Anarchy in Theory: The Neorealist-Neoliberal Debate Neorealism and its Critics. by Robert O. Keohane; Neorealism and Neoliberalism: The Contemporary Debate. by David A. Baldwin Review by: Robert Powell International Organization, Vol. 48, No. 2 (Spring, 1994), pp. 313-344 Published by: The MIT Press Stable URL: http://www.jstor.org/stable/2706934 . Accessed: 20/12/2011 19:43

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http://www.jstor.org Anarchyin international relationstheory: the neorealist-neoliberaldebate RobertPowell

Robert0. Keohane, editor.Neorealism and Its Critics.New York: Columbia UniversityPress, 1986. David A. Baldwin,editor. Neorealism and Neoliberalism:The Contemporary Debate. New York: ColumbiaUniversity Press, 1993.

Two ofthe most influential contemporary approaches to internationalrelations theoryare neorealism and neoliberalism.The debate between these two approaches has dominatedmuch of internationalrelations theory for the last decade. It is now commonplacefor an articleabout some aspect of interna- tionalrelations theory to beginby locatingitself in termsof thisdebate. These two approaches and the debate between them have failed to contributeas much as theymight have to internationalrelations theory. These approaches sufferfrom serious internalweaknesses and limitationsthat the neorealist- neoliberaldebate oftenhas tended to obscure ratherthan to clarify.Once we have exposed and clarifiedthese weaknesses and limitations,we willbe able to see severalimportant directions for future theoretical work. Two books,Neorealism and Its Criticsand Neorealismand Neoliberalism:The ContemporaryDebate, make significantcontributions to thisdebate. The former offereda wide-rangingcritique of neorealismwhen it was publishedin 1986. The latter,which has just been published,is morenarrowly focused. It takesup where some of the critiquesin Neorealismand Its Criticsleft off. A reviewof these twocomplementary volumes affords an excellentopportunity to beginto identifysome of the weaknessesand limitationsthat the neorealist-neoliberal debate frequentlyhas obscured.

I am gratefulto Carol Evans, JeffryFrieden, Joanne Gowa, JosephGrieco, ErnstHaas, Peter Katzenstein,, David Lake, JamesMorrow, John Odell, JaniceGross Stein,and KennethWaltz fortheir thoughtful comments and criticismsof an earlierdraft. I also thankGreg Louden and Michael Sinatra for invaluable research assistance. I gratefullyacknowledge the supportof a grantfrom the National Science Foundation,no. SES-921959.

IntemationalOrganization 48, 2, Spring1994, pp. 313-44 ?3 1994 byThe 10 Foundationand the MassachusettsInstitute of Technology 314 InternationalOrganization

In thisreview, I discussfour broad avenues of criticismthat these volumes take in evaluatingneorealism and specificallyKenneth Waltz's formulationof it.' The firstthree avenues are the originsof states' preferences,the agent- structureproblem, and Waltz's specificdefinition of politicalstructure. These criticismsgenerally do notchallenge the logicalcoherence of neorealism.They focus instead on the limitationsof the theory.The firsttwo centeron what neorealismtakes forgranted, e.g., preferencesand intersubjectivemeanings and understandings.The thirdcriticism finds Waltz's definitionof structuretoo confining.The fourthavenue of criticismchallenges the internallogic of neorealism directly.It argues that conclusionsclaimed to follow fromthe assumptionsof neorealismactually do not. The neorealist-neoliberaldebate lies alongthis fourth avenue. Three issues lie at the center of the neorealist-neoliberaldebate. In reviewingthese issues,I tryto bringimportant implicit assumptions to the fore and showthat those assumptions account for many of theimportant differences betweenthe two theories.Moreover, many of the differencesthat have been thoughtto be significant,such as the differencebetween relative and absolute gains, are not. The firstissue at the heart of the debate is the meaningand implicationsof anarchy.Although the notionof anarchyhas servedas a central organizingconcept for much of internationalrelations theory, the emphasison anarchyis misplaced.What have oftenbeen taken to be the implicationsof anarchydo not reallyfollow from the assumptionof anarchy.Rather, these implicationsresult from other implicitand unarticulatedassumptions about the states'strategic environment. The second centralissue is the problemof absolute and relativegains. I argue that the controversysurrounding this problemgenerally has mistaken effectsfor causes and that this mistake has handicapped analysis of the problemof internationalcooperation. More specifically,I tryto demonstrate that the internationalrelations literaturegenerally holds, if at times only implicitlyso, thatthe extentto whicha state is concernedabout relativegains depends on its strategicenvironment, for example, the offense-defense balance and the intensityof the securitydilemma. But if thisis the case, then the degree to which a state is concerned about relativegains is part of the outcometo be explained:it is an effectand not a cause. The extentto whicha stateis concernedabout relativegains, therefore, does not explainthe level of internationalcooperation. This realization should refocusour attentionon whatdetermines the degreeof a state'sconcern about relativegains. The thirdissue is the tensionbetween coordination and distribution.There are oftenmany ways to realize the joint gains fromcooperation, and these alternativesoften lead to differentdistributions of those gains. Thus, the potentialfor joint gains usually creates distributionaldisputes that tend to impedecooperation. Although these distributional concerns only recently have

1. KennethWaltz, Theory of Intemational Politics (Reading, Mass.: Addison-Wesley,1979). Neorealismand neoliberalism 315 begun to receive attentionin the debate betweenneorealism and neoliberal- ism,they hold the promiseof clarifyingsome of the questionsthat actually do dividethese twoapproaches.

Neorealismand the structuralapproach

Much of the neorealist-neoliberaldebate can be seen as a reactionto Waltz's Theoryof InternationalPolitics and a response to those reactions.A brief discussionof two of thatbook's primaryobjectives is essentialto understanding the debate.2 One objectivewas to reiterate,reinforce, and refinea line of argumentWaltz began inMan, theState, and War.3There, he had underscored the importanceof third-imageexplanations. First-image explanations locate the causes of internationaloutcomes, say the cause of war, "in the natureand behavior of men. Wars resultfrom selfishness, from misdirected aggressive impulses,from stupidity."4 Second-image explanations locate causes in the internal structureof the state. Imperialism,for example, results from a particularinternal economic structure like capitalism;similarly, international peace resultsfrom a particularform of government like .5 Appealing to Rousseau's stag huntand alludingto the thenrecent development of game theory,Waltz argued that first-and second-imageexplanations were insuffi- cient.6In a situationentailing strategic interdependence, such as that of the great powers, an actor's optimal strategydepends on the other actors' strategies.If, therefore,we want to explainwhat the actorswill do, then,in additionto lookingat the attributesof the actors,we must also look to the constraintsthat definethe strategicsetting in whichthe actorsinteract. The thirdimage locates causes "withinthe statesystem."7 A simple example from microeconomictheory illustrates the potential importanceof third-imageexplanations. The price is higherand the outputis lower in a monopolized marketthan in a competitiveone. But first-and second-imageaccounts, which Waltz collectivelycalls reductiveexplanations in Theoryof IntemationalPolitics, do not explain these differences.In both markets,the attributesof the actors,which are firmsin thiscase, are identical: everyfirm tries to maximizeits profitsand consequentlyproduces the level of outputat whichmarginal cost equals marginalrevenue. What accountsfor the variationin price and output between these marketsis not variationin the attributesof the unitsbut variation in the environmentsor marketstructures in whichthey act. This is the essence of the thirdimage.

2. For a summaryof Waltz's goals, see p. 323 of Kenneth Waltz, "Reflectionson Theoryof IntemationalPolitics, " in Keohane, Neorealismand Its Critics,pp. 322-45. 3. KennethWaltz, Man, theState and War(New York: ColumbiaUniversity Press, 1959). 4. Ibid.,p. 16. 5. Ibid.,pp. 80-164. 6. Ibid.,pp. 172-86 and 201-5. 7. Ibid.,p. 12. 316 InternationalOrganization

It is importantto emphasize two points about the divisionof explanations intoreductive and systemicaccounts. The firstis an assumptioninherent in this division:namely, that we can usefullyconceive of the actorsor unitsin a system as separate and distinctfrom the constraintsthat define the strategicsetting in whichthe unitsinteract. The second importantpoint is the kindof conceptual experimentand explanationthat naturallyfollows from this division.Once a systemhas been decomposedinto units and constraints,it is naturalto ask one of two questions;or, to put it differently,it is naturalto considertwo types of thoughtexperiment. First, how would some aspect of the units'behavior, say theprobability of startinga war,vary if we conceptuallychange some attributes of the unitswhile holding the constraintsconstant? What, for example, would happen to the probabilityof war if a state's form of governmentwere democraticrather than authoritarian?Fixing constraintsand varyingunits' attributescomprise the essentialconceptual experiment underlying reductive explanations.Second, howwould behaviorchange if the attributesof the units remained constantand the constraintswere changed? What, for example, would happen to the probabilityof war if the attributesof the units were unchangedbut the distribution of power changed from bipolarity to multipolar- ity?Fixing the units' attributes and varying the constraints facing the units comprise thefundamental conceptual experiment underlying systemic explanations. After emphasizing the general importance of third-imageor systemic explanations,Waltz turns to a second objective in Theoryof Intemational Politics.He sees structureas a "set of constrainingconditions."8 But statesmay be constrainedby manythings-like the distributionof power,the natureof militarytechnology, or the state'scomparative economic advantage. A second goal forWaltz is to specifya restrictedset of constraintsthat provide a way of conceivingof a political systemand then to demonstratethe power of this formulationby showingthat it tells "us a small numberof big and important things."9He restrictsthis set to threeelements, defining a politicalstructure in termsof its orderingprinciple, the distributionof the units' capabilities,and thefunctional differentiation or nondifferentiationof the units.10 Two criteriaseem to have guided the selectionof these elementsand this definitionof politicalstructure. The firstis pragmatic.This definitionappeared to lead to interestinginsights, which, of course, is the goal of all positive theories.The second criterionis less general and reflecteda trade-off.Waltz triedto definepolitical structure so that"it would showus a purelypositional picture.""1The advantageof a positionalpicture is thatmany systems can be seen as similarregardless of the particularsubstantive context in whichthe units interact."Structure, properly defined, is transposable."12Thus, firms

8. Waltz,Theory of Intemational Politics, p. 73. 9. Waltz,"Reflections on Theoryof Intemational Politics," p. 329. 10. Ibid.,pp. 79-101. 11. KennethWaltz, "A Response to My Critics,"in Keohane, Neorealismand Its Critics,p. 330. 12. Ibid. Neorealismand neoliberalism 317 facinga highrisk of bankruptcyin an oligopolisticmarket may be seen to be in an anarchical,self-help system in muchthe same waythat states facing a high riskof war in the internationalsystem are in an anarchical,self-help system.13 If, therefore,anarchy implies certain behavior, such as the tendencyfor balances of power to form,then we would expectto see thisbehavior obtain "whetherthe systemis composedof tribes, nations, oligopolistic firms, or street gangs."'14The potentialadvantage of a spare definitionof a politicalstructure is thatit may help us see similaritiesin whatinitially appeared to be verydifferent domains.The potentialdisadvantage of thisspare definitionis thatif the three dimensionsWaltz uses to characterizesystems do not sufficientlyconstrain the units'interaction, then units in similarsystems may not interact in similarways. If thisis the case, thenwe shall have to look elsewherefor explanations of these variations.Recognizing this trade-off, Waltz opts fora spare definition.

