RO Keohane and JS Nye, Power and interdependence (Longman New York, 2001).
"We live in an era of interdependence. This vague phrase expresses a poorly understood but widespread feeling that the very nature of world politics is changing" (3).
Some see the traditional state as unraveling and being supplanted by newer actors. Traditionalists call this view "globaloney", according to the authors (3).
"Our task in this book is not to argue either the modernist or traditionalist position. Because our era is marked by both continuity and change, this would be fruitless. Rather, our task is to provide a means fo distilling and blending the wisdom in both positions by developing a coherent theoretical framework for the political analysis of interdependence" (4).
The authors explore how increasing economic interdependence is changing politics. They also are interested in how politics is changing the nature of economic interdependence, and refer to governmental programs and actions designed to create procedures, rules, etc., as international regimes. They wonder how and why these international regimes are alter over time.
They explore the rhetoric of interdependence.
Some believe that interdependence will lessen conflict. This is naïve, and interdependence could just as easily increase conflict. This empirical question aside, the more likely claim is that interdependence will change the nature of conflict. Also, interdependnece is not synonymous with mutual benefit. Cases of mutual dependence, where both do not benefit but both are still wedded represent interdependence. Also, interdependence will change the cost of interaction because it has the potential to restrict autonomy.
The authors explore the distinction between joint gains and how those gains are divided. Economists typically address the former, not the later.
"We must therefore be cautious about the prospect that rising interdependence is creating a brave new world of cooperation to replace the bad old world of international conflict" (10).
Power and Interdependence:
"Power can be thought of as the ability of an actor to get others to do something they otherwise would not do...Power can also be conceived in terms of control over outcomes. In either case, measurement is not simple" (11).
The authors make a distinction between sensitivity and vulnerability. The former is how responsive changes in one country make impacts in other countries. "Sensitivity interdependence is created by interactions within a framework of policies" (12). "Vulnerability can be defined as an actor's liability to suffer costs imposed by external events even after policies have been altered...Vulnerability dependence can be measured only by the costliness of making effective adjustments to a changed environment over a period of time" (13).
International Regime Change:
International regimes are not insignificant, though they may lack serious teeth, ie., enforcement mechanisms.
"International regimes are intermediate factors between the power structure of an international system and the political and economic bargaining that takes place within it. The structure of the system...profoundly affects the nature of the regime...The regime, in turn, affects and to some extent governs the political bargaining and daily decision-making that occurs within the system" (21).
Ch 2: Realism and Complex Interdependence:
"The realist assumptions about world politics can be seen as defining an extreme set of conditions or ideal type. One could also imagine very different conditions. In this chapter, we shall construct another ideal type, the opposite of realism. We call it complex interdependence" (23).
Realists focus on power and international anarchy.
Three factors give rise to complex interdependence: linkage strategies; agenda setting; transnational and transgovernmental relations.
Showing posts with label Interdependence (Economic). Show all posts
Showing posts with label Interdependence (Economic). Show all posts
Wednesday, December 3, 2008
Monday, July 28, 2008
Bennett and Stam: A Universal Test of an Expected Utility Theory of War
Bennett, DS, and AC Stam. 2000. “A Universal Test of an Expected Utility Theory of War.” International Studies Quarterly 44:451-480.
This account explores the expected utility theory of war, a rationalist approach to modeling the interaction of states that stems from the work of Bueno de Mesquita and Lalman. In War and Reason, these authors explore the International Interaction Game (IIG), but only on 707 dyads and only for Europe. These authos attempt to expand upon that approach.
“Rational choice applications to war initiation begin with the assumption that states can be modeled as rational actors who make choices about war and peace by assessing the costs and benefits of alternative actions” (452).
“The IIG posits a series of interactive decision paths that lead to a set of eight different possible outcomes for any dyadic relationship at any given moment. Given adequate data, a prediction can be made of the expected outcome in equilibrium from any given interstate dyadic interaction” (452). It is assumed that this model “holds up” against space and time.
“Overall, our results support the prior findings of Bueno de Mesquita and Lalman that the game-theoretic predictions of the IIG and the empirical measures developed to test them successfully predict behavior” (477).
This account explores the expected utility theory of war, a rationalist approach to modeling the interaction of states that stems from the work of Bueno de Mesquita and Lalman. In War and Reason, these authors explore the International Interaction Game (IIG), but only on 707 dyads and only for Europe. These authos attempt to expand upon that approach.
