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Distant Gains: When Do States Make Choices for the Long Term?
Browne Center for International Politics
July 1997
Introduction
Why are states sometimes farsighted and other times not? This is an old question in the study of world politics, but we do not really have very good answers. This is surprising, because many of our most vigorous theoretical debates hinge on this issue. If a state calculates in the short-term, it may use its favorable power position to extract immediate gains from other states, but if it calculates with a longer time horizon, it may use that power position to shape agreements that bring a slower but longer-term stream of benefits. Confounding both realists and liberals, states in history act in both these ways. The interesting theoretical question is: can we specify the conditions when they act in one way or the other?
We have a sense that states differ in their willingness or capacity to make long-term choices -- to act so as to realize distant gains at the expense of immediate gains. Some states seem to be more farsighted than others. We also have a sense that individual states vary widely in the time horizons they use to make decisions and calculate interests. Frequently they act for immediate gains and other times they act for the long run. But we do not have a good theory about when and why they do so.
What does it means to say that states make long term choices? Essentially, it means that a state chooses to forego some immediate gains for gains to be realized in the future. A state is confronted with a choice between using its resources to achieve short-term payoffs today or using those resources to create conditions (in its external environment) that will allow it to realize gains in later years. That is, a state faces trade-offs and choices between actions that have different time horizons -- the returns are expected sooner in some cases and later in others. But why do states make the choices they do about present and future gains?
The question can be sharpened by invoking the analogy of the business firm. A firm can use its assets to realize immediate returns or it can invest some of those assets, creating conditions that will allow the stream of benefits to flow in later years. Firms will discount future gains at different rates depending on the situation. Sometimes the future is fully discounted -- the firm is on the brink of bankruptcy and all resources are needed to achieve profits that are needed today to pay creditors. In other situations, the future is discounted at a lower rate -- the firm sees that if it plows resources into research and development or a marketing initiative it can expand its market share or generate a new product line to achieve profits in later years. The theoretical question is the same: when do firms find it necessary or more remunerative to allocate resources to achieve immediate gains and when do they see advantages and opportunities to invest in future returns?
In this paper, I present a framework for thinking about this problem as it relates to states operating within a competitive international environment. I argue that states can invest in future gains primarily through the creation of international institutions. Institutions are agreements between states that specify rules, obligations, and expectations about future state actions. 1 In creating institutions, states are in effect using power assets to secure agreements that obligate states to act in certain ways in the years ahead. States may act in a wide variety of ways, all with an eye on future gains. But in creating institutions they are investing assets that could otherwise be used for more immediate purposes to shape and constrain future state actions -- and therefore influence the flow of future gains.
Beyond this, I argue that a variety of specific conditions -- domestic and international -- can impact on the time horizon that states use to calculate their gains. Domestic characteristics, such as regime type and reigning ideas about what state interests are and how they can be achieved, can matter. But more importantly, the capacity of states to in fact do things that will insure long-term returns varies widely. The presence of constraint and opportunity structures -- which are different for each state and which evolve over time -- are very important in creating the conditions and incentives for states to calculate for the long haul. I will begin by presenting a basic investment model of state choice, and this is followed by a series of hypotheses about the conditions that influence state calculation of long-term and short-term gains.
After developing these hypotheses, the paper uses them to help explain historical moments when states appear to be particularly farsighted in the calculation of their interests, namely when leading or hegemonic states confront the problem of rebuilding order after major wars.
The State and Investment in Future Gains
To get at the problem, it is useful to develop a basic model of state choice about returns on power assets and alternative time horizons. We can start by making several assumptions. First, we can assume that a state has a given set of power assets -- that is, a particular share of material power capabilities. These power assets may be rising, declining, or constant in relative terms. Second, the state has a choice of using these assets for one or both of two types of actions: it can use them to engage in bargaining with other states to secure gains in distributive struggles over outcomes, or it can use those assets to invest in securing agreement over the creation of international institutions or regimes that will persist into the future. 2 The implication is that there is a trade-off between these two choices, and each choice will produce a different rate of return to the state over the short and long term. 3
Accordingly, when a state is using its power assets to win short-term struggles over distributive gains, it is foregoing at least some of its ability to forge agreements that will have benefits over the longer term. Likewise, when a state is allocating power assets to get other states to agree to the creation of rules and institutions, it is forgoing some of its capacity to win in short-term battles. 4 Each of these choices creates a stream of benefits to the state: one maximizes gains in the short term and the other creates gains that are realized over a longer period of time. Essentially, the choice is between a lump-sum gain today or a slower flow of gains over a longer period of time.
Given these assumptions, two obvious factors that will determine which choice (or allocation of power assets) the state will make. One is the absolute level of gains that each option will realize. If the immediate gains are truly substantial and the long-term flow of gains is small or uncertain, than the state is likely to opt for the immediate gains. But if the immediate gains are trivial and the long-term gains from an institutional agreement are huge, the relative attractiveness of the choices will change. The other factor that also weighs in the balance is the necessary discounting of future gains. If the absolute size of the gains from the two choices are roughly the same, the state will probably choose the immediate gains. 5 This is true for several reasons. First, future gains will always be more problematic than the certainty of current gains. There are no absolute guarantees that institutional agreements will in fact hold into the future and constrain other states, which would be necessary to insure the expected flow of benefits. Second, if the gains can be realized today, it is possible that they can be reinvested as power assets. So the state is able to put the gains to work right away, and the state's power assets will be greater than if the same amount of gains trickled in over a longer period of time. For both these reasons, the promise of future gains must be substantially higher than immediate gains to tilt the choice in that direction.
Several additional considerations can sharpen this discussion. First, a distinction is being made in the model between two types of bargaining that states can engage in. One type is bargaining over distributive outcomes, where states struggle over the distribution of benefits in specific relationships. The other type of bargaining is "institutional bargaining," which Oran Young calls "efforts on the part of autonomous actors to reach agreement among themselves on the terms of constitutional contracts or interlocking sets of rights and rules that are expected to govern their subsequent interactions." 6 The first type of agreement is a substantive agreement with outcomes that determine the actual distribution of material benefits between the states. The second type is an institutional agreement that specifies the principles, rules, and parameters within which particular bargains are conducted over outcomes. 7
Second, an assumption is being made that institutional agreements can be a form of investment. The implicit assumption is that rules and institutions are sticky. Unless there is a substantial shift in state power and interests, institutions are likely to persist and continue to shape and constrain state action even after the power that created them has declined. 8 The claim is that if a state can get other states to commit to an institutional agreement, it creates obligations and locks in the actions of other states into the future. Of course, agreement on institutions do not create absolute guarantees that states will abide by its rules and obligations. The relations between states are still anarchic. States can break out of the agreements if they have the interest and capacity to do so. But all that is needed to give this institutional investment strategy some efficacy is the assumption that institutions create some resistance to change, and therefore that with the institutional agreement expectations about the future flow of benefits will be greater than without the institutional agreement. 9
If this assumption is true, institutional investment can be a very attractive option for a state, particularly if the state is large or hegemonic. This is because the institutional agreement conserves the state's power resources. That is, the state gets a better return on its use of power assets than it would if it simply used those assets to pursue a multitude of distributive struggles. This is true in two ways. First, if the investment assumption holds, the institutional agreement will continue to yield gains for the state even when that state's power resources have declined. Because the institutional creation is sticky, it continues to shape and constrain the actions of other states in ways that are favorable to the founding state even after that state had lost the capacities to achieve those same gains through the ad hoc use of its power assets. This institutional investment device amplifies the power of the state and extends it into the future.
