

• The general model, built on the same concepts as the two-period model, expands the time horizons to infinity.
• States now face new choices:
1. An agreement-type choice between no agreement, one infinite-duration agreement, and one finite agreement followed by an infinite-duration agreement.
2. If states choose to renegotiate the agreement, they must make a second choice regarding the timing of renegotiation.

VII. Empirical Data from Nuclear Non-Proliferation Treaty (NPT)

• Main treaty provisions:
• Article 1 - Prohibits nuclear-weapon states (NWS) from transferring nuclear explosives
• Article 2 - Places obligations on the non-nuclear-weapon states (NNWS) not to receive or manufacture such weapons
• Article 3 - Requires that signatories negotiate individually or collectively full-scope safeguards agreements with the International Atomic Energy Association (IAEA)
  Article 4 & 5 - Provides reassurance to NNWS that they will be able to enjoy peaceful uses of nuclear energy and explosions without discrimination; the NWS are obliged to provide both technological and material assistance to NNWS
• Article 6 - Demands progress by existing nuclear powers on controlling the arms race
• Uncertainty about:
• Participants led to uncertainty about the distribution and level of security benefits under NPT
• Security consequences
• Effect of NPT on economic prosperity and technological development
• Political costs and benefits that would result from the agreement.
• Evidence of resolving uncertainty through learning:
• The parties to the NPT planned review conferences every few years at which they could cooperatively take stock of how the treaty was working in practice. 
• In terms of the distribution of political gains and losses, it became clear over time that concerns that the NPT would prevent European integration were groundless. Uncertainty with regards to other concerns were eliminated reduced over time as well.

VIII. Conclusion

• The credibility of commitments in the face of uncertainty—in this paper, a one-shot uncertainty surrounding the division of gains from an agreement—requires a trade-off between flexibility and constraint. 
• This model shows that the reason we do not observe much reneging in actual agreements is in part because their duration and renegotiation provisions have been chosen in ways that act to minimize this costly behavior.

James McCall Smith. 2000. The Politics of Dispute Settlement Design: Explaining Legalism in Regional Trade Pacts

James McCall Smith. 2000. "The Politics of Dispute Settlement Design: Explaining Legalism in Regional Trade Pacts." International Organization 54(1): 137-80.

This paper investigates the conditions under which member states adopt legalistic mechanisms for resolving disputes and enforcing compliance in regional trade accords. To account for variable levels of legalism, he offers a theory of trade dispute settlement design based on the domestic political trade-off between treaty compliance and policy discretion.

I. Introduction

• Parallel trends in international trade:
1. Rise of regionalism and new integration initiatives drawn along geographical lines
2. Move toward legalism in the enforcement of trade agreements; trading states have given impartial third parties the authority to review and issue binding rulings on alleged treaty violations, at times based on complaints led by non-state or supranational actors.

II. Defining the Spectrum: From Diplomacy to Legalism

• Level of legalism depends on (see Table 1 on page 143):
1. Third-party Review - an explicit right to third-party review of complaints regarding treaty application and interpretation is more legalistic (as opposed to diplomatic). 
2. Third party Ruling - (secondary concern if there is an automatic right to third-party review) - if judicial rulings are formally binding in international legal terms, then it is more legalistic.
3. Judges - how legalistic each treaty is depends on the the number, term, and method of selecting arbitrators or judges. 
• Standing tribunals are likely to be more consistent over time with their rulings—and thus more legalistic—ad hoc panels whose membership and rulings changes with each dispute.
4. Standing - whether actors have standing to file complaints and obtain rulings is the measure of legalism. 
• In general, the more expansive the definition of standing, the more legalistic the dispute settlement mechanism. 
5. Remedies in cases of treaty violation. 
• The most legalistic remedy is to give direct effect in domestic law to dispute settlement rulings made at the international level. Where rulings are directly applicable, government agencies and courts have a binding obligation under national law to abide by and enforce their terms.
• Where treaties have no direct domestic effect, another remedy is the authorization of retaliatory trade sanctions by the complaining state. 