Four avenuesof criticism

Structuraltheories decompose a systeminto units and constraints.This decompositionmakes these theories vulnerable to two broad avenues of criticism.The firstcriticism accepts thisdecomposition but stressesthe need for a theoryof preferenceformation to supplementthe structuraltheory. Because the units'preferences are exogenouslyspecified in a structuraltheory, we need a theorythat explainstheir origins. The second avenue rejectsthis decomposition.It emphasizesthe agent-structureproblem, arguing that agents and structureare inseparable.In additionto these firsttwo broad avenues of criticism,any particular structural theory, like Waltz's formulationof neoreal- ism,is also subjectto a thirdand fourthavenue of criticism.The thirdfocuses on and questionsthe specificdefinition of structureemployed in the theory. The fourthquestions whetherthe conclusionsclaimed to follow fromthe theorydo indeed follow.

Preferencesare given exogenously The firstavenue of criticismcenters on preferences.Structural approaches take the units'preferences as given.That is, thesepreferences are exogenously specified.They become inputs into the analysis ratherthan the subject of analysis.This may be an importantweakness of the structuralapproach. As Robert Jerviscautions, "By takingpreferences as given,we beg what maybe the most importantquestion on how theywere formed.... Economic theory treatstastes and preferencesas exogenous.Analysis is thereforefacilitated, but

13. Waltz,Theory of Intemational Politics, pp. 105 and 111. 14. The quotationis fromp. 37 of KennethWaltz, "Realist Thoughtand NeorealistTheory," Joumalof IntemationalAffairs 44 (Spring/Summer1990), pp. 21-37. 318 InternationalOrganization at the cost of drawingattention away from areas thatmay contain much of the explanatory'action' in whichwe are interested."'15 The firststep in assessingthe force of the criticism that structural approaches lack a theoryof preferencesis to clarifythe criticism by distinguishing two types of preferences.The firsttype is preferencesover outcomes; the second is preferencesover actions or policies.To differentiatethese two types, consider a game in payoff-matrixform. The cells in the matrixcorrespond to potential outcomes.The utilitiesthat appear in each cell in the matrixrepresent the players'preferences over these potentialoutcomes. That is, a player'sutilities reflectits preferenceranking of the possible outcomes.Given its preferences over outcomesand itsbeliefs about whatthe otherplayers are doing,a player can rank its potentialactions frommost to least preferred.In a two-person game,for example, the rowplayer can rankits actions from best to worstgiven its payoffsand itsbeliefs about whatthe columnplayer is doing.This induced rankingdefines a player'spreferences over actions.'6 Structuraltheories do nottry to explainpreferences of one typebut do tryto explain preferencesof the other type. Structuraltheories take the units' preferencesover possible outcomes as givenand, consequently,lack a theoryof preferencesover outcomes. But structuraltheories try to make predictions about the units'preferred actions by combiningassumptions about the units' preferencesover outcomes with other assumptions about the structural constraintsfacing the units. In this sense, structuraltheories claim to be a theoryof preferencesover actions. Game theory,for example,is a theoryof preferencesover actions. It attemptsto predictthe units' optimal actions based on theirpreferences over outcomes and the strategicsetting in which they interact.Similarly, Waltz's formulationof neorealismtakes the units'prefer- ences as given. "In a microtheory,whether of internationalpolitics or of economics,the motivationof the actors is assumed ratherthan realistically described."'17In particular,Waltz assumes "that states seek to ensure their survival"and thenattempts to predictthe units' actions, albeit in a verygeneral way,on the basis of this assumptionabout the units' preferencesand other assumptionsabout the politicalstructure in whichthe unitsinteract.18 The two typesof preferencesare frequentlyconflated. For example,after notingthat "economic theorytakes tastesand preferencesas exogenous"and warningthat we may be beggingthe most importantquestions by doing so, Jervisdiscusses some of the sources of these tastes and preferencesover outcomes. These sources include transnationalforces, ideologies, beliefs,

15. Robert Jervis,"Realism, Game Theory,and Cooperation,"World Politics 40 (April 1988), pp. 324-25. For similarwarnings, see JosephNye, "Neorealism and Neoliberalism,"World Politics 50 (January1988), p. 238. 16. The distinctionbetween preferences over outcomes and over actionsis useful,but it should notbe pushed too hard.An outcomein one game maybe seen as a policychoice in a largergame. 17. Waltz,Theory of Intemational Politics, p. 91. 18. The quotationis drawnfrom ibid. Neorealismand neoliberalism 319

experience,and knowledge.19He also sees realism as a source or theoryof preferencesover outcomes,saying, "Sometimes we can deduce preferences fromthe structureof the system,as Realism suggests.But even a structural theoryof internationalpolitics as powerfulas Waltz's has troubleproducing precisedeductions."20 Jervis confounds the two typesof preferenceshere. He correctlyobserves that economic theorytakes preferencesover outcomes as givenbut thentreats neorealism, which is a theoryof preferencesover actions, as a theoryof preferencesover outcomes.Robert Keohane similarlyconflates the twotypes of preferenceswhen he intendsto criticizeneorealism as a weak theoryof behavior (that is, a weak theoryof preferencesover actions) but describesneorealism as a weak theoryof preferencesover outcomes.2' Conflatingthe twotypes of preferenceshas at least twonegative effects. The firstis to suggestthat we cannotuse structuralor game-theoreticapproaches, whichtake preferencesas given,to studythe effectson preferencesof changes in beliefs,experience, or knowledge.22This suggestionis simplywrong if what we wantto studyis how changesin thesefactors affect preferences over actions or policies.Indeed, one ofthe primaryuses of incomplete-informationgames is to studyhow interaction affects players' beliefs and, throughthese beliefs, their preferredactions. Andrew Kydd, for example, develops an interestingincom- plete-informationmodel of arms races that he uses to studyJervis's spiral model of escalation.23The basic issue in Kydd's game is whethera state will change frompreferring not to arm to preferringto arm because it interprets anotherstate's arms increase as a sign of hostilityrather than of insecurity. Kydduses thismodel to studythe circumstancesin whichtwo states that have no hostileintent might arm and eventuallygo to war because theyfear that the otheris hostile.The formalstudy of dynamicinteractions and the learningand signalinginherent in themis at an earlystage in internationalrelations theory. Many legitimatecriticisms can be made of thiswork.24 But the claim thatthis work has nothingto say about learningand changes in preferences(over

19. Jervis,"Realism, Game Theory,and Cooperation,"pp. 324-29. 20. Ibid.,p. 325. 21. Robert Keohane, "Theoryof World Politics,"in Keohane, Neorealismand Its Critics,pp. 175-76. One factorcontributing to this conflationmay be that both Jervisand Keohane focus primarilyon theprisoners' dilemma. There is no strategicinterdependence in a one-shotprisoners' dilemma:a playeralways does strictlybetter by playingD ratherthan C regardlessof what the otherplayer does. In cases in whicha player'soptimal action is independentof whatothers do, a theoryof preferencesover outcomes also serves as a theoryof preferencesover actions. The distinctionbetween the twotypes of preferencesis meaningfulonly if the game entailsa situation of strategicinterdependence in whicha player'soptimal strategy depends on whatit believes others willdo. 22. Jervis,"Realism, Game Theory,and Cooperation,"p. 327. 23. AndrewKydd, "The SecurityDilemma, Game Theory,and WorldWar I," paper presented at the annual meetingof the American Association,Washington, D.C., 2-5 September 1993. For Jervis'sinsightful discussion of the spiral model, see his Perceptionand Misperceptionin InternationalPolitics (Princeton, N.J.: Press, 1977). 24. For an excellentreview of some of the limitationsof thisapproach, see David Kreps,Game Theoryand EconomicModelling (New York: OxfordUniversity Press, 1990). 320 InternationalOrganization

actions) because it takes preferences(over outcomes) as givenis not one of thesecriticisms. The second negativeeffect of conflatingthe twotypes of preferencesis that doing so confoundstwo objectionsto structuralapproaches that need to be evaluatedseparately. The firstobjection is thatthese approaches take theunits' preferencesas given.The second is that these approaches offerat best very weak theoriesof preferencesover actions and at worstmisleading theories. As will be seen, the firstobjection is not very importantto the neorealist- neoliberaldebate, while the second objectionlies at the heartof it. The significanceof taking the units' preferences as givenin a theoryor model depends verymuch on the theoryor model and the purposesfor which it has been constructed.In some models of nuclear crisisbargaining, for example, thereare onlythree outcomes: a state prevailsin the crisis,it backs downbut avoidsa nuclearexchange, or the crisisends in nuclearwar.25 Preferences over these outcomes are exogenouslygiven in these models, but it would seem bizarrenot to assume thata state prefersthe firstoutcome to the second and the second to the third.Many situations,however, are muchmore complicated and what to assume about preferencesover outcomesis not obvious.It is not clear, for example,what to assume about a state's preferencesover possible trade arrangements.Here the workof JeffryFrieden, Peter Gourevitch,Peter Katzenstein,David Lake, Helen Milner, Ronald Rogowski, and others in developingan understandingof the originsof preferencesis veryimportant.26 Similarly,a state's preferencesover potentialnational security arrangements, for example, possible arms control agreements,may not be obvious, and theoriesmay be needed to explainthese preferences.27 That neorealismtakes the units'preferences as givenis of littleconsequence forthe neorealist-neoliberaldebate. As will be developed more fullybelow, thisdebate largelyfocuses on the likelihoodof cooperationin anarchyand on the role of institutionsin facilitatingcooperation. Neorealism maintains that cooperationwill be difficultin an anarchicsystem composed of units that prefer survivalover extinction.Neoliberalism questions this conclusionbut not the

25. See, forinstance, the models of nuclearbrinkmanship in Robert Powell,Nuclear Deterrence Theory(Cambridge: Cambridge University Press, 1990). 26. See JeffryFrieden, "Invested Interests,"Intemational Organization 45 (Autumn1991), pp. 425-51; Peter Gourevitch,Politics in Hard Times(Ithaca, N.Y.: Cornell UniversityPress, 1986); Peter Katzenstein,ed., BetweenPower and Plenty(Madison: Universityof WisconsinPress, 1978); David Lake, Power,Protection, and Free Trade(Ithaca, N.Y.: CornellUniversity Press, 1988); Helen Milner,Resisting Protectionism (Princeton, N.J.: PrincetonUniversity Press, 1988); and Ronald Rogowski,Commerce and Coalitions(Princeton, N.J.: Princeton University Press, 1989). 27. For example, Adler uses the concept of epistemic communitiesto explain American preferencesabout arms control agreements. See Emanual Adler,"The Emergenceof Cooperation," InternationalOrganization 46 (Winter 1992), pp. 101-46. For attemptsto explain a state's preferencesover militarydoctrines and the importanceof civil-militaryrelations in determining those preferences,see Barry Posen, The Originsof MilitaryDoctrine (Ithaca, N.Y.: Cornell UniversityPress, 1984); JackSnyder, The Ideology of the Offensive (Ithaca, N.Y.: CornellUniversity Press, 1984); and Stephen Van Evera, "The Cult of the Offensiveand the Originsof the First WorldWar," InternationalSecurity 9 (Summer1984), pp. 58-107. Neorealismand neoliberalism 321 assumptionthat units are minimallymotivated to survive.Indeed, it would seem bizarrenot to assumethat units prefer survival over extinction. Thus, the criticismthat these preferences are specifiedexogenously is unimportantto the debate about the likelihood of cooperation in anarchy. The potentially importantcriticism is thatthe conclusionsclaimed to followfrom neorealism's spare assumptionabout units'preferences and about the politicalstructure in whichthese unitsinteract actually do not follow.This is the fourthavenue of criticism,which will be discussedbelow.