“Rational choice applications to war initiation begin with the assumption that states can be modeled as rational actors who make choices about war and peace by assessing the costs and benefits of alternative actions” (452).
“The IIG posits a series of interactive decision paths that lead to a set of eight different possible outcomes for any dyadic relationship at any given moment. Given adequate data, a prediction can be made of the expected outcome in equilibrium from any given interstate dyadic interaction” (452). It is assumed that this model “holds up” against space and time.
“Overall, our results support the prior findings of Bueno de Mesquita and Lalman that the game-theoretic predictions of the IIG and the empirical measures developed to test them successfully predict behavior” (477).
Barbieri and Schneider: Globalization and Peace
Barbieri, K, and G Schneider. 1999. “Globalization and Peace: Assessing New Directions in the Study of Trade and Conflict.” Journal of Peace Research 36:387.
This piece explores the connection between globalization, a synonym for economic interdependence, is or is not a driver of peace. The authors claim that this is a disputed topic, and they present a model that shows that increased interdependence in trade can actually promote less peace. “…critics of the ‘trade promotes peace’ hypothesis argue that economic interdependence may have either a negligible or amplifying effect on international conflict” (387).
Four views of the trade/peace debate are presented. These are the same as Barbieri’s earlier piece.
Table I is a very useful overview of a wide variety of works on the trade/conflict debate (391). These are separated into Expected Utility Models, Cooperative Game Models and Non-Cooperative Game Models.
Table II summarizes the empirical studies of the relationship between trade and conflict.
There is not a consensus as to the relationship between trade and conflict. “What are the origins of the contradictory explanations and evidence regarding the impact of trade on interstate relations?...To date, no compelling theoretical rationale has been offered for why empirical findings differ, other than the fact that scholars pursue very different inquiries, with different samples, data, measures or modeling techniques” (399).
This piece explores the connection between globalization, a synonym for economic interdependence, is or is not a driver of peace. The authors claim that this is a disputed topic, and they present a model that shows that increased interdependence in trade can actually promote less peace. “…critics of the ‘trade promotes peace’ hypothesis argue that economic interdependence may have either a negligible or amplifying effect on international conflict” (387).
Four views of the trade/peace debate are presented. These are the same as Barbieri’s earlier piece.
Table I is a very useful overview of a wide variety of works on the trade/conflict debate (391). These are separated into Expected Utility Models, Cooperative Game Models and Non-Cooperative Game Models.
Table II summarizes the empirical studies of the relationship between trade and conflict.
There is not a consensus as to the relationship between trade and conflict. “What are the origins of the contradictory explanations and evidence regarding the impact of trade on interstate relations?...To date, no compelling theoretical rationale has been offered for why empirical findings differ, other than the fact that scholars pursue very different inquiries, with different samples, data, measures or modeling techniques” (399).
Oneal and Russett: Assessing the Liberal Peace with Alternative Specifications
Oneal, JR, and B Russett. 1999. “Assessing the Liberal Peace with Alternative Specifications: Trade Still Reduces Conflict.” Journal of Peace Research 36:423.
This article deals with attacks coming from scholars who claim that trade interdependence does not have pacifying effects. These two claims, specifically from Beck et al. (1998) and Barbieri (1998), address potential effects that were not taken into consideration by the earlier work of Russett and Oneal (and Moaz). The authors find that, by extending the analysis to all dyads, there is not a “relationship between interdependence and peace, but the pacific benefits of trade become evident among the politically relevant dyads (those including a major power, or two contiguous states), among whom the great majority of disputes occur…With these sequential modifications we find increasingly strong support for the liberals’ belief that economic interdependence and democracy have important pacific benefits” (423). “We find no evidence that asymmetric trade increases conflict” (423).
“Beck et al. argue that simple logistic regression analysis is inappropriate for cross-sectional and time-series data because observations are not temporally independent. They suggest a method to correct for this problem and show that, with their technique, the beneficial influence of economic interdependence…becomes statistically insignificant” (423-4). “In this article, we address the concerns of our colleagues by adopting their suggestions for testing liberal theory, although we do not regard all of their proposed procedures as appropriate. Nevertheless, when we adopt their methods, we find that interdependence did significantly reduce the likelihood of conflict during the years 1950-92” (424).
“Beck et al. (1998) propose that researchers using logistic regression remedy temporal dependence in their time-series by creating a variable marks the number of years that have elapsed from the most recent occurrence of a dispute and by generating a spline function of the years of peace” (427).
They use COW data.