III. The Model Scope

• Model assumptions:
1. The model takes as unproblematic the motivation and capacity of domestic political leaders to negotiate a trade pact.
2. The substantive terms of a trade agreement are exogenous; the model focuses only on the procedures chosen by parties to enforcement commitments.
3. There is only one bargaining forum.
4. Regime type does not affect preferences.
5. Trade policy changes over time are external to the strategic interaction of disputants and independent third parties.

IV. The Actors and their Motivations

• Actors: political leaders
• Why the actors might be wary of legalistic trade dispute settlement: the threat that legalistic trade dispute settlement poses to policy discretion of political leaders is threefold. 
1. It may constraint their ability to manage the unforeseen costs of adjustment, making it more costly to provide relief or protection to specific groups injured by trade liberalization.
2. It may limit their general policy autonomy across a range of domestic regulations, which it judges against treaty commitments to eliminate nontariff barriers to trade.
3. The delegation of authority to third parties may constraint their ability to pursue trade policy bilaterally, a strategy with distinct political advantages. 
• Why the actors might want legalistic trade dispute settlement: legalistic dispute settlement improves the value of trade agreements through two principal channels:
1. By defining, monitoring, and enforcing compliance, it constraints the opportunistic behavior of foreign governments that are tempted to provide protection to their constituents. 
2. As an institutional commitment to policy stability, it promotes the confidence of the private sector, inducing traders and investors to take risks that increase the aggregate benefits of liberalization. These activities improve the rates of unemployment, inflation, and growth.

V. How Governments Specify Determine Dispute Settlement Preferences Ex Ante 

• How political leaders assess the trade-off between policy discretion and treaty compliance happens in two stages:
1. National preference formation
2. International bargaining
• The level of legalism preferred by a particular government in a specific trade negotiation depends on:
1. Intrapact trade-dependency - the extent to which its economy depends on trade with other signatories in the accord. The more trade-dependent the economy , the more legalistic the dispute settlement mechanism its government will tend to favor. Legalistic dispute settlement is more valuable politically where trade with prospective partner countries accounts for a larger share of the domestic economy. 
2. Relative economic power. The more powerful the country in relative terms, the less legalistic the dispute settlement mechanisms the government will favor. 
3. The proposed depth of liberalization. The more ambitious the level of proposed integration, the more willing political leaders should be to endorse legalistic dispute settlement because deeper integration promises to generate larger economic gains.

V. Hypotheses

• Observations suggest that the relative value of liberalization--and, by implication, of legalistic dispute settlement--is usually lower to larger economies than to smaller economies. So the signatory state with the largest economy is most likely to wield the unit veto that determines the level of legalism in a given agreement.
• Legalistic dispute settlement is expected only in accords among parties whose relative size and bargaining leverage are more symmetrical; when there is a hegemon, it can impose its preferences can more effectively use unilateral trade measures. 
• In settings of low economic asymmetry--provided the proposed legislation is sufficiently deep--all member governments have an incentive to improve treaty compliance through impartial third parties. 

VI. Results from Empirical Data

• Levels of economic asymmetry and legalism are inversely related given the preferences and negotiating leverage of regional hegemons. Highly legalistic forms of dispute settlement generally do not occur in highly asymmetric settings. 
• When asymmetry is low, high levels of legalism occur only where the proposed level of integration is high. 
• Evidence generally confirms a positive relationship between the level of proposed integration and legalism.
• Anomalous combinations of high integration and low legalism in trade agreements share high asymmetry.
• The most robust predictor of dispute settlement design is the interaction of asymmetry and proposed integration. If the level of proposed integration is relatively low, there is less legalism in the appointment of judges. 

VII. Conclusion

• This approach is grounded in a political calculation of costs and benefits in the domestic arena, not in expectations about absolute or relative gains internationally. 
• Given a regional trade initiative, negotiations over dispute settlement design are driven by domestic political concerns. 