The second way in which institutional agreement conserves the power of a large or hegemonic state is that it can reduce that state's enforcement costs. If a leading state can get other states to agree to basic principles and rules of order, that state will not need to expend resources to kept weaker states in line -- saving its power assets. If an institutional agreement can be achieved, this means that the leading state will face fewer challenges to its position and the necessity of using power assets to coerce and enforce is lower. 10 Margaret Levi argues that a similar incentive exists for power holders in domestic systems: institutionalized bargaining is less risky for the dominant actor than the constant expenditure of resources to quell resistance. "Coercion is expensive, and its use often precipitates resentments that can fuel the flames of opposition. Thus, rulers will seek to create compliance that is quasi-voluntary." 11 Moreover, the power savings from agreement on rules and institutions may be sufficiently great that the leading state will be willing to make compromises and concessions to weaker state in exchange for their acquiescence in the overall organization of the order. 12
Thus when a state makes a choice between ways of using its power assets, it is faced with alternative attractions and limitations, and these are summarized in Table One:
| Table One: Substantive Agreements versus Institutional Agreements | ||
| Advantages to Short-term Substantive Agreements: | ||
| Achievement of immediate gains: | ||
| - uncertainty over future gains from institutional agreements | ||
| - gains can be put immediately to work | ||
| Advantages to Longer-term Substantive Agreements: | ||
| Conserves power, i.e., more returns per unit of power assets expended: | ||
| - gains continue after power declines | ||
| - lower enforcement costs for hegemon | ||
The use of power assets for short-term gains is attractive in that the gains themselves are more certain and they can be put to work immediately. Ambiguity in calculating future gains from institutional agreements and the uncertainty over whether the institutional agreements will persist will undercut the other option. On the other hand, if institutional agreements can be secured, they are a remarkable power savings arrangement.
This basic model puts us in a position to see what factors influence the tilting of choices one direction or the other, toward short or long-term choices. The decision to allocate resources to create institutions that produce future returns, and therefore a core factor that will determine state choice centers on its capacity to do so. This in turn rests on the underlying power capacity of the state. But the choice also centers on the ability of the state to wait to receive gains -- and this raises the issue of the state's domestic situation and whether its leaders are in a sufficiently secure position to defer gains. Most importantly, the choice will also depend on whether in fact there are opportunities to create conditions that will produce future returns; even powerful states will confront different opportunities at different times.
Hypotheses about Investment in Future Gains
The model presented above provides the basis to specify a series of key variables that will determine when it is in the interest of the state to act for short-term gains or use some of its power assets to invest in future returns. Six answers can be found for the question: when will the state act for long-term gains?
(1) Distribution of Power
This is the most basic explanation, and it is advanced in theories of hegemonic power. A state that is big enough to act to create the conditions for future returns will do so. The reasons are two-fold. First, the hegemonic state has a preponderance of power resources, and therefore it is in a favorable position to establish and enforce an order that provides a long-term flow of benefits. 13 It has the capacity to use resources as carrots and sticks to get lesser states to agree to the establishment of rules and institutions within various realms of order. 14
Second, because it is so large relative to other states, it can afford to forego short-term gains that it might otherwise realize. The United States, for example, allowed itself to be discriminated against after World War II in its trade relations with Japan so as to encourage Japanese economic recovery, reform of its domestic institutions, and secure a U.S.-Japan alliance. It could have used its overwhelming power capacities to insure more favorable trade terms, but it made the calculation that foregoing short-term gains would allow it to achieve gains later -- both economic gains from a recovered postwar Japan and security gains from a stronger Japan. 15 The point made here is that the United States was in a strong domestic position to suffer these short-term losses. The lost Japanese trade was a very minor fraction of the large and booming postwar economy, and any losers could easily be compensated by the government or by gains made elsewhere.
Despite these considerations, it does remain an open question whether a large or hegemonic state does have an interest in giving up some short-term gains by reallocating those power assets to investments in future returns. Indeed, if the state is truly hegemonic, the conserving of its power resources -- which is a key incentive to invest in institutions -- will seem to be a minor consideration. It can use its overwhelming power position to struggle and win on a vast array of distributive battles. The hegemonic state does not need to coerce or induce other states to agree to operate within an institutionalized political process because it can fight and win all the individual struggles anyway. Moreover, in not pressuring other states into institutional agreements, the hegemonic state is saving itself compromises and constraints that it would need to make in order to get those agreements. For a hegemonic state with seemingly unlimited power, investing in the long term looses its attraction. 16
Because of this, an important factor in the time horizon of a hegemonic state would appear to be its view about its future power position. If the hegemon believes that its power position will continue to persist (or even grow) in the future, it is likely to forego institutional investment. Conserving its power assets is not necessary, and it remains unconstrained to use its power to achieve favorable outcomes in distributive conflicts. But if the hegemon makes a judgement that its favorable power position is or will decline, the institutional investment option becomes more attractive. If the leading state thinks its power position is on a downward slope, it knows that it will be in a more constrained and diminished position tomorrow than it is today. The hegemonic state sees itself as sitting on a declining power asset base (at least in relative terms), and therefore the allocation of those scarce resources becomes a more serious matter. As a result, if it finds opportunities to use some of those resources to create situations that conserve its power and lower its costs, it will do so. Hence, the attraction of the investment option.
