Beyond Anarchy: The Importance of Security - UC San Diego

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Beyond Anarchy David A. Lake
The Importance of Security Institutions
BeyondAnarchy S
ecurity institutions
arecentraltopatternsofcon(cid:143)ictandcooperationwithintheinternationalsys-
tem.1Althoughbipolaritywouldundoubtedly havebroughttheUnitedStates
and the Soviet Union into competition anyway, the depth and length of the
Cold Warwereexacerbatedby thesecurityinstitutionscreatedafter1945.The
SovietUnion’sinformalempireinEasternEuropethreatenedtheWestbecause
it secured Moscow’s control over the region; a looser alliance in which each
state could choose its own foreign policy and form of internal rule would
havebeenfarmorefractiousanddiffusethanthesolidblocthatemerged. The
East-West con(cid:143)ict evaporated in turn when this informal empire collapsed in
1989. Likewise, the ability of the United States to (cid:142)ght the 1991 Persian Gulf
Wardepended crucially on theprotectorateit established overtheGulfstates,
wherein they gave up their independent foreign policies and followed Wash-
ington’sleadinthecrisis,andonthemultilateralcoalitionitcreatedtobindits
own hands. Neither the Cold War nor U.S. hegemony in the Persian Gulf
would have taken the form it did without the particular security institutions
that lay at their core and eventually came to be among their most prominent
characteristics.
The search for how and to what extent international institutions “matter”
has largely played out in the realm of internationalpoliticaleconomy.2To the
extentthatscholarslookforinstitutionaleffects,itismostlyatthelevelofuni-
versal or at least broad-based multilateral institutions in the areas of trade,
DavidA.LakeisProfessorandChairofPoliticalScienceattheUniversityofCalifornia,SanDiego,andco-
editorofInternationalOrganization.
Forcommentsonpreviousversionsofthisarticle,IwouldliketothankPeterGourevitch,Robert
Keohane,LisaMartin,CelesteWallander,andBarbaraWalter.
1. Forcontraryviews,seeRobertJervis,“SecurityRegimes,”InternationalOrganization,Vol.36,No.
2(Spring1982),pp.357–378;andJohnJ.Mearsheimer,“TheFalsePromiseofInternationalInstitu-
tions,”InternationalSecurity,Vol.19,No.3(Winter 1994/95),pp.5–49.
2. SeeRobertO.Keohane,AfterHegemony:Cooperation andDiscord intheWorld PoliticalEconomy
(Princeton,N.J.:PrincetonUniversityPress,1984);LisaL.Martin,CoerciveCooperation:Explaining
MultilateralEconomicSanctions(Princeton, N.J.:Princeton University Press, 1992);andRonaldB.
Mitchell,“RegimeDesignMatters:IntentionalOilPollutionandTreatyCompliance,”International
Organization,Vol.48,No.3(Summer1994),pp.425–458.Forreviews ofthisliterature,seeRobert
O.KeohaneandLisaL.Martin,“ThePromiseofInstitutionalistTheory,”InternationalSecurity,Vol.
20,No.1(Summer1995),pp.39–51;andLisaL.MartinandBethA.Simmons,“TheoriesandEm-
pirical Studies of International Institutions,” International Organization, Vol. 52, No. 4 (Autumn
1998),pp.729–757.
InternationalSecurity,Vol.26,No.1(Summer2001),pp.129–160
©2001bythePresidentandFellowsofHarvardCollegeandtheMassachusettsInstituteofTechnology.
129
International Security 26:1 130
(cid:142)nance, standards, and so on. With several noteworthy exceptions,3 analysts
presume thatinthe“highpolitics”realm ofsecurityaffairs,stateswilleschew
institutions and depend on their own unilateral capabilities.
This presumption rests on a severe truncation of the variation in interna-
tional institutions. Even anarchic institutions—those premised upon the full
sovereigntyofallmembers—cansolveproblemsofcoordinationamongstates,
asinthecaseofmultilateralsanctions,andin(cid:143)uenceinternationalpolitics.But
where national interests that would be signi(cid:142)cantly compromised by oppor-
tunism areatstake,statescanbe expected toeitheravoidcooperationorform
more hierarchic institutions, such as informal empires and protectorates, that
exert greater constraints on their members. Through the common practice of
restrictinganalysistoonlyanarchicinstitutions,scholarsbiastheirselectionof
either their independent ordependent variables. I hope to show here that we
can better grasp the impactof institutions on worldaffairsby broadening the
range of variation.
