THEORIES OF INTERNATIONAL ORGANIZATIONS

THEORIES OF INTERNATIONAL ORGANIZATIONS

Organization theorists, especially from sociology, provide insights relevant to studying international organizations as organizations.

ORGANIZATIONS are created to solve problems that require collaborative action; they are not just mechanical tools doing what their founders envisioned.

ORGANIZATIONS thus develop mechanisms for learning a new developments in the environment; they search for means of action and to decide what problems can and should be solved.

Organizations theorists see organizations as open systems that are continually responding to the environment, developing and changing goals through negotiations among the dominant coalitions, and utilizing various technologies.

Perrow, 1970.

THEORIES OF INTERNATIONAL ORGANIZATIONS

Four concepts drawn from organization theory are particularly usefulfor studying IGOs, NGOs, and MNCs. These are;

1.Organizational Culture

2. Organizational Adaptation and Learning

3. Interorganizational Relations

4. Networks

INTERNATIONAL ORGANIZATIONS

INTERGOVERNMENTAL

ORGANIZATIONS (IGOs)

NON-GOVERNMENTAL

ORGANIZATIONS (NGOs)

COMMON CHARACTERISTICS OF BOTH IGO AND NIGO

• a permanent organization to carry on a continuing set of function• voluntary membership of eligible parties• a basic improvement stating goals, structure and methods of operation• a broadly representative consultative conference organ• a permanent secretariat to carry on continuous administrative,

research and information functions.

•NGOs are voluntary organizations formed by individuals to perform a variety of functions and roles.

GLOBAL REGIONAL GLOBAL REGIONAL

CHIEF FUNCTION OF INTERNATIONAL ORGANIZATION’S IS TO;• PROVIDE THE MEANS OF COOPERATION AMONG STATESIN AREAS IN WHICH COOPERATION PROVIDES ADVANTAGESFOR ALL OR A LARGE NUMBER OF NATIONS.

SUBFUNCTION OF INTERNATIONAL ORGANIZATION’S IS TO;

•PROVIDE MULTIPLE CHANNELS OF COMMUNICATION AMONG GOVERNMENTS SO THAT AREAS ACCOMODATION MAYBE EXPLORED AND ANY ACCESS WILL BE AVAILABLE WHEN PROBLEMS ARISE.

•THOSE MOST PROBABLY WILL BE THE CHANNEL OF DIPLOMACY AND PEACEFULL SETLEMENT.

•IN ADDITION UN SPECIALIZED AGENCIES AND REGIONAL ORGANIZATIONS PROVIDE MULTIPLE AND CONTINUOUS CONTACT POINTS THROUGH WHICH ACCOMODATION CAN BE EXERCISED.

AS OF 2008 THERE ARE;

194 NATION STATES (including Kosovo)

300 INTERGOVERNMENTAL ORGANIZATIONs

5000 NON-GOVERNMENTAL ORGANIZATIONs

OPERATING IN INTERNATIONAL SYSTEM.

ALMOST ALL THE LATTER HAVE BEEN ESTABLISHED THE PAST CENTURY, MOSTLY AFTER WW II.