This consideration is helpful in explaining the puzzle raised by the different institutional strategies that the United States pursued in Europe and Asia after World War II. In Europe, the United States reached a settlement based on multilateral economic and security institutions, anchored in the NATO alliance, while in Asia it negotiated bilateral security ties with Japan, South Korea, and other countries in the region. The hypothesis is that the United States had much more unchallenged hegemonic power in Asia than in Western Europe, and therefore it has fewer incentives to secure its dominant position with institutional investments. Peter Katzenstein argues that "[i]t was neither in the interest of the United States to create institutions that would have constrained independent decision making in Washington nor in the interest of subordinate states to enter institutions in which they would have minimal control while foregoing opportunities for free-riding and dependence reduction. Extreme hegemony thus led to a system of bilateral relations between states rather than a multilateral system that emerged in the North Atlantic area around the North Atlantic Treaty Organization (NATO) and the European Community." 17
To summarize, a state's decision to act in a farsighted manner will turn on its ability to actually create conditions for the long-term flow of benefits. Generally speaking, the more powerful a state is, the more likely it will have this capacity. This is because the investment option ultimately entails creating conditions that mutually constrain the relevant states, and to get other states to agree to constrain themselves in the future, the original state needs substantial power assets to use in bargaining and compromise. But the attractiveness of the investment option ultimately turns on judgements by state leaders. They must answer the questions: what are the actual gains that will flow to the state from the short-term and long-term choices, and is the power asset basis of the state in decline or not?
(2) Low Threat of Force
Another factor that will alter the relative attractiveness of short versus long-term calculations is the presence or absence of immediate security threats -- including, most importantly, the threat of war. When a state is under immediate security threat, it will allocate its power assets for immediate gains and forsake longer-term investments in future power assets. This will be the case even when the expected future returns are vastly higher than the present gains. The analogy of the firm facing bankruptcy is apt here: the prospect of future gains is meaningless when the threat of extinction looms. In general, war or the threat of force intensifies the incentives states have to act to achieve short-term gains. Alternatively, where security threats are largely absent or when the use of the threat of force is not credible, longer-term calculations are possible. 18
There are obviously a variety of conditions that can contribute to the low threat of war. The costs of war may be very high in some situations -- both because of what may potentially be destroyed (e.g. a highly developed industrial society) and the violence capability of the weapons involved (e.g., nuclear weapons). In these instances, the losses in war may overwhelm the prospects of gains. The massive violence capability that threatens to be brought into the conflict -- such as that which is produced by nuclear weapons -- might reduce the credibility of war. Other factors also likely bear on the threat of force in inter-state relations. 19
One moment when war is not immediately relevant to state calculations comes in the aftermath of war. When war has played itself out, the trade-offs between short-term and longer-term gains shift, making investment in future gains relatively more attractive. In these postwar situations, there are clearly opportunities for powerful states to "lock in" structures that provide long-term gains. Likewise, the attraction of the alternative -- winning in short-term distributional struggles -- declines.
The logic here is that the end of the war has removed the use or threat of war from inter-state bargaining in two ways: First, the outcome of the war serves to clarify certain basic realities about the relative position of the relevant states. And second, with the war's end, the immediate threat of war in the relations among the relevant states has been removed for the moment. If the resumption of war were a possibility, these states would likely find it necessary to forego allocating power assets to longer-term investments. Threats to a state's immediate survival makes the pursuit of short-term gains more imperative. In the aftermath of war, this situation is changed.
(3) Path Dependency and Windows of Opportunity
A related factor influencing a state's willingness to forego present gains for distant gains will be changing external opportunity structures. The argument is that opportunities open up only rarely to create the conditions -- in the form of major new institutional agreements -- to provide long-term returns on the investment. A window of opportunity opens, creating a moment when efforts to create institutions or some set of mileau arrangements are possible, but if the state fails to move on the opportunity it is subsequently lost. 20 These openings would appear to emerge primarily when old institutions and sets of international relations break apart -- such as in the aftermath of war or great economic upheaval. At these moments, states with available power assets will have an incentive to use those assets on long-term institution building efforts.
The reason institutions have a "lock in" effect is primarily because of the phenomenon of increasing returns. 21 There are several aspects to increasing returns to institutions. First, there are large initial startup costs to creating new institutions. Even when alternative institutions might be more efficient or accord more closely with the interests of powerful states, the gains from the new institutions must be overwhelmingly greater before they overcome the sunk costs of the existing institutions. 22 Moreover, there tend to be learning effects that are achieved in the operation of the existing institution that give it advantages over a new startup institution. Finally, institutions tend to create relations and commitments with other actors and institutions that serve to embed the institution and raise the costs of change. Taken together, as Douglass North concludes, "the interdependent web of an institutional matrix produces massive increasing returns." 23
According to this path dependent logic, these moments are so attractive precisely because they are so rare. If properly taken advantage of, institutions can be established that "lock in" a flow of gains well into the future. The state knows that the resolution of institutional controversies will have lasting consequences and, therefore, it allocates power assets to this purpose even at the expense of winning more immediate distributional conflicts.
(4) Density of Contacts
Another factor that can lengthen the time horizon by which states calculate their interests is the frequency or density of their interaction with other states. The greater the prospects for future interaction, the more likely that state leaders will think about each individual interaction as part of a larger and longer-term stream of interactions. The knowledge of future relations alters what is at stake in the present. The resolution of a current interaction will not only result in a discrete payoff today, but it will influence the resolution of tomorrow's interaction. Hence the hypothesis: the greater the density of relations -- that is, the greater the depth and breadth of interdependence -- the more likely states will factor in future dealings in deciding how to resolve current dealings.
A variant of this hypothesis is the argument that when states create institutions they are, in effect, creating circumstances that lengthen the "shadow of the future." In this view, institutions reinforce the likelihood of future interactions, allowing states to monitor and respond to each other, and therefore allowing states to pursue their interests with longer-term and potentially more cooperative strategies. 24 Under these circumstances, policy decisions are not simply static choices between more or less advantageous courses of action, but they are also instruments to shape a longer-term relationship with other states which can generate a longer-term stream of gains. As Charles Lipson argues, the prospects of future interaction with another state creates "incentives for states to keep their bargains in order to capture a stream of future gains, thus making some agreements self-enforcing." 25
The current hypothesis is not concerned with the impact of institutions on the prospects of multiple iterations. The argument is that the underlying density of relations will itself influence the time frame in which state leaders think about their interests, or at least it alters their incentive structure.
(5) Rent Seeking and State Autonomy
Another factor that will influence the time horizon of states is the vulnerability in the domestic position of their leaders. The leaders of states -- those making decisions about the allocation of power assets -- vary in their accountability and the stability of their position. Some state leaders are elected to fixed terms and therefore are vulnerability to removal from office in the next election. Other state leaders are authoritarian or autocratic and rule without formal mechanisms for removal or accountability. Generally speaking, the more vulnerable that leaders are to quick removal, the more they will allocate power resources to achieve short-term gains. Conversely, the more that state leaders are insulated from immediate checks on their incumbency, the more they will be willing to calculate their gains over the longer-term.