The inseparabilityof agents and structure The structuralapproach decomposes a systeminto units and the constraints facingthem. The second avenue of criticismdenies the separabilityof agents and structure.Drawing on structurationisttheories in sociology,Alexander Wendt argues that agents and structureare "mutually constitutiveyet ontologicallydistinct entities. Each is in some sense an effectof the other;they are 'co-determined.'"28 If agents and structurewere conceptuallyinseparable, two consequences would follow.First, the two conceptualexperiments underlying the structural approach fromwhich this approach derives its explanatorypower would become problematic.We would no longerbe able to studythe constraining effectsof structureby theoreticallyholding the units and theirpreferences constantwhile varyingthe structurein which they interact.If units and structureare inseparableso thateach is at least partlythe effectof the other, thenvariation in the structurewill also changethe units. Second, challengingthe separabilityof unitsand structuremakes the units an object of inquiry and directs our attention to systemicchange and transformation.If units and structureare mutuallyconstitutive, then it is natural to ask, How do they evolve, and How do they interactover time? Thinkingof the units as being endogenous shiftsour attentionaway froma positionalmodel to what David Dessler calls a transformationalmodel. In a positional model like Waltz's formulationof neorealism,"structure is an environmentin which action takes place. Structuremeans the 'setting'or 'context'in which action unfolds."29Structure is, in other words, a set of constraints.In a transformationaltheory, "structure is a mediumof activity that in principlecan be alteredthrough activity."30 Structure shapes action and is shaped byaction. The goal, therefore,of a transformationaltheory is to explain how structureand agent interact.To do this, Robert Cox, Dessler, John

28. See p. 360 of AlexanderWendt, "The Agent-StructureProblem in InternationalRelations Theory,"International Organization 41 (Summer1987), pp. 335-70. 29. The quotationis fromp. 426 of David Dessler, "What's at Stake in the Agent-Structure Debate," IntemationalOrganization 43 (Summer1989), pp. 441-70,emphasis original. 30. Ibid.,p. 461. 322 InternationalOrganization

Ruggie,Wendt, and othershave emphasizedidentities, interests, rules, roles, and intersubjectiveunderstandings and meanings.3' As withthe firstavenue of criticism,the forceof the second avenue depends verymuch on the particulartheory or model beingcriticized. Cox's distinction between problem-solvingtheories and criticaltheories is helpfulhere.32 The formeruses the ceteris paribus assumptionto restrictthe statementof a specificproblem "to a limitednumber of variableswhich are amenable to a relativelyclose and precise examination."33Among the many thingsthat problem-solvingtheories may exclude by taking them as givenand unproblem- atic are intersubjectiveunderstandings and expectations.The ceterisparibus assumptioneffectively freezes and therebyassumes away the interactionof unitsand structure. It seems entirelyappropriate to assume awaythis interaction in a problem- solvingtheory as longas the applicabilityor domainof the theoryis understood to be boundedby the ceteris paribus assumption. Structurationists rightly argue thatintersubjective understandings are part of what is beingtaken as givenor unproblematicin thisassumption. If theseunderstandings and meaningsdiffer significantlyfrom those presumed in the ceteris paribus assumption,then theoriespredicated on that assumptionmay be of littleuse. Of course, the ceterisparibus conditions-be theyabout interestsand identitiesor about the manyother factors left out of a specifictheory-are neverstrictly satisfied. We do not knowa prioriwhether differences in interestsand identitiesor in the otherexcluded factors are important.The bestwe can do is tryto determinethe domain of applicabilityof problem-solvingtheories by usingthem in different settings.Powerful theories will workin a large domain because the excluded factorssubsumed in the ceterisparibus assumption generally are insignificant. Weak theorieswill have a verylimited domain. The sociological approach makes a serious and importantcriticism and contributionin stressingthe importanceof intersubjectivemeanings and understandingsand the interac- tionbetween agents and structure. The sociologicalapproach stressesthe inseparabilityof unitsand structure. But it is importantnot to identifythis criticism with this particular approach. A second line of research is also predicated on the interactionof units and structureor, more precisely,the interactionof states and the international structure.The essence of Gourevitch'ssecond-image-reversed argument is that

31. See RobertCox, "Social Forces,States, and WorldOrders," in Keohane,Neorealism and Its Critics,pp. 204-54; Dessler, "What's at Stake in the Agent-StructureDebate?"; JohnRuggie, "Continuityand Transformationin World Polity,"in Keohane, Neorealismand Its Critics;John Gerard Ruggie, "Territorialityand Beyond," InternationalOrganization 47 (Winter 1993), pp. 139-74; Wendt, "The Agent-StructureProblem in InternationalRelations Theory"; and Alex- ander Wendt,"Anarchy is What States Make of It," InternationalOrganization 46 (Spring 1992), pp. 391-425. 32. Cox, "Social Forces,States, and WorldOrders," p. 208. 33. Ibid.,p. 208. Neorealismand neoliberalism 323 the internationalstructure shapes domestic institutionsand states' prefer- ences: statesand structureinteract. This second formof the criticismthat agents and structureare inseparableis importantfor two reasons. First, it showsthat the agent-structureproblem may arise even in rationalistapproaches thattake interestsand identitiesas given and assume that the units act in theirown narrowself-interest. Second, the existingliterature illustrates a way of tryingto deal with this formof the agent-structureproblem. The potentialsolution is to redefinethe unitsin the system.Rather than treatingstates as unitaryactors, states are decomposed into more basic units.The hope here is thatwe will be able to separate these morebasic unitsfrom the constraintsfacing them. To illustratethis approach to dealingwith the interactionof statesand the internationalstructure, consider Rogowski'swork on the effectsof interna- tionaltrade on domesticpolitical alignments and states'preferences.34 At the riskof doingthe subtletyof his analysisgrave injustice, Rogowski decomposes a countryinto three groups or units:landowners, capitalists, and labor. A state's preferencesemerge through competition among these units.Moreover, any- thing that significantlyaffects the terms of internationaltrade shiftsthe distributionof domestic political power among the units. For example, technologicalor politicalchanges, like the adventof railroadsand steamships or the rise of Britishhegemony, reduce the cost or riskof internationaltrade. These changes favor and enrich domesticgroups that benefitfrom greater trade.By assumption,benefited groups become morepowerful and the state's preferencesgenerally become more reflectiveof the preferencesof these favoredgroups.35 Rogowski'sanalysis illustrates a rationalistversion of the agent-structure problemor, more accurately,the state-structureproblem. Capital, land, and labor in Rogowski'sargument are actingin theirown materialself-interest. Changingintersubjective meanings and understandingsare not at issue here. Nevertheless,we cannot decompose the internationalsystem into units and structureif we treat states as the units. For example, a change in the internationalsystem, like the rise of Britishhegemony, that reduces the risk and thereforeincreases the expected returnto internationaltrade will also

34. Rogowski,Commerce and Coalitions. 35. Rogowskireadily acknowledges that he is makingassumptions about the domesticpolitical processand does not have a theoryof the state.He also emphasizesthat although changes in the termsof trademay make some domesticgroups more powerful, they still may lose in the domestic politicalstruggle (ibid., pp. 4-5). The powerof Rogowski'sanalysis, of course,lies in its abilityto identifythe groups that will benefitfrom greater trade and the domesticcleavages thatgreater trade will tend to create. Appealing to the Stolper-Samuelsontheorem, Rogowski argues that greater trade favorsthe domesticgroup that controlsthe relativelyabundant factor.So, for example,land was abundantand capital and labor were scarce in the in the latter part of the nineteenthcentury, while labor was abundant and capital and land were relatively scarce in Germany.Accordingly, agriculture in the United States and labor in Germanyshould have supportedgreater openness, while capital and labor in the UnitedStates and capitaland land in Germanyshould have unitedin supportof protectionism(pp. 3-20). 324 InternationalOrganization tend to change states' preferences.States and structureare interdependent; each is in partan effectof the other. This briefillustration also suggestsa wayof tryingto deal withthis version of the agent-structureproblem: namely, to decompose the systeminto different unitsthat hopefully can be separatedfrom the structureconstraining them. In effect,we enlargethe game bytrying to breakwhat we previouslytook to be a unitaryactor, namely the state,into more basic units.36Of course,enlarging the game to include the interactionbetween domesticand internationalpolitics makesany analysis much more difficult. Needless to say,an approachto dealing with the inseparabilityof states and structureis not a theory of their interaction.Much importantwork remains to be done on the interactionof statesand structure.37 In sum,theories that take intersubjectivemeanings and understandingsas givenassume awayone formof agent-structureinteraction. Structural theories thattake the state to be a unitaryactor also assume away a rationalistform of agent-structureinteraction. These theoreticalsimplifications may be appropri- ate forsome questionsand notfor others. We need to do moreto identifythose domains in which this interactioncan be disregardedand those in which it cannot.

