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Bueno de Mesquita

Bueno de Mesquita - 136 This is a complicated problem...

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Unformatted text preview: 136 This is a complicated problem because sometimes cheating is hard to detect and some— times evidence mounts that cheating has taken place when in fact it has not. The avail- able information is sometimes misleading. The problem is further complicated because even if cheating is detected and there is agreement that the culprit should be punished, nations still have to coordinate with each other to establish what the punishment should be and how it should be administered. At this juncture, the risk of problems of collective action arises again as some nations may try to free ride on the benefits of punishing a wayward state. The case of UN peacekeeping operations is an example. Although free riders benefit from the punishment’s imposition, they do not share in the possible polit- ical or economic costs of the punishment. In fact, payments to the United Nations for peacekeeping efforts are almost always in arrears as members seek the benefits while trying to avoid the costs. In recent years, the United States, particularly, has been notable for its failure to pay its dues and honor other obligations to the United Nations. LIBERAL THEORIES AND THE PROMOTION OF COOPERATION In building up a system of cooperation, it is certainly undesirable to punish a nation mis- takenly; at the same time, true cheaters must not go unpunished. The mechanisms or political institutions that are developed to monitor adherence to international norms Leading military and political officials in Pakistan stand with their heads bowed as a Muslim cleric recites prayers for twenty-three Pakistani soldiers killed in Somalia on June 5, 1993, while serving there as part of the United Nations peacekeeping force. The long line of coffins emphasizes the fact that the collective benefits of peace entail high costs, reminding us why so many states prefer to gain a free ride at the expense of others. how the international system can reward cooperation and how it can punish cheaters through well-structured rules and regimes is central to understanding how liberal theory approaches international affairs. Liberal theory focuses on two main solutions to the problem of promoting coopera- tion: hegemony and repeated interaction. Each solution can play a prominent role in promoting cooperation, but each also suffers from important deficiencies. AMERICAN HEGEMONYAND BRETTON Woons. Under hegemony, a hegemonic, or dominant, state is willing to bear the extra burden of providing public goods, such as enforcing a free trade regime, in order that all may benefit. It is in exactly this sense that liberal theories assume that international politics is hierarchical rather than anarchic. The hegemon is a central authority that is able and willing to enforce agreements and punish cheaters. At the end of World War II, the United States assumed responsibility for providing public goods to the international community—that is, it became a hegemon. It did so by signing the Bretton Woods Agreement. Under the terms of this agreement, the United States took on significant responsibility for helping to stabilize world currencies and control global inflation. By guaranteeing that the dollar could be converted to gold on demand by central banks in other countries, the United States created what was known as a dollar—gold equivalence standard. It provided a means to control inflation and stabi- lize the world money supply by making the US. dollar the world’s reserve currency. Thus, currencies acquired fixed exchange rates pegged to the value of the dollar. The cost of one ounce of gold was set at $35, so that anyone could trade an ounce of gold to the US. government for $35. Through this exchange rate mechanism the United States guar- anteed the stability of currencies by absorbing the costs of inflation itself. At the same time, the United States joined and strengthened the International Monetary Fund and the International Bank for Reconstruction and Development, now known as the World Bank. These two institutions were designed at Bretton Woods, the former to stabilize currencies and economies and the latter to foster economic recovery and development. Each has evolved since then into a quite different organization with changed functions. By August 1971 the global economic situation had changed dramatically from the days of American dominance in 1945. With deficits growing in the United States and with pressure from the British and French to convert dollars they held to gold, President Richard Nixon reneged on the agreement reached at Bretton Woods (Gowa 1983). This put an end to the fixed exchange rate system that had been created at Bretton Woods and moved much of the global economy to a system of floating exchange rates. Whereas under Bretton Woods the fixed exchange rate mechanism dampened global inflation by shifting the burden to the