The factors at work in determining the domestic stability of state leadership are at least two-fold: they concern both the degree of vulnerability to removal faced by state leaders and the ways in which the leaders' performance is judged. The analogy to the firm is again relevant. If a CEO's job is highly dependent on periodic votes of confidence by a board of directors and if that board evaluations the leader's performance in terms of quarterly profits, the CEO will be very sensitive to immediate gains -- and he is likely to forego long-term investments in future profits. The immediate balance sheet is what is important to his survival. Conversely, if a CEO is the firm's founder, selected the board members, and therefore is in a secure position, a longer time horizon in possible. In both cases, performance is based on measures of profits and returns on capital -- but the time-frames for judging and achieving performance differ.
At the outset, these distinctions seem to hold for states as well. The more that a leader is dependent on the periodic judgement of an electorate, the more concerned he will be with short-term gains (even at the expense of longer-term gains that provide greater returns on the expenditure of power assets). Conversely, it would seem that autocratic and authoritarian state leaders -- who we will assume are more secure in the short-term from removal -- are in a better position to forego short-term gains when better bargains are available for more distant gains.
But this formulation is too simple. If an autocratic and authoritarian leader is truly secure, he has few incentives to try to allocate power assets efficiently. He can impose higher costs on society without paying the sort of price that elected leaders would suffer. Likewise, elected leaders might have a more complicated calculation of their time horizon than simply maximizing short-term gains. If immediate removal is not likely, they might choose to move their time horizon outward to reap benefits in the later part of their term or to strengthen the position of their political party into the future. These considerations become relevant because as elected leaders they are not able to impose costs of society as readily as autocratic and authoritarian leaders. 26 This means that they have a greater incentive to try to allocate power assets efficiently; thus, where they find openings to use assets more productively as investments, they will do so.
Overall, it appears that vulnerable leaders will be more sensitive to costs and more interested in the efficient allocation of power assets than autocratic and authoritarian leaders. Autocratic and authoritarian states will have more capacity to invest in future returns, but they will have fewer incentives to do so. When elected leaders are not in immediate fear of electoral punishment, they will have an incentive to shade their calculation toward the longer term -- if doing so is more efficient. Autocratic and authoritarian states will also have an incentive to calculate over a longer time horizon if they make judgements that their internal position is not absolutely secure. 27
This logic fits with our understanding of state decision making. In the developing world, some states have been able to shelter themselves from rent seeking groups so as to allocate resources to longer-term economic growth policies. These states tend to have relatively isolated bureaucratic institutions that allow professional elites to make strategic decisions. This autonomy from immediate societal pressure means that officials can take a variety of actions that are meant to create future gains but that limit or delay short-term advantages: open domestic producers to competitive foreign pressures, resist rising labor costs, allocate capital resources to efficient and promising sectors. 28
(6) Ideas about Gains and Institutions
Beyond the structural variables that influence the payoffs that result from short-term and long-term allocations of assets, there is a more basic factor: the actual thinking by leaders about the values or payoffs themselves. The model presented earlier was based on a basic choice that states have been short-term gains and longer-term gains. The assumption is that states are in a position to assess and compare the valuations of these alternative choices. Obviously this is a heroic assumption. Assigning such valuations is inherently problematic -- even business firms with a much more explicit unit and methodology of account find that it is as much art as it is science. Yet to the extent choices are made, they are made in terms of assumptions and notions about what is valued and what the returns are to the allocation of power assets.
One type of variation that states might bring to such comparative assessments is simply causal: decision makers differ in how they draw connections between policies and flows of costs and benefits. When American officials deliberated over their response to the Iraqi invasion of Kuwait, they could have calculated the costs and benefits of different types of action (and inaction) in a variety of ways. In a simple static calculation, they could think about the costs of mounting a military defense of Kuwait with the immediate benefits of liberating Kuwait and reestablishing its sovereignty. A more complex calculation would include the costs of losing Kuwait's oil reserves and its control by Iraq in later years. Costs also could include the precedent set if the invasion were left to stand.
The thinking was that Iraq's control of Kuwait would alter the power in the region and create huge risks in later decades in the political stability of the region and the availability of dependable oil flows. Added to this was the notion that there was likely to be a window of opportunity attached to the crisis: the United States would be in a better position to build a coalition to retake Kuwait in the immediate aftermath of the invasion, but it would loose that ability in the later months and years to follow. In effect, the calculation of costs and risks in the longer-term overwhelmed short-term calculations costs.
The ideas or ideology of state officials can also shape their calculations about the static and dynamic character of policy. The notion of dynamic gains is implicit, for example, in the liberal economic model. The classic free trade argument is that if individuals and societies are willing to absorb the short-term costs of adjustment and maintain an open economy, they will be rewarded over the longer-term with greater economic gains. 29 The more sophisticated and elaborate a state's conception of its environment, the more likely it is to calculate its moves according to an extended causal chain, and thereby extend its decision calculus further into the future. 30
Hegemony and Postwar Junctures
These hypotheses are useful in making sense of a variety of historical patterns and episodes, and in some instances the hypotheses can be extended and modified. They appear particularly useful in explaining patterns of hegemonic state action at moments when international order has broken down, during the period of postwar settlement.
First, there is some evidence that opportunities to engage in institution building are episodic, and, more precisely, that the great moments of institution building tend to come after major wars or upheavals in the international order. 31 Several of the hypotheses help explain why this may be so. To begin with, it is precisely after major wars when one or several states are in an extraordinarily advantaged position in relation to weaker and defeated states. At these moments, the power differentials between strong and weak are most pronounced. According to our first hypothesis, the leading or hegemonic states at this moment are most likely to have both the capacity to use their assets to create institutional arrangements and the incentives to do so. Major war exaggerates power differences between states, but the extreme power gaps are also fleeting -- ultimately, the defeated states will rebuild and the winning states will demobilize. So the incentive exists to use that momentary premium of power efficiently.
Postwar junctures are also moments when, perhaps ironically, the risks of war are unusually low. Exhaustion, depletion of resources, social disarray, territorial occupation -- all these realities in the aftermath of war make it difficult to resume war in the short term. Because immediate threats of armed violence are diminished, according to our second hypothesis, states can forego pursuing short-term gains aimed at increasing their security in favor of longer-term gains. Hence, the heightened appeal of institutional investments. This logic tends to be confirmed by the historical experience after the two world wars: in each postwar episode it was France, the country most geographically proximate to Germany and most devastated by the war, that favored short-term security-driven actions to disarm and disable Germany, while Britain, and even more so the United States, favored longer-term institutional solutions. 32 The absence of immediate threats help explain why statesmen were able to pursue more comprehensive and long-term strategies of order.
Moreover, the opportunities to "lock in" a settlement that will provide long-term gains are evident in the historical record. Charles Maier describes the postwar World War II juncture for American officials as a "rare and heady opportunity . . . to secure Western economic ground rules according to its own needs and vision." 33 The remarkable expansion in the range of policy debate about American postwar grand strategy at these postwar moments is also evidence of the changing opportunity structure for calculating state interests. 34 The outburst of proposals and strategies offered by officials and other actors was a result of the extraordinary opportunities and potential consequences inherent in the moment.