Waltz's definitionof structure The firstand second avenues of criticismare directed at the structural approach in general. The thirdand fourthavenues of criticismapply more specificallyto neorealismand to Waltz's particularformulation of it. The third criticismfocuses on Waltz's spare definitionof structureand generallyargues thatother elements be includedin the descriptionof a system'sstructure. Waltz defineda politicalstructure by its orderingprinciple, the distribution of capabilities,and the functionaldifferentiation or nondifferentiationof the units. This definitionthus implies that the nuclear revolutionin military technologyis a unit-levelchange and not a structuralchange.38 Joseph Nye finds it "particularlyodd to see nuclear technologydescribed as a unit characteristic."39He and Keohane argue thatsuch factorsas "the intensityof internationalinterdependence or the degree of institutionalizationof interna- tionalrules do notvary from one stateto anotheron the basis of theirinternal characteristics... and are thereforenot unit-levelfactors."40 They conclude

36. Clearly this approach does nothingto address the importantconcerns raised in the sociologicalapproach to the agent-structureproblem. 37. For suggestivediscussions of the interactionbetween states and structurein different substantivecontexts, see Brian Downing,The MilitaryRevolution and PoliticalChange (Princeton, N.J.:Princeton University Press, 1993); Katzenstein,Between Power and Plenty;and Charles Tilly, Capitaland Coercion(New York: Blackwell,1990). 38. Waltz,"Reflections on Theoryof International Politics, " p. 327. 39. Nye,"Neorealism and Neoliberalism,"p. 243. 40. Joseph Nye and Robert Keohane, "Power and InterdependenceRevisited," Intemational Neorealismand neoliberalism 325 that"making the unitlevel the dumpingground for all unexplainedvariance is an impedimentto the developmentof theory."41 It is clear whyWaltz would not want to include militarytechnology in his definitionof structure.Recall thatone of his goals in fashioninghis definition was to give a purelypositional picture of a systemso the notionof structure would be transposablefrom one substantivecontext to another. One can readilytranspose the idea of the distributionof capabilitiesfrom the interna- tionalsystem where states are the unitsto, for example, an oligopolisticmarket where firmsare the actors. But what is the analogue to having a secure, second-strikeforce for a firmin an oligopoly?Including military technology in the definitionof structurewould seem to make the conceptless transposable. Of course, greater transposabilitycomes at a cost. Waltz's theorycannot accountfor variations in outcomeslike the probabilityof war thatmay be due to thenuclear revolution. To understandthose effects, we have to look to other theories. Althoughit is evidentwhy Waltz would not wantto includedimensions like militarytechnology in his notionof structuregiven his goal of transposability, whyshould the distributionof capabilitiesacross states "be included in the definitionand not other characteristicsof states that could be cast in distributionalterms?"42 The answer seems to be a pragmaticone. Waltz believes thatstate "behaviorvaries more withdifferences of power thanwith differencesin ideology, in internal structureof propertyrelations, or in governmentalform."43 That is, Waltz believes that a definitionof structure based on the distributionof capabilitiesrather than on the distributionof somethingelse seems more likelyto have greater explanatorypower.44 In evaluatingthe theorybased on thisdefinition, part of what is beingevaluated is theusefulness of focusingon the distributionof capabilities. Notwithstandingthe prevalenceof criticismsof Waltz's spare definitionof structure,there is often a certain hollownessto debates about the proper definitionof structure.Surely the effectsof, say, the nuclear revolutionon internationalpolitics do not depend on whetherwe attach the appellation "4structural"or "unit-level"to thischange. Putting a highvalue on transposabil- ity,Waltz opted for a definitionthat made the concept of structuremore readilytransposable. Other theoristsworking on other questions may value transposabilityless and may definestructure differently. The importantissue, however,is not whetherthe consequences of the nuclearrevolution, different formsof propertyrelations, varying degrees of institutionalization,or changes

Organization41 (Autumn 1987), pp. 725-53, and especiallyp. 746, fromwhich the quotation is drawn. 41. Ibid. 42. Waltz,"Reflections on Theoryof International Politics, " p. 329. 43. Ibid. 44. Buzan, Jones,and Littlemake a similarpoint in BarryBuzan, Charles Jones,and Richard Little,The Logic ofAnarchy(New York: ColumbiaUniversity Press, 1993), pp. 54-56. 326 InternationalOrganization in othersets of constraintsare called "structural"or somethingelse. The issue is to developtheories that explain these consequences.45 When we debate what to call these changes rather than develop and test theories about the consequencesof thesechanges, we appear to believe thatthe name impliesthe consequences.

Neorealism and its implications The neorealist-neoliberaldebate developsprimarily along the fourth avenue of criticism.This criticismquestions the conclusionsclaimed to followfrom Waltz's assumptionsand those of neorealismmore generally.Neorealism, for example,claims thatinternational institutions play a minimalrole in shaping internationalpolitics and that the prospectsfor cooperationin anarchyare bleak.46Neoliberalism questions these claims in two ways.First, it challenges the logicalcoherence of the neorealistargument by trying to showthat there is a mistakein thelogic. Second, neoliberalismargues that the explanatory power of neorealismis weak when compared to neoliberalism.I trace the develop- mentof thiscriticism and the neorealist-neoliberaldebate in the remainderof thissection. I examinethree major disputes in the debate in the nextsection. In his contributionto Neorealismand Its Critics,Keohane surveysthe neorealist research programand questions its predictivepower.47 He then describeswhat a "modifiedstructural research program" would look like. It would "pay muchmore attention to the rolesof institutions and rulesthan does StructuralRealism. Indeed, a structuralinterpretation of the emergenceof internationalrules and procedures,and of obedience to themby states,is one of the rewardsthat could be expectedfrom this modified structural research program.1148 Keohane challengesneorealism more directlyand develops an institutional approach more fullyin his work,After Hegemony.49 The centralquestion is, "Under what conditionscan independentcountries cooperate in the world politicaleconomy?"50 Can, forexample, states cooperate in the absence of a hegemon?Keohane beginshis analysisof thisquestion "withRealist insights about the role of power.... [Keohane's] centralarguments draw more on the Institutionalisttradition, arguing that cooperation can under some conditions develop on the basis of complementaryinterests and thatinstitutions, broadly defined,affect the patterns of cooperation that emerge."'51 In short,institutions

45. Fora recenteffort to do this,see ibid. 46. JosephGrieco, "Anarchy and the Limitsof Cooperation,"in Baldwin,Neorealism and Neoliberalism,pp. 116-42and pp. 118-19in particular. 47. Keohane,"Theory of World Politics." 48. Ibid.,p. 194. 49. RobertKeohane, After Hegemony (Princeton: Princeton University Press, 1984). 50. Ibid.,p. 9. 51. Ibid.,p. 9. Neorealismand neoliberalism 327

maybe a significantfactor in promotinginternational cooperation in waysthat neorealismhas failedto appreciate. Keohane challengedboth the logical coherenceand the explanatorypower of neorealism.Attacking the logic, Keohane writes,"I propose to show,on the basis of theirown assumptions,that the characteristicpessimism of Realism does not follow.I seek to demonstratethat Realist assumptionsabout world politicsare consistentwith the formationof institutionalizedarrangements, containing rules and principles,which promote cooperation."52In sum, Keohane intendsto startwith the same set ofcore assumptionsthat neorealism does and thenshow that cooperation is compatiblewith these assumptions. Keohane attemptsthis demonstrationin the context of the repeated prisoners'dilemma. There are two steps to the demonstration.The firstis to argue that the repeated prisoners'dilemma is a reasonable model for the internationalsystem envisioned in neorealism,that is, that this model is compatiblewith realism's central assumptions about the internationalsystem. Althoughhe does not develop thispoint at length,Keohane claims,"Not all situationsin worldpolitics or internationalpolitical economy take the formof Prisoner'sDilemma, but manydo."53 As furthersupport for the claim thatthe repeated prisoners'dilemma is generallyseen to be compatiblewith realism's basic assumptions,he mightalso have referredto Jervis'sbelief that this game is an appropriatemodel forstudying the securitydilemma.54 The second stepin Keohane's argumentis to appeal to the Folk theorem,which shows that the mutuallycooperative outcome can occur in equilibrium in an infinitely repeated prisoners'dilemma if the actors do not discount the futuretoo much.55These two steps taken togetherimply that cooperation is compatible withrealism. Writingin 1983, Keohane believed his neoliberal institutionalapproach would prove to have greater explanatorypower than neorealism. But, a definitivetest of his institutionalapproach was not yet possible because the worldwas "onlyjust enteringthe posthegemonicera."56 It was too soon to test the explanatorypower of an argumentthat predicted that international institutionsand cooperationwould persistdespite the absence of a hegemon. Instead of a test,Keohane offereda "plausibilityprobe" of his institutional approachin the cases of internationaltrade, finance, and petroleum.57 One can envisiontwo general typesof response to Keohane's neoliberal challengeto neorealism.The firstaddresses Keohane's challengeto thelogic of

52. Ibid.,p. 67. 53. Ibid.,p. 68. 54. Robert Jervis,"Cooperation Under the SecurityDilemma," WorldPolitics 30 (January 1978), pp. 167-214 and p. 170 in particular. 55. Drew Fudenberg and Eric Maskin, "The Folk Theorem in Repeated Games with Discountingor withIncomplete Information," Econometrica 54 (October 1986), pp. 533-54. 56. Keohane,After Hegemony, p. 218. 57. See Robert Keohane, "InstitutionalistTheory and the Realist Challenge Afterthe Cold War," in Baldwin, Neorealismand Neoliberalism,pp. 269-301, and particularlyp. 292; and Keohane,After Hegemony. 328 InternationalOrganization neorealism's analysis of the problem of internationalcooperation. This responsewould show thatKeohane had reallynot based his argumenton the same set of core assumptionsthat neorealism does. If thiswere the case, then Keohane's argumentthat neorealism's conclusions about the prospectsof internationalcooperation do notfollow from its assumptionswould be invalid. If, more specifically,the repeated prisoners'dilemma is incompatiblewith neorealism'score assumptionsabout the internationalsystem, then showing thatcooperation in thisgame is possiblewould say nothingabout whatfollows fromneorealism's assumptions. The second typeof responseis moreempirical. It would say thatneorealism neverclaimed that internationalcooperation was logicallyincompatible with neorealism'sassumptions. So, showingthat cooperation is possiblegiven these assumptionsdoes not contradictneorealism. The real question is how much internationalcooperation exists and whetherneorealism or neoliberalismdoes a betterjob of accountingfor the observedpattern of internationalcoopera- tion. This response would then go on to compare the relativeexplanatory powerof thesetwo approaches. Joseph Grieco developed both types of response to the institutionalist challenge.58He argued thatKeohane had not startedwith the same assump- tions neorealismdoes. In using the repeated prisoners'dilemma, Keohane implicitlyhad assumed that states try to maximize their absolute gains. Accordingto Grieco,however, neorealism requires a state'sutility function to reflecta concernfor relative gains.59 Consequently, Keohane does not "show, on the basis of their [realists'] own assumptions,that the characteristic pessimismof Realism does not follow," as he claimed.60In Cooperation Among Nations, Grieco tried to assess the relative explanatorypower of neorealismand institutionalism.He considersthe case of negotiationsover nontariffbarriers during the Tokyo Round of the General Agreementon Tariffsand Trade, a case that he believes poses a hard test for realism,and concludesthat realism explains this case betterthan does institutionalism.The latest round of the debate between realism and liberalismwas now fully engaged.6' David Baldwinbrings a numberof previouslypublished contributions to this debate together in Neorealismand Neoliberalism.62 Baldwin provides an