IGOs and NGOs CAN BE THOUGHT AS GLOBAL and REGIONAL

GLOBAL REGIONAL

• UN

• League of Nations

• Universal Postal Union

• International Telegram Union

• World Health Organization

• World Trade Organization

• Hague Conference

• Concert of Europe

• ASEAN

• EUROPEAN UNION

• Organization of African Unity

• Leage of Arap States

• WEU

• OPEC

• NATO

• Rhein and Danube River Co

IGOs

Multipurpose - Alliance - Functional

IGOs and NGOs CAN BE THOUGHT AS GLOBAL and REGIONAL

GLOBAL REGIONAL

• Greenpeace

• Doctor’s Without Borders

• Friends of the Earth

• Jurnalists Without Borders

• Amnesty International

• Human Rigths Watch

• Part of the Some Global NGO for regional function,

• UN credited NGOs

• Millenium Forum

•Peace,security,disarmament

•The eradication of poverty

•Human rights

•Sustainable development and environment

•The challenges of globalization

•Strengthening the UN

NGOs

Treaty of Kadesh1295 BC

Attica-DelosSea Union476 BC

HellenicUnion338 BC

PeleponnesianUnion 461 BC

Treaty of Presburg,1806 End of Roman Empire

HanseaticLeageu1356-1669

(1) Peleponnesian Wars (441-445 BC) For 30 year Treaty between Delos Union and Spartan in 445 BC. (2) Tyucidides as first realist wrote his book “Peleponnesian War”(3) While Attica-Delos established in lead of Athens, Peleponnesian Union Sparta.(4) Macedon King Philippos II gathered all Greek city-states in Corinth Conference. Everey member states named “Helen”, Synedrion was common assembely to operate the

Union’s function. Synedrion was also a court. Hellenic Unon built up against Persian and defeated her at the end of the war. And Kallias Treaty was signed in 445 BC.(5) Hanseatic League comprised of 100-160 Northern European Cities, was formed to facilitate common monetary, customs union and trade. It was a system of regional federation.(6) Czar Nicholas II, convened two conferences to problem solving and preventing war. All European and non European states icluding Japan, Chine and Latin America.

RomanEmpire

Concert of Europe 1815

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League ofNations

Regional International Organizations

United Nations

Hague System1890-1907

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CHART OF INTERNATIONAL ORGANIZATIONs

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1648 199119451918

The Treaty of Westphalia

TREATY of WESTPHALIA

CHART OF INTERNATIONAL ORGANIZATIONs

PRE - WESTPHALIAN SOVEREIGNTY POST- WESTPHALIAN SOVEREIGNTY

ECONOMIC

SOCIAL

POLITICAL COOPERATION

ELIMINATINGWAR

EliminatingPovertyDiseaseHunger

BEYOND- WESTPHALIAN SOVEREIGNTY

WAR

AS A STATE POLICY PARAMOUNT EVIL TO BE ELIMINATED

Plato (427-347 BCAristotle (384-322 BCSt Augustine (354-430)Thomas Aquinas (1225-1274)Pierre Dubouis (1250-1322)Hugo Grotious (1538-1645)

Confucius(551-479 BC)Mo Ti (500’s BC)Desiderus Erasmus (1466-1536)W.Ellery Channing (1780-1842)Norman Angell (1874-1967)William Penn (1694Jeremy Bentham (17A Hobson (1902-Richard Cobden (1804-1865)Emeric Cruce(1623

Dante AlighieriCiceroSenecaAbbe de St Pierre (1700’sEmanuel Kant (1795William Ladd (1840

UNIVERSALIST-WORLD GOVERNMENT

PLATO ; State should not neglect its military defense, but the ideal state would be an isolated, self sufficient unit with a little dependence on the rest of the world as possible

ARISTOTLE ;He generally opposed war except in self defense, but because he believed that some people were suited only to serve as slaves, so he justified the conquest of inferior people.

ST AUGUSTINE ; He disapproved of war of conquest but accepted war of defense. The church during the middle age generally accepted war under certain conditions. For example war against infidel were approved, but among chiristians were undesireable.

THOMAS AQUINAS; Acceptance war is inhuman but crusaders.

DANTE – CICERO - SENECA; Service to the world socıety, , universal and superior law of justice.

ABBE DE SAINT PIERRE ; Both advice that establishment of general parliament or assembly to settle all disputes by a three-fourths vote, with collective sancstions including armed forces.

EMMANUEL KANT ;Main element of him a federation open to voluntarily membership of any state, a congress to settle dispute, no standing armies, free movement from one country to another.

WILLIAM LADD ; “Essay on a Congress Nations” He takes the US and Swiss government as a mode. He advocated the establishment of a congress of nation and Court of Nations with legislative and judicial.

PIERRE DUBOIS; He suggest Christion Ruler under French leadership. War should be prohibited among christians but encourages against infidel.

RICHARD COBDEN ; His suggest is interdependence of states. Universal organization not limited to christian ruler, promotion of trade.

INTEGRATION

Integration is defined as the voluntary linking in the economic domain of two or more formerly independent states to the extend that authority over key areas of domestic regulation and policy is shifted to the supranational level.

REGIONAL INTEGRATION

Regional integration is the process of providing common rules, regulations, and policies for a region.