Barry R. Weingast and William J. Marshall. 1988. The Industrial Organization of Congress; or, Why Legislatures, Like Firms, Are Not Organized as Markets

Barry R. Weingast and William J. Marshall, "The Industrial Organization of Congress; or, Why Legislatures, Like Firms, Are Not Organized as Markets," Journal of Political Economy 96, 1 (Feb. 1988): 132-63.

The purpose of this paper is to extend the theory of the firm to the study of political organizations and to explain the pattern of institutions within the legislatures that facilitates decision making.

I. Introduction

• The diversity of interests within the legislature creates gains from exchange.
• Legislative institutions are like market institutions because they reflect:
1. the goals and preferences of individuals (legislators seeking reelection)
2. transaction costs that are induced by imperfect information. 

II. The New Economics of Organization

• Firms emerge to avoid the costs of using markets and the price system; their set of contractual mechanisms substitute for the price mechanism.
• The literature on vertical integration argues that organizational form is largely an endogenous response to ex post contractual problems and ex post opportunism that arise when ex post incentives of the bargaining parties are inconsistent with performing ex ante agreements.

III. Representatives and Their Constituencies

• Perspectives in this paper, that legislative institutions can be analyzed as market institutions/firms, rest on the following assumptions:
1. Congressmen represent the (politically responsive) interests located within their district. Electoral competition induces congressmen, at least in part, to represent the interests of their constituents. Because groups are not uniformly distributed across constituencies, different legislators represent different groups.
2. Parties place no constraints on the behavior of individual representatives.
3. Majority rule is a binding constraint.

IV. The Gains from Exchange: The Problem to Be Solved

• Given the diversity of interests legislators represent, each can bargain and cooperate (vote trade, logroll, etc.) with other legislators in order to benefit their respective constituents.
• The new economics of organization suggests that institutions evolve to enforce cooperation.
  
• Previous work viewed logrolling/vote trading as a market in votes in which legislators give away votes on issues that have lower marginal impact on their district (and therefore on their electoral fortunes) in exchange for votes on issues having a larger marginal impact. 
• Shortcomings: assumes there are no random or unforeseen future events that may influence outcomes or payoffs. Either the time dimension is suppressed or enforcement of agreements over time is left exogenous. Does not explain how legislators cope with agreements that cover more than one legislative session.
• Uncertainty over the future status of today's bargain come from:
1. Noncontemporaneous benefit flows - occurs when benefit flows to one party can be curtailed when the other party reneges on the agreement after they have already received their benefits.
2. Nonsimultaneous exchange - occurs when bills do not come up for a vote simultaneously. Bills evolve and public opinion can change. 
• Legislative institutions reduce the circumstances in which breakdown occurs; it is not a substitute for reputation building and trigger strategies commonly used in repeat play, but rather complement those strategies for circumstances in which those strategies fail.
• In the model in this paper, instead of trading votes, legislators exchange special rights affording the holder of these rights additional influence over well-defined policy jurisdictions. The extra influence over particular policies institutionalizes a specific pattern of trades and because the exchange is institutionalized, it need not be renegotiated each new legislative session and it is subject to fewer enforcement problems.

