Over the past fifty years, barriers to international trade have decreased substantially. A key source of this decline in protectionism has been the proliferation of agreements among countries to liberalize commerce. In this article, we analyze the domestic political conditions under which states have concluded such agreements and, more generally, explore the factors affecting interstate economic cooperation. We argue that interstate cooperation on commercial issues depends heavily on the political regime types of participants: as states become more democratic, they are increasingly likely to conclude trade agreements. To test our claim, we examine whether the regime types of states have influenced their propensity to form and expand preferential trading arrangements (PTAs) during the period since World War II. We find that democratic countries are about twice as likely to form a PTA as autocratic countries, and that pairs of democracies are roughly four times as likely to do so as autocratic pairs. These results provide strong evidence that democracies are more commercially cooperative than less democratic countries.

In recent decades, countries have experimented with a variety of monetary institutions, including alternative exchange-rate arrangements and different levels of central bank independence. Political economists have analyzed the choice of these institutions, emphasizing their role in resolving both the time-inconsistency problem and dilemmas created by an open economy. This “first-generation” work, however, suffers from a central limitation: it studies exchange-rate regimes and central bank institutions in isolation from one another without investigating how one monetary institution affects the costs and benefits of the other. By contrast, the contributors to this volume analyze the choice of exchange-rate regime and central bank independence together and, in so doing, present a “second generation” of research on the determinants of monetary institutions. The articles incorporate both economic and political factors in explaining the choice of monetary institutions, investigating how political institutions, democratic processes, political party competition, and interest group pressures affect the balance between economic and distributional policy objectives.

Politics remains prominently absent in the literature showing that higher levels of trade integration lead to a larger public sector. As openness increases, the state, acting as a social planner, adopts a salient role to minimize the risks of economic integration and secure social peace. Given the highly redistributive nature of both trade and fiscal policies, we claim, however, that the interaction of the international economy and domestic politics leads to three distinct political-economic equilibria. First, nations may embrace protectionist policies to shore up the welfare of key domestic sectors—without engaging, therefore, in substantial public spending. Second, to maintain trade openness in democracies, policymakers develop compensation policies to muster the support of the losers of openness. Finally, given the tax burden of public compensation, pro-free trade sectors may impose an authoritarian regime to exclude (instead of buying off) their opponents. After formally stating the conditions under which each regime emerges, we test the model on a panel data of around sixty-five developing and developed nations in the period 1950–1990 and explore its implications through a set of key historical cases drawn from the last two centuries.

Central bank independence and pegged exchange rates have each been viewed as solutions to the inflationary bias resulting from the time inconsistency of discretionary monetary policy. While it is obvious that a benevolent social planner would opt for such an institutional solution, it is less obvious that a real-world incumbent facing short-term partisan or electoral pressures would do so. In this article, I model the choice of monetary institutions from the standpoint of a survival-maximizing incumbent. It turns out that a wide range of survival-maximizing incumbents do best by forfeiting control over monetary policy. While political pressures do not, in general, discourage monetary commitments, they can influence the choice between fixed exchange rates and central bank independence. I highlight the importance of viewing fiscal policy and monetary policy as substitutes and identify the conditions under which survival-maximizing incumbents will view fixed exchange rates and central bank independence as substitutes. In so doing, I provide a framework for integrating other contributions to this volume.

Some prominent scholars and public activists contend that a fundamental change in the nature of world politics can be brought about through efforts to change prevailing culture, norms, and ideas. In this view, behavior in anarchy is what the prevailing culture makes of it, since social reality is, in Alexander Wendt's words, “ideas almost all the way down.” Anthropologists studying the causes of war in pre-industrial anarchies have tested this hypothesis extensively. Their research shows that war behavior cannot be reduced to either material factors or culture alone. Rather, material, institutional, and cultural elements must all be taken into account simultaneously in assessing an anarchical society's propensity for war and in designing strategies to promote change. Models of nested causality or of interaction effects between variables can sometimes capture these causal interrelationships, but they cannot capture nonlinear system effects that often play a prominent role. Patterns found in anthropological research can serve as a heuristic for understanding the democratic peace and processes of contemporary international cultural change.

Why are extremists able to sabotage peace processes in some cases but not others? And under what conditions will the public respond to such provocation and return to unpopular wars? We seek to show that extremist violence is not indiscriminate or irrational as many people have assumed but quite strategic. We argue that extremist violence intentionally plays on the uncertainty that exists between the more moderate groups who are attempting to negotiate a peace agreement. Using a game-theoretic model of the interaction of extremist violence and mistrust, we identify the conditions under which extremists will succeed and fail. We find that extremists are most likely to succeed in derailing a peace process when the targeted side believes that opposition moderates are strong. At these times, the public perceives moderates as best able to control and suppress extremists within their own ranks. When moderates are viewed as weak and unable to crack down on extremists, terrorism is more likely to fail. We discuss this finding, as well as a number of additional implications of the model, in connection with the Israeli–Palestinian case.