WHAT IS REGION ?

Groupings of countries that interact well beyond what is expected on the basis of countries relative contributions to world import and exports.

If region has boundaries, these boundaries are usually vast grey in tones and shades rather than black and white.

(Richard Savage and Carl Deutsch, 1960)

THREE CRITERIA FOR THE DEFINITION OF REGIONS;

1. PHYSICAL PROXIMITY AND SEPARATENESS,- Although related with the geography, even today it does not follow automatically that the political and cultural patterns shaped by geography have been eroded.

1. INTERDEPENDENCE- As economic terms, interdependency refers to interconnectedness of among countries. A region in this sense is a zone where there is a high density of economic transactions relative to other units.

• HOMOGENITY- A large number of variables fit within this framework; similarity of of values, of economic systems, of political systems, of way of life, of level of economic development and so on.

(Bruse Russett, International Regions and the International System, 1967)

Most political scientists studying integration have been primarily interested in understanding the institutional and policy dimensions of integration.

INTEGRATION

They have sought to specify the political context in which integration occurs and have provided insightful accounts of the process of integration.

The critical question related with integration is; Which forces drive the process of voluntary integration?

INTEGRATION

There are basicly three types of so-called explanations, mostly taking into consideration of European Union. These are not wrong, but fail basic tests of scientific inference. At least they are insufficient.

It is said that politicians, hounted by the horrors of the Second World War, were naturally driven to devise a novel structure of European governance capable of eradicating the very roots of intra-European conflicts.

INTEGRATION

First;


Charismatic leaders, it is alleged, managed to transcend the narrow-mindedness and selfishness of domestic pressure groups hostile to integration and European unity.

INTEGRATION

Second;


An ever-popular third explanation refers to changed preferences. The timing of a new application for membership, it is claimed, is attributable to the pressure from growing segments of society desirous of being connected to the larger “Euro-culture.”

INTEGRATION

Third;


TYPES OF INTEGRATION

At various times, social scientists have searched for more rigorious explanations of economic and political integration. In political science, three major analytical framework for understanding integration.

Functionalism, Neofunctionalism,

Intergovermantalism.


Economists who study regional integration look primarily at market relationship among goods and factors of production within a region and assume away the relevance of institutional and political forces. They are interested in the welfare effects of integration.

Customs union theory Optimal currency area theory

The fiscal federalism theory

Other explanation of integration in political science is neofunctionalism. It refers to regional integration. It bring a critics to functionalism which functionalism as a teleologic.


Intergovernmentalism is an alternative approach to integration in political science. Unlike neofunctionalism it assigns a central role to heads of states.

One explanation of integration in political science is functionalism. It refers global integration based on world peace. Peace is more likely working together in workshops and marketplace than by signing pacts in chancelleries.

neofunctionalism.

WEAKNESSES OF THESE EXPLANATIONS

Intergovernmentalism

functionalism.

Optimal currency area theory specifies conditions under which integration in the monetary domain is economically efficient.


The fiscal federalism theory aIso seeks to issues of regional integration.

Customs union theory seeks to understand the welfare implications of integration in terms of trade creation, trade diversion, and terms of trade.

Optimal currency area theory specifies conditions under which integration in the monetary domain is economically efficient.

Customs union theory seeks to understand the welfare implications of integration in terms of trade creation, trade diversion, and terms of trade.

Optimal currency area theory

WEAKNESSES OF EXPLANATIONS

The fiscal federalism theory

Customs union theory

Optimal currency area theory

Customs union theory

THEORETICAL APPROACHES TO INTEGRATION

Political Approaches Economical Approaches

Functionalism

Neofunctionalism

Intergovermentalism Customs Union Theory

OptimalCurrency Area

FiscalFederalism



Functionalism

Neofunctionalism



FiscalFederalism

Davit Mitrany 1943

Earns Hass 1958

Andrew Moravcsik 1993

A WorkingPeace System

Uniting ofEurope

Preferences & Power in the EU Community



Functionalism

Neofunctionalism



FiscalFederalism

Davit Mitrany 1943

Earns Hass 1958

Andrew Moravcsik 1993

A WorkingPeace System

Uniting ofEurope

Preferences & Power in the EU Community

JacopViner 1950

Robert Mundall 1953

A Theory of OptimalCurrency Area

The CustomsUnion

Main proponent, (Roman academician) Davit Mitrany,

The book, A Working Peace System

FUNCTIONALISM

FUNCTIONALISM

Fundemental aspect of functionalism or functional method is that “sovereignty can not be transfered effectively through a formula only through a function”.

