7/29/2019 Rational Institutional Design - Abstract of Special Edition of IO 2001

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International Organization Foundation

AbstractsSource: International Organization, Vol. 55, No. 4, The Rational Design of InternationalInstitutions (Autumn, 2001)Published by: The MIT PressStable URL: http://www.jstor.org/stable/3078614

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7/29/2019 Rational Institutional Design - Abstract of Special Edition of IO 2001

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Abstracts

The Rational Design of International Institutions

by BarbaraKoremenos,CharlesLipson, and Duncan Snidal

Why do internationalnstitutionsvaryso widely in terms of suchkey institutional eaturesas

membership,scope, and flexibility? We argue that internationalactors are goal-seeking

agents who make specific institutionaldesign choices to solve the particularcooperation

problems they face in different issue-areas. In this article we introduce the theoretical

frameworkof the Rational Design project. We identify five important eatures of institu-

tions-membership, scope, centralization, ontrol,andflexibility-and explaintheir variation

in terms of fourindependent

variables that characterizedifferentcooperation problems:distribution,numberof actors, enforcement,and uncertainty.We draw on rationalchoice

theoryto develop a series of empiricallyfalsifiableconjectures hatexplain this institutional

variation.The authors of the articles in this special issue of InternationalOrganizationevaluate the conjectures n specific issue-areasand the overall RationalDesign approach.

Trust Building, Trust Breaking: The Dilemma of NATO Enlargement

by Andrew Kydd

BarbaraKoremenos,CharlesLipson, and Duncan Snidal conjecturethat the conditions of

membership n international nstitutionswill grow more restrictiveas a response to uncer-taintyaboutstatepreferences.Membership riteriawill actas a signalingdevice-states more

committedto cooperationwill be willing to meet the criteria,whereas those less committed

to cooperationwill not. The recentenlargementof NATO to include the formerWarsawPact

members Poland, Hungary, and the Czech Republic illustrates this logic. The potentialcandidates for admission had to meet standardswith respect to democratization,civilian

control over the military,and the resolution of borderand ethnic disputes with neighbors.These criteriaservedto identify the more cooperativepotentialmembersand to encourage

cooperativebehavioramong those who aspiredto membership.However, NATO enlarge-ment came at a price. Although trustwas built and cooperationfostered between the East

Europeanstates thatgained membership, rustwas broken andcooperationharmedbetweenNATO and Russia. This unfortunateoutcome represents a dilemma that arises in the

expansion of a security community:While expandingthe securitycommunity enlarges the

zone of peace and mutualtrust, it may generatefear among those still on the outside, who

view it as a potentiallyhostile alliance. I presenta game-theoreticanalysis of this dilemma

and analyze the conditionsunderwhich it arises.

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The Optimal Design of International Trade Institutions: Uncertaintyand Escape

by B. Peter Rosendorff and Helen V. Milner

International nstitutionsthat include an escape clause generate more durableand stablecooperative internationalregimes and are easier to achieve ex ante. The escape clause is

endogenous in a model of repeated trade-barrier etting in the presence of symmetric,two-sided, political uncertainty. They permit, along the equilibrium path, countries to

temporarilydeviate from their obligations in periods of excessive, unexpected political

pressureat some prenegotiatedcost. The architectsof internationalagreements optimallychoose a cost so that escape clauses are neither too cheap to use (encouraging frequentrecourse,effectively reducingthe benefits of cooperation)nor too expensive (makingtheir

use rareand increasingthe chance of systemic breakdown).The international nstitution's

crucial role is to provideinformation,verifyingthat the self-enforcing penaltyhas been paid

(voluntarily),rather han to coerce payment.Escape clauses also make agreementseasier toreachinitially.Theirflexibilityreassuresstatesthat the division of the long-termgains from

the agreement s not immutable.

Most-Favored-Nation Clauses and Clustered Negotiations

by Robert Pahre

Though substantively important,centralized negotiations have received less theoreticalattention than problems of centralizedmonitoringand enforcement.I address this gap byexaminingvariation n a particular orm of centralizednegotiationsthat I call "clustering."

