1 groups of countries to know for the mid-term: “g5” – top shareholders of the imf/world bank...
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Groups of countries to know for the mid-term:
• “G5” – top shareholders of the IMF/World Bank
United States, Japan, Germany, France, United Kingdom
• G20
G7 + BRIC + EU + MAKTISAS
• “G4” – Countries seeking permanent membership on the UNSC
Brazil, Germany, India, Japan • P5
United States, France, United Kingdom, Russia, China
• Swiss bloc
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Reading regression tables: The cheat sheet 1. What is the dependent variable? (Maybe in the title)
2. Consider the number of observations – What is the unit of analysis?
3. What are the “explanatory”/independent variables?
4. Consider the coefficient for each variable– Is it positive/negative?– (Don’t be too persuaded by the magnitude – the real effect
depends on how the variable is measured… and whether the model is “linear”)
5. Consider the SIGNIFICANCE– Standard error < about ½ the size of the coefficient– |T-stat or Z-stat| > 1.96– P-value < 0.05– Or… lots of * (stargazing!)
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Table 5.6: The effect of UNSC membership on African Development Bank lending
Pre-1982 1982 and onward:Variable AfDF AfDFUNSC Member -0.104 1.717***
(0.06) (3.55)UNSC Member, unimportant year
1.59 0.713(0.75) (1.12)
UNSC Member, somewhat important year
-1.84 2.327**
(0.84) (2.04)UNSC Member, important year
2.531***(4.23)
Pariah state6.193*** 6.184*** 0.904 1.05
(4.43) (4.55) (0.48) (0.52)War
0.072 -0.091 -1.519** -1.27
(0.04) (0.05) (2.05) (1.64)ln(GDP per capita, PPP)
6.582** 6.469** 1.368 1.858
(2.14) (2.10) (0.90) (1.22)Political regime
-0.043 -0.045 0.026 0.019
(0.29) (0.33) (0.44) (0.32)
Number of observations 355 355 1,338 1,289
R-squared 0.39 0.40 0.07 0.08
Notes: All regressions include country and year fixed-effects and regional quartics (for North Africa and Africa South of the Sahara). Numbers in parentheses are the absolute values of t-statistics.
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Reading quantitative social science articles: The cheat sheet
1. Study the abstract
2. Read intro & conclusion
3. Study the stats tables
4. Look up the definitions of variables
5. Skim the rest
6. Read the abstract one more time 5
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TODAY:The United Nations Security Council Reform...
a new permanent seat for Japan?
Or…?
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Today is really about an analytical tool:
• The Commitment Problem
• One version:– The Schelling Conjecture:
Tying your hands increases your bargaining leverage
• Another version:– Time-inconsistent preference problems
• For both versions we need a– CREDIBLE constraint or – “CREDIBLE COMMITMENT” MECHANISM
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Plan• The Schelling Conjecture
• Weiss’s argument:– Japan's UNSC seat & domestic politics
• The Schelling Conjecture reversed?
• Credible commitments & democratization
• Ὀδύσσεια– The Odyssey
• Kidnapping
• Government expropriation
• Central Banks (The Federal Reserve)
• Your exam as a credible commitment device
• Marriage 8
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Let’s start with the Weiss story
Tell me about it!
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Puzzle
Anti-Japanese protests in ChinaSometimes allowedSometimes prevented
Why?
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Typical Schelling Conjecture
• 2 actors negotiating at the international level– (e.g., over tariffs)
• One actor is constrained by a domestic legislature– (e.g., protectionist legislature)
• The other actor is a dictator with no constraints
• Who has the better bargaining position?
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Pres*Aut* L* SQNSQ
A little animation
P?
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Line represents some generic policy space (e.g., total free trade on left, total protectionism on right. Two governments – an authoritarian and a democratic country – are negotiating.
Aut*= Ideal point of an “Authoritarian” government
Pres*= Ideal point of a democracy’s President
SQ=Status quo
P?=A proposal from the authoritarian government, which seems plausible for the democratic government – in the absence of the legislative constraint…
L*=Ideal point of the democracy’s legislature
NSQ=The new status quo – the best deal the authoritarian government can get, given the credible legislative constraint
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Most have argued…
• The Schelling Conjecture favors DEMOCRACIES
• They have the CREDIBLE CONSTRAINT
• E.g., the LEGISLATURE
• More generically:
• AUDIENCE COSTS
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Weiss turns this around!
• US announces support for Japan
• So, audience costs are in place for backing down!