V. The Legislative Committee System

• Committees are decentralized decision-making units compose of those legislators with the greatest stake in their jurisdiction.
• The legislative committee system is defined by the following three conditions:
1. Committees are composed of a number of seats or positions, each held by an individual legislator. 
• Associated with each committee is a specific subset of policy issues over which it has jurisdiction; within their jurisdiction, committees possess the monopoly right to bring alternatives to the status quo up for a vote before the legislature.
• Committee proposals must command a majority of votes against the status quo to become policy.
2. There exists a property rights system over committee seats called the "seniority system." 
• A committee member holds his position as long as he chooses to remain on the committee; subject to his reelection, he cannot be forced to give it up.
• Leadership positions within the committee are allocated by seniority, the length of continuous service on the committee.
• Rights to committee positions cannot be sold or traded to others. 
3. Whenever a member leaves a committee, his seat becomes vacant and is filled using a bidding mechanism amongst the congressmen.
• Assertions about committee operation:
1. The assignment process operates as a self-selection mechanism.
2. Committees are not representative of the entire legislature but instead are composed of "preference outliers," or those who value the position highly.
3. Committee members receive the disproportionate share of the benefits from programs within their jurisdiction.
• Committee jurisdiction resolves noncontemporaneous benefit flows; a party cannot renege on an agreement to support a bill in another party's jurisdiction by later passing a new bill to revoke that original bill because the reneging party will not have the jurisdiction to bring that bill to a vote. 
• The legislative committee system effects on coalition formation:
1. Agenda power held by committee members implies that successful coalitions must include the members of the relevant committee or else the bill will not reach the floor for a vote; the committee veto reduces the feasible set of policies.
2. Trades among committee members are more likely to succeed that those across committees; inter-committee agreements have to bring separate bills to be voted on while intra-committee agreements can present a single bill that satisfies trading partners simultaneously once it is passed.
3. Policy will respond only to large changes in political circumstances or to major shifts in the electorate because forming new coalitions is difficult. 
• The majority rule condition precludes any one committee from extracting too many gains at the expense of others. 
• Policy in a particular area can remain stable if committee membership is relatively stable.

VI. Conclusion

• Legislative institutions enforce bargains among legislators.
• Given the peculiar form of bargaining problems found in legislatures, specific forms of nonmarket exchange are superior to market exchange.
• Empirical evidence supports four implications that follow from this model of legislative institutions but do no follow from a simple market exchange mechanism.
1. Committees are composed of "high demanders," that is, individuals with greater than average interest in the committee's policy jurisdiction.
2. The committee assignment mechanism operates as a bidding mechanism that assigns individuals to those committees they value most highly.
3. Committee members gain a disproportionate share of the benefits from their policy area. 
4. As the interests represented on tghe committee change, so too will policy, with the interests of non-committee members held constant. 

Michael Spence. 1973. Job Market Signaling

Michael Spence. 1973. "Job Market Signaling," The Quarterly Journal of Economics Vol. 87 #3 (August): 355-374.

Terms:

1. Indices - observable, unalterable attributes, such as race. Changes to such attributes are do not occur at the discretion of the individual.
2. Signals - observable characteristics attached to an individual that are subject to manipulation, such as education.
3. Signaling costs - the cost of manipulating a signal.

I. Hiring as Investment Uncertainty

• Hiring is an investment decision because it takes time to learn an individual's productive capabilities after they are hired.
• Hiring is a decision made under uncertainty because an individual's productive capabilities are not known beforehand.

II. Applicant Signaling

• Potential employees confront an offered wage schedule that are a function of signals and indices.
• Critical assumption: signaling will not effectively distinguish one applicant from another unless the signaling costs are negatively correlated with productive capability.
• If this condition does not hold, everyone will invest in the signal in exactly the same way and become undifferentiable.
• An alterable characteristic becomes an actual signal if the signaling costs aer negatively correlated with the individual's unknown productivity; this is a necessary but not sufficient condition.

III. Information Feedback and the Definition of Equilibrium

• New market information comes in to the employer through hiring and subsequent observation of productive capabilities as they relate to signals.
• An equilibrium occurs when the set of employer beliefs about signals and indices prior to hiring generate offered wage schedules, applicant signaling decisions, hiring, and new market data over time that are consistent with those intial beliefs; beliefs before and after hiring and observing are equivalent.

IV. The Informational Impact of Indices

• By themselves, indices could never tell the employer anything about productivity.
• Any informational impact of indices must be through their interaction with the educational signaling mechanism.
• There are externalities implicit in the fact that an individual is treated as the average member of the group of people who look the same and that, as a result, and in spite of an apparent sameness the opportunity sets facing two or more groups that are visibly distinguishable may in fact be different.
• The source of signaling and wage differentials is in the informational structure of the market itself. Differential signaling costs over groups are an important possibility. 

V. Conclusion

• The framework in this paper examines a basic equilibrium signaling model and one possible type of interaction of signals and indices. This framework can be used to examine phenomena ranging from selective admissions procedures, promotion, and loans and consumer credit.