FUNCTIONALISM

Functionalism begins with the assumption that; supranationality is the only method available to states to secure maximum welfare and then proceeds to provide an insightful account of how integration evolves using concepts such as functional spillover, updating of common interests , and subnational and supranational group dynamics.

FUNCTIONALISM

His assumptions is based on that nation states capabilities doing things efficient less than the capabilities of international organizations.

“problem of our time is not how to keep nations peacefully apart but how to bring them actively together”

Peace “is more likely to grow through doing things together in workshops and marketplace than by singing pacts in chancelleries”

FUNCTIONALISM

Mitrany claim that nationalism is threat to world peace. He insists that dependencies among nations based on mutually cooperation and beneficiary agricultural, health, transportation and other areas like these should be reverse from national level to international.

FUNCTIONALISM

Coactivity rather than national coexistance defines the ideal of peace.

He put his faith “not in protected peace but in a working peace”.

FUNCTIONALISM

Functional cooperation does not start from the political but from the low-key economic and social plane such as the joint management of scarce resources, unemployment, commodity price fluctuations, labor standarts, and public health.

FUNCTIONALISM

• Functionalism is applicable at both regional and global levels and has been important in explaining the evolution of the European Union as a process of economic integration, gradually spilling over into limited political integration.

FUNCTIONALISM

FUNCTIONAL INTEGRATION

Functional Integration, that is, the provision of common rules, regulations, and policies embodied in an integrated governance structure, may begin with exchance rate coordination.

The weaknesses of functionalism;

1. It is not properly speaking a theory of integration but rather than a normative method.

2. Integration is in fact sought to secure peace, is not fully compelling. (Why were not all European countries participating in the peace-building effort from the begining?)

FUNCTIONALISM

John McCormick compares functionalism's fundamental principles with realism's thus:

Realism Functionalism

Dominant goals of actors

Military security Peace and prosperity

Instruments of state policy

Military force and economic instruments

Economic instruments and political acts of will

Forces behind agenda formation

Potential shifts in the balance of power and security threats

Initial emphasis on low politics, such as economic and social issues

Role of international organizations

Minor; limited by state power and the importance of military force

Substantial; new, functional international organizations will formulate policy and become increasingly responsible for implementation

Comparing Functionalism to Realism

• One of its protagonists is Ernst B. Haas, a US-political scientist. His book is “The Uniting of Europe”.

• Unlike previous theories of integration, functionalism; neofunctionalism declared to be non-normative and tried to describe and explain the process of regional integration based on empirical data.

NEOFUNCTIONALISM

NEOFUNCTIONALISM

• In a significant departure from functionalism, it shifts its analytical focus from the teleology, a working peace system, to the utilitarian dimension of the functional method. This makes it gain analytical clarity and powerful implications.

NEOFUNCTIONALISM

Neofunctionalist approach is concerned with explaining “how and why nation-states cease to be wholly sovereign, how and why voluntarily mingle, merge, and mix with their neighbors so as to lose the factual attributes a sovereignty while acquiring new techniques for resolving conflicts between themselves.

• Neofunctionalism, describes a process” whereby political actors in several distinct national settings are persuaded to shift their loyalties, expectations, and political activities towards a new and larger center, whose institutions possess or demand jurisdiction over the pre-existing states.

NEOFUNCTIONALISM

• The actorsInterest groups, PP – NATION STATE – Supranational RI

• The motivesGood Europeans are not the main creators of the community

• The processSpillover( functional, political ), upgrading common interests

• The context Against functionalism, for neofunctionalism economy and politics can not be separable.

