Friday, March 17, 2006

Short Review of Neoliberal Institutionalism

Neoliberal Institutionalism: A Summary and Critique


In the study of international relations, the concept of power has been given preeminence. E.H. Carr, Hans Morgenthau and Kenneth Waltz argued that power was center stage in any discussion of state interaction. The authors I discuss — Robert Keohane, Stephen Krasner, and John Ruggie — are no different. However, these authors situate their discussion of power within the rubric of neoliberal institutionalism. In particular, they explore the idea of cooperation “after hegemony,” whereas powerful states seek cooperation as a means to attain and restore power. Notwithstanding nuance, each author also argues that states and regimes follow rational-egoist logic, and are not guided by some moral compass. This paper fleshes out in more detail the institutional (or regime) framework, and demonstrates how this approach was an improvement over previous “ideal-types,” and Realist notions. A second concern of this paper, however, is to analyze the shortfalls of the rational-egoist logic Keohane, Krasner and Ruggie employ. Although Keohane and Krasner discussed the concept of empathetic interdependence and the problem of lags at length, I suggest that these issues might undermine the rational-egoist logic as a whole.

Cooperation and Regimes: Keohane, Krasner and Ruggie

Most of the arguments about neoliberal institutions are centered on Robert Keohane’s seminal work, After Hegemony. For Keohane, he wondered about a world of cooperation “after hegemony,” where there were no hegemonic superpowers, and the international environment consisted of many regimes and institutions (Keohane 1984: 49). He surmised that although cooperation was hard, and could easily lead to situations of discord,[1] regimes and institutions could benefit states by incorporating cooperative strategies. They also had their own conception of what cooperation and regimes were. By cooperation, they meant a process whereby states, “adjust their behavior to the actual or anticipated preferences of others, through a process of policy coordination” (Keohane 1984: 51). By regimes, they meant “a set of mutual expectations, rules and regulations, plans, organizational energies and financial commitments, which have been accepted by a group of states” (Ruggie as cited in Keohane 1984: 57). At first glance, this might appear to be what E.H. Carr would call “utopian” thinking, but neoliberal institutionalists are not utopian in the slightest. Rather, they argue that states pursue such policies because it is usually in the best interest of all involved to do so.[2]

For Keohane, Krasner and Ruggie, they all are attracted to rational-egoist logic, or what some might call rational choice institutionalism. Rational choice institutionalists accept that actors, in this case states, seek to do what is in their best interest. But unlike overly atomistic conceptions of rational choice logic, rational choice institutionalists argue that actors’ choices are limited by a number of factors: partial information, bounded rationality, partial knowledge and institutional constraints being just four (Shepsle 1989: 138-139). In their discussion of rational-egoism, the authors made clear their distrust of these “atomistic” notions. As Keohane acknowledged, one cannot observe state behavior as “a set of discrete, isolated acts,” but that they must be understood in a larger “pattern of cooperation” (Keohane 1984: 56). And as Ruggie pointed out, this pattern of cooperation cannot be understood in some “generic sense” but in a sense where institutions are taken seriously (Ruggie 1992: 597).[3] Moreover, rational-egoism is not based on short-term calculations or temporary arrangements. Regimes are seen as enduring creatures, not based on one-shot ventures among states (Krasner 1982: 186-167). The rational-egoist logic they employ also lodges a critique of the behavioral malady that plagued political science in the 1960s and 1970s. Whereas some international relations theorists wished to measure power based on quality of weapons, or wealth, these authors thought this was a behaviorist mistake (Keohane 1984: 20).[4] Put simply, observing individual action tells one nothing of the system at large.

Although the neoliberal institutional framework suggests that power is important, and that states do things in their self-interest, one should not necessarily confuse the Realist and neorealist camp with neoliberalism. For E.H. Carr, the process of cooperation was doomed to failure, and his pessimism about the League of Nations was prevalent in his, Twenty Years’ Crisis (Carr 1939: 52). In Kenneth Waltz’s, Theory of International Politics, Waltz argued that in an anarchic world order, bipolarity stabilizes, or balances power, and that cooperation was equally difficult (Waltz 1979: 171). In fact, multiple states can threaten stability. Waltz also makes the faulty distinction that wealth and power can be separated, a claim neoliberals think is bunk. But the main point of contention between neoliberals and realists is the concept of power with respect to an institutional set-up. “What distinguishes my argument from structural realism,” Keohane writes, “is my emphasis on the effects of international institutions and practices of state behavior.” Like political theorist Jeffrey Isaak suggested, Waltz might have made a “first face” of power mistake, observing what states did, and not necessarily how power existed within a systemic, international environment.[5] For Keohane and others, their point-of-departure was at the systemic level (Keohane 1984: 26).

A Critique of Rational-Egoism: Some Methodological Issues

Thus far, the paper has been kind to the neoliberal institutional model in both its methodology and substance. However, two issues in particular seem to question the logic of rational-egoism with regard to regimes and institutions. First, is Keohane’s example of empathetic interdependence in international politics. Second, is Krasner’s discussion of lags within regimes. By empathetic interdependence, Keohane calls attention to situations where states do things that seemingly contradict the notion of self-interest and rational-egoist thinking. For example, although some instances of governmental aid can account for self-interest, some aid and programs given to others defies self-interest (Keohane 1984: 123). With the example of lags, Krasner notes that often times power and interest might change, but regimes do not (Krasner 1982: 501). In this case, previous customs and rules prevail, because that’s the “way the did it in the past” (Krasner 1982: 502).