58. See the followingworks of Joseph Grieco: "Anarchy and the Limits of Cooperation"; "Realist Theoryand the Problemof InternationalCooperation," Journal of Politics50 (Summer 1988), pp. 600-624; and CooperationAmong Nations (Ithaca, N.Y.: CornellUniversity Press, 1990). 59. Grieco,"Anarchy and the Limitsof Cooperation,"p. 129. Gowa made the same criticismof Axelrod'suse of the repeated prisoners'dilemma [Robert Axelrod, The Evolutionof Cooperation (New York: Basic Books, 1984)] when he used this game to model internationalpolitics. See Joanne Gowa, "Anarchy,Egoism, and Third Images," InternationalOrganization 40 (1986), pp. 167-86 and particularlypp. 172-79. 60. Keohane,AfterHegemony, p. 67. 61. See Nye, "Neorealism and Neoliberalism," and the referencescited therein for an introductionto earlierrounds of thisdebate. 62. These contributionsare: Robert Axelrod and Robert Keohane, "AchievingCooperation Neorealismand neoliberalism 329 overviewof the debate, and Grieco and Keohane offertheir reflections and appraisalsof the debate in new essays.This volumecomplements and extends some of the linesof analysisdeveloped in Neorealismand Its Critics.Neorealism and Its Criticsincludes both internaland externalcritiques of neorealism.The formershare neorealism'sproblem-solving approach, while the latteradopt a criticalapproach.63 The scope of Neorealismand Neoliberalismis narrower, more focused, and whollyinternal. Ali of the contributionsexemplify the problem-solvingapproach and address various facets of the neorealist- neoliberaldebate. Three issues have dominatedthis debate, and an assessment of it requiresan examinationof each.

At issue

The threeissues at the centerof neorealist-neoliberaldebate are the meaning and implicationsof anarchy,the problem of absoluteand relativegains, and the tensionbetween cooperation and distribution.In what follows,I make three points about these issues. First, although anarchyis often taken to be a fundamentalorganizing concept in internationalrelations theory, the emphasis on anarchyis misplaced.What have oftenbeen takento be the implicationsof anarchydo not reallyfollow from that assumption. Rather, these implications resultfrom other implicit and unarticulatedassumptions about states'strategic environment.Second, the controversyover the problem of absolute and relativegains generallyhas mistakeneffects for causes in its analysisof the prospectsfor internationalcooperation. Finally,although the debate only recentlyhas begun to considerdistributional concerns, the analysisof these concernsmay help to clarifythe differencesthat do divide neorealismand institutionalism.

The meaning and implications of anarchy Much of the neorealist-neoliberaldebate centers on the meaning and implicationsof anarchy.According to Grieco, neorealismentails five proposi-

UnderAnarchy," World Politics 38 (October 1988),pp. 226-54; Grieco,"Anarchy and theLimits of Cooperation";Stephen Krasner, "Global Communicationsand NationalPower," WorldPolitics 43 (April 1991), pp. 336-66; Charles Lipson, "InternationalCooperation in Economic and Security Affairs,"World Politics 37 (October 1984), pp. 1-23; Michael Mastanduno,"Do Relative Gains Matter?"International Security 16 (Summer1991), pp. 73-113; Helen Milner,"The Assumptionof Anarchyin InternationalRelations Theory," Review of International Studies 17 (January1991), pp. 67-85; RobertPowell, "Absolute and RelativeGains in InternationalRelations Theory,"American PoliticalScience Review 85 (December 1991),pp. 1303-20;Duncan Snidal,"Relative Gains and the Patternof InternationalCooperation," American Political Science Review 85 (September1991), pp. 701-26; and ArthurStein, "Coordination and Collaboration,"International Organization 36 (Spring 1982),pp. 294-324. 63. For an example of the former,see Keohane, "Theory of World Politics"; forone of the latter,see RichardAshley, "The Povertyof Neorealism,"in Keohane, Neorealismand Its Critics, pp. 255-300; and Cox, "Social Forces,States, and WorldOrders." 330 InternationalOrganization tions.He definesthe last threeof these as "Third,international anarchy is the principleforce shaping the motivesand actions of states. Fourth,states in anarchyare preoccupiedwith power and security,are predisposed towards conflictand competition,and often fail to cooperate even in the face of commoninterests. Finally, international institutions affect the prospectsfor cooperationonly marginally."64 The pointof departurefor Keohane's analysis inAfter Hegemony was to use the prisoners'dilemma to showthat anarchy did not implya lack of cooperation.Grieco respondedby arguingthat Keohane's modelwas misspecifiedbecause he neglectedstates' concerns for relative gains. Duncan Snidal then tried to show that anarchydoes not implya lack of cooperationeven ifstates are concernedwith relative gains.65 A review of the neorealist-neoliberaldebate about the meaning and implicationsof anarchyshows that our continuingemphasis on anarchyis misplaced. Many of the purportedimplications of anarchymay be more usefullytraced to otherassumptions about theconstraints facing the units. This suggeststhat we should focus less attentionon anarchy and much more attentionon characterizingthe strategicsettings in whichthe unitsinteract. In reviewingthe debate about anarchy,it is necessaryto beginby distinguish- ing betweentwo formulationsof anarchy.The firstis that anarchymeans the "lack of a commongovernment" that can enforceagreements among the states or more generallyamong the units.66Robert Art and Jervistogether explain that "internationalpolitics takes place in an arena that has no central governingbody. No agencyexists above individualstates with authorityand power to make laws and settle disputes.States can make commitmentsand treaties,but no sovereignpower ensurescompliance and punishesdeviations. This-the absence of a supreme power-is what is meant by the anarchic environmentof internationalpolitics."67 It is importantto emphasize that thisformulation of anarchysays nothing aboutthe means the units have at theirdisposal as theytry to furthertheir ends. It saysonly that no higherauthority exists that can preventthem from using the meansthey have. Thus,for Waltz, firms facing a highrisk of bankruptcy may be in an anarchicself-help system even thoughthe means available to them to furthertheir interests, like cuttingprices or formingalliances to distributethe

64. Grieco,"Anarchy and the Limitsof Cooperation,"pp. 118-19. 65. Snidal, "Relative Gains and the Patternof Cooperation."For Grieco's critiqueof Snidal's analysis and Snidal's response, see Joseph Grieco, Robert Powell, and Duncan Snidal, "The Relative Gains Problem for InternationalCooperation," American Political Science Review87 (September1993), pp. 729-43. 66. The quotation is fromp. 226 of Axelrod and Keohane, "AchievingCooperation Under Anarchy."Also see KennethOye, "ExplainingCooperation Under Anarchy,"in KennethOye, ed., CooperationUnder Anarchy (Princeton, N.J.: PrincetonUniversity Press, 1986), particularlypp. 1-2. 67. RobertArt and RobertJervis, International Politics, 3d ed. (Boston: Harper Collins),p. 1. Neorealismand neoliberalism 331

costsof researchand development,have nothingto do withthe use of military force,which is one ofthe means availableto statesin theinternational system.68 One advantageof defininganarchy without reference to the means available to the units is that it makes the concept of anarchyreadily transposable to differentsubstantive domains. As discussedabove, Waltz weighedthis advan- tage heavily in constructinghis formulationof structure,so it is hardly surprisingthat he would adopt thisfirst definition of anarchy.But he certainly is not alone, as Milner'ssurvey of differentconcepts of anarchyshows.69 The second notionof anarchyrefers to the means available to the units.In "Coordinationand Collaboration,"Arthur Stein begins by observing that many internationalrelations scholars use anarchyto describe"the classic character- ization of internationalpolitics as relationsbetween sovereignentities dedi- cated to their own self-preservation,ultimately able to depend only on themselves,and prepared to use force."70In effect,this second formulation adds anotherdimension to the lack of a centralauthority: namely, that one of themeans available to the unitsis the use of force. The additionof thissecond dimensionhas twoconsequences. First, it makes the transposabilityof the concept of anarchymore problematic.What, for example, is the analogue to using force for a firmfacing a high risk of bankruptcy?If thereis no analogue,then a groupof firmsfacing a highrisk of bankruptcywould not forman anarchicsystem according to thisdefinition. If we wantto arguethat there is an analogue,what are thecriteria for establishing thatone of the means open to a firmis analogousto a state'sability to resortto force?Of course, a definitionof anarchythat reduces its transposabilitymay have compensatingadvantages. Whether these potentialadvantages outweigh the disadvantageof a less transposabledefinition will be discussedbelow. Second, adding anotherdimension raises importantquestions for interna- tional relationstheory. Do the patternsof behaviorgenerally associated with anarchicsystems, such as the tendenciesfor balances of powerto formand-at least for neorealists-the limited prospects for internationalcooperation, resultfrom the lack of a centralauthority? Or, are thesepatterns more heavily influencedby implicitand unarticulatedassumptions about, say, the natureof militaryforce that are subsumedin the second definitionof anarchy? Two argumentssuggest that our emphasison anarchyhas been misplacedif by anarchywe mean the lack of a centralauthority. These argumentssuggest thatconclusions often claimed to followfrom the absence of a centralauthority do not. These conclusionsrequire other supportingassumptions. The first argumentis reallyan empiricalobservation. Keohane notes in his assessment of the debate between neorealismand neoliberalismthat the modern state

68. Waltz,Theory of International Politics, pp. 105 and 111. 69. Milner,"The Assumptionof Anarchy in InternationalRelations Theory." 70. Stein,"Coordination and Collaboration,"p. 30. 332 InternationalOrganization system,conventionally dated from1648, has alwaysbeen anarchicin the sense that it lacked a common government.71 Thus, anarchy,while perhaps a necessarycondition, is certainlynot sufficientto explainany of thevariation in internationalpolitics duringthe modern era. In particular,anarchy cannot account forwhatever variation in the level of internationalcooperation and institutionalizationthere has been. The second argumentis moretheoretical and beginswith a recentattempt to formalizethe classic guns-versus-butterproblem.72 To summarizethe model, thereare twostates. In each period a statemust decide how muchof itsoutput to consume,how muchto allocate to its militarysector, and whetheror not to attack the other state. Each state's utilityis the discounted sum of its consumptionin each period. As long as neither state attacks, the game continues.If a state attacksat some time,the game effectivelyends in one of two ways.Either one state or the otherwill prevailby conqueringthe other. The odds thata statewill prevail are simplythe ratio of itsmilitary allocation to theother state's military allocation. The factthat a state'sprobability of victory depends on its militaryallocation creates a trade-offbetween currentand expectedfuture consumption. The morea stateconsumes today, the smaller its militaryallocation, and the higherthe probabilityof defeat. Because defeat means a loss of futureconsumption, consuming more todayreduces expected futureconsumption. The formalanalysis of the game determineseach state's equilibriumlevel of consumptionand militaryspending that balances this trade-off. The guns-versus-buttermodel shows that our emphasis on anarchy is misplaced.Neorealism expects balance-of-power politics to prevailwhenever the systemis anarchicand the unitswant to survive.73The guns-versus-butter model indicatesthat this expectation is too broad. Whetheror not the states balance in the model depends on an assumptionabout militarytechnology. Generalizingbeyond this model, whether units balance or not dependsas much on other featuresdefining the strategicsituation in whichthey interact as it does on thepresence of anarchy. To see that balancing depends on underlyingassumptions about military technology,note that the guns-versus-buttergame presumesa conventional militarytechnology in whichthe probability of victory or defeatdepends on the relativesizes of the opposingmilitary forces. Given this stylizedassumption about militarytechnology, the statesbalance againsteach otherin the waywe would expect the units to do in an anarchic system.74Now suppose that