United States, under the floating exchange rate system curren- cies respond to market forces. One consequence of this shift was a rapid devaluation of the dollar against gold and a sustained outbreak of global inflation. Before President 137 CHAPTER 4 INTERNATIONAL POLITICS FROM A STRUCTURAL PERSPECTIVE Nixon put an end to the Bretton Woods arrangement, for example, gold sold for $35 per ounce. Afterward, it soared to as high as $400 an ounce. Indeed, so dramatic were these changes that the discarding of the Bretton Woods Agreement and its aftermath sparked debate over whether an end to American hegemony had been reached (Gowa 1983; Keohane 1984; Russett 1985; Strange 1987; Nye 1988; Kugler and Organski 1989). Today, however, it seems clear that American hegemony, if anything, has increased. A significant problem with hegemony as a solution to collective action problems is that, as liberal theorists acknowledge, the international system only rarely sees the emer- gence of a real hegemon. Furthermore, it can be quite costly for a hegemon to assume the burden of providing public goods, as Nixon’s 1971 decision to renege to avoid inflation so dramatically demonstrates. Consequently, a hegemon cannot be counted on to pro- vide public goods, especially when doing so is contrary to its interests. In fact, it is at least as easy to point to historic examples of dominant states using their position to extract tribute from dependent states as it is to find examples of them providing public goods. The unpredictability of hegemons is one reason that liberal theorists began to inves- tigate regimes and norms as alternative mechanisms that nations use to resolve collective action problems. Little evidence has emerged, however, to demonstrate that behavior is actually altered in response to regimes or norms. Having said this, we will see how inter- national law, international organizations, and domestic political institutions might induce states to behave differently from the way they would if such laws and organizations did not exist. We will see how, out of self-interest, leaders form and join organizations and agree on rules designed to tie their own hands by limiting their future choices. The earlier dis— cussion of self—regulation of tuna fishing through changing norms already pointed to one way that leaders accept rules that restrict freedom of action for the benefit of long- term interests. Give some examples of a hegemon providing public goods. What are some examples from history of hegemonic states extracting tribute or wealth from weaker states without in turn providing a public good to resolve a collective action problem? COOPERATION THROUGH RBPEATED INTERACTION. The second solution to fostering cbop- eration depends on the idea that self—interest can promote cooperation in the long run, even when short-term interests favor conflict, or at least the absence of cooperation. Liberal theory relies here on a concept called the shadow of the future. This concept states that under certain circumstances decision makers who benefit in the short run from noncooperation can be persuaded to engage in cooperative relationships if they are shown that to do so would garner them a long-term stream of benefits (Taylor 1976; Axelrod 1984). The logic for promoting cooperation when short—term interests encourage non- cooperative behavior is best depicted by a game called the prisoners’ dilemma. The story 138 \ behind the prisoners’ dilemma—which you can see played out almost any night of the week on just about any television police show—is that two confederates in crime have been arrested. Each is held in a separate cell, with no communication between them. The police do not have enough evidence to convict both of them of the serious crime they allegedly committed. But they do have enough evidence to convict them of a lesser offense. If the prisoners cooperate with each other and both remain silent, they will be charged and convicted of the lesser crime. If they both confess, they will each receive a stiff sentence. However, if one confesses and the other does not, then the former will get off with only a light sentence (as part of a plea bargain) whereas the latter will be put away for a very long time. Let’s call the payoff that each prisoner receives when neither confesses (that is, when they cooperate with each other) the reward (R) and the payoff each receives if they both confess the punishment (P). If one prisoner cooperates by remaining silent while the other defects by confessing, then we will say that the cooperator gets the sucker’s payoff (S) and the defector gets a payoff we’ll call the temptation (T). In the game of the prisoners’ dilemma, T is worth more than R, which is worth more than R which is worth more than S (T > R > P > S). For repeated versions of the game (that is, when people play it over and over again), we will assume that R is more than twice as large as the combined value of Tand S (R > [T + S]/2), implying that it is better for the players to cooperate than it is for them