Both neorealists and neoliberal institutionalistsare blinkered by their com-
mon assertionthat all importantrelationshipswithin theinternationalsystem
are anarchic. International relations is a variegated system composed of a
rangeofinstitutions,someanarchic,somehierarchic.Identifying theelements
of hierarchy at the core of both the Cold War and Gulf War reveals how tak-
ing anarchy as the de(cid:142)ning characteristic of international politics—although
useful in some circumstances as a simplifying device—actually distorts our
vision.
Current studies seek to measurethe effects ofinstitutions by examining the
behaviorsofmemberstates.Becauseinstitutionsaretypicallycreatedby these
samestates,however,it is dif(cid:142)culttoidentify theindependent effects ofinter-
ests and institutions. Here, I attempt to gauge the effects of institutions by
assessing the reactions of nonmembers to institutional creation.Given under-
lying political cleavages, such as those in the Cold War, if third parties react
stronglytoinstitutionalinnovations,wecaninferthattheinstitutionitselfwas
relatively important. If these other parties react weakly or not at all, we can
conclude that the institution exerted little effect. I also employ counterfactual
reasoning to augment and support these inferences.
3. CelesteA.Wallander,MortalFriends,BestEnemies:German-RussianCooperationaftertheColdWar
(Ithaca,N.Y.:CornellUniversityPress,1999);HelgaHaftendorn,RobertO.Keohane,andCeleste
A. Wallander,eds., Imperfect Unions: SecurityInstitutionsoverTime and Space(NewYork:Oxford
University Press,1999);andJohnS.Duf(cid:142)eld,“InternationalRegimesandAllianceBehavior:Ex-
plainingNATOConventionalForceLevels,”InternationalOrganization,Vol.46,No.4(Fall1992),
pp.819–855.
Beyond Anarchy 131
This exercise yields two conclusions that together offer smallcomfort to ei-
therneorealistsorneoliberal institutionalists.First,institutionsdo matter,and
theyarelikelytomatterinsecurityaffairspreciselybecauseimportantnational
interests are at stake. The skepticism of neorealists toward institutions is un-
warranted. Second, anarchic institutions may resolve coordination problems
and enable cooperation.But because they do notgreatly constraintheir mem-
bers, such institutions are less effective when participants have incentives to
defect. Anarchic institutions may produce large aggregate bene(cid:142)ts by facili-
tating trade liberalization or exchange rate coordination, for instance, but
they do not in(cid:143)uence the behavior of states to the same extent as hierarchic
institutions.
The remainder of this article seeks to explicate the above claims. The (cid:142)rst
sectionidenti(cid:142)es amorecompleterangeofsecurityinstitutionsinworldpoli-
ticsandexaminesproblemsofinferenceinexistingstudies.Thesecondsection
provides theoretical tools for explaining institutional variation. The third
probes the role of institutions in the Cold War, and the fourth does the same
forthePersianGulfWar.The(cid:142)nalsectiondiscussestheproperroleofsecurity
institutions in the twenty-(cid:142)rst century.
Security Hierarchies
Robert Keohane, a leading neoliberal institutionalist, de(cid:142)nes institutions as
“persistent and connected sets of rules (formal or informal) that prescribe be-
havioral roles, constrain activity, and shape expectations.”4 This de(cid:142)nition is
widely sharedin the (cid:142)eld ofinternationalrelations,even by prominent critics
of neoliberal institutionalism.5 Although Keohane and other neoliberal
institutionalists typically focus on “cooperation under anarchy,” nothing in
this de(cid:142)nition limits institutions to voluntary agreements between sovereign
states.Indeed thisde(cid:142)nitionissimilartothoseofDouglassNorth,whoispri-
marily interested in the role of authoritative states in setting property rights,
and Jack Knight, who is broadlyconcerned with the role of institutions in so-
cialcon(cid:143)ict.6Institutionsmaybehierarchicaswellasanarchic,forgedthrough
4. RobertO.Keohane,InternationalInstitutionsandStatePower:EssaysinInternationalRelationsThe-
ory(Boulder,Colo.:Westview,1989),p.163.