Clustering occurs when a state negotiates with several other states at the same time.Clusteringenables statesto avoid having to makeconcessions on the same issue to one stateafteranother,and thereforehas importantdistributionaladvantages.Clusteringalso central-izes bargainingwithin a regime, especially when several states cluster simultaneously n a"macro-cluster."

I propose several hypotheses aboutclustering.First, most-favored-nationMFN) clausesare a necessarycondition for clustering. They link the distributional onflicts among manypairsof countriesand makecentralizedbargainingmorelikely. Second, increasingmember-

shipin the traderegimemakesclusteringmorelikely. This relationshipbetweenmembershipand centralizationechoes Rational Design conjectureC3, CENTRALIZATIONncreases with

NUMBER, though the causal mechanism differs significantly. Third, clustering providesdistributional dvantages o those who cluster.A state thatclusters,such as FranceundertheMeline tariffor GermanyunderChancellorsLeo von Capriviand Bernardvon Builow,willmake fewer concessions thanone thatdoes not.

Situation Structure and Institutional Design: Reciprocity, Coercion,and Exchange

by Ronald B. Mitchell and Patricia M. Keilbach

Statesexperiencingnegativeexternalities ausedby otherstates' behaviorshave incentivesto

deviseinternationalnstitutionso change hosebehaviors.Theinstitutions tatescreate o counterincentives o defectvaryin whetherandhow they expand nstitutionalcopeto accomplish hat

goal. When facing symmetricexternalities, tatestend to devise narrow nstitutionsbased on

issue-specific eciprocity.Whenfacing asymmetric xternalities, r upstream/downstreamrob-lems, states tend to broaden nstitutional cope using linkage strategies.When victims of an

externality restrongerhan tsperpetrators,heresultingnstitutions,f anyaredevised,are ikelyto incorporatehenegative inkageof sanctionsor coercion.Whenvictims areweaker,exchange

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institutions elyingon thepositive inkageof rewardsare morelikely.We illustrate he influence

of situation tructure n institutional esignwith threecases: international haling,ozone-layer

depletion,and RhineRiverpollution.

Private Justice in a Global Economy: From Litigation to Arbitrationby Walter Mattli

Drawingon the analytical rameworkdeveloped by BarbaraKoremenos,CharlesLipson,and

Duncan Snidalin the RationalDesign project,I seek to shedlight on the striking nstitutional

differences among the various methods of internationalcommercialdispute resolutionfor

private parties. These methods include recourse to public courts and more frequently to

private nternational ourts,such as the InternationalCourtof Arbitration f the International

Chamberof Commerceor the LondonCourtof InternationalArbitration, s well as recourse

to so-called ad hoc arbitration nd alternativedispute-resolution echniques,such as concil-

iation and mediation. The key institutional dimensions along which these methods ofinternationaldispute resolution vary are (1) proceduraland adaptive flexibility, and (2)

centralizationof proceduralsafeguardsand informationcollection. I explain why different

methods of internationalcommercial dispute resolution are selected. I argue that these

methods respond to the varying institutional needs of different types of disputes and

disputants.Such needs can be explainedin termsof the severityof the enforcementproblem,

uncertaintyaboutthe preferencesor behaviorof contractualpartners,and uncertaintyabout

the state of the world.

Multilateralizing Trade and Payments in Postwar Europe

by Thomas H. Oatley

Europe'spostwar hift to multilateralradeandpaymentsarrangements ascomplicatedby three

factors.Distributional roblemsand uncertainty boutthe state of the world made European

governmentsreluctant o adopt multilateral rrangementswithoutfinancialsupport rom the

UnitedStates.An enforcement roblemmadeU.S. policymakers eluctanto financea European

multilateralrading ystem.The severityof theseproblemswas reducedby institutional esigns

thatcombined lexibility,centralization,ndparticular ecisionrules.Centralizationndflexibil-

ity reduceduncertainty nd softeneddistributive onflict.Centralizationndparticular ecision

rulessolvedthe enforcementproblem hat U.S. policymakersaced.