Second, the actions of hegemonic states at these postwar moments also suggest that time horizons of officials shift toward the longer-run. There is evidence that hegemons at these junctures could do more to exploit others in the short-run but choose not to do so in order to influence the incentives of others. Joanne Gowa, for example, argues that hegemons may not exploit their optimal tariffs because they are concerned about the well-being of their allies. In particular security environments, hegemons have an incentive to forego short-term gains when the added economic growth of allies creates assets that can be extracted for alliance security. 35 In these instances, hegemonic states are engaged in efforts to manage the longer-term course of power distribution and foregoing short-term gains in order to do so.
Similarly, James and Lake argue that Britain adopted free trade during its mid-19th century hegemony in part to influence relative prices for its goods; by adopting free trade, Britain increased prices for agricultural goods and induced the United States to specialize along the lines of its own comparative advantage (i.e., agricultural goods) and not protect its nascent industries. 36 As the dominant economy, Britain was willing and able to absorb some short-term loses in favor to creating a more long lasting congenial world economy.
Third, leading states after wars seem to respond to a more general incentive to create a legitimate postwar order -- which is manifestly a long-term calculation. This is the pattern observed for various analysts that states after major wars often pursue a "benign" or "generous" peace. 37 After World War II, the United States wanted to create a postwar order with dependent loyal allies, and not one with states that resented American power and who would be willing to challenge American dominance at every turn. There is evidence that the United States crafted and altered many of its postwar economic and security proposal so as to elicit the overall acquiescence of Western Europe and Japan. 38 In effect, the United States sought an institutional investment strategy, where the other major industrial democracies would agree to abide by the rules and principles of the order. In doing so, the United States was foregoing the opportunity to exploit its immediate power advantages, and in return it was able to establish a generally legitimate order where the use of power assets would not be needed continuously to secure American interests. 39
Fourth, the fluidity of the postwar environment reinforces the longer-term calculation of the leading states. As Peter Gourevitch and other scholars have noted, crises and their aftermath tend to be "plastic" -- that is, there is a great deal of uncertainty about the future and a wide range of political possibilities. 40 In such situations, actors have neither institutions to guide their choices nor good information about the future, and thus they face high uncertainty. They operate, as Brennan and Buchanan argue, under a "veil of uncertainty." 41 Choices must be made with little knowledge of how they will directly or immediately impact on the actor or its environment.
Under these conditions, two implications follow. One is that philosophies of governance will matter a great deal. Not knowing precisely what state interests are or how institutions will impact on these interests, leaders fall back on their own experience and the political ideas they embrace. The uncertainty of the situation elevates the role of existing ideas about order and state interests. As Goldstein and Keohane argue, "[i]f actors do not know with certainty the consequences of their actions, it is the 'expected' effects of actions that explain them. And under conditions of uncertainty, expectations depend on causal beliefs as well as on institutional arrangements for authoritative decision making." 42 Where information is incomplete, just as when a state's security is not immediately threatened, ideas and norms that are seen to advance the country's long-term interests can guide the choice of state policy. 43
The other implication is that under a "veil of uncertainty," where it is difficult for states to determine how specific institutional arrangements will affect their interests over time, states will seek to develop rules and institutions that are fair in that "patterns of outcomes generated under such arrangements will be broadly acceptable, regardless of where the participants might be located in such outcomes." 44 Such agreements are more likely to be legitimate and durable over time because they do not hinge on a particular distribution of benefits to participating states. The various states have bought into the institutional agreement with the view that they can live with the settlement regardless of their eventual position within it.
For these reasons, the crisis brought on by war creates a postwar environment where not just the leading state but the weaker and losing states also have reasons to pursue institutional agreements and not just substantive agreements. Likewise, where those states have similar "ideas" about order and the situations that advance state interests, successful institutional agreement is more likely.
Finally, as suggested in our fourth hypothesis, the density of negotiations that follow the end of war serve to reinforce the incentive for a general agreement on rules and principles. States must negotiate over such matters as territory, military demobilization, and reparations -- so there are incentives to work out some general and principled guidelines to do business. 45 Garrett and Weingast argue that normative principles of procedure and settlement emerged in negotiations over the European single market act as a functional response to the complexity and multidimensionality of the issues under discussion. 46 When a group of states are highly interdependent and confronted with a continuous stream of interactions, they have incentives to think about future consequences and the larger relationship in the settlement of individual disputes.
Taken together, postwar junctures appear to be unusually opportune moments for states to act farsighted. The various factors that tend to present at these moments work together to provide opportunities and incentives for leading or hegemonic states to forego or de-emphasize short-term struggles of distributive gains in favor of wider and more enduring agreements. To be farsighted, it helps to be a powerful state, but a powerful state that is aware of prospective relative decline. It also helps to be free of immediate security threats or coercive domination, and it helps to be making choices over relations with other states that together are highly interdependent. Finally, it helps if the reigning ideas about state interests acknowledge the dynamic character of state interests, where it is believed that the absorption of some short-term costs will lead to longer-term gains.
Conclusion
There are limits to the model and hypotheses developed here to explain state time horizons and institutional investment. First, the posited choice and trade-off between the allocation of assets for short-term and long-term payoffs is an analytic distinction not readily observed in the real world. States do not always need to do one or the other; it is plausible that they can simultaneously pursue both distributional and institutional strategies. The trade-off may sometimes be a faint one, and the power assets that are employed in each strategy may not be fungible or finite. Nonetheless, the framework remains useful in clarifying alternative strategies and time horizons. For our purposes, what is particularly interesting is the relative importance of each -- and particularly the logic and incidence of institution building as an investment in particular historical environments.
Second, it is also true that institutions can be used for short-term gains and distributional struggles can be pursued with an eye toward long-term gains. Institutions, even if established to lock in a state's long-term interests, are easily and inevitably infused with short-term politics. For example, recent work on COCOM, the Cold War agreement between Western allies devised to contain technology transfer to the Soviet Union, was often used for narrow, short-term purposes. 47 So the distinction between short-term gains and non-institutional solutions and long-term gains and institutional solutions is not neat. But the argument hinges on the basic claim that in using some of its assets to build institutions, it is choosing to create an institutional environment which will bias state policies in certain directions, constrain state actions at least to some extent, and overall create more predictability about what states will do in the future. Institutions matter in the context of a system of interacting constraints and opportunities, of which they are a part.