5. Mearsheimer,“TheFalsePromiseofInternationalInstitutions,”p.8,offersasimilarandlargely
consistentde(cid:142)nition.
6. DouglassC.North,StructureandChangeinEconomicHistory (NewYork:W.W. Norton,1981),
pp. 201–202;and Jack Knight, Institutions and Social Con(cid:143)ict (New York: Cambridge University
Press,1992),pp.2–3.
International Security 26:1 132
coercionorvoluntarilynegotiated,andrestondifferencesinpowerorequality.
What is important is that the relevant actors share an understanding of the
rules that shape and constrain their interactions.7
Although neorealists and neoliberal institutionalistsdo not assume that all
relationshipsandinturnallinstitutionswithintheinternationalsystemarean-
archic, they exclude nonanarchic actors and relationships from their purview
through aseries of progressively restrictiveassertions.Recognizing thatother
types of actors may exist, Kenneth Waltz, the dean of neorealism, reasonably
posits that “states are not and never have been the only international actors.
But then structures are de(cid:142)ned not by all of the actors that (cid:143)ourish within
thembutbythemajorones.”Waltzthenassertsthat“solongasthemajorstates
arethemajoractors,thestructureofinternationalpoliticsisde(cid:142)nedintermsof
them.”8 Keohane similarly writes that “institutionalist theory assumes that
statesare theprincipalactorsin worldpolitics.”9 Noticethenarrowinginboth
schools. Although open to variations in actors and relationships, they posit
that anarchy is the foundation of international structure because it character-
izes relations between the major actors.
Anarchyisindeed ausefulassumptionforsomepurposes,especiallyforex-
plainingrelationsamonggreatpowers.Yetatthedyadiclevel,atleast,anarchy
is onlyonepossibleset ofrelationships.Institutionsinsecurityaffairsarecon-
siderablybroaderthanthealliances,concerts,andcollectivesecurityorganiza-
tions that are normally taken to de(cid:142)ne the set.10 Amore complete accounting
would include such increasingly hierarchic security institutions as:
· spheres of in(cid:143)uence, in which dominant states prevent subordinates from
entering intosecurityrelationshipswiththirdparties(theUnitedStatesand
7. Toillustrate,slaveryandimperialismarebothinstitutionswithlonghistoricalpractice.Neither
restsonanarchy,voluntarism,orequality—andneitherproducesequitableoutcomes.Both,how-
ever,arepremisedonclear(ifusuallyinformal)rulesunderstoodbyallpartiesthatprescriberoles,
constrainbehavior,andshapeexpectations.
8. Kenneth N. Waltz, Theory of International Politics (Reading, Mass.: Addison-Wesley, 1979),
pp.93–94(emphasisadded).
9. RobertO.Keohane,“InstitutionalTheoryandtheRealistChallengeaftertheColdWar,”inDa-
vid A.Baldwin,ed.,Neorealism andNeoliberalism: TheContemporary Debate (NewYork:Columbia
UniversityPress,1993),p.271(emphasisadded).Forcontrast,seeRobertO.KeohaneandJoseph
S.Nye,PowerandInterdependence:WorldPoliticsinTransition(Boston:Little, Brown,1977).
10. Thisisnottosaythatscholarshavenotvariedinstitutionsatall,butthesearetypicallyminor
variationsinrulesoverdecisionmakingwithinwhatremainbroadlyanarchicinstitutions.Ondi-
mensions of variation in institutions, see Miles Kahler, International Institutions and the Political
EconomyofIntegration(Washington,D.C.:Brookings,1995),pp.2–6.SeealsoBarbaraKoremenos,
CharlesLipson,andDuncanSnidal,“TheRationalDesign ofInternationalInstitutions,”Interna-
tionalOrganization,Vol.55,No.4(forthcoming2001).