Joe B. Stevens. 1993. The Economics of Collective Choice.

Joe B. Stevens. The Economics of Collective Choice. Boulder: Westview Press, 1993. Chapter 5.

This chapter considers whether there can be voluntary solutions to market failure without resorting to coercion by the government. For voluntary action to be effective, it would have to lead to a more efficient level of output or to the right people sharing more fully in the rewards.

Terms:

1. Willingness-to-pay (WTP) = what an individual would pay to gain access to new opportunities
2. Willingness-to-accept (WTA) = what an individual would accept as payment to be deprived of something; the consumer surplus is the minimum payment that would be required to compensate a consumer for reduced availability of a nonmarket good.
• Discrepancies between the WTP and WTA are due to fundamental differences in how people view potential gains and how they view potential losses. (Prospect Theory)
3. Marginal congestion costs - for an impure public good, the disadvantages of increased crowding associated with more people in a club. (For example, in a club that provides fire-fighting services, too many members increases the chances that the fire-fighting forces are occupied, helping another member, when your house catches on fire.)
4. Efficient club size - the level of membership that would equate the (falling) marginal reduction in service cost with the (rising) marginal congestion costs.

• There might be conflict between self-interest and the collective interest, such as in the case of the Prisoner's Dilemma, in which self-interested actions lead to a collectively worse outcome.
• The following help to allow for voluntary provision of goods:
• Researchers argue that feedback, learning, and game replay allow for the possibility of cooperation.
• It is possible for two individuals to work together to Pareto-efficiently provide a public good by paying prices equivalent to their respective marginal benefit of the public good, but free-riding would still be an issue.
• Externalities can be eliminated with property rights.
• People might not free-ride or might help to provide a public good for altruistic reasons.
• People may choose not to free ride because of the low cost of participation, because of the potentially high cost of nonparticipation (species extinction, for example), and because individual action may be crucial in affecting outcomes. 
• Hindrances to the voluntary provision of public goods:
• If transaction costs exist, there would be less incentive for two parties to agree on a Pareto-efficient quantity of the public good. If costs are high enough, they can prevent negotiated solutions altogether.
• Even with the allocation of property rights, the costs (transaction, monitoring, etc.) of a voluntary solution using property rights with unorganized and dissimilar groups are often so high that they siphon off the willingness to pay for the externality.
• Conditions for club provisions of goods:
1. "Provision" condition - labor and capital resources would need to be provided until the summed marginal benefits to members from reducing the congestion costs are equal to the marginal cost of provision.
2. "Toll" or "utilization" condition - an efficient toll should equate a member's marginal benefit from use with the marginal congestion costs that might be imposed on others. 
3. "Membership" condition - new members should be added until the net benefits from membership (through cost reductions to others) equal the congestion costs imposed on others by that member's use of services. If members have different preferences and incomes, there are likely to be differences in the amount and value of property to be protected. 

Richard Price. 1998. Reversing the Gun Sights: Transnational Civil Society Targets Land Mines

Richard Price. 1998. "Reversing the Gun Sights: Transnational Civil Society Targets Land Mines." International Organization 52(3): 613-44. 

Price examines the hard case of the role of transnational nonstate actors working through issue networks to affect how states prepare for and wage war in order to demonstrate the influence of international politics on state practices of weapons procurement and military doctrine. He seeks to investigate the processes by which members of a transnational civil society seek to change the security policies of states by generating international norms that shape and redefine state interests. 

• Terms:
1. Civil society - the locale self-consciously identified by both the NGO (nongovernmental organization) community and by governments.
2. Transnational - interactions across national boundaries where at least one actor is a nonstate agent.
3. Transnational civil society - a set of interaction among an imagined community to shape collective life that are not confined to the territorial and institutional spaces of states. 

I. Introduction

• In the 1990s, AP land mines became the object of a transnational campaign because they:
1. hurt primarily populations without adequate emergency care
2. rendered large tracts of land useless
3. burdened economies with disabled survivors
• The effort culminated in the signing of a comprehensive ban treaty by 122 states in December 1997.