“We found that interdependence significantly reduced the likelihood of conflict…among contiguous and major-power pairs” (439).
This article deals with attacks coming from scholars who claim that trade interdependence does not have pacifying effects. These two claims, specifically from Beck et al. (1998) and Barbieri (1998), address potential effects that were not taken into consideration by the earlier work of Russett and Oneal (and Moaz). The authors find that, by extending the analysis to all dyads, there is not a “relationship between interdependence and peace, but the pacific benefits of trade become evident among the politically relevant dyads (those including a major power, or two contiguous states), among whom the great majority of disputes occur…With these sequential modifications we find increasingly strong support for the liberals’ belief that economic interdependence and democracy have important pacific benefits” (423). “We find no evidence that asymmetric trade increases conflict” (423).
“Beck et al. argue that simple logistic regression analysis is inappropriate for cross-sectional and time-series data because observations are not temporally independent. They suggest a method to correct for this problem and show that, with their technique, the beneficial influence of economic interdependence…becomes statistically insignificant” (423-4). “In this article, we address the concerns of our colleagues by adopting their suggestions for testing liberal theory, although we do not regard all of their proposed procedures as appropriate. Nevertheless, when we adopt their methods, we find that interdependence did significantly reduce the likelihood of conflict during the years 1950-92” (424).
“Beck et al. (1998) propose that researchers using logistic regression remedy temporal dependence in their time-series by creating a variable marks the number of years that have elapsed from the most recent occurrence of a dispute and by generating a spline function of the years of peace” (427).
They use COW data.
“We found that interdependence significantly reduced the likelihood of conflict…among contiguous and major-power pairs” (439).
Oneal and Russett: The Classical Liberals were Right
Oneal, JR, and BM Russett. 1997. “The Classical Liberals Were Right: Democracy, Interdependence, and Conflict, 1950-1985.” International Studies Quarterly 41:267-294.
(23).
“The liberals believed that economic interdependence, as well as democracy, would reduce the incidence of interstate conflict. In this article, we test both their economic and their political prescriptions for peace, suing pooled-regression analysis of politically relevant dyads for the Cold War era. We find that the pacific benefits of trade, both total and dyadic, have not been sufficiently appreciated” (267).
This article represents an expansion on earlier work by Maoz, Russett and Oneal. This approach is more theoretically grounded in the relationship between regimes and trade affect conflict. It also uses expanded data sets. Finally, it explores the transition from one type of regime to another.
There is a review of the literature beginning with classical liberalism and building towards democratic peace theory. There is a nice overview of democratic peace theory and it would be useful to revisit this article to explore that. The literature review then builds to an account of trade interconnectedness as being a mitigating factor for conflict and how this is not entirely taken into consideration by democratic peace theories, though it should, because it stems naturally from the classic liberalism literature. There have been analyses of the effect of trade interdependence on peace, but the findings have been largely unclear, and there is still a substantial divide between liberal and realist thought on the matter. The direction of causality is also important to take into consideration: before the 19th century, it was not uncommon for nations at war to continue trading. That has since changed, and, if one is not careful to examine the data thoroughly, the decline of trade as a result of conflict could be misinterpreted as being causally connected in different ways.
They use dyads involving at least one great power from the Correlates of War database. They examine the years 1950-85. Use MID data from COW: “A militarized dispute is an international interaction involving threats, displays, or actual uses of military force; it must be explicit, overt, not accidental, and government sanctioned” (273). They have a relatively standard set of independent variables (economic interdependence, democracy, political change, alliances, economic growth, contiguity, etc.).
(23).
“The liberals believed that economic interdependence, as well as democracy, would reduce the incidence of interstate conflict. In this article, we test both their economic and their political prescriptions for peace, suing pooled-regression analysis of politically relevant dyads for the Cold War era. We find that the pacific benefits of trade, both total and dyadic, have not been sufficiently appreciated” (267).
This article represents an expansion on earlier work by Maoz, Russett and Oneal. This approach is more theoretically grounded in the relationship between regimes and trade affect conflict. It also uses expanded data sets. Finally, it explores the transition from one type of regime to another.
There is a review of the literature beginning with classical liberalism and building towards democratic peace theory. There is a nice overview of democratic peace theory and it would be useful to revisit this article to explore that. The literature review then builds to an account of trade interconnectedness as being a mitigating factor for conflict and how this is not entirely taken into consideration by democratic peace theories, though it should, because it stems naturally from the classic liberalism literature. There have been analyses of the effect of trade interdependence on peace, but the findings have been largely unclear, and there is still a substantial divide between liberal and realist thought on the matter. The direction of causality is also important to take into consideration: before the 19th century, it was not uncommon for nations at war to continue trading. That has since changed, and, if one is not careful to examine the data thoroughly, the decline of trade as a result of conflict could be misinterpreted as being causally connected in different ways.