Beyond Anarchy 133
LatinAmericaundertheMonroeDoctrine;theSovietUnionandFinlandaf-
ter 1945);
· protectorates, where subordinate states yield control over their foreign
anddefensepoliciestodominantpowers(GreatBritainandAfghanistanun-
til World War II; the United States and the Federated States of Micronesia
today);
· informal empires, through which dominant states control substantial areas
of policy in subordinate polities—even some typically regarded as purely
domestic—butsubordinatescontinuetointeractwiththirdpartiesontheba-
sis of sovereignty (the United States and CentralAmerica under the Roose-
veltCorollarytotheMonroeDoctrine;theSovietUnionandEasternEurope
under the Brezhnev Doctrine); and
· empires,wheredominantstatesformallycontrolsubordinatesthatretainno
independent international “personality,” and therefore no right to enter in-
ternational agreements in their own name.11
Perhaps because of their focus on systemic anarchy, international relations
scholarstypicallyignoresuchhierarchies.Althoughit istruethatthesearein-
stitutionsthat normallygovern relations between major and minor states,ex-
cluding suchinstitutions unnecessarily ignores importantphenomena—inclu-
ing nineteenth-century imperialism, arguably one of the fundamental causes
of World War I. As I hope to show below, ignoring such international hierar-
chiesdistortsourunderstandingofboththeColdWarandPersianGulfWar.
why hierarchy matters
By focusing exclusively on anarchic institutions,analysts not only ignore im-
portantphenomenabutalsointroduceastrongselectionbiasthatsigni(cid:142)cantly
weakens their ability to draw causalinferences.12Limiting the range of varia-
tion in institutions as a dependent variable underestimates the effect of inde-
pendent or causal variables, suggesting that those factors that produce inter-
national institutions are more signi(cid:142)cant than past studies have revealed.13
11. David A. Lake, Entangling Relations: American Foreign Policy in Its Century (Princeton, N.J.:
Princeton University Press, 1999), chap. 2. An analogous continuum of economic institutions
wouldrangefrompreferentialtradingagreementstocustomsunionswithcommonexternaltariffs
toeconomicunions.
12. GaryKing,RobertO.Keohane,andSidneyVerba,DesigningSocialInquiry:Scienti(cid:142)cInferencein
QualitativeResearch(Princeton,N.J.:Princeton University Press,1994),pp.129–135,137–138.
13. SeeLake,EntanglingRelations,chap.3andpp.270–271.Mostimportant,thisselectionbiashas
ledanalyststolargelyignorewhatIcall“governancecosts”(seebelow).
International Security 26:1 134
Transactions costs, informational asymmetries, the need for credibility, and
other variables that neoliberal institutionalists have used to explain institu-
tions may be more important than even they recognize.14
Limiting variationin institutions as an independent variable—the problem
addressed in this article—makes estimates of their effects more uncertain. In-
deed selecting only one type of institution for analysis renders any such esti-
mate highly problematic. Implicit in most studies is a comparisonof anarchic
institutions,whichmaybecommoninternationally,andhierarchicinstitutions,
whichareoftenpresumedtocharacterizedomesticpoliticalsystems.15Thereal
question is not whether internationalinstitutions matter in an absolutesense,
but how much and in what ways they matter relative to courts, legislatures,
and other hierarchic institutions that are presumed to characterize domestic
politics.Ifoneweretoplotpointsforinstitutionsofincreasinghierarchyonthe
X axis,thereby capturingthiscomparison,and effectiveness on theYaxis,the
research design most commonly employed in international relations would
produceastackofpointsnearthe“anarchic”origin,withsomeverticaldisper-
sionre(cid:143)ecting naturalvariationin effectiveness. With no further observations
at other values of the X axis, almost any regression line drawn through this
stackofpointswouldbejustavalidasanyother,thuspreventing usfrom de-
termining whether international institutions matter a little, a lot, or not at all.