71. Keohane, "InstitutionalistTheory and the Realist ChallengeAfter the Cold War." 72. RobertPowell, "Guns, Butter,and Anarchy,"American Political Science Review 87 (March 1993),pp. 115-32.The presentdiscussion extends some of the observationsmade in thatessay (see pp. 126-27). 73. Waltz,Theory of International Politics, p. 121. 74. Externalbalancing through alliances is impossiblewhen thereare onlytwo states.Rather, the states engage in internalbalancing. For a discussionof internaland externalbalancing, see Waltz,Theory of International Politics, p. 168. Neorealismand neoliberalism 333

the states' strategicsetting is different.Formalizing and stylizingthe nuclear revolutionin militarytechnology, assume that there is, to use BernardBrodie's term,an absolute weapon.75The probabilityof victoryno longerdepends on the relativesize of the states' militaryforces. Rather, once both states have attainedsecure second-strike forces, war is certainto take a tollfar higher than any potential gain. If we solve the model based on this assumptionabout militarytechnology, the states will spend enough to acquire second-strike forces.But theywill not spend more even if the otherstate does. There is no balancinghere eventhough the system remains anarchic and theunits still seek to survive.76The firstnotion of anarchy,albeit very transposable, does notimply balancing. The guns-versus-buttermodel, like manymodels, makes many stark simplifi- cationsand, accordingly,must be used cautiously.On the plus side, models,in part because of these simplifications,let us vary one factorwhile holding everythingelse constant.Models therebypermit us to isolate the effectsof differentfactors in ways that historicalcases rarelydo. When we use the guns-versus-buttermodel to isolate the effectsof anarchy,we find that conclusionsclaimed to followfrom the assumptionof anarchydepend at least as muchon otherunarticulated assumptions about the units'strategic environ- ment. The firstdefinition of anarchyis in some sense too transposable,while the second definitionis nottransposable enough. As we have seen, ifdefined as the absence of a centralauthority, anarchy encompasses systems in whichstates do and do not balance. Conversely,if we defineanarchy by addingthe notionof the potential use of force to the lack of a central authority,we find the transposabilityof the conceptto be greatlylimited, even if unitsgenerally will balance in such a system.The disadvantagesof this very limitednotion of anarchyare quite high.In particular,this notion does not applyto systemsin which the use of force is for all intentsand purposes not at issue. Even if neorealism'sexpectations about anarchicsystems in whichthe use of forceis a seriouspotential concern are correct,the argumentsunderlying these expecta- tionscannot be transposedto systemsin whichthe use of forceamong units is not at issue. Neorealist expectationsabout these systemsmay of course still proveto be correct,but they lack theoreticalfoundations.

75. Bernard Brodie, Strategyin the MissileAge (Princeton,N.J.: PrincetonUniversity Press, 1959). For otherdiscussions of the effectof the nuclearrevolution, see RobertJervis, The Meaning of theNuclear Revolution (Ithaca, N.Y.: Cornell UniversityPress, 1989); Robert Powell,Nuclear DeterrenceTheory (Cambridge: Cambridge University Press, 1990); Thomas Schelling,Arms and Influence(New Haven, Conn.: Yale UniversityPress, 1966); and Glenn Snyder,Deterrence and Defense(Princeton, N.J.: Princeton University Press, 1961). 76. Buzan, Jones and Little reach the same conclusion in The Logic of Anarchy.They and Morrow offerthe expansion of the Roman empire as an importantexample of the failureof balances to form.See James Morrow,"Social Choice and SystemStructure," World Politics 41 (October 1988), pp. 75-97. 334 InternationalOrganization

The absence of a definitionthat is less transposablethan the firstand more transposablethan the second poses an importantproblem for international relationstheory after the cold war. The problemis evidentin some recent effortsto use neorealism'sanalysis of anarchyand the problemof absoluteand relativegains to outlinethe post-cold war contoursof internationalpolitics. The neorealistanalysis argues that stateswill startcompeting and balancing over economicissues afterthe cold war muchas theycompeted and balanced over securityissues duringthe cold war. Samuel Huntington,for example, bases his assessment of the continued importanceof U.S. primacyon a neorealist analysis.77Yet, he and others also believe that the prospectsof "militaryconflict between major states is unlikely."78The discussion of transposabilityshows that neitherdefinition of anarchyprovides adequate theoreticalsupport for the neorealistanalysis of international politics if the use offorce is not a relevantconcern. The firstnotion of anarchycan be transposed readilyto a systemin whichthe use offorce is notat issue. But as we have seen, this definitiondoes not supportthe neorealistclaims that anarchyimplies balance-of-powerpolitics.79 The second notionof anarchy,while it mayimply balancingwhen forceis at issue, cannot be transposedto a domain in which forceis presumednot to be at issue. Huntington,believing that the politicsof internationaleconomics is more like a systemwith conventional military technology, argues for the importance of internationalprimacy. Jervis, believing that the politics of international economics is more like a systemwith an absolute weapon, questions the importanceof internationalprimacy.80 In eithercase, the neorealist-neoliberal debate's emphasison the lack of a centralauthority is misplaced.As Charles Lipson putsit in his contributionto the Baldwinvolume, "The idea of anarchy is, in a sense,the Rosettastone of international relations.... Butwhat was once a blindinginsight-profound and evocative-has ossifiedand become blinding in the othersense of theword-limiting and obscuring."8'We need to develop a morecareful specification of the strategic settings in whichunits interact if we are to be able to explainthe patternof theirinteractions. Characterizing this structureis an importantopen questionfor international relations theory.

The problem of absolute and relativegains The second majorissue at the centerof the debate betweenneorealism and institutionalismis the problemof absoluteand relativegains. In whatfollows, I

77. Samuel Huntington,"Why International Primacy Matters," Intemational Security 17 (Spring 1993), pp. 68-83. See also RobertJervis, "International Primacy," Intemational Security 17 (Spring 1993), pp. 52-67; and Kenneth Waltz, "The Emerging Structureof InternationalPolitics," IntemationalSecurity 18 (Fall 1993), pp. 44-79. Jervisuses a neorealistperspective to framehis discussion,but his conclusionsdiffer from Huntington's. 78. Huntington,"Why International Primacy Matters," p. 93. 79. For a differentview, see Waltz, "The Emerging Structureof InternationalPolitics," especiallyp. 74. 80. Jervis,"International Primacy," pp. 57-59. 81. Lipson,"International Cooperation in Economicand SecurityAffairs," p. 80. Neorealismand neoliberalism 335 firstbriefly summarize some aspects of the debate about thisproblem. Then I argue that in a narrowermethodological sense this debate reflectsa basic misunderstandingof the role of models.More broadly,the debate surrounding absolute and relative gains generallyhas mistakeneffects for causes and, therefore,contributed little to the analysisof the problem of international cooperation.Once we separate causes fromeffects, we again see the need to focus our attentionon a more elaborate characterizationof the strategic settingsconfronting states. To reviewthe debate, neorealismassumes that states are concernedwith relativegains. For Waltz, "states thatfeel insecuremust ask how the gain will be divided.They are compelledto ask not 'Will bothof us gain?' but 'Who will gain more?' 182 In mountinghis institutionalchallenge in AfterHegemony, Keohane assumesthat states are tryingto maximizetheir absolute gains, that is, the states' preferences"are based on theirassessments of theirown welfare, not thatof others."83He thenanalyzes the problemof cooperationin termsof the repeated prisoners'dilemma. Grieco in turncriticizes Keohane's assump- tion that states attemptto maximizetheir absolute gains. Grieco assertsthat "realismexpects a state's utilityfunction to incorporatetwo distinct terms. It needs to includethe state'sindividual payoff ... reflectingthe realistview that states are motivatedby absolute gains. Yet it must also include a term integratingboth the states'individual payoff ... and the partner'spayoff ... in sucha waythat gaps favoringthe state add to itsutility while, more importantly, gaps favoringthe partnerdetract from it."84 In sum,the debate about absolute and relativegains became a debate about what to assume about states' utility functions. The key to understandingthis debate is to distinguishbetween two possibilities.The firstis thata state'sconcern or, moreprecisely, the degreeof its concern for relativegains is the productof the strategicenvironment in whichthe statefinds itself. If so, thenthe degree of concernis likelyto varyas the environment,say the intensityof the securitydilemma, varies. In thiscase, the strategicsetting facing the state induces a concernfor relative gains. The second possibilityis that a state's degree of concerndoes not varyand is the same regardlessof itsenvironment. Both neorealism and neoliberalismappear to agree that this concern is induced.Grieco, for example, believes that a state'ssensitivity to relativegains "willbe a functionof, and willvary in responseto, at least sixfactors."85 These includethe fungibilityof power across issues,the lengthof the shadow of the future,and whetherthe relativegains or losses occurover military or economic matters.86Neoliberalism also assumes that the degree of concern varies. Indeed, Keohane emphasizesthat both neorealism and neoliberalismpresume