NEOFUNCTIONALISM

Neofunctionalism’s main analytical attributes are;

• BACKGROUND CONDITIONS

• PROCESS CONDITIONS

• CONDITIONS THAT ARE LIKELY TO ENCOURAGE OR DISCOURAGE TASK EXPANSION

NEOFUNCTIONALISM

AS A COMPOSITE THEORY, NEOFUNCTIONALISM HAS THREE COMPONENTS

(Hass, and Schimitter, 1964)

• BACKGROUND CONDITIONS–Neofunctionalism argued that integration was most likely

emerge to first among countries with a certain type of domestic environment; liberal democratic countries with advance capitalist economies, differentiated social structures, and highly pluralistic interest group structures.

–In these societies class conflicts were to be muted, ethnic rivalries less intense and warfare an obsolescent institution.

–Such countries would have much to gain from an expansion of capitalism to the regional level.

NEOFUNCTIONALISM


• PROCESS CONDITIONS

• PC’s entail dense network of economic exchange, trade, labor migrations, tourism and free flows of productive factors.

NEOFUNCTIONALISM


• THAT ARE LIKELY TO ENCOURAGE OR DISCOURAGE TASK EXPANSION CONDITIONS

• This phase involves spillover. Once integration begins in initial settings (presumably least controversial ones), there are prospects for expanding cooperative habits into other ares. This process is labeled spillover.

• Spillover could be purely functional with linkages among different sectors serving as the transmission belts of integration,(trade might imply increasing ccordination of monetary policy for example) or it could rely on tactical linkage among sectors by agent in a bargaining process.

NEOFUNCTIONALISM


• BACKGROUND CONDITIONS1. Size of units, 2. Rate of transactions, 3. Pluralism, 4. Elite complimantarity

• PROCESS CONDITIONS5. Decision-making style 6. Rate of transaction, 7. Adaptability of governments

• CONDITIONS THAT ARE LIKELY TO ENCOURAGE OR DISCOURAGE TASK EXPANSION (ECONOMIC UNION)8. Government purposes, 9. Independence of regional institutions.

(Hass, and Schimitter, 1964)

NEOFUNCTIONALISM

NINE VARIABLES FOR ECONOMIC AND POLITICAL UNION

If a group of countries maintains a high degree of economic and social transactions,

and at the same time shares pluralist domestic institutions with similar economic size and similar level of development,

it will have a good chance of achieving political union.

NEOFUNCTIONALISM

LAST WORDS ON NEOFUNCTIONALISM

• Intergovernmentalism can best be understood as a series of bargain between the head of the governments of the leading states of the region.

• The emphasis of intergovernmentalism on head of states as central players is a key difference between it and neofunctionaism.

INTERGOVERNMENTALISM

• While neofunctionalism starts with transnational society and supranational institutions, liberal intergovernmentalism places states(central governments, usually executively) at the center of analysis.

• This is not to say that interest groups are unimportant. Albeit, crucial to integration are the process of interest aggregation, intergovernmental bargaining, and enforcement of decision.

INTERGOVERNMENTALISM

Aware of some of these weaknesses, intergovernmentalists have sought to expand

their theorical approach.

A liberal Intergovernmental Approach (1993) Andrew Moravcsik* lays out a two-step process of preference formation and bargaining which he extends(1998) to a three-step process;

- preference-formation,- intergavernmental bargaining- institutional lock-in of bargains.

*Preferences and Power In the EU, A Liberal Intergovernmental Approach.

Aware of some of these weaknesses, intergovernmentalists have sought to expand

their theorical approach.

The liberal intergovernmental approach provides a more sophisticated theory of preference formation than neofunctionalism. This theory is based in part on the logic of collective action and the new institutionalism.

But LIA is still vulnerable on several grounds. “What is the relationship between grand bargains and day-to-daypolitics in regional organizations?”

As a theory of integration intergovernmentalism suffers from several

shortcomings.

The theory that focuses only on major interstate (Ge, Fr, i.e) decisions or “celebrated intergovernmental bargains; it thus is difficult to test.

Intergovermentalism argues that the “ups” of integration, that is the big decisions, are the result of convergence of the preferences of the leading states.

CONSTRUCTIVIST APPROACH TO NEOFUNCTIONALISM

This is a newer approach to regional integration, but again limited mostly to Western Europe.