They use dyads involving at least one great power from the Correlates of War database. They examine the years 1950-85. Use MID data from COW: “A militarized dispute is an international interaction involving threats, displays, or actual uses of military force; it must be explicit, overt, not accidental, and government sanctioned” (273). They have a relatively standard set of independent variables (economic interdependence, democracy, political change, alliances, economic growth, contiguity, etc.).
Oneal, Oneal, Maoz and Russett: The Liberal Peace
Oneal, JR, FH Oneal, Z Maoz, and B Russett. 1996. “The Liberal Peace: Interdependence, Democracy, and International Conflict, 1950-85.” Journal of Peace Research 33:11.
Classic liberals believed that interdependence rooted in trade as well as similar political systems based on majority rule would lead to increased levels of international peace. This article uses economic interdependence variables to augment the democratic peace studies of Maoz and Russett (1993). “Our logistic regression analyses of politically relevant dyads…indicate that the benefits of the liberals’ economic program have not been sufficiently appreciated. Trade is a powerful influence for peace, especially among the war-prone, contiguous pairs of states…international conflict is less likely when external economic relations are important, executives are constrained, and societies are governed by non-violent norms of conflict resolution” (11).
There is initially a very thorough review of literature relating to trade, liberalism, peace and international interdependence.
The research operationalization follows closely that of Maoz and Russett (1993) and is an attempt to quantify the variables identified by Kant. They look at “major powers” as defined by the Correlates of War project. Use MID data for dependent variable and a variety of independent variables. “Our logistic regression analyses of politically relevant dyads…indicate that the pacific benefits of interdependence have not been sufficiently appreciated. This is especially apparent in the analyses of contiguous pairs of states, where the potential for conflict is greatest. Countries that share a border have more issues, particularly territorial, over which to fight; and their proximity makes armed conflict feasible. Economic interdependence significantly counteracts these influences” (23).
Classic liberals believed that interdependence rooted in trade as well as similar political systems based on majority rule would lead to increased levels of international peace. This article uses economic interdependence variables to augment the democratic peace studies of Maoz and Russett (1993). “Our logistic regression analyses of politically relevant dyads…indicate that the benefits of the liberals’ economic program have not been sufficiently appreciated. Trade is a powerful influence for peace, especially among the war-prone, contiguous pairs of states…international conflict is less likely when external economic relations are important, executives are constrained, and societies are governed by non-violent norms of conflict resolution” (11).
There is initially a very thorough review of literature relating to trade, liberalism, peace and international interdependence.
The research operationalization follows closely that of Maoz and Russett (1993) and is an attempt to quantify the variables identified by Kant. They look at “major powers” as defined by the Correlates of War project. Use MID data for dependent variable and a variety of independent variables. “Our logistic regression analyses of politically relevant dyads…indicate that the pacific benefits of interdependence have not been sufficiently appreciated. This is especially apparent in the analyses of contiguous pairs of states, where the potential for conflict is greatest. Countries that share a border have more issues, particularly territorial, over which to fight; and their proximity makes armed conflict feasible. Economic interdependence significantly counteracts these influences” (23).
Gartzke et al.: Investing in Peace
Gartzke, E, Q Li, and C Boehmer. 2003. “Investing in the Peace: Economic Interdependence and International Conflict.” International Organization 55:391-438.
“Research appears to substantiate the liberal conviction that trade fosters global peace” (391). These studies are limited. There is an overemphasis on trade, while other transfers are quantitatively larger. “Second, the manner in which economics is said to inhibit conflict behavior is implausible in light of new analytical insights about the causes of war” (391).
“Our quantities results who that capital interdependence contributes to peace independent of the effects of trade, democracy, interest, and other variables (391).
“We begin with a theory of disputes. A valid explanation for the effect of economics on peace must be placed in the context of an account of why most states occasionally resort to military violence” (392).
The authors explore different kinds of interdependence, monetary, trade, democratic, capital, and thoroughly explore the literature.
They use MID data.
Dismisses Barbieri’s findings as being flawed because of the author’s metric for determining economic interdependence: trade share.