Interestingly, the incentives that a hegemon has in institutions is similar to the incentives authoritarian regimes have to move toward democratic government. Adam Przeworski argues that military dictatorships only move toward an open system when their position declines and they are faced with violent protest from below. "Faced with the alternative of an open, possibly violent, conflict -- the outcome of which may be highly beneficial but also quite risky -- and of a democratic solution, which requires compromise but provides security, political forces involved in regime transformation may opt for the democratic compromise." 48 But in accepting an institutional settlement where limits are agreed to on the exercise of power, the reorganized authoritarian party still presses its advantages within newly democratic institutions. 49 Likewise, hegemonic states that acknowledge their eventual decline opt for an institutional settlement that puts some basic limits on the actions of both itself and weaker states, but within that new institutional order the hegemon still struggles for relative advantage.
Third, a focus on the time horizon by which states calculate their interests shifts the old debate between realist and liberal theories of state action. I argue that it is more useful to focus on variations in the constraints and opportunities that states face as they calculate their interests. If states must, they will calculate in the short term. They are interested in employing their assets to achieve gains, and it is more straightforward to use assets to achieve immediate gains. Yet, under specific circumstances, constraints fall away and opportunities present themselves to employ resources -- to invest resources in bargaining over institutional agreements -- that are expected to pay returns over the longer-term.
But, importantly, the argument is not that when states calculate for short-term gain they are being "realist" and when the are calculating for the long-term they are being "liberal." 50 If institutions are sticky, as I have argued, they can be a very attractive tool for leading states that seek to protect and advance their power position. The neo-liberal argument is that institutions are functional solutions to efficiency problems, such as uncertainty and transaction costs. 51 The present model accepts these functional features of institutions. But it goes on to make a stronger argument -- that they also have certain "lock in" effects, primarily because of the phenomenon of increasing returns. In this view, institutions are essentially mechanisms that shape and constrain the actors that are situated within them. They limit to varying degrees the range of state action and thereby create expectations about future inter-state relations, at least greater expectations than would exist without the institutions. This argument, that international institutions can conserve and project power, is as consistent or more so with realism as it is with neo-liberal theory.
Finally, the approach presented here suggests that particular moments in history tend to lend themselves to longer-term interest calculation. The moments that seem most likely to exhibit the search for distant gains are those that follow major upheavals or wars. It is at these moments that winning states achieve their greatest moments of power -- the war intensifies the asymmetries between major states. This presents the leading state with several new realities. First, the state's heightened power is clearly temporary. Reconstruction will bring the other states back to prominence, so there is clearly only a fleeting window of opportunity to use that power to lock in gains that will be realized in later years. Second, the destruction of war has cleared away pre-existing institutions -- making way for opportunities to invest in new ones. The start-up costs that attend the creation of new institutions are not as relevant because institution building has become a practical necessity. Third, the end of the war also brings with it a decline in the problems of anarchy and the security dilemma. In the aftermath of war, the victorious states are demobilizing and the losing states are not in a position to use or threaten the use of force. Likewise, the turmoil of war and the onerous demands that mobilization and war put on societies can trigger far-reaching debates about the interests and strategies of the great powers as they bargain over the postwar settlement. For all these reasons, the constraints and opportunities that follow war seem to be particularly congenial with the search for distant gains.
**:
G. John Ikenberry
Department of Political Science
The University of Pennsylvania
Philadelphia, PA 19104
215-898-7646
ikenberr@mail.sas.upenn.edu
Back.
Note 1: The term institution is used in many ways within the international relations literature. For present purposes, John Mearsheimer provides a useful definition of institutions as "a set of rules that stipulate the ways in which states should cooperate and compete with each other. They prescribe acceptable forms of state behavior, and proscribe unacceptable kinds of behavior." Mearsheimer, "The False Promise of International Institutions," International Security, Vol. 19, No. 3 (Winter 1994/95), p.8. See also Robert Keohane, "International Institutions: Two Approaches," International Studies Quarterly, Vol. 32, No. 4 (December 1989); and Duncan Snidal, "Political Economic and International Institutions," International Review of Law and Economics, Vol. 16 (1996), pp. 121-37. Back.
Note 2: The classic statement of these state choices is Arnold Wolfers' distinction between "possession" and "mileau" foreign policy goals. See Wolfers, "The Goals of Foreign Policy," Discord and Collaboration: Essays on International Politics (Baltimore: Johns Hopkins University Press, 1962), pp. 73-74. Back.
Note 3: Obviously, there may be other types of "mileau" initiatives that states can pursue as investments in future gains besides creating institutions. Most importantly, states can pursue policies or forego actions that serve to strengthen the economic or power position of other states. In effect, investment takes the form of attempts to shape the future distribution of power. See John C. Mathews III, "Current Gains and Future Outcomes: When Cumulative Relative Gains Matter," International Security, Vol. 21, No. 1 (Summer 1996), pp. 112-46. Also left out of this analysis is the state's capacity to invest domestically in its future gains. Realists argue that a major way in which a state can alter its security position within an anarchic system is through internal mobilization -- economic growth, technological development, and the stimulation of other power capacities. See Michael Mastanduno, David Lake, and G. John Ikenberry, "Toward a Realist Theory of State Action," International Studies Quarterly 33 (1989), pp. 457-74. This is an attractive option precisely because international agreements are inherently less certain and entail some compromise of state autonomy. Back.
Note 4: In both cases, the state is using power assets as a way to secure favorable outcomes in the form of concessions and agreements by other states. Material power capabilities provide the basis to use coercion and inducements to get desired outcomes. In the first case, the outcomes are specific distributive gains, and in the second case they are agreements on rules and institutional arrangements that will govern an ongoing set of relations and exchanges. There is a trade-off between these two objectives for two reasons. First, a state has a finite set of power assets and they are expended in the process of pursuing either objective. Second, in securing institutional agreements, the state may need to agree to forego the ad hoc and discriminate use of its material power capabilities, thus limiting or circumscribing its pursuit of short-term gains through the use of power assets. Back.
Note 5: This entails the optimistic assumption that states can actually make calculations of this sort -- comparing benefit flows from two different policy actions. It also assumes that choices can get framed in this simple way. Of course, to the III, "Currentextent these conditions do not hold, states are likely to opt for the immediate gains. Back.
Note 6: Young, "Political Leadership and Regime Formation: On the Development of Institutions in International Society," International Organization, 45, 3 (Summer 1991), p. 282; and Young, International Cooperation: Building Regimes for Natural Resources and the Environment (Ithaca: Cornell University Press, 1989). See also Geoffrey Brennan and James M. Buchanan, The Reason of Rules: Constitutional Political Economy (New York: Cambridge University Press, 1985), Chapter Two. Back.
Note 7: For a useful discussion of the distinction between substantive and institutional agreements, see Adam Przeworski, "Democracy as a Contingent Outcome of Conflicts," in Jon Elster and Rune Stagstad, eds., Constitutionalism and Democracy (New York: Cambridge University Press, 1988), pp. 64-70. Back.