82. Waltz,Theory of International Politics, p. 105. See also Waltz,Man, State,and War,p. 198. 83. Keohane,After Hegemony, p. 66. 84. Grieco,"Anarchy and the Limitsof Cooperation,"p. 129,emphasis original. 85. Grieco,"Realist Theoryand the Problemof InternationalCooperation," p. 610. 86. Ibid.,pp. 610-11. 336 InternationalOrganization that the concern for relative gains is conditional in his appraisal of the neorealist-neoliberaldebate.87 Two importantimplications follow from the conclusionthat the degree of a state's concernfor relativegains is conditionaland varies fromsituation to situation.The firstis that the debate about what to assume about a state's preferencesor utilityfunction is largely irrelevantand reflectsa basic misunderstandingof the role of models.We can formallyinduce a concernfor relativegains in twoways. First, we can explicitlyrepresent the constraintsthat lead to thisconcern in the model. This is the approach I followedin analyzing the absolute and relativegains problem.88I assumedthat states were tryingto maximizetheir absolute gains. But the strategicsetting in which theywere attemptingto do so induced a concernfor relative gains. The second way to induce a concernfor relativegains is to representthis concernin the state's utilityfunction. When done in thisway, the model is in effecta reduced form for some more complicated and unspecifiedmodel in which the strategic constraintswould induce this concern. Grieco's analysismay be seen as an attemptto workwith a reduced form.Rather than specifyinga model that explicitlyrepresents the six factorshe believes induce a concernfor relative gains,he abbreviatesthe influencesof thesefactors through his specificationof the states'utility functions.89 Which approach to modelinga state's concernis better?I do not believe thereis an a priorianswer to thisquestion. Models are tools and askingwhich approachis betteris akin to askingwhether a hammeror a saw is better.The answerdepends on whetherthe task at hand is drivingnails or cuttingwood. One advantageof a reducedform is thatit is likelyto be simplerand easier to use analytically.A disadvantageis that as long as the more complicated underlyingmodel remainsunspecified, we cannot analyze the purportedlink between the constraintsthat are believed to induce a concern and the realizationof this concern.The linkthus remainsproblematic. Whether the balance of advantages and disadvantagesfavors an approach based on a reducedform or on a more explicitstructural form depends on the model as a whole and on the substantiveproblem. Thus, debates about what to assume about preferencescannot be resolvedwithout reference to an overallevalua- tion of the entire model and the substantiveproblem being modeled. By focusingsolely on what to assume about preferencesand not evaluatingthis

87. Keohane, "InstitutionalistTheory and the Realist Challenge Afterthe Cold War," pp. 418-25. 88. Powell,"Absolute and RelativeGains in InternationalRelations Theory." 89. See Grieco,"Anarchy and theLimits of Cooperation,"as well as his "Realist Theoryand the Problemof InternationalCooperation," and CooperationAmongNations.Although Grieco's model maybe seen as a reduced form,it is not clear thathe sees it as such. His assertionthat a state's utilityfunction must incorporate a termreflecting its concern for absolute gains and one reflecting itsconcern for relative gains may be trueof a particularmodel, but it does not hold forall models. His apparentclaim thatit is truefor all models suggeststhat he does not interprethis model as a reducedform. Neorealismand neoliberalism 337 assumptionin the overallcontext of theentire model, the neorealist-neoliberal debate about states' preferencesseems largelyirrelevant. It reflectsa basic misunderstandingof the role of models. A second importantimplication follows from the conclusionthat the degree ofa state'sconcern for relative gains depends on, or is a functionof, its strategic environment.This dependencymeans that the concern for relative gains is part of the outcomeand not partof the explanation.A concernfor relative gains is an effectand not a cause. We cannot explain the presence or absence of internationalcooperation because of the presence or absence of significant concernsfor relativegains. Cooperation and concernfor relativegains may co-vary,but one does not cause the other. The causes for both are the underlyingfeatures of the states' strategicenvironment that jointly induce a concernfor relative gains and therebymake cooperationdifficult. Existingwork in internationalrelations theoryhas to varyingdegrees recognized firstthat relative gains concerns do not explain the level of cooperationand second the need to look to the underlyingstrategic environ- ment.Lipson, forexample, tries to relate differencesin the strategicenviron- mentsinherent in militaryand economicissues to differencesin states'discount factorsand, throughthe differencesin those discountfactors, to the likelihood of internationalcooperation in militaryand economicaffairs.90 Jervis explicitly recognizesthis need: "The conditionsunder which states seek to maximize theirrelative as opposed to theirabsolute gains need moreexploration."91 A possibleexplanation of the concernfor relative gains might at firstseem to be anarchy:a lack of a centralauthority leads to balancingand a concernfor relativegains. This answer,however, fails for at least tworeasons. Anarchy has been a constantfeature of the modern international system. It cannottherefore accountfor variation in the degreeof a state'sconcern for absolute gains. And, as we have seen above, anarchydoes not implybalancing. As emphasizedabove, models oftenmust be judged in lightof the problem theyare designedto address.If we wantto studythe problemof international cooperation and its relation to concerns for relative gains, modeling that concernin termsof state preferencesseems likelyto prove a poor approach. The reducedform would be leavingimplicit and unspecifiedprecisely what we wantto knowmore about, i.e., thelink from the states' strategic environment to theirconcern for relativegains and the prospectsfor cooperation. Trying to make thislink more explicitby elaboratinga state's strategicsetting and the connectionbetween this settingand the induced concern for relativegains seems likelyto provea morefruitful approach. As in our discussionof anarchy, we are led to the need to focus our attentionon a more sophisticated characterizationof the strategicsituations confronting the units.

90. Lipson,"International Cooperation in Economicand SecurityAffairs." See also Joanne Gowaand Edward Mansfield, "Power Politics and ," American Political Science Review87 (June1993), pp. 408-20. 91. Jervis,"Realism, Game Theory, and Cooperation." 338 InternationalOrganization

In sum,the debate surroundingthe problemof absolute and relativegains has betrayeda fundamentalmethodological misunderstanding of the role of models. The debate has also mistakeneffects for causes. Unfortunately,the methodologicalmisunderstanding has reinforcedthe substantivemistake. By focusingon what to assume about states' preferences,the debate has made it more difficultto correctthe mistakeof seeing effectsas causes. In a reduced formin whichthe concernfor relative gains is representedin the states'utility functions,the degreeof thisconcern is formallyan independentvariable. Thus, it is easyto imagineholding everything else constantand askinghow changes in thedegree of thisconcern would affectcooperation. The difficultyis, of course, thatif the degreeof concern is reallyan effect,then one cannothold everything else constantwhile varying this concern. Although formally independent in the reduced form,the degree of this concern is substantivelydependent. The reducedform thus masks this dependence and makesit more difficult to correct the mistakeof seeing effectsas causes. Once we separate effectsfrom causes, we also appreciate the need for a more careful specificationof the units' strategicsetting.

Coordination and distribution The debate betweenneorealism and neoliberalismrecently has focusedon a thirdissue. A centralcontention of the neoliberalapproach is thatinstitutions matter.In particular,they can help states cooperate: "institutions,broadly defined,affect the patternsof cooperationthat emerge."92In analyzinghow institutionsmatter, Keohane emphasizes marketfailures and explains that institutionscan help independentactors overcome these failuresby providing informationand reducingtransactions costs.93 In short,institutions may make it possible to realize joint gains and move out towardthe Pareto frontier.But thereare oftenmany ways to realize thesegains, with some waysgiving a larger shareto one stateand otherways giving a largershare to anotherstate. "There are," as Stephen Krasnerobserves in his contributionto the Baldwinvolume, "manypoints along the Paretofrontier."94 These multipleways of achievingthe joint gains fromcooperation can create conflictsover how those gains will be distributed.As GeoffreyGarrett observes of theSingle European Act,"the EC [European Community]members shared the commongoal of increasingthe competitivenessof European goods and services in global markets.It is apparent,however, that there were also substantialdifferences in national preferenceswithin this broad rubric."95Reflecting on the debate, Keohane

92. Keohane,AfterHegemony, p. 9. 93. Ibid.,p. 246. 94. Krasner,"Global Communications and National Power," p. 235. 95. The quotationis fromp. 535 of GeoffreyGarret, "International Cooperation and InstitutionalChoice," Intemational Organization 46 (Spring1992), pp. 533-60. For another discussionof conflicting interests, see AndrewMoravcsik, "Negotiating the Single European Act," IntemationalOrganization 45 (Winter1991), pp. 19-56. Neorealismand neoliberalism 339

U2 A4 3

A A2

XA I

FIGURE 1. Distributionalconflicts: U1 = theutility of state 1 (SI); U2 = the utilityof state 2 (S2); Q = statusquo; Al throughA4 = possibleagreements alongthe Pareto frontier now believes thathe underemphasized"distributive issues and the complexi- ties they create for internationalcooperation" in AfterHegemony.96 I will suggest that a careful analysis of the tension between cooperation and distributioncan illuminatethe debate betweenneorealism and neoliberalism by clarifyingsome of the differencesthat actually do divide these two approaches. The distributiveproblem arises because thereare manyways to divide the cooperativegains. Figure 1 illustratesthis problem when two states, SI and S2, are tryingto cooperate. SI's utilityis measured along the horizontalaxis, and S2's utilityis measuredalong the vertical axis. Q is thestatus quo.Al throughA4 are possibleagreements that lie alongthe Paretofrontier. BothA2 andA3 lie on the Pareto frontierand are Pareto-superiorto Q; i.e., bothS, and S2 preferA2 to Q andA3 to Q. A2 and A3 are differentways of realizingthe joint gains from cooperation. But, S, prefersA2 to A3 because A2 yields a higher utility. Similarly,S2 prefersA3. Thus, there is a distributiveconflict over A2 and A3. More generally,S, prefersagreements closer to Al and S2 prefersagreements closertoA4. Krasner recentlyhas used these distributionalissues to challenge the neoliberalapproach.97 The thrustof Krasner'scriticism is that"the natureof institutionalarrangements is betterexplained by the distributionof national

96. Keohane, "InstitutionalistTheory and the Realist Challenge Afterthe Cold War," pp. 446-47. 97. Krasner,"Global Communicationsand National Power." See also JamesMorrow, "Model- ingInternational Regimes," International Organization, forthcoming. 340 InternationalOrganization power capabilitiesthan by effortsto solve problemsof marketfailure."98 In termsof Figure1, the morepowerful Sl, the greaterwill be itsshare of thejoint gain and the closerthe agreementwill be toA1. Viewingthe question of whether institutions matter in termsof distributional issues helps refineand clarifythat question. If cooperation can take many differentforms and these alternativeforms have distributionalconsequences, then the arrangementsthemselves can become the object of negotiation. Indeed, giventhe absence of a supranationalauthority, the statescannot bind themselvesto anyparticular initial institutional arrangement and correspond- ing allocation of cooperativebenefits. The institutionalstructure is always subjectto renegotiationif a statebelieves it worthwhile. The perpetual possibilityof renegotiationraises an importantdynamic questionthat must be separatedfrom a more staticissue. That is, institutions mightmatter in eitheror both a staticand a dynamicway. The staticway that institutionsmight matter is thatthey might be a means of overcomingmarket failuresor, more generally,of realizingjoint gains fromcooperation. As a means to an end, the structureof the institutionbecomes somethingto be explained.In his explanationof institutionalstructure, Keohane emphasizes monitoringand reducinguncertainty. In emphasizingthese factors, he is trying to explain how institutionscan serve as a means to achievingthe joint gains fromcooperation. Krasner focuses on anotheraspect of the explanationof institutionalstructure. He arguesthat the actual institutionalarrangement that willemerge from the set of potentialinstitutional arrangements that fulfill the functionsKeohane describes will tend to reflectthe desires of the more powerfulactors. Thus, Keohane's and Krasner's analyses of the static issue complementeach other. There is also a second, more dynamicway that institutionsmay matter.If institutionsdo matterin this second sense, then theywould be part of an explanationand not partof the outcometo be explained.Figure 1 can be used to illustratethis second way.Suppose thatat some timeto two statesare at Q. Both stateswant to moveout to the Pareto frontier.To thisend, theycreate an institutionthat reduces transactioncosts and uncertaintyin the way Keohane describes.In thisway the institutionis a means to the end of realizingthe joint gains of cooperation.But thereare also distributionalconflicts, so both states also use theirpolitical power to shape the institutionalarrangements in order to obtaina largershare of thejoint gains. Assume that S1 is morepowerful and, as Krasner argues,the institutionthrough which the states realize the joint gains will give S, a larger share of the benefits.In particular,suppose the arrangementmoves them from Q toA2. AtA2,S, receivesa largershare of the joint gains,which reflectsits greaterpower. A2 thus reflectsKeohane's and Krasner's complementaryanalyses of the static dimensionof the way that institutionsmay matter.