“We have reviewed arguments for the effect of economic interdependence on peace. We show that existing accounts do not adequately explain why liberal economies are less likely to fight, but that a signaling argument is consistent with the observation of a liberal peace. We also expand interdependence to include financial and monetary integration, offering a set of variables that measure these processes” (418). They key finding is that increased interdependence reduces the vagueness of information transfers in bargaining between states.
“Research appears to substantiate the liberal conviction that trade fosters global peace” (391). These studies are limited. There is an overemphasis on trade, while other transfers are quantitatively larger. “Second, the manner in which economics is said to inhibit conflict behavior is implausible in light of new analytical insights about the causes of war” (391).
“Our quantities results who that capital interdependence contributes to peace independent of the effects of trade, democracy, interest, and other variables (391).
“We begin with a theory of disputes. A valid explanation for the effect of economics on peace must be placed in the context of an account of why most states occasionally resort to military violence” (392).
The authors explore different kinds of interdependence, monetary, trade, democratic, capital, and thoroughly explore the literature.
They use MID data.
Dismisses Barbieri’s findings as being flawed because of the author’s metric for determining economic interdependence: trade share.
“We have reviewed arguments for the effect of economic interdependence on peace. We show that existing accounts do not adequately explain why liberal economies are less likely to fight, but that a signaling argument is consistent with the observation of a liberal peace. We also expand interdependence to include financial and monetary integration, offering a set of variables that measure these processes” (418). They key finding is that increased interdependence reduces the vagueness of information transfers in bargaining between states.
Barbieri: Economic Interdependence: A Path to Peace or a Source of Interstate Conflict?
Barbieri, K. 1996. “Economic Interdependence: A Path to Peace or a Source of Interstate Conflict?.” Journal of Peace Research 33:29.
“Four propositions about the trade-conflict relationship are easily identified among a broad group of theorists” (30). These are the liberal argument linking trade to peace, the neo-Marxist argument that symmetry in trade promotes peace, the (realist) idea that trade promotes conflict and the final belief that the two variables are not related.
These four positions are explored.
Of interest: “Interdependence generally implies relations of mutual need and, by extension, mutual vulnerability between actors, while dependence denotes asymmetrical relations. A further distinction is made by Keohane and Nye (1977, pp. 8-9), between interdependence and interconnectedness. Interconnectedness merely represents weak linkages among states incapable of having a significant influence eon interstate relations; while interdependence entails a vulnerability and sensitivity not found in less extensive linkages” (33).
Barbieri then puts forth 4 hypotheses that deal with the degree of economic salience in a trading relationship as well as the symmetry.
Uses Mitiliarized Interstate Dispute Dataset.
Thorough review of the literature on the operationalization of interdependence, and the difficulties in identifying interdependence.
The article finds that there is an interesting, curvilinear relationship between interdependence and MID conflict: if there is asymmetrical conflict, the chance of conflict is high. If there is a very high degree of symmetrical interdependence, there is also a very high degree of conflict.
“Four propositions about the trade-conflict relationship are easily identified among a broad group of theorists” (30). These are the liberal argument linking trade to peace, the neo-Marxist argument that symmetry in trade promotes peace, the (realist) idea that trade promotes conflict and the final belief that the two variables are not related.
These four positions are explored.
Of interest: “Interdependence generally implies relations of mutual need and, by extension, mutual vulnerability between actors, while dependence denotes asymmetrical relations. A further distinction is made by Keohane and Nye (1977, pp. 8-9), between interdependence and interconnectedness. Interconnectedness merely represents weak linkages among states incapable of having a significant influence eon interstate relations; while interdependence entails a vulnerability and sensitivity not found in less extensive linkages” (33).
Barbieri then puts forth 4 hypotheses that deal with the degree of economic salience in a trading relationship as well as the symmetry.
Uses Mitiliarized Interstate Dispute Dataset.
Thorough review of the literature on the operationalization of interdependence, and the difficulties in identifying interdependence.
The article finds that there is an interesting, curvilinear relationship between interdependence and MID conflict: if there is asymmetrical conflict, the chance of conflict is high. If there is a very high degree of symmetrical interdependence, there is also a very high degree of conflict.
Copeland: Economic Interdependence and War
Copeland, DC. 1996. “Economic Interdependence and War: A Theory of Trade Expectations.” International Security 20:5-41.
“The prolonged debate between realists and liberals on the causes of war has been largely a debate about the relative salience of different causal variables. Realists stress such factors as relative power, while liberals focus on the absence or presence of collective security regimes and the pervasiveness of democratic communities” (5).
