Explanation of the term “neoconservative”: US foreign policy debate on how to treat the USSR. Three positions:
1. Rollback—existence of Soviets on the planet were a danger by existing because they would expand/infect world, destroy our freedom. Partly realist. Also worry about the idea “catching on”—liberal notion of “why should you care about people far away.” So partly classical liberalism (we are all connected).
2. Containment—military and political flavor. Quarantine the threat. Do not cooperate. Idea that since our system is better, the communists will eventually collapse.
3. Détente—We don’t have to contain it—that would make the world more dangerous. So we should interact, trade, exchange.
Détente—democratic and Kissinger and Nixon parties associated. “We can live with communism forever.” Other countries freedom doesn’t matter. Very realist, the democrats came around to it in the 70’s.
But there was a backlash—helping was viewed as morally outrageous. Senator Jackson said they need to take a harder line. Became “neoconservative”—deal with USSR because of internal workings, not foreign policy. Not neorealist. Idea of regime changes came around.

(Interdependence continued)
What is the explanation for weak states pushing around strong states (oil crisis again)? Sensitivity (can be though of as short-term). Why was US sensitive, but not vulnerable? Other supply sources of energy. And changes to demand (fuel efficiency). If we’d been vulnerable, war more likely. What is their (K and N) version of interdependence? They add “complex interdependence”—we have many more ties between people than just business to business (“globalization”). The interconnected NGO’s, easier travel, nonstate actors. So, even more things would be lost as a result of war. Recent events suggest this is not the reason for not invading during embargo (2 wars since in Middle East). True that we give up a lot of the inter-dependence, but that still didn’t stop us.
Complex interdependence=the web of [??] matters (think Freedom Fries).

Liberalism—obstacles to collective action
Olson—Do groups act in their own self-interest? Do gropus of rational individuals act in the group’s self-interest?
Public good—everyone benefits.
Collective good—members of the group benefit.
People more likely to free-ride—all of the benefit and none of the cost. This is why we have underprovision of public goods. We are net worse off.
Only a few ways to get it done:
Coercion: “Hegemon” can punish. Forces individual self-interest (eg labor union requires picketing, or you’d lost your job). Hegemonic coercion. Collective action problem (League of Nations).
Hegemonic leadership—a single actor benefits enough to do it rationally (in the mining road example, the mine company itself benefits enough to make the road). Charging the freeriders would be a form of coercion (ie a toll on the road for the miners). Hegemonic coercion sometimes a form of hegemonic leadership. Taxation an example of coercion.
Small group can overcome the problem of freeriding. No anonymity. Only transparency. This facilitates cooperation. “K-group” where K is a small number. This insight from observations of cartels. Smaller=easier. True for all.
So, do we see as little cooperation as predicted? Keep in mind some non-financial benefits can make an action rational even if it seems pure altruistic. Or ethics may drive to “irrational” decision. Enlisting in army and voting are examples. Patriotism is an ethos that makes you act irrationally. These examples are pervasive. Is this true for states? Consider later, when we get to “norms.” For the rest of today we’re going to assume states act on rational self-interest.

Neoliberalism (Neoliberal institutionalism)
Non-normative. (classical assumes no different between individual and common(?).

Even if states selfish and not altruistic, cooperation possible between states. Beating realists at own game (starting with same assumptions, but different potential outcome). Set up so mutual benefit from selfishness.

Axelrod—Prisoner’s Dilemma an depend on how likely to repeat interaction in the future. If played over and over, then the payoffs change. So cost of defecting is now also the likelihood of other side defecting in future. Try to get it so if you cooperate, it’s better for me to cooperate. “tit for tat” won the competition/simulation. You cooperate last time, I cooperate this time. Same for defection. Evolution of the cooperators surviving.

Relative Gains vs. Absolute Gains
If both countries get absolute gains in a trade deal, but country B gets a relative gain, will country A support the deal? Realists say no. Neoliberals say yes.

Country A
Country B
GDP
5
5
GDP (with trade)
7
8
Normative only in that structures that would promote this should be constructed. Anyway, what will state A actually do in the above situation? When will a state not care about relative gains?
No switch in dominance (but may think about it more carefully if dominance lessened against certain states)
Is the other state a rival? I.e. If A/B is US/UK vs. US/USSR
Idea of a “friend” vs. “rival.” Walt, remember, said there are other factors besides power. Balance of Power Vs. Balance of Threat (determined by aggressive intentions). By Waltz prescription, it’s better to be poorer as there’s no relative loss, even if a friend. We should suffer, so they suffer more. Not a popular idea, so democrats and republicans both favor open trade.

Order of countries preferences

Cooperate
Defect
Cooperate
2
2
1
4
Defect
4
1
3
3
Countries acting rationally, in their own self-interest, end up in Box 4 (both defecting)

Oye— Getting from box 4à1. Olson’s idea of having a small group of people. Detecting defection is easier—Defection is less attractive. Or Axelrod’s prescription—repeat iterations (“lengthening the shadow of the future”) so tit-for-tat can become a prescription and rational decision. Alter the payoffs (directly, not just shadow of the future). One idea is the one of “hostages,” making it so you and others suffer more if you defect. Put your own troops in harm’s way (similar to First Move Advantage scenario.). Publicize a treaty. Everyone knows if you break it, no one trusts you, not just the person you broke it with (Wilson’s idea). How do you lengthen the shadow of the future? Don’t fling open doors—becomes a one-shot game if they stab you in the back. Peace negotiations, slow etc. Start seeing several rounds of them, each one becomes more and more likely. How an you increase your ability to discern what is defection (worst misperception is they cooperate but you think they are defecting).
Transparency and “norms” help with misperception.
Set a norm—if the norm/agreement is 100 missiles per year, 100 is cooperation. If only 50/yr, 100 is defection. Norms needed to clarify cooperation and defection.
Reduce number of players. Better to have local trade agreements rather than, for example, the WTO. Total gains vs. individual gains again. How do you split up the total gains?
An individual may gain more from something that benefits less overall. All of these things can be done by institutions. Building, norms, rules for example.

Keohane most famous for explaining why institutions can do this increase in cooperation.
§ They provide information, which creates transparency. Eg. International Atomic Energy Agency.
§ Reduction of transaction costs. Cooperation more costly if you need lawyers, negotiations; cumbersome. Institutions can reduce those costs. Economies of scale.
§ They lengthen the shadow of the future. If you screw over someone, you might have to face them the next day (at the UN, for example, on a different issue the next day). That’s why there are very few vetoes in the UN).
§ Institutions can also provide for enforcement. Punishment if a country defects. Possibly less likely to use violent means. Institutions have smaller numbers, more likely to carry out enforcement as it’s a collective good.