98. Krasner,"Global Communicationsand NationalPower," p. 235. Neorealismand neoliberalism 341

To examinethe dynamicaspect, suppose furtherthat at some latertime, say t1,the balance of power has shiftedin favorof S2. Indeed, assume thatif the institutioncreated at time to did not exist and that the states were tryingto createan institutionde novo at tl,then S2's greaterpower would mean thatthe institutionthat would be createdwould movethe statesfrom Q toA3. AtA3,S2 obtainsmore of the gains,presumably reflecting its greater power. But the states are not creatinga new institutionat tl, for theycreated an institutionat to that moved them fromQ to A2. How does the fact that an institutionalready exists at tl,when the states must deal witha new distribution of power,affect the institutionalarrangements and distributionof benefitsthat willbe devisedat thattime? There are twopossibilities. First,the institutionalarrangements existing at toare irrelevant.Institutions adjust smoothlyso that the distributionof benefits always reflectsthe underlyingdistribution of power. In termsof Figure 1, thestates will be atA3 at t1 regardlessof the existenceof an institutionat to.In brief,history does not matter. The second possibilityis thatthe institutionalarrangements that existat to affectthose that prevail at tl. To illustratethis possibility,let A in Figure 1 denote the arrangementsand associateddistribution of benefitsthat exist at t1 giventhe arrangementsexisting at to. Then A will in general differfrom A3, whichis whatwould have prevailedhad therebeen no preexistinginstitution or ifinstitutions adjusted smoothly. Intuitively, the fartherAis fromA3,the more currentarrangements are shaped by past arrangements.99A moreconcise way of describingthis second way that institutionsmay matteris that history matters.100In termsof Figure 1, the neoliberalclaim thatinstitutional history mattersin internationalrelations means thatA willoften be verydifferent from A3. Moreover, the fact that the states originallycooperated means that cooperationis less likelyto collapse and A is more likelyto lie on the Pareto frontier.Cooperation will often continue in the face of a change in the underlyingdistribution of power. The possibilitythat institutions may not adjustsmoothly and thatthe existing institutionalarrangements and distributionof benefitsmay not reflectthe underlyingdistribution of poweris a recurrenttheme in internationalpolitics. Robert Gilpin, for example, sees this as the cause of hegemonicwar. A hegemon establishes an internationalorder and associated distributionof benefitsthat favorsthe hegemon. Over time,the hegemon'srelative power declines because of uneven economic growth,and the existingorder and distributionof benefits no longerreflect the distributionof power.This setsthe

99. To simplifymatters, I have assumedthat institutions are efficientin thatthey move the states out to the Pareto frontier.Of course, institutionsneed not be efficient.For a discussion of institutionsand efficiency,see Douglass North,Institutions, Institutional Change, and Economic Performance(New York: CambridgeUniversity Press, 1990). 100. Northanalyzes the problem of institutionalchange and stabilityin ibid. 342 InternationalOrganization scene for another hegemonicconflict.'01 Similarly, a disparitybetween the distributionsof benefitsand power is inherentin Krasner's metaphor of tectonicplates.102 When regimesare firstcreated, theygenerally reflect the underlyingdistribution of power.But the pressureto changethe regimebuilds overtime as the distributionof powerchanges. In the tectonicplate metaphor, thispressure does not lead to a smoothadjustment. Rather, the pressuregrows untilit is suddenlyrelieved in an earthquakein whichthe regimealters in a way thatrealigns it with the distributionof power. In the neorealist-neoliberaldebate, Keohane generallyemphasizes market failures,transaction costs, uncertainty, information, and institutionsas impor- tantmeans of cooperation.But he also argues thatinternational institutional historymatters. Once institutionsor regimesare established,actors behave in waysthat, whether deliberately or not,make it costlyto change the regimeor build a new one. Thus, even ifthe originaldistribution of powerunderlying the regimeshifts, the now more powerfulstates will not change the regimeunless thedistribution of power has shiftedto suchan extentthat the benefits of a new regime,which would reflectthe new distributionof power,outweigh the costof changingthe existingregime. The costof changingor constructingnew regimes thus gives existingregimes some resilienceto shiftsin the balance of power. "The highcosts of regime-buildinghelp existingregimes persist."1103 In contrast,Krasner argues that regimesand institutionsdo not matterat least in the case of global communications: In recentyears distributional questions have precipitatedconflict over the allocationof the radio spectrumand overinternational telecommunica- tions.The outcomeof these disputeshas been determinedprimarily by the relativebargaining power of the statesinvolved. Whereas previous institu- tionalchoices had notimposed much constraint, new interestsand powerca- pabilitiesconferred by new technologieshave led to new institutionalar- rangements. This is not to say thatinstitutional arrangements were everirrelevant: indeed,they were necessaryto resolvecoordination problems and to estab- lishstability. Without regimes all partieswould have been worseoff. There are, however,many points along the Pareto frontier:the natureof institu- tionalarrangements is betterexplained by the distributionof national powercapabilities than by efforts to solveproblems of marketfailure.104 In brief,institutions may serve as a means of achievingthe joint gains of cooperation.But institutionalhistory does not matter.Previous institutional

101. RobertGilpin, War and Changein WorldPolitics (Cambridge: Cambridge University Press, 1981). 102. Stephen Krasner, "Regimes and the Limits of Realism," in Stephen Krasner, ed., InternationalRegimes (Ithaca, N.Y.: CornellUniversity Press, 1983), pp. 355-68. 103. Keohane,After Hegemony, p. 103. 104. Krasner,"Global Communicationsand NationalPower," p. 235, emphasisadded. Neorealismand neoliberalism 343 choices do not constrainor significantlyaffect the futureinstitutional arrange- mentsand the futuredistribution of benefits. The neorealist-neoliberaldebate leaves us withcontrasting claims about the importanceof institutionalhistory. These claimsin turnpose twoquestions for futureresearch. First, do institutionsor regimesactually adjust smoothlyto changesin thedistribution of power. Does institutionalhistory matter? Second, what factorsaffect the stabilityor rigidityof a regimeor institutionand the rates at whichit adjusts? In particular,are therefactors in the international environmentthat make internationalregimes and institutionsless stable than, forexample, the institutionof the medievallaw merchant,the Declaration of Rightsand associated institutionalchanges following the GloriousRevolution in England, or the currentefforts to establishconstitutional governments in Russia and Eastern Europe?105Douglass North and others offer many examples in whichinstitutional history seems to be profoundlyimportant.106 We need a betterunderstanding of the conditionsunder whichinstitutional historymatters and the extentto whichthe internationalsystem satisfies these conditions.Work on these questions holds the promise of a more unified understandingof institutionsand cooperation. Before thiswork can be done, however,two obstacles mustbe overcome. First,we need a way of measuringor assessing the constrainingeffects of institutions.Figure 1 helps us visualize the issue, but much more than a visualizationis required.Second, we need more powerfultheories that make more specificclaims about the extent to which institutionsshape future decisionsand actionsthan neorealism or neoliberalismpresently does.

Conclusion

Althoughthe neorealist-neoliberaldebate sometimeshas obscuredas muchas it has clarified,this debate has forcedus to examinethe foundations of some of our mostinfluential theories of internationalpolitics more carefully.This is an importantcontribution. Such examinationsdeepen our understandingof these theoriesby clarifyingtheir strengths and weaknesses. These clarificationsin turnmay suggestimportant directions for future work and ultimatelylead to bettertheories with greater explanatory power. As we have seen, both neorealism and neoliberalismsee the effectsof anarchyand the degree of concernabout relativegains to be conditional.The

105. See Paul Milgrom,Douglass North,and BarryWeingast, "The Role of Institutionsin the Revivalof Trade: The Law Merchants,Private Judges, and the ChampagneFairs," Economics and Politics 2 (March 1990), pp. 1-23; Douglass North and Barry Weingast,"Constitutions and Commitment,"Joumal of Economic History 49 (December 1989), pp. 803-32; and BarryWeingast, "The PoliticalFoundations of Democracyand the Rule of Law," manuscript,Hoover Institution, February1993. 106. North,Institutions, Institutional Change, and EconomicPerformance. 344 InternationalOrganization task ahead is to specifythese conditionsmore precisely. We mustalso explain more satisfactorilyhow these conditionslead to particularoutcomes like balancingbehavior and a concernfor relative gains. Grieco makes a usefulstart in thisdirection by identifying six factors that may affect the degreeof a state's concern for relative gains.107The next step is to develop a more explicit characterizationof the strategicsettings that yield outcomes like balancing and relative-gainsconcerns. When we look beyondthe narrownessof the neorealist-neoliberaldebate about anarchyand the relative-gainsproblem, we see that this debate has focusedour attentionon a verybroad and importantset ofissues. These are the absence of centralauthority, the potentialfor joint or cooperativegains, the distributionalconflict these potential gains engender, and the rolesof coercion and institutionsin realizingand allocatingthese joint gains. This nexusof issues also lies at the heart of the expandingliteratures on constitutionaldesign, governingthe commons,and stateformation. 108 That a core of commonissues underliesthese seeminglydisparate substantive concerns makes it possible to imagine movingbeyond what has become a rathersterile debate between neorealismand neoliberalismin a way thatdraws on and contributesto these otherliteratures.

107. Grieco,"Realist Theoryand the Problemof InternationalCooperation," pp. 611-13. See also Gowa and Mansfield,"Power Politicsand InternationalTrade." 108. See, forexample, Barry Weingast, "Constitutions as GovernanceStructures," Journal of Institutionaland TheoreticalEconomics 149 (March 1993), pp. 286-311; Elinor Ostrom,Governing theCommons (New York: CambridgeUniversity Press, 1990); and Tilly,Capital and Coercion.