Given this research design, it is not surprising that reasonable scholars have
been able to read the record of institutional effectiveness very differently.16
identifying institutional effects
Inadditiontotheselectionbiasesjustnoted,thestudyofinstitutionshasbeen
bedeviled by what Robert Keohane and Lisa Martin term an “endogeneity
trap.”17Thatis,ifinstitutionsareconstructedtoservetheirmembers,identify-
ingtheindependent effects ofinstitutionsis extremelyhard.If institutionsare
endogenous, demonstrating that they matter beyond the interests that gave
rise to them in the (cid:142)rst place is well-nigh impossible—and explains why the
14. Ontransactionscostsandinformation,seeKeohane,AfterHegemony,pp.85–98.Oncredibility,
seeMartin,CoerciveCooperation,pp.11–12.
15. SeeWaltz,TheoryofInternationalPolitics,pp.81–93.Foranalternative,seeHelenMilner,“The
Assumption of Anarchy in International Relations Theory: A Critique,” Review of International
Studies,Vol.17,No.1(January1991),pp.67–85.
16. Althoughtheproblemofinstitutionaleffectiveness hasnotbeenformulatedinprecisely this
manner,recognizingithelpsexplainthefocusofmanyinstitutionalistsontheEuropeanUnion.As
themosthierarchicofthevoluntarilynegotiatedinstitutions,itprovidescrucialanalyticleverage
onthequestionofinstitutional effectiveness.
17. RobertO.KeohaneandLisaL.Martin,“InstitutionalTheoryasaResearchProgram,”inColin
ElmanandMiriamFendiusElman,eds.,ProgressinInternationalRelationsTheory(forthcoming).
Beyond Anarchy 135
initial studyof internationalregimes wasdrawntoperiods “after hegemony”
wherescholarscould reasonablyarguethatinterests had changed but institu-
tions had not.18
In this article I employ two methods to estimate the effects of institutions.
Neither provides aprecisemetricagainstwhichwecanmeasuretheeffects of
institutions,butbothaidinrevealingwhetherinstitutionsmatteralittle,alot,
ornotatall.First,Iexaminenotthebehaviorofthemembersofaninstitution
but the reactions of third parties to the creationof the institution. The greater
thechangeinthebehaviorofnonmembers, wecaninfer,thegreater theeffect
of the institution. This method is particularly appropriate for the kinds of
con(cid:143)ictualrelationsexamined here.19 As members and nonmembers alike are
assumed to act in their self-interest, it is still dif(cid:142)cult to separatethe effect of
theinstitutionpersefromthelargersetofactionsandreactions,butcarefulat-
tention to sequence and the perceptions of the actors themselves can shed
some light on causal import.
Second, I employ counterfactual thought experiments, asking the reader to
imagine a different institution and then to project the logical outcome of this
imagined world.20 Because the Cold War and Persian Gulf War were unique
events, we have only one observation for each. We cannot rewind the tape of
history, modify the institutions, and replay these events. To establish the im-
portanceofinstitutions,then,Ipositthenextmostlikelyalternativeinstitution
and try to assesswhatwould have changed as a consequence. Counterfactual
reasoningisentirelyconsistentwiththetypeofequilibriumanalysisemployed
throughout this article. Any rationalist account of decisionmaking presup-
poses that actors compare across alternatives and consider what is likely to
happen “off the equilibrium path.” Counterfactual analysis is merely a struc-
turedwayofinquiring intotheconsequencesof“nearmisses.”21Itremainsan
imperfect method, of course, both because we lack completely speci(cid:142)ed theo-
18. Onstaticinstitutionsbutshiftinginterests,seeStephenD.Krasner,“RegimesandtheLimitsof
Realism:Regimes as Autonomous Variables,”in Krasner,ed., International Regimes(Ithaca,N.Y.:
CornellUniversityPress,1982),especially pp.359–361.
19. Butitisnotlimitedtorelationsbetweenantagonists.ThecreationoftheEuropeanFreeTrade
AssociationinresponsetotheformationoftheEuropeanEconomicCommunityisasimilarindi-
catorofthelatter’simportance.