Empathy and the problem of lags would seem to spell trouble for the rational-egoist methodology, but Keohane and Krasner brush away these critiques. With regards to empathy, Keohane has asserted that reputation plays a role in state response. Although some rules would have no seeming validity, to violate them could result in severe reputational repercussions. Lastly, as Keohane is quick to point out, what appears to be empathy might actually be rational, self-interest (Keohane 1984: 132). Krasner, although troubled at how lags could destabilize regimes, believes that lags ultimately occur infrequently, and rarely occur at such duration to render regimes meaningless (Krasner 1982: 501). Of course, if regimes act empathetically too often, and lags occur too much, Keohane and Krasner have serious problems with their methodology. Take for instance the example provided by John Meyer and Brian Rowan.

While Meyer and Rowan are best known for their work in organizational theory, their theory about “institutionalized myths” might apply in the cases of empathy and lags. Meyer and Rowan argue that institutions or regimes have formal rules, customs and norms, but rarely are these rules what they appear to be. Instead, although an organization might have some sort of formal blueprint for what ought to happen, rarely does this blueprint match onto the inner-workings of the organization. This mismatch creates “gaps” in the reality of institutional goings-on. The ultimate lesson one can learn from Meyer and Rowan is this — the institution and what it does becomes mythological (Meyer and Rowan 1982: 60). For example, one perceives that hospitals or schools are good things without ever investigating what it is hospitals or schools really do (Meyer and Rowan 1982: 54). Moreover, one might support giving aid to these institutions based on these perceptions.

Meyer and Rowan present Keohane and Krasner with an interesting dilemma. If rational-egoists make decisions based on institutionalized myths, how rational are their decisions? Keohane, as he did throughout After Hegemony, might at some level of abstraction, be able to make a rational-egoist claim based on institutionalized myth. But I do not think it is that simple. For example, regimes giving international aid might appear to have self-interested goals at hand — advancing capitalism or protecting natural resources — but under closer investigation, it is not always clear why regimes might give aid, especially when giving aid could have disastrous results.[6] As Norman Angell explained some eighty years ago, attempts at global economic power fail more than work (Angell 1933: 74). Second, in a world of bounded rationality, the myths could become “shortcuts” on how one should act. For Krasner, institutional myths might create a different type of problem. Krasner argued that lags had the potential to hurt regimes and their durability for cooperation. But for Meyer and Rowan, myths actually reinforce regimes and institutions. The more we perceive certain actions to be good, like giving aid, and others to be bad, like not giving aid, institutions endure. These conflicts between rules and norms that Krasner was so worried about thus mean very little in the end.

The extent to which regimes act on myths would be hard to detect. For one, no regime would admit they acted so irrationally. But secondly, it would be hard to imagine programs of cooperation enduring without respect to shared norms, rules, decision-making procedures, and organizational plans at some point in the mutually beneficial relationship. While I am not naïve enough to think that morality is run amok in the affairs of regimes, events happen that defy rational-egoist logic. Institutionalized myths might fill these gaps.


The neoliberal institutional model gave IR theorists another lens through which to examine politics. While it agrees with some tenants of the realist and neorealist camp — that power is important and actors do things in their own interest — they raise a larger question about how, although infrequent, cooperation happens in the world. As well, these IR theorists argue that actor’s choices are also constrained by a larger international system. Through partial information, partial knowledge, bounded rationality, and other institutional constraints, the policy of cooperation is difficult, but possible. From their rational-egoist logic, however, flowed two concerns: the situation of empathetic interdependence and the problem of lags. I suggest that these two concerns might undermine the rational-egoist method that regimes employ to achieve cooperation. Taking a page from Meyer and Rowan, I argue that regimes might actually engage in a process of “institutionalized myths,” whereby they make decisions based on their perceptions of the international world. Rarely do these assumptions match on to the blueprint of reality. Nonetheless, neoliberal institutionalism gives students and scholars a more qualified analysis of age-old international relations problems. For this they should be complemented.

[1] Discord comes about when actors do not “adjust their policies to…other’s objectives (Keohane 52).

[2] Keohane and Krasner are quick to point out that this is not Adam Smith’s laissez-faire logic at work, where actors pursue self-interest for the sake of the common good. As Keohane notes: “The argument here for the importance of international regimes does not depend on smuggling in assumptions about altruism and irrationality” (29).

[3] Ruggie was especially concerned with the rise of multilateralism after the fall of the Soviet Union in 1991.

[4] Behaviorism, as Shepsle noted, used “precise observation, counting and measuring where possible,” to solve political questions (See Shepsle, 1989).

[5] By “first face” argument, I am referring to Robert Dahl’s conception of power put forth in (1961) Who Governs? Isaak sought to correct this “behaviorist” tendency by looking at the “structure” of power relationships.

[6] This is possibly the case in Rwanda, where the IMF and the world ignored the ethnic tensions between Hutu and Tutsi in the 1990s.