II. Issue Generation and Moral Persuasion

• Members of civil society were the primary movers in generating world wide concern about AP land mines when no international legal institutions existed to deal with the issue.
• Civil society's most basic effect was the transnational dissemination of information about the scope of land mine use and its affects to transnational actors.
• Transnational actors then politicized the issue and taught states that land mines were a problem by focusing on the victims and generating and publicly disseminating information to governments and wider society alike; the impetus for action came from outside the state.
• Early steps such as a U.S. export moratorium on AP land mines were used by members of the campaign to challenge others to take leadership measures.
• The International Committee of the Red Cross (ICRC) launched an international media campaign in November 1995 directed at a worldwide ban on the production, stockpiling, transfer, and use of all AP land mines in contrast to its usual reputation/role as a neutral humanitarian organization. 
• The International Campaign to Ban Landmines (ICBL) provided support for national campaigns worldwide; as a direct result of their activities the issue received widespread coverage in the media, even in comic books. 

III. Networks

• Civil society sought to achieve its aims by network with political officials in governments and international organizations. 
• NGOs were allowed to participate in policy debates and interstate negotiations with state officials; they made statements, provided information, and the like.
• An important effect of networking in an issue campaign is that it generates access to the policymaking process by transforming decisions about weapons doctrine from an insulated military matter into a political decision. 
• The global web of electronic media, including telecommunications, fax machines, the Internet and World Wide Web played an unprecedented role in facilitating a global network of concerned supporters around the issue. Telecommunications and hyperlinked networks on the Internet are important in the following respects:
1. They provide a web of surveillance that has not only facilitated widespread awareness of the sources of the problem
2. They greatly facilitate the watchdog role of civil society in grading state and industry compliance with the AP land mine taboo.
3. They create a "space" for politics occupied by a transnational political community--a space other than that bounded by the territory of the state--and, thus, undermine the idea that the international states system is the legitimate arena where politics across borders takes place. 

IV. Grafting

• War and international humanitarian laws set the background against which efforts to ban weapons such as land mines were made intelligible. Two central concepts from these traditions:
• Civilian discrimination / noncombatant immunity - one of the oldest notions of the just war doctrine, it meant that civilians are not to be intentional objects of attack during conflict.
• Unnecessary suffering - the principle that means of warfare that cause superfluous injury are prohibited.
• The ICRC was instrumental in institutionalizing such humanitarian norms of warfare, which legitimized efforts to restrict warfare among states.
• AP land mines transgressed the norm of discrimination because they operate without immediate human intentionality and are indiscriminate in the nature of their effects.
• Proponents of a ban grafted normative justifications from other weapons (chemical and biological weapons) that were already successfully branded taboo onto AP land mines to justify banning land mines.

V. Utility and Reversing the Burden of Proof

• The ICRC commissioned an analysis of the "Military Use and Effectiveness of Anti-personnel Mines", which found that the use of anti-personnel mines never empirically played a major role in determining the outcome of a conflict; they only had a marginal tactical value under certain specific but demanding conditions.
• Questioning the military utility of mines helped to instigate a comparable shift by making mine proponents publicly defend, to domestic and international audiences, what previously required no justification: the assumption that mines have military utility and thus pass the test of military necessity.

VI. Authority and Civil Society

• The transnational campaign challenged and transformed the balance between civil society and the state in the constitution of security. 
• State acceptance of the Ottawa treaty embodies how the issue has been defined: less like a war issue, where change tends to move at a glacial pace and states are reticent to intervene, and more like a humanitarian or health crisis for which norms have developed that legitimize rapid multilateral action.

VII. Conclusion

• The role of moral persuasion and the social pressure arising from identity politics and emulation are particularly crucial.
• Thee impetus for systemic normative change fostered by transnational civil society
• Two widespread processes were stimulated by civil society:
1. Norm adoption through moral entrepreneurship
2. Emulation
• Widespread acceptance of the validity of the AP land mine taboo is indicative of the emergence of a new norm, a status formalized by states signing and ratifying the land mines treaty.