Note 8: The claim is that institutions can have an independent ordering impact on their environment even after the disappearance or decline of the actors that created them. See James G. March and Johan P. Olsen, Discovering Institutions: The Organizational Basis of Politics (New York: Free Press, 1989). Regarding international regimes, see Stephen Krasner, International Regimes (Ithaca: Cornell University Press, 1982); Robert Keohane, After Hegemony: Cooperation and Discord in the World Political Economy (Princeton: Princeton University Press, 1984); and Oran Young, International Cooperation: Building Regimes For Natural Resources and the Environment (Ithaca: Cornell University Press, 1989), Chapter Three. Back.
Note 9: The weak version of this claim is the modified realist position that sees lags in the shifts of regimes as power and interests change. See discussion in Krasner, "Introduction," in Krasner, ed., International Regimes (Ithaca: Cornell University Press, 1981). The strong version entails assumptions about path dependency and increasing returns. For a survey, see Walter W. Powell and Paul J. DiMaggio, The New Institutionalism in Organizational Analysis (Chicago: University of Chicago Press, 1991), Introduction, pp. 1-38. Back.
Note 10: For a similar argument, see G. John Ikenberry and Charles Kupchan, "Socialization and Hegemonic Power," International Organization (Summer 1990). Back.
Note 11: Margaret Levi, Of Rule and Revenue (Berkeley: University of California Press, 1988), p. 32. Back.
Note 12: See Lisa Martin, "The Rational State Choice of Multilateralism," in John Gerard Ruggie, ed., Multilateralism Matters: The Theory and Praxis of an Institutional Form (New York: Columbia University Press, 1993), p. 110. Back.
Note 13: The classic statement of this position is Robert Gilpin, War and Change in World Politics (New York: Cambridge University Press, 1981). Back.
Note 14: We are leaving aside the huge debate about whether non-hegemonic states can cooperate to create international regimes and institutions. It is fairly well established that, in certain circumstances, states can share an interest in creating a regime or institution and they can overcome collective action problems to do so. See Robert Keohane, After Hegemony. For a critical review of the literature, see David Lake, "Leadership, Hegemony, and the International Economy: Naked Emperor or Tattered Monarch with Potential?" International Studies Quarterly, Vol. 37, No. 4 (1993), pp. 459-89. Back.
Note 15: For a discussion of some recently released American documents on its postwar Japan policy, see Stuart Auerbach, "The Ironies that Built Japan," Washington Post, 18 July 1993. Back.
Note 16: A version of this point has been made in the critique of the hegemonic stability argument: that a declining or less overwhelmingly hegemonic state may be more willing to cooperate with other countries than a fully hegemonic state. See Duncan Snidal, "The Limits of the Hegemonic Stability Theory," International Organization, Vol. 37 (1985); and Arthur A. Stein, "The Hegemon's Dilemma: Great Britain, the United States, and the International Economic Order," International Organization, Vol. 38, (1984). Back.
Note 17: Peter J. Katzenstein, "The Cultural Foundations of Murakami's Polymorphic Liberalism," unpublished paper. Back.
Note 18: A variation of this point is emphasized by Robert Powell in the relative gains-absolute gains debate. The costs of war as a means to achieve a state's end will range from very low to very high. When the costs are low -- and therefore, where the possibility of war is relatively high -- states will seek to maximize their short-term relative gains among the relevant states. When the costs are high -- and therefore, where the threat of war -- states will be more willing to calculate their gains in absolute rather than relative terms. See Powell, "Absolute and Relative Gains in International Relations Theory," American Political Science Review 85 (1991), pp. 1303-20. Back.
Note 19: The literature in this area, of course, is huge. For present purposes, a survey of its various arguments and debates is not necessary. Back.
Note 20: This may be the case even for a large or hegemonic state, who might otherwise seem to have ongoing opportunities to engage in institutional investment. Back.
Note 21: Both rational choice and sociological theories of institutions offer theories of institutional path dependency -- both emphasizing the phenomenon of increasing returns. See B. Arthur, "Competing Technologies, Increasing Returns, and Lock-In by Historical Events," Economic Journal, (1989), Vol. 99. Back.
Note 22: On sunk costs, see Arthur L. Stinchcombe, Constructing Social Theories (New York: Harcourt, Brace and World, 1968), pp. 108-18. Back.
Note 23: North, Institutions, Institutional Change and Economic Performance (New York: Cambridge University Press, 1990), p. 95. For discussions of path dependency arguments and their implications, see Stephen Krasner, "Approaches to the State: Conceptions and Historical Dynamics," Comparative Politics 16 (January 1984); and Paul Pierson, "When Effect Becomes Cause: Policy Feedback and Political Change," World Politics (July 1993), pp. 595-628. For a survey of the literature of path dependency, see Stephen K. Sanderson, Social Evolutionism: A Critical History (London: Basil Blackwell). Back.
Note 24: See Robert Axelrod, The Evolution of Cooperation (New York: Basic Books, 1984); and Robert Axelrod and Robert O. Keohane, "Achieving Cooperation Under Anarchy: Strategies and Institutions," World Politics, 38, 1 (October 1985). Back.
Note 25: Charles Lipson, "Are Security Regimes Possible? Historical Cases and Modern Issues," in Efraim Inbar, ed., Regional Security Regimes: Israel and Its Neighbors (Albany: State University of New York, 1995), p. 9. Back.
Note 26: It is, however, true that democratic states may be able to more efficiently extract resources from society over the long-term because the process of mobilization and extraction is more legitimate. See David Lake, "Powerful Pacifists: Democratic States and War," American Political Science Review, Vol. 86 (1992), pp. 24-37. For a related argument, emphasizing the greater credibility and therefore borrowing capacity of limited, constitutional governments, see Kenneth A. Schultz and Barry R. Weingast, "The Democratic Advantage: The Institutional Sources of State Power in International Competition," unpublished paper, 1995. Back.
Note 27: This is a similar point to the one made earlier about hegemonic states. If a hegemonic state believes that its asset base is in relative decline, an incentive emerges to use that power base more efficiently, which may include allocating resources to institutional investment. Back.
Note 28: There is a large literature exploring this argument. See Stephan Haggard, "The Newly Industrializing Countries in the International System," World Politics, Vol. 38, No. 2 (January 1986), pp. 343-70; Haggard, Pathways from the Periphery: The Politics of Growth in the Newly Industrializing Countries (Ithaca: Cornell University Press, 1990); Robert Wade, Governing the Market: Economic Theory and the Role of Government in East Asian Industrialization (Princeton, N.J.: Princeton University Press, 1990); and Peter Evans, Embedded Autonomy: States and Industrial Transformation (Princeton: Princeton University Press, 1995). Back.
