Liberalism: markets and interdependencies
Petr Ocelík
ESSn4007 / MEBn4001
Outline
• Liberalism in International Relations
• Liberalism: agency and structure
• A complex interdependence
Liberalism in IR
• International system (IS) is anarchically organized
• But, the effects of anarchy are mediated by institutions and interdependencies
• The IS consists of national states and non-state actors such as firms or NGOs
• Conflict is not an inherent feature of the IS
• The domestic level processes are important for our understanding of
international politics (“bottom-up” perspective)
Economic theories’ influence
• Liberalism has been heavily influenced by economic theory
• Neoclassical economics:
• market mechanism
• Neoinstitutional economics:
• institutional context of market functioning (e.g. transaction costs)
• direct influence on neoliberal institutionalism (Keohane & Nye)
Agency
• Agency: concept of a social actor
• Actor: an entity that is able to make decisions
• Liberalism holds rather optimistic view of agency
• Two variants:
• Classical Liberalism: assumption of an essential harmony of interests
• Neo-variants of Liberalism: agency based on rational actor model where
actors maximize their utility
Agency: methodological individualism
• Neo-variants of Liberalism are based on methodological individualism
(MI)
• MI assumes that structures result from actors’ interactions and
stresses the individual (actor) level of explanation
• → The emergence of complex higher-level phenomena, such as a
segregation or war, can be explained by actors’ interactions
The Schelling’s segregation model
• In 1971, Thomas Schelling developed an agent-based model
to explain emergence of segregation
• The model is populated by two groups of agents
• Each agent seeks a position with a minimum share of the
neighboring agents is from the same group
• Each agent scans the adjacent patches, if the criteria of the
minimum share is not achieved, the agent moves randomly
• When all agents find satisfactory position, they stop moving =
equilibrium is achieved
Structure: a market
• Structure: a context that enables and constraints actions of actors
• Neoclassical economics: a market mechanism
• Aggregates actors’ interests
• Effectively distributes their resources
• Provides information (signals) about the environment
Supply / demand
Structure: a complex interdependence
• Neoliberal institutionalism: a complex of institutions
and interdependencies
• Complex interdependence:
• Weakened state-centrism: trans-/national and governmental relations
• Borders between international/domestic and high/low politics are eroding
• States’ behavior is influenced by international regimes and interdependencies
Natural gas flows (2001)
Structure: international regime
• International regime: an intentionally created institution that
establishes norms and principles according to which actors’
expectations about a particular issue converge
• Regimes are often “complemented” by international organizations
• International regimes have a (semi)autonomous status
• Functions of regimes (Keohane 1982):
• Convergence of expectations
• Reduction of uncertainties
• Reduction of transaction costs
Structure: interdependence
Structure: interdependence
Structure: interdependence
(inter)dependence vs. (inter)dependency
• (inter)dependence ~ (mutual) bilaterally defined relation
• E.g.: import dependence, security dependence, capital dependence etc.
• → issue specific, narrowly defined relations
• dependency ~ structurally defined relation
• A complex relationship between center and (semi)periphery
• → a broad pattern of relations that maintains underdevelopment of periphery
Frequency of the terms in Google corpus
Structure: an interdependence
• Interdependence: a relation of mutual, typically,
asymmetrical dependence that, when disrupted,
brings significant costs and constraints to both
parties.
→ It is not possible to a priori say whether the costs
of disruption overweight the benefits.
→ The “strategic commodity” per se does not exist its
importance is given by cost/benefit calculation.
Interdependence: sensitivity
• Sensitivity: given by an (in)ability to decrease externally imposed
costs before (or without) adaptation measures are implemented
(1) How high are the costs?
(2) How quickly the costs come?
• What could be examples of regulation or policy responses that
decrease sensitivity?
Interdependence: sensitivity
• Sensitivity: given by an (in)ability to decrease externally imposed
costs before (or without) adaptation measures are implemented
(1) How high are the costs?
(2) How quickly the costs come?
• E.g.: utilization of storage capacities, spot market trade, activation of
diversification contracts etc.
Interdependence: sensitivity
Interdependence: vulnerability
• Vulnerability: given by an (in)ability to decrease externally imposed
costs after adaptation measures (AM) are implemented
(1) How high are the costs after the AM are implemented?
(2) How quickly the costs decrease after the AM are implemented?
• What could be examples of regulation or policy responses that
decrease vulnerability?
Interdependence: vulnerability
• Vulnerability: given by an (in)ability to decrease externally imposed
costs after adaptation measures (AM) are implemented
(1) How high are the costs after the AM are implemented?
(2) How quickly the costs decrease after the AM are implemented?
• E.g.: restrictions of energy consumption, investments in
diversification and alternative sources of energy, restructuring of
economy etc.
Interdependence: vulnerability