Scholars and policymakers alike have recently begun to tout the ability of international organizations (IOs) to encourage and secure democracy throughout the world. Despite this stance, little theoretical attention or empirical investigation has attempted to ascertain why or whether this relationship truly exists. One challenge to answering this puzzle is that extant theories of international institutions do not generally delineate clear hypotheses about how IOs influence domestic politics. In this article, I address this paucity of both theory and empirical evidence. I delineate three causal mechanisms that link IOs to domestic actors' calculations about political liberalization and test the argument. I find that membership in regional IOs is correlated with transitions to democracy during the period from 1950 to 1992.

The relationship between democratization and war has recently sparked a lively debate. We find that transitions from autocracy that become stalled prior to the establishment of coherent democratic institutions are especially likely to precipitate the onset of war. This tendency is heightened in countries where political institutions are weak and national officials are vested with little authority. These results accord with our argument that elites often employ nationalist rhetoric to mobilize support in the populist rivalries of the poorly-institutionalized democratizing state but then get caught up in the belligerent politics that this process eventually unleashes. In contrast, we find that transitions that quickly culminate in a fully coherent democracy are much less perilous. Further, our results refute the view that transitional democracies are merely the targets of attack due to their temporary weakness: in fact, they tend to be the initiators of war. We also refute the view that any regime change is likely to precipitate the outbreak of war: transitions toward democracy are significantly more likely to generate hostilities than transitions toward autocracy.

Why did Western Europe create uniquely strong international institutions in the 1950s, setting the foundations for today's quasi-federal European Union? This article contests explanations of the European Economic Community (EEC) as a straightforward response to structural interdependence, or as an institutionally “path-dependent” variation on such a response. Only leadership based on certain ideas explains why Europeans created the EEC rather than pursuing cooperation within weaker institutions or standard diplomatic instruments. In France—the only major state that insisted on the “community” framework—divided preferences and issue-linkages created “multiple equilibria” that allowed leaders to mobilize support for several European strategies. The EEC strategy was selected over viable alternatives by leaders who stood out from their party, bureaucratic, sectoral, and regional allies in holding certain ideas about Europe. This demonstration of the major, distinct impact of ideas offers concrete support to the growing theoretical literature on ideas and norms.

Although relatively unknown outside of Europe, comitology committees are an object of considerable controversy in the European Union (EU). Controversy stems from their pivotal role in overseeing policy implementation authority delegated from the Council of Ministers (Council) to the European Commission (Commission). In this article, we employ a game-theoretic model to analyze the influence of these, committees on policy outcomes. Our analysis provides three important insights. First, we show that, contrary to the conventional wisdom, comitology committees move outcomes toward the Commission's preferred policies rather than the Council's. Second, we demonstrate that the possibility of a Council veto may also move outcomes away from Council members' policy preferences and toward the Commission's. Third, the 1999 changes to the comitology procedures, designed to enhance the Commission's autonomy in policymaking, may have had the exact opposite effect. Paradoxically, we conclude that comitology serves to enhance the Commission's role in policy implementation and thereby strengthens the separation of powers within the EU.

In this article, we argue that the effectiveness of central bank independence and exchange-rate pegs in solving credibility problems is contingent on two factors: political institutions and information asymmetries. However, the impact of these two factors differs. We argue that the presence of one institution—multiple political veto players—should be crucial for the effectiveness of central bank independence, but should have no impact on the efficacy of exchange-rate pegs. In contrast, exchange-rate pegs should have a greater anti-inflationary impact when it is difficult for the public to distinguish between inflation generated by policy choice and inflation resulting from exogenous shocks to the economy. Such information asymmetries between the public and the government, however, do not increase the efficacy of central bank independence. Empirical tests using newly developed data on political institutions provide strong support for our hypotheses.

In this paper, we explain why the U.S. government chose multilateral security arrangements in Europe and bilateral ones in Asia in the 1940s and 1950s. After reviewing the inadequacies of a number of universal and indeterminate explanations, we put forward three explanations—great power status, efficient responses to threats, and regional identity—which rely on the combination of material and social forces for their explanatory power. Starting with common rationalist explanations that focus on material capabilities and institutional efficiency to explain the forms of international cooperation, we add to them the important effect that America's collective identity had on the formulation of its foreign policy goals. U.S. policymakers believed that the United States was a natural part of the North Atlantic community but that Southeast Asia was part of an alien political community. This difference helped drive the U.S. government to adopt divergent policies in two regions that, far from being natural, were constructed politically only in the 1940s. We conclude by pointing to the advantage of eclectic combinations of rationalist and constructivist insights, with an extension to the politics of regional collective identity in the 1990s.