Note 29: Political and intellectual controversies about free trade have always been at least in part about whether and how to conceive of national economic interests in dynamic and long-term ways. See Douglas A. Irwin, Against the Tide: An Intellectual History of Free Trade (Princeton: Princeton University Press, 1996). Back.
Note 30: For a discussion, see Robert Jervis, "Systems and Interaction Effects," in Jack Snyder and Robert Jervis, eds., Coping with Complexity in the International System (Boulder, CO: Westview Press, 1993), pp. 25-46. Back.
Note 31: I am aware of no statistical measures that confirm this pattern, but historical analysis does support it. Craig Murphy observes major "waves" of international institution creation, and he links these waves both to underlying transformations of industry and the world economy and to historical moments, such as the aftermath of war, when leading states are in a position to establish these institutions. See Murphy, International Organization and Industrial Change: Global Governance since 1850 (New York: Oxford University Press, 1994), pp. 1-12. Back.
Note 32: See Kal J. Holsti, Peace and War: Armed Conflicts and International Order, 1648-1989 (New York: Cambridge University Press, 1991), Chapters Eight and Ten. On American postwar policy after 1919, see Thomas J. Knock, To End All Wars: Woodrow Wilson and the Quest for a New World Order (New York: Oxford University Press, 1992). For American postwar policy after 1945, see Robert Dallek, Franklin D. Roosevelt and American Foreign Policy (New York: Oxford University Press, 1979); and Melvyn P. Leffler, A Preponderance of Power: National Security, The Truman Administration, and the Cold War (Stanford: Stanford University Press, 1992). Back.
Note 33: Charles Maier, "The Politics of Productivity: Foundations of American International Economic Policy After World War II," in Peter J. Katzenstein, ed., Between Power and Plenty (Madison: University of Wisconsin Press, 1978), p. 171. Back. Intellectual History of Free Trad
Note 34: For a survey of these debates, see Gordon Craig and Alexander George, Force and Statecraft: Diplomatic Problems of Our Time (New York: Oxford University Press, 1983). For a study of post-1945 debates about American grand strategy, see Wesley T. Wooley, Alternatives to Anarchy: American Supranationalism Since World War II (Bloomington: Indiana University Press, 1988). Back.
Note 35: See Joanne Gowa, "Bipolarity, Multipolarity, and Free Trade," American Political Science Review 83 (1989), pp. 1245-56; and Gowa, Allies, Adversaries, and International Trade (Princeton: Princeton University Press, 1994), Chapter Three. See also Edward D. Mansfield, Power, Trade, and War (Princeton: Princeton University Press, 1994), Chapter Five. Back.
Note 36: Scott C. James and David A. Lake, "The Second Face of Hegemony: Britain's Repeal of the Corn Laws and the American Walker Tariff of 1846," International Organization, 43 (Winter 1989), pp. 1-29. Back.
Note 37: See Holsti, Peace and War; and Charles Doran, The Politics of Assimilation: Hegemony and Its Aftermath (Baltimore: Johns Hopkins University Press, 1971). Back.
Note 38: Various scholars have argued that American officials were willing to alter postwar policy in order to gain greater European consent. See John Lamberton Harper, American Visions of Europe (Cambridge: Cambridge University Press, 1994); Thomas Schwartz, America's Germany: John McCloy and the Federal Republic of Germany (Cambridge, Mass.: Harvard University Press, 1991); and Geir Lundestad, The American "Empire" (Oslo: Norwegian University Press, 1990). Back.
Note 39: For an evocative argument about the role of legitimacy as a state asset, see Giulo M. Gallarotti, "Legitimacy as a Capital Asset of the State," Public Choice (1989), Vol. 63, pp. 43-61. For a more general discussion, see David Beetham, The Legitimation of Power (London: Macmillan, 1991). Back.
Note 40: Peter Gourevitch, Politics in Hard Times (Ithaca: Cornell University Press, 1987). The uncertainty that attends postwar junctures has been noted by both participants and observers. Harold Nicholson, who was a British delegate at the 1919 Paris Peace Conference, described his diplomatic history of the settlement as a "study in fog." Confusion and uncertainty reigned as events unfolded and the direction of change remained unclear. See Nicholson, Peacemaking, 1919 (New York: Grosset and Dunlop, 1965), p. 6. Several decades later, U.S. Secretary of State Dean Acheson witnessed the emerging post-1945 order, and he also found the flow of events unusually confusing, noting that "[n]ot only was the future clouded, a common enough situation, but the present was equally clouded. . . . The significance of events was shrouded in ambiguity." See Acheson, Present at the Creation: My Years in the State Department (New York: Norton, 1969), pp. 3-4. Back.
Note 41: Brennan and Buchanan, The Reason of Rules, p. 50. The notion is an adaptation of the Rawlsian "veil of ignorance." For a new effort to trace the connection between uncertainty and international institutions, see George W. Downs and David M. Rocke, Optimal Imperfection? Domestic Uncertainty and Institutions in International Institutions (Princeton: Princeton University Press, 1995). Back.
Note 42: Judith Goldstein and Robert O. Keohane, "Ideas and Foreign Policy: An Analytical Framework," in Goldstein and Keohane, eds., Ideas and Foreign Policy: Beliefs, Institutions, and Political Change (Ithaca: Cornell University Press, 1993), p. 13. Back.
Note 43: For a extended discussion of this argument, see Peter J. Katzenstein, "Conclusion: National Security in a Changing World," in Katzenstein, ed., The Culture of National Security: Norms and Identity in World Politics (New York: Columbia University Press, 1996). Back.
Note 44: Brennan and Buchanan, The Reason of Rules, p. 50. Back.
Note 45: This is an argument advanced in Robert Keohane's functional theory of regimes. See Keohane, After Hegemony. Back.
Note 46: See Geoffrey Garrett and Barry R. Weingast, "Ideas, Interests, and Institutions: Constructing the European Community's Internal Market," in Goldstein and Keohane, eds., Ideas and Foreign Policy, pp. 173-206. Back.
Note 47: See Lisa Martin, Coercive Cooperation (Princeton: Princeton University Press, 1994), p. 190; and Ed Mansfield, "International Institutions and Economic Sanctions," World Politics, Vol. 47, No. 4 (July 1995), pp. 599-605. Back.
Note 48: Przeworski, "Democracy as a Contingent Outcome of Conflicts," in Jon Elster and Rune Slagstad, eds., Constitutionalism and Democracy, p. 70. Back.
Note 49: Indeed, Przeworski argues that authoritarian dictatorships that have useable party organizations are more likely to move toward democratic reform than those without a party apparatus precisely because they are better positioned to compete within the new institutions. Back.
Note 50: In its starkest formulation, this is often how the debate appears. See, for example, Mearsheimer, "The False Promise of International Institutions," International Security, and the responses that followed. Back.
Note 51: The major statement of this position, of course, is Keohane, After Hegemony. Back.