20. Oncounterfactualanalysis,seeJamesD.Fearon,“CounterfactualsandHypothesisTestingin
Political Science,”WorldPolitics,Vol.43,No.2(January1991),pp.169–195;andPhilipE.Tetlock
andAaronBelkin,eds.,CounterfactualThoughtExperimentsinWorldPolitics:Logical,Methodological,
andPsychologicalPerspectives(Princeton,N.J.:Princeton University Press,1996).
21. SeeBruceBuenodeMesquita,“CounterfactualsandInternationalAffairs:SomeInsightsfrom
GameTheory,”inTetlockandBelkin,CounterfactualThoughtExperimentsinWorldPolitics,pp.211–
229; and Barry R. Weingast, “Off-the-Path Behavior: A Game-Theoretic Approach to Counter-
factualsandItsImplications forPolitical andHistoricalAnalysis,”inibid.,pp.230–243.
International Security 26:1 136
ries and because human interactioncontains a random element. Nonetheless,
counterfactualanalysisgivesussomeanalyticandempiricalpurchaseoninsti-
tutional effects.
Restrictinganalysistothenextmostlikely alternativeisvitaltomaintaining
the plausibility of any counterfactual analysis. By altering the independent
variableaslittleaspossible,oneminimizesthechangesintheantecedent con-
ditionsthatarerequired.Withineachcase,asa result,Icon(cid:142)nemydiscussion
to what the theory suggests is the next most reasonable institutional choice.
The plausibilityof thecounterfactualis then con(cid:142)rmed by an analysisof con-
temporarypolicydebates.Ineachcase,thealternativesuggestedbythetheory
was actually advocated by a signi(cid:142)cant bloc of policymakers.
Counterfactual analysis cannot prove the causal role of institutions.Yet the
plausiblerereadingsofhistorybelowmakeastrongcasefortheroleofinstitu-
tions. Counterfactual analysis also shows how a theory of institutional varia-
tion is essential for identifying institutional effects, and explains why, in an
articleontheeffectsofinstitutions,Idevotesomuchspacetoatheoryofinsti-
tutional choice.
Explaining Institutional Choice
Institutions are both aproductand a cause.Actorscreateinstitutionstoserve
their interests, and these institutions in(cid:143)uence subsequent behavior. Institu-
tionseitherenable actorstoachieveoutcomesthatmight otherwisebe impos-
sible or constrain actors from undertaking behaviors that would otherwise
be chosen. They are intended to channel behavior in predictable ways, and
this intent forms part of the explanation for the particular institution. It is
thisdualrole thatmakes the separateeffects ofinterestsand institutions hard
to distinguish.
Nonetheless, interests ascommonly described in internationalrelationssel-
domdetermineaparticularinstitutionalchoice.Toincreasesecurityorcounter
threats from revisionist states, countries may augment their own capabilities
bycooperatingwithothers.Yettheresourcesandeffortsofthepartnerscanbe
more or less effectively aggregated through an alliance, a protectorate, or an
empire. Whether and how states can design an agreement to cooperateis de-
termined not only by their interests but also by features of their relationship
withone another. Are theinterestsofthe partiesaligned so thatthe (cid:142)rstneed
notfearthedefectionofthesecond?Wouldthedefectionofthesecondimpose
high costson the (cid:142)rst?What are the costsof establishing a hierarchy through
which the (cid:142)rst would controlmore orfewer of the actionsof the second,and
Beyond Anarchy 137
thus possibly limit the ability of the latter to shirk its obligations? Moreover,
are the synergies from combining resources and efforts greater than the ex-
pected costsofdefection and the likely costsofconstructingsomeinstitution?
Because the answers to these questions are not determined by the sorts of
primordial security interests such as territorial integrity normally attributed
to states, institutions themselves may have an independent effect on world
politics.