The core of constructivist research program concerns the role of ideas, norms, and identities as opposed to material factors in the integration proess.

At bottom, constructivism concern the issue of human consciousness.(Ruggie 1998)

Human thought, ideas and agency as crucial to the explanation of the international order. (Onuf, World of Our Making,1989)

CONSTRUCTIVIST APPROACH TO NEOFUNCTIONALISM

The leading constructivist is Jeffrey Checkel. For Checkel norms can become constitutive of agents, part of who they are, and deeply internalized.

When this occurs, the overall interpretation changes from one based on conscious adjustment to changing costs to one based on enactment of values (a scripted model based on logic of appropriateness rather than a utilitarian one).

Jo Shaw has elaborated a changing conception of “postnational constitutionalism” in which citizens rights are not fixed, nor limited to the territorial containers of the state, bur responsive to transborder movements and demands that are not easily dealt with the nation-states.

• Free Trade Area (FTA) refers removing of the tariffs and quotas among the member states.

• Custom Union, in addition to FTA, use common external tariffs by the members to the third (non-member) countries.

• Custom union theory is mostly concerned with the markets for goods.

CUSTOMS UNION THEORY

• In the optimal currency area theory, however the focus

is on money, markets for goods and and markets for production factors(land-labor-capital-enterpreneurship).

• A currency area is defined as an area in which a common currency exists or in which exchange rates are immutably fixed.

• “ Optimality” refers to the ability of an area to achieve both internal balance(full employment, price stability) and external balance( payments equilibirium) in the least costly way, without much interference from monetary and fiscal policies.

OPTIMAL CURRENCY AREA THEORY

• Fiscal federalism theory is an offshoot (branch) of public finance theory that analyzes the special fiscal problems arising in federal countries, drawing on the literature on public goods, taxation and public dept incidence and various parts of location theory.

FISCAL FEDERALISM THEORY



Functionalism

Neofunctionalism

Intergovermentalism

Customs Union Theory


FiscalFederalism

EXPLAINING REGIONAL INTEGRATION

Implicating the insidercountries in an integration process

TWO PUZZLES OR QUESTIONS OF REGIONAL INTEGRATION

1.Why have so many attempts at integration failed while a few have been crowned with success? (+EU, +EFTA,-LAFTA)

Implicating the outsiderscountries in an integration process

2.What explains when outsiders seek to become insiders? (Outsiders can become insiders either by joining an existing economic union or by creating their own regional group) --timing of the desicion by outsiders countries to seek integration--


TWO PUZZLES OR/AND QUESTIONS OF REGIONAL INTEGRATION

1.Implicating the insider countries in an integration process.Why have so many attempts at integration failed while a few have been crowned with success? (+EU, +EFTA,-LAFTA)

2. Implicating the outsiders countries in an integration process.What explains when outsiders seek to become insiders? (Outsiders can become insiders either by joining an existing economic union or by creating their own regional group) --timing of the desicion by outsiders countries to seek integration--

The Condition In Order For Integration to Success

The potential for economic gains from markets exchange within a region must be significant. Economies should be strong.

There must be a fullfilment of supply conditions. These are the conditions under which political leaders are willing and able to accommodate demands for regional institutions at each step of the integration process. Willingless depends on the payoff integration to political leaders. Although willingness of political leaders may be unable to supply regional institutions because of collective action problems.

Areas with stronge market pressure for integration and indisputed leadership are most likely to experience successful integration; ”commitment institution” help the catalyze the process.


TWO PUZZLES OR QUESTIONS OF REGIONAL INTEGRATION

The Condition In Order For Integration to Success

The potential for economic gains from markets exchange within a region must be significant. Economies should be strong.

There must be a fullfilment of supply conditions. These are the conditions under which political leaders are willing and able to accommodate demands for regional institutions at each step of the integration process. Willingless depends on the payoff integration to political leaders. Although willingness of political leaders may be unable to supply regional institutions because of collective action problems.

Externalities,transaction costs, and demand forinstutitionalchanges.

Externalities,transaction costs, and demand forintegration.

The supplyofİntegration.

Integration andeconomicperformans.

The externaleffects ofintegration.

PropertyRightstheory

Transactioncosts

Economichistory

Supply conditions are the conditions under which political leaders Are willing and able to accommodate demands for functional integration.