to alternate between confessing and cooperating over time. If, for example, R is worth 3 points, Tis worth 6 points, and S is worth 1 point, then over time the two players could learn through experience to alternate the Tand 8 pay- offs between them. This could be achieved simply by one player choosing to defect when the other chooses to cooperate and then the first player choosing to cooperate when the second defects. This leaves them each with an average benefit of (6 + 1)/2, or 3.50 points, which is larger than R at 3 points. If, however, Tis worth less than 5 points—say it’s worth 4.50 points—then alternating between cooperation and defection is not as good a strategy as trying to find a way for both to cooperate: (4.50 + 1)/2 = 2.75 points versus R at 3 points. Table 4-1 displays the possible outcomes of the prisoners’ dilemma. Notice it does not specify the order of play. This is because under the rules of the game, the players each must make their choices without knowing what the other player’s choice will be. (Remember, they are being held in separate cells with no communication possible.) The game can be solved by finding the Nash equilibrium. (Recall that a Nash equi- librium is the set of strategies from which no player has a unilateral incentive to switch.) TABLE 4-1 The Prisoners’ Dilemma . Player B’s Choice Player A (or Player B) can start by asking Player NS Choice Cooperate Defect himself or herself what the best move to . ‘ Cooperate R, R S,T make 18 if B chooses to cooperate and what De‘ect T S P P the best move is if B chooses to defect. By 139 140 CHAPTER 4 INTERNATIONAL POLITICS FROM A STRUCTURAL PERSPECTIVE examining the implications for him or her of B’s potential choices, A can determine which move will be most advantageous (though A cannot know what B will ultimately choose to do). Of course, A can also calculate from B’s viewpoint, seeing what would be best for B if A cooperates or defects. In this way, both players can formulate their com- plete plan of action—their strategy—for the game. The prisoners’ dilemma is an interesting way to look at problems of cooperation and conflict because it has a surprising implication. Notice that whatever choice A assumes B will make, A is better off defecting than cooperating. If B cooperates, A will earn T by defecting and only R by cooperating. Because T is more valuable than R, it is in A’s self- interest to defect. If A assumes that B will defect, then A earns P by defecting, which is not very good but still better than choosing to cooperate and thereby only earning 8 (the worst result). Thus, by defecting A can guarantee herself or himself a stiff prison sen- tence or a chance to get off with only a light sentence but avoid altogether the possibility of receiving a very long prison sentence. The same logic holds for B. Whatever A decides to do, B is better off defecting. Defection is each player’s dominant strategy. In consequence, they each will end up with the second-worst outcome and be handed a stiff prison term. Had they been able to coordinate their choices and cooperate with each other, they could have guaranteed themselves a light sentence, the second-best outcome. Thus, by choosing rationally they each suffered an outcome that was worse than what they would have gotten if they had cooperated. This type of outcome is said to be pareto inferior: In contrast, a pareto opti— mal outcome is one in which no player is made worse off and at least one is made better off. Ioint cooperation is pareto optimal, but the players do not seem to have a rational path to get there because no matter what the other player is expected to do, each finds that defecting dominates cooperating because it earns a bigger reward. This is the dilemma. If international politics frequently involves situations like this, then it seems that conflict rather than cooperation would prevail, as suggested by neorealism’s focus on anarchy. Many situations in international relations mimic the conditions of the prisoners’ dilemma. Consider the example of telecommunications in the United States and Mexico. The Mexican government wants to sell its telephone services to Spanish speakers in the United States while still protecting its fledgling telephone industry against American competition. When Mexico privatized its telephone company (Telefonos de Mexico), it guaranteed the company a continuing monopoly for about a decade so that it could get on its feet, forge strategic alliances (which it did with Sprint), upgrade its equipment, and thereby compete in the marketplace. Although American telephone service providers such as MCI, Sprint, and AT&T would prefer to avoid negotiations with Telefonos de Mexico and enjoy open access to the Mexican telephone market, they also want to pre- vent the Mexican company from enjoying equal access to the large Spanish—speaking telephone marketplace in the United States. The Mexican government, being sensitive to STRUCTURAL PERSPECTIVES its domestic political situation, is protecting its industry even as it seeks