Elsewhere I have explained the choice of security relationships in terms of
three variables: joint production economies, which determine the gains from
securitycooperationandderivefromscaleeconomies,positiveexternalities(or
bene(cid:142)cial spillovers from the actionsof others), and the division of labor; the
expected costs of opportunism, or the costs incurred when a partner defaults
onanagreementtocooperate;and governancecosts,theresourcesandefforts
devoted to creating and maintaining the relationship. I argue that:
· the larger the joint productioneconomies,the more willing statesare toex-
pend resources to obtain more effective cooperation;
· the expected costs of opportunism decline with hierarchy because subordi-
nates are less able to act against the wishes of dominant powers; and
· governancecostsrisewithhierarchy. Dominantstatesmustinduce subordi-
natestogiveuptheirvaluedfreedomandcompensatethemaccordingly,en-
gage in costly actions that signal their benign intent and restrict their own
behavior so as to limit their ability to exploit their increasingly vulnerable
partners, or coerce subordinates into relationships against their will.22
It follows that anarchic institutions are most likely to be created under two
circumstances. First, when joint production economies are small, a state will
enteraninstitutiononlyifitexpectsthatitspartnerwillliveup totheiragree-
ment—because a high risk of opportunism is likely to negate the limited
bene(cid:142)tsofcooperation—andtheagreementdoesnotgreatlyconstrainitsown
behavior, implying that the governance costs of cooperation are also low. In
otherwords,whenjointeconomiesaresmall,weshouldexpectthecreationof
anarchic institutions only when it is in the interests of the parties to abide by
agreements and the accords themselves do not impose signi(cid:142)cant costs on
theirmembers.Anarchicinstitutionsarechosen,inshort,whentheneed toal-
terthebehaviorofthecontractingpartiesissmallest.Thatsuchinstitutionsof-
tenfailtomodifysigni(cid:142)cantlythebehaviorofstatesshouldnotbesurprising.
22. Lake,EntanglingRelations,chap.3.
International Security 26:1 138
Second, we can also expect anarchic institutions to arise when joint econo-
mies arelargebutgovernancecostsriserapidlywithhierarchy.In thesecases,
thepotentialgains makecooperationattractive,but hierarchy is notafeasible
solution for potential opportunism. States will then choose to cooperate as
longastheexpectedcostsofopportunismandgovernancecostsdonotexceed
the bene(cid:142)ts created by the joint economies. Despite a high probability or
cost of opportunistic behavior by partners, states may still enjoy net gains
from cooperation—even though the overall bene(cid:142)ts will appear small as the
largegains from joint economiesaredissipatedby frequent opportunism.Un-
der these circumstances, we will typically observe lots of defections, states
largely ignoring oraccepting these defections, and—surprisingly—continuing
cooperation.
Critics of the importance of international institutions correctly identify the
limits of such anarchic relationships, but fail to recognize that the observed
weakness of extant institutions is the product of rational selection: States get
the institutions they need or can afford. In a way not appreciated by either
institutionalistsor their critics,anarchic institutions are most likely to be con-
structed by states precisely when cooperation produces little value added,
statespossessfew incentivestodefect,orstatesarewillingtotoleratesubstan-
tial opportunism.
Hierarchic institutions will tend to arise when more is at stake. Hierarchies
are most likely when there are signi(cid:142)cant bene(cid:142)ts from cooperation, such as
technologicalscaleeconomies that allow force to be projected at low costand
largepositiveexternalitiesthatmakeit asef(cid:142)cient todefend alarger areaasa
smaller one; high costsif a partner acts opportunistically, which in turn are a
function of the speci(cid:142)c assetsin the relationship such as ports or forward de-
fensesitesinuniquelocations;andlowcostsforcreatingandmaintainingare-
lationshipthatdo notincreaserapidlywithhierarchy,suchasthosethatarose
fromthepowerdisparitiesbetween theEuropeanimperialistsandthepeoples
they encountered during the age of expansion. When the potentialbene(cid:142)tsof
cooperationarelargeandthecostsofopportunismby partnersaregreat,gov-
ernance costs are the determining factor.
Ifthecostsofcreatingahierarchyarehigh,stateswilleschewcooperation—
which is the traditional realist prediction. If the costs of building a hierarchy
arenottoohigh,stateswillinvestininstitutionstocontrolthebehavioroftheir
partners. The greater the potential bene(cid:142)ts of cooperation or the greater the
risks of defection by partners, the more likely stateswill be to forgo coopera-
tionorcreateahierarchic institution.When cooperationis both attractiveand
risky, hierarchy is the likely result.