Demand for İntegration on the part of big business does not automatically translate into success.If demand is not met by supply, no change will occur.

Coordination GamesPrisoner’s Dilemma

1.Implicating the insider countries in an integration process.Why have so many attempts at integration failed while a few have been crowned with success? (+EU, +EFTA,-LAFTA)

2. Implicating the outsiders countries in an integration process.What explains when outsiders seek to become insiders? (Outsiders can become insiders either by joining an existing economic union or by creating their own regional group) --timing of the desicion by outsiders countries to seek integration--

Areas with stronge market pressure for integration and indisputed leadership are most likely to experience successful integration; ”commitment institution” help the catalyze the process.

2.What explains when outsiders seek to become insiders? (Outsiders can become insiders either by joining an existing economic union or by creating their own regional group) timing of the desicion by outsiders countries to seek integration

Externalities,transaction costs, and demand forİnstutitional changes.

Externalities, transaction costs, and demand forintegration.

The supplyof integration.

Integration andEconomic performans.

The external effects ofintegration.

PropertyRightstheory

Transactioncosts

Economichistory

Supply conditions are the conditions under which political leaders are willing and able to accommodate demands for functional integration.

Demand for integration on the part of bigbusiness does not automatically translate into success. If demand is not met by supply, no change will ccur.

Coordination GamesPrisoner’s Dilemma

Affected outsiders can pursue two integration strategies

“SecondIntegrativeRespond”(create a newİntegration)

“First IntegrativeResponse”(Want to participate)But twoproblems

No interestin acceptingnew members

Price of membershipof a successful union is typically very high (membership countryshould accept so-called Acquis communautarie,for Latin countries also She must accept”Washington Concensus”

2.What explains when outsiders seek to become insiders? (Outsiders can become

insiders either by joining an existing economic union or by creating their own regional group) timing of the desicion by outsiders countries to seek integration

Transactioncosts

Externalities,transaction costs, and demand for instutitional changes. What drives reginol integration process?

Property Rightstheory

Economichistory

Tc’s are the costs of specifying, negotiating, monitoring andenforcing contractsthat underlie exchange.In other words, They are the costs of capturing the gains from marketexchange.

This theory identify key actors and motives driving institutional change. PR’s develop to internalize externalities when the gains of internalization, in the main, results from changes in economic values, changes which stem from the development of new technology and the opening of new markets, changes to which old property rights are poorly attuned.

These theories are primarily concern with the explaining the evolution of domestic institutional arrangements , but their logic can be extended to shed light on the dynamics of regional İnstitution-building.

The economic history school refines the analysis of the impact of new technologies on markets and institutions by introducing the concept of transaction costs.



Externalities,transaction costs, and demand for integration.

Demand for integration on the part of big business does not automatically translate into success. If demand is not met by supply, no change will occur.

As new technologies increase the scope of markets beyond the boundaries of a single state, actors who stand to gain from wider markets will seek to change and existing governance structure in order to realize these gains to the fullest extend.

What are the potential gains from wider markets?

1. Larger markets help firms achieve economies of scale in production. That is, an increase in production lowers the avarage cost of output per unit.

2. Trade is beneficial because it permits countries to exploit their comparative advantage. A comparative advantage arises when the marginal opportunitycost of producing one good in terms of another good differ between countries.

3. In addition to these gains from trade, there are specific gains to be had from investing abroad. Investment abroad bring several advantages for firms. Inclueding several risks too.

- Uncertainty- Unexpected price hikes, Poor quality goods, tariff change, differing rates of inflation,- A host country can revert to outright nationalization of foreign asset.

DEMAND FOR INTEGRATION ON THE PART OF BIG BUSINESS DOES NOT AUTOMATICLY TRANSLATE INTO SUCCESS . IF DEMAND IS NOT MET BY SUPPLY, NO CHANGE WİLL OCCUR.

The supply of integration.

Supply conditions are the conditions under which political leaders are willing and able to accommodate demands for functional integration.



Willingness depends greatly on the payoff integration to political leaders.

Why sacrifice national sovereignty and pay the price of membership in a regional group if the economy is growing relatively fast and voters are thus content?