to gain free access for its phone company to the U.S. market. The United States, for its part, has also imposed restrictions on behalf of its home industry in an effort to reduce competition from Telefonos de Mexico for the U.S. Latino market. In effect, both “players” (Mexico and the United States) have sought 7; leaving their opponents with S. Had each govern- ment opened its telephone market fully at the outset, each country’s industry would have concentrated on the market niches in which it could be most competitive and produc- tive. American and Mexican consumers would have enjoyed the greatest benefits. By working cooperatively and promoting free trade in telecommunications, then, each would have achieved the best outcome for both, R. Instead, because P (both governments impose restrictions on access by the other country’s telephone services) is better than S, and T is better than R, each has followed a protectionist, regulatory policy that prevents achieving the best outcome for both governments through cooperation. Resistance to free trade globally arises from trade involving the prisoners’ dilemma, where each state wants to protect its own industry but enjoy unfettered access to the markets in other countries. International players may find themselves involved in this type of troubling situation over and over across an indefinite period of time. For example, during the cold war years the United States and the Soviet Union faced off repeatedly in situations where mutual cooperation would have benefitted both but mutual distrust prevented (potentially costly) attempts at cooperation. Distrust, in fact, is at the heart of the prisoners’ dilemma and at the heart of arms races. Because the prisoners’ dilemma is a noncooperative game, promises made by either player or both players to cooperate with the other mean noth- ing. Whatever agreement might have been reached previously, each should recognize that the other player could exploit the situation by defecting. So neither can count on any promise given by the other. This is a perennial problem when rival states unilaterally agree to reduce arms. The promise is not binding, nor is it credible, and if one state dis- arms and the other does not, the one that cheats gains a significant advantage. This is also a problem in trade relations where promises to open markets are made but no means of enforcing those promises are adopted. How can one escape the prisoners’ dilemma? Suppose that the sucker’s payoff is bad, but not fatal. That is, suppose it is something from which one can recover over time. If the game is played an indefinite number of times, then it makes sense to experiment by starting out by cooperating. If the other player also cooperates, both are better off. If the other player does not cooperate, he or she can be punished if the first player then chooses not to cooperate again. Over an indefinite period of repetition, the small, one—time loss from that initial sucker’s payoff becomes trivial against the possible benefit if the other player subsequently cooperates, provided enough value is attached to future payoffs. If this is the case, then each player can credibly declare that his or her strategy will be to make the move the other player made in the previous round of interaction. If a player 141 142 CHAPTER 4 INTERNATIONAL POLITICS FROM A STRUCTURAL PERSPECTIVE defects, then both players will get caught up in a cycle of repeated defection; if a player cooperates, however, a cycle of cooperation can continue indefinitely. Axelrod (1984) has shown that if the shadow of the future is large enough to allow a player to recover from a temporary setback, then possible equilibria of the game include cooperation. The key is that each player must believe that there is sufficient time to recover from a setback and that the risk of setback is amply rewarded by the prospects of a stream of high payoffs later resulting from cooperation. Defecting now and exploiting the cooperation of the other player provides a short-term benefit, but one that is more than offset by the indefinite stream of punishment that follows when the other player stops cooperating too. How can players credibly promise to cooperate with one another when they are involved in an indefinitely repeating prisoners’ dilemma? It turns out that the solution depends on being able to communicate to the other player how you plan to play the game and establish a credible scheme for punishing cheaters. The North American Free Trade Agreement (NAFTA) between the United States, Canada, and Mexico is, in essence, 'a declaration of what each country’s strategy is for dealing with trade relations in the future. Each promises to keep its market open to the others largely unfettered by tariffs and nontariff barriers. Although there are areas where nontariff barriers exist within NAFTA (for example, US. environmental requirements imposed on Mexico), these are part of the agreement and so do not represent cheating. NAFTA h...
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