This article explains how consensus decision making has operated in practice in the General Agreement on Tariffs and Trade/World Trade Organization (GATT/WTO). When GATT/WTO bargaining is law-based, consensus outcomes are Pareto-improving and roughly symmetrical. When bargaining is power-based, states bring to bear instruments of power that are extrinsic to rules, invisibly weighting the process and generating consensus outcomes that are asymmetrical and may not be Pareto-improving. Empirical analysis shows that although trade rounds have been launched through law-based bargaining, hard law is generated when a round is closed, and rounds have been closed through power-based bargaining. Agenda setting has taken place in the shadow of that power and has been dominated by the European Community and the United States. The decision making rules have been maintained because they help generate information used by powerful states in the agenda-setting process. Consensus decision making at the GATT/WTO is organized hypocrisy, allowing adherence to the instrumental reality of asymmetrical power and the sovereign equality principle upon which consensus decision making is purportedly based.

Taking the example of the liberalization of the electricity supply industy, I analyze member-state negotiations in the European Union (EU). Confronting central tenets of the intergovernmental approach, I suggest that member-state executives act within the limits of bounded rationality and do not always hold clear and fixed preferences. I focus on the large member states Germany, France, and the United Kingdom and identify four institutional mechanisms that support outcomes above the least common denominator: (1) the role of norms that constrain strategic action and frame the negotiations, (2) the empowerment of supranational actors, (3) the decision routines of the Council of the European Union that provide standardized mechanisms for resolving conflicts and induce policy learning and preference changes, and (4) the vertical differentiation within the Council system that can unblock issue-specific controversies. Even if as a result of these techniques EU legal acts contain several flexibilization elements, they can trigger behavioral changes that clearly surpass their regulatory content.

I argue that two types of veto players matter in the choice of monetary institutions: party veto players and subnational governments, which are strong in federal systems but weak in unitary systems. A crucial issue is whether voters can readily identify the manipulation of the economy with party players. A second issue concerns the national party veto player's ability to control either fiscal or monetary policy. In one-party unitary governments identification and control are clear; parties where such governments are common prefer flexible exchange rates and dependent central banks. In multiparty coalition governments in unitary systems, identification is traditionally difficult, and the ability to target benefits to specific constituencies under fiscal policy makes fiscal policy autonomy more attractive for coalition governments. Such governments prefer central banks that are politically independent but that finance government debt. Under federalism, parties that constitute the central government have less control over fiscal policy and they prefer flexible exchange rates. Subnational governments do not support a dependent central bank that gives more power to the central government.

Increased levels of economic openness in the industrial democracies have heightened the potential for intra-party and intra-coalition policy conflicts, hurting the ability of parties to win and retain office. We argue that politicians can use monetary commitments to help manage these conflicts and improve cabinet durability. To determine the political value of these commitments, we test the effect of fixed exchange rates and central bank independence on cabinet durability using a set of 193 cabinets in sixteen parliamentary democracies across the period 1972–98. The results indicate that monetary commitments are associated with higher cabinet durability, particularly for coalition governments. We then use the results of our statistical models to generate expected cabinet durability under alternative institutional configurations. By comparing these expected values, we show that actual monetary reforms in the industrial democracies have helped (or at least not hurt) the ability of political parties to remain in office.

I present a theory of effective diplomacy based on honesty and reputations. I model diplomacy as a form of “cheap talk” and international interactions as an infinitely repeated game in which similar states find themselves in disparate situations over time. The theory explains the success and failure of diplomacy. Reputations for honesty make honest communication possible. A state caught bluffing is less able to communicate and less likely to attain its goals in the near future. These findings imply that domestic audience costs are unnecessary for international signaling and that military strength is not the only way to build credibility.

The contemporary debate on compliance has been framed in terms of two contending perspectives on how best to make states comply with international rules: enforcement or management. Whereas enforcement theorists stress a coercive strategy of monitoring and sanctions, management theorists embrace a problem-solving approach based on capacity building, rule interpretation, and transparency. In this article, I challenge the conception that enforcement and management are competing strategies for achieving compliance. Based on the case of the European Union (EU) and a comparison with other international regimes, I suggest that enforcement and management mechanisms are most effective when combined. The twinning of cooperative and coercive instruments in a “management-enforcement ladder” makes the EU highly successful in combating violations, thus reducing non-compliance to a temporal phenomenon. An examination of regimes in the areas of trade, environment, and human rights lends additional support to this proposition; compliance systems that offer both forms of mechanism are particularly effective in securing rule conformance, whereas systems that only rely on one of the strategies suffer in identifiable ways.

International relations research has paid little attention to why states often spend precious resources building and maintaining domestic institutions in other states. I identify 198 cases of forcible domestic institutional promotion, the most costly form of such interventions, between 1555 and 2000. I note several patterns in the data: these interventions come in three historical clusters; they are carried out by states of several regime types; states engage in the practice repeatedly; target states tend to be undergoing internal instability; states tend to promote their own institutions; and targets tend to be of strategic importance. The most intensive periods of promotion coincide with high transnational ideological tension and high international insecurity. I argue that these two conditions interact: forcible promotion is most likely when great powers (1) need to expand their power; and (2) find that, by imposing on in smaller states those institutions most likely to keep their ideological confreres in power, they can bring those states under their influence. Although in periods of high insecurity domestic variables alone may account for institutional impositions, such impositions may nonetheless extend the promoting states' influence and thereby alter the balance of international power.