• China – at first – does not object
• Then “releases” the protests
• Now China has a credible constraint
• And the US backs down!
• A dictatorship uses audience costs against a democracy
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Credible commitment?
• Always ask this question!
• Here:
– China can control when protest STARTS
– But cannot put the genie back in the bottle
• If China can stop protests as easily as it can prevent them, then the constraint is not credible
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International constraints?
• Look back at CLASS 5 notes, slide 24
• International constraints to gain domestic leverage
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Government’s Chief Executive
(eg, Prez, PM, etc.)
Without the IMF
With the IMF
Veto player
(eg, Congress)
Accept
Reject
Payoff to veto player
-1 (change policy)
0 (maintain the status quo)
-r (reject the IMF)
Figure 1: The logic of bringing in the IMF
Veto player
(eg, Congress)
Accept
Reject
-1 (change policy) + loan
How does bringing in the IMF help push through economic reform?
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A pure domestic setting?
• Boix’s story of democracy
• Do the poor have a credible commitment not to expropriate/tax the rich?
• Do the rich have a credible exit threat?
• All hinges on – repression costs– income distribution– asset specificity
• Explains political regimes in the Middle East – it’s OIL, not Islam or Arabic culture
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‘‘That minority still controls the police, the army, and the economy. If we lose them, we cannot address the other issues.’’
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Now onto the 2nd version:
Time-inconsistent
preference problems
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The generic problem of time-inconsistent preferences:
Individual’s preferences over time:
• Time 1: U(A)>U(B)
• Time 2: U(B)>U(A)
• Anticipating the change in preferences, can the individual COMMIT @ Time 1 to choosing State A @ Time 2?
• Is there a CREDIBLE COMMITMENT?
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Examples:• Classic: Ulysses & the Sirens
• Time 1=Before listening to the Sirens.
• Time 2=While listening to the Sirens.
• State A=Sailing home…
• State B=Belly of the beast…
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American Weekly, Temptaions of Ulysses: Sirens (1948) Pogany – 033http://www.americanartarchives.com/pogany,w.htm
http://traumwerk.stanford.edu/philolog/2009/10/homers_odyssey_in_art_sirens_f.html
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• Hostages would like to commit to not pressing charges.
H Promise
Not
K Free
Kill
H Testify
Not
(–,1) (–, 1) (0,1)
(T,-10 years)
Time 1 Time 2
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Under democracy:
• Time 1: Voters elect a government that offers incentives to firms to invest.
• Time 2: Voters elect a government to tax the firm (expropriate the benefits from investment).
• Solution: Credible property rights?
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G Offer
Not
F Invest
Not
G Expropriate
Not
(0,0) (-S,S) (1,1)
(T,0)
Time 1 Time 2
Suppose that T>1>S>0
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Another common example:
• Principal: Government.
• Agent: Central bank.
• If the central bank is not independent of the government, it may be subject to pressures to lower interest rates before elections…leading to inflation and long-run economic problems.
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• Principal=student.
• Delegates to agent=professor.
• Time 1: Beginning of the semester.
• Time 2: Any Thursday night.
• State A: State of knowledge.
• State B: State of… (Tombs).
• Solution: Your agent (me) will give you a bad grade if you do poorly on the exam– Credible commitment?
• REPUTATION!!!
Education:
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Marriage:• Not needed if there is “true love” or “happily ever after.”
• Needed because we anticipate the possibility of “Time 2.”
• Time 2: U(B)>U(A)
• State A=Together
• State B=Sirens, Tombs, etc…
• “Richer,” “health,” & “better” added for symmetry.
• “Poorer,” “sicker,” “worse” are the kickers.
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• The COMMITMENT problem pervades many political, economic, and other relationships.
• The analytical tool of CREDIBLE COMMITMENTS can be applied well outside of the study of international relations.
What did you learn today?
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Take-aways
• Constraints strengthen negotiation posture– (The Schelling Conjecture)
• Usually interpreted as favoring democracies
• Weiss turns this around (also see J. Weeks, Cornell)
• Constraints only work if they’re CREDIBLE
• Recalls “The Commitment Problem”
• Credible commitments can solve “time-inconsistent” preference problems
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Thank youWE ARE GLOBAL GEORGETOWN!
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Suggested further readings
• Elster, Jon. 1990. Ulysses and the Sirens: Studies in Rationality and Irrationality. New York: Cambridge University Press.
• Elster, Jon. 2000. Ulysses Unbound. New York: Cambridge University Press.
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