The Institutional Features of the Prisoners of War Treaties

by James D. Morrow

Duringthe twentiethcenturystatesnegotiatedand ratified ormal treatieson the treatmentof

prisonersof war (POWs). These treatieshave createda system for the treatmentof POWs

with universalanddetailedstandards nd decentralized nforcement. explainthe formof the

POWsystemas a rational nstitutional esponseto fourstrategicproblemsthe issue of POWs

poses:monitoringundernoise, individualas opposedto stateviolations,variation n preferred

treatmentof POWs, and raising a mass army. In response to these four problems,neutral

partieshelp address he problemof monitoring he standards.The ratificationprocess screensout some statesthat do not intendto live up to the standards.The two-level problemof state

andindividualviolations is addressedby makingstatesresponsiblefor punishingthe actions

of their own soldiers. By protecting POWs, the treaties help states raise armies during

wartime.The POW case supportsmany, but not all, of the RationalDesign conjectures.In

particular, t suggests other strategic logics to explain variation in the membershipand

centralizationof international nstitutions.

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Institutions for Flying: How States Built a Market in International

Aviation Services

by John E. Richards

In the aftermathof WorldWar II, states created a complex set of bilateraland multilateralinstitutions o governinternationalaviationmarkets.Nationalgovernmentsconcludedbilat-

eral agreements o regulate airportentryand capacity and delegatedto the airlines,throughthe InternationalAir TransportAssociation (IATA), the authority o set fares and the terms

of service in internationalmarkets.The resultingmixture of public and privateinstitutions

produceda de facto cartel that lastedfor more thanthirtyyears.Consistentwith the Rational

Design frameworkput forthby BarbaraKoremenos,CharlesLipson, and Duncan Snidal, I

argue that the institutions states created reflect the bargaining and incentive problems

generated by internationalaviation markets. This case provides support for four of the

RationalDesign conjecturesand slightly contradicts hreeothers.

Driving with the Rearview Mirror: On the Rational Scienceof Institutional Design

by Alexander Wendt

The RationalDesign projectis impressiveon its own terms. However, it does not addressotherapproaches elevantto the design of internationalnstitutions.To facilitatecomparisonI surveytwo "contrast paces"around t. The firstsharestheproject'scentralquestion-Whatexplains institutionaldesign?-but addresses alternativeexplanations of two types: rival

explanationsand explanationscomplementarybut deeper in the causal chain. The second

contrast begins with a different question: What kind of knowledge is needed to designinstitutions in the real world? Asking this question reveals epistemological differencesbetween positive social science and institutionaldesign that can be traced to differentorientations toward time. Making institutions is about the future and has an intrinsic

normativeelement.Explaining nstitutions s aboutthepastanddoes notnecessarilyhave this

normativedimension.To avoid "drivingwith the rearviewmirror"we need two additionalkinds of knowledge beyond that developed in this volume, knowledge about institutionaleffectiveness and knowledge aboutwhat values to pursue.As such, the problemof institu-tionaldesignis a fruitfulsite for developinga broaderandmorepracticalconceptionof socialscience that integratesnormativeand positive concerns.

Rational Design: Looking Back to Move Forward

by Barbara Koremenos, Charles Lipson, and Duncan Snidal

In this article we summarize he empiricalresults of the RationalDesign project.In generalthe results strongly supportthe RationalDesign conjectures,especially those on flexibilityand centralization; ome findingsare inconclusive (in particular, hose addressingscope) or

point toward a need for theoreticalreformulation in particular, he membershipdimension).We also addressthe broader mplicationsof the volume's findings,concentratingon several

topics directlyrelated to institutionaldesign and its systematicstudy.First,we consider the

trade-offs n creatinghighly formalizedmodels to guide the analysis.Second,ourdiscussionof the variablecontrol is a steptoward ncorporating power"morefully andexplicitly in our

analysis. We also consider how domestic politics can be incorporatedmore systematicallyinto internationalnstitutionalanalysis.Finally, we initiate a discussionabout how and whyinstitutions change, particularlyhow they respond to changing preferences and externalshocks. We conclude with a discussion of the forward-lookingcharacterof rationaldesign.