Willengness brought about by economic difficulties, however, is no guarantee of successful integration. Willing leaders may still find it impossible to supply integration because of collective action problems.

TWO TYPES OF COLLECTIVE – ACTION DILEMMA

Coordination Games**Prisoner’s Dilemma*

R L

L

R 1,1

1,1-1,-1

-1,-1Drivers

y1 y2

x2

x1 3/3

2/24/1

1/4Strategy

* Duncan Snidal Arthur Stein ** Y. Varoufakis

This game is the standart representation of externalitieswhere in the pursuit of their own private gains actors impose costs on each other independently of each other’s action.

Theproblem in PD is that in pursuing its self-interest, each state imposes cost on the other independent of the other’s policy, whereas in the coordination game each imposes costs or benefits on the other contingent upon the other’s policy.

The collective action problem is that neither state can choose its best policy without knowing what the other intends to do, but there is no obvious point at which to coordinate.

CREATION OF ORIGINAL UNION

Demand and supply condition are met

Success

Perceptible negative external effect on outsiders

No perceptiblenegative external effects on outsiders

Demand and supply condition are not met

Failure

Willingness to paymembership price;and union accepts new members

Unwillingness to paymembership price;Or rejected by union

First integrativeresponse; joiningof union

Second integrativeresponse; creation of counter-union

Demand and supply condition are met

Demand and supply condition are not met

Success Failure

No external effect

No integrative responseNo integrative

response

-A union may no interest-price of membership highly cost

The prisoner's dilemma was originally formulated by mathematician Albert W. Tucker and has since become the classic example of a "non-zero sum" game in economics, political science, evolutionary biology, and of course game theory.

A "zero sum" game is simply a win-lose game such as tic-tac-toe. For every winner, there's a loser. If I win, you lose. Non-zero sum games allow for cooperation. There are moves that benefit both players, and this is what makes these games interesting.

In the prisoner's dilemma, you and Albert are picked up by the police and interrogated in separate cells without a chance to communicate with each other. For the purpose of this game, it makes no difference whether or not you or Albert actually committed the crime. You are both told the same thing:

If you both confess, you will both get four years in prison.

If neither of you confesses, the police will be able to pin part of the crime on you, and you'll both get two years.

If one of you confesses but the other doesn't, the confessor will make a deal with the police and will go free while the other one goes to jail for five years.

At first glance the correct strategy appears obvious. No matter what Albert does, you'll be better off "defecting" (confessing). Maddeningly, Albert realizes this as well, so you both end up getting four years. Ironically, if you had both "cooperated" (refused to confess), you would both be much better off.

And so the game becomes much more complicated than it first appeared. If you play repeatedly, the goal is to figure out Albert's strategy and use it to minimize your total jail time. Albert will be doing the same. Remember, the object of the game is not to screw Albert over. The object is to minimize your jail time. If this means ruthlessly exploiting Albert's generosity, then do so. If this means helping Albert out by cooperating, then do so.

To make this game more fun, I've given Albert several different strategies that were inspired by a chapter in Carl Sagan's book, Billions And Billions:

The Golden Rule - "Do unto* others as you would have them do unto you." Albert always cooperates (doesn't confess). It's quite easy to take advantage of this innocent "turn the cheek" strategy.

The Brazen Rule - "Do unto others as they do unto you." Albert begins with a cautious defection (he confesses), but after that he does whatever you did last. A similar strategy which begins with cooperation is usually called "tit-for-tat."

The Brazen Rule 3 - Almost the same as the Brazen Rule. The exception is that Albert is a little more forgiving. If you defect (confess), Albert will forgive you about once every three times and cooperate the next time anyway.

* ..e, ye kadar

The Iron Rule - "Do unto others as you wish, before they do it unto you." Albert always defects. Both of you tend to accumulate a large prison sentence.

??? - Albert decides randomly which of the above four strategies to use, and you have to figure out for yourself which one he's chosen. Albert does not randomly choose "confess" or "don't confess." Instead, he randomly chooses one of the above strategies and sticks with that one strategy until you change his strategy to something else.

THEORIES OF INTERNATIONAL ORGANIZATIONS

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