“Liberals argue that economic interdependence lowers the likelihood of war by increasing the value of trading over the alternative of aggression…Realists dismiss the liberal argument, arguing that high interdependence increases rather than decreases the probability of war” (5-6). Different periods in time can be used as supports for either theory, and the results appear to be problematically correlated.
Copeland presents a theory of trade relations that tries to overcome these problems. “The theory starts b y clarifying the notion of economic interdependence, fusing the liberal insight that the benefits of trade give states an incentive to avoid war with the realist view that the potential costs of being cut off can push states to war to secure vital goods. The total of the benefits and potential costs of trade versus autarchy reveals the true level of dependence a state faces, for if trade is completely severed, the state not only loses the gains from trade but also suffers the costs of adjusting its economy to the new situation” (6). “Trade expectations theory introduces a new causal variable, the expectatt4ions of future trade, examining its impact on the overall expected value of the trading option if a state decides to forgo war” (6). “Levels of interdependence and expectations of future trade, considered simultaneously, lead to new predictions” (7). “Interdependence can foster peace, as liberals argue, but this will only be so when states expect that trade levels will be high into the foreseeable future” (7).
The liberal argument that free trade incentivises nations towards making peaceful decisions was first made popular in the 1850s by Richard Cobden. “Realists turn the liberal argument on its head, arguing that economic interdependence not only fails to promote peace, but in fact heightens the likelihood of war” (10). This realist logic is most clearly made by Waltz and Mearsheimer, though it has its roots in mercantilist thinking of the 1800s. “Mercantilists saw states as locked in a competition for relative power and for the wealth that underpins that power” (11).
“While the liberal and the realist arguments display critical differences, they possess one important similarity: the causal logic of both perspectives is founded on an individual state’s decision-making process. That is, while the two camps freely use the term ‘interdependence,’ both derive predictions from how particular decision-making units—states—deal with their own specific dependence” (12).
“The main difference between liberals and realists has to do with their emphasis on the benefits versus the costs of interdependence” (12).
“…these theories [realism and liberalis] lack an understanding of how rational decision-makers incorporate the future trading environment into their choice between peace and war” (16).
“For the purposes of forging strong theories, however, trading patterns cannot be simply assumed a priori to match the stipulations of either liberalism or of realism. Trade levels fluctuate significantly over time, both for the system as a whole and particularly between specific trading partners, as the last two centuries demonstrate” (16-7).
“From consideration of the expectations-of-future-trade variable along with a state’s level of dependence, one can derive a consistent deductive theory of state decision-making showing the conditions under which high interdependence will lead to peace or to war” (17).
On page 24 there is a very nice overview of the difference between liberal, realist and trade expectations theory.
The theory is then applied to Germany and WWI and Germany and WWII.
“The prolonged debate between realists and liberals on the causes of war has been largely a debate about the relative salience of different causal variables. Realists stress such factors as relative power, while liberals focus on the absence or presence of collective security regimes and the pervasiveness of democratic communities” (5).
“Liberals argue that economic interdependence lowers the likelihood of war by increasing the value of trading over the alternative of aggression…Realists dismiss the liberal argument, arguing that high interdependence increases rather than decreases the probability of war” (5-6). Different periods in time can be used as supports for either theory, and the results appear to be problematically correlated.
Copeland presents a theory of trade relations that tries to overcome these problems. “The theory starts b y clarifying the notion of economic interdependence, fusing the liberal insight that the benefits of trade give states an incentive to avoid war with the realist view that the potential costs of being cut off can push states to war to secure vital goods. The total of the benefits and potential costs of trade versus autarchy reveals the true level of dependence a state faces, for if trade is completely severed, the state not only loses the gains from trade but also suffers the costs of adjusting its economy to the new situation” (6). “Trade expectations theory introduces a new causal variable, the expectatt4ions of future trade, examining its impact on the overall expected value of the trading option if a state decides to forgo war” (6). “Levels of interdependence and expectations of future trade, considered simultaneously, lead to new predictions” (7). “Interdependence can foster peace, as liberals argue, but this will only be so when states expect that trade levels will be high into the foreseeable future” (7).
The liberal argument that free trade incentivises nations towards making peaceful decisions was first made popular in the 1850s by Richard Cobden. “Realists turn the liberal argument on its head, arguing that economic interdependence not only fails to promote peace, but in fact heightens the likelihood of war” (10). This realist logic is most clearly made by Waltz and Mearsheimer, though it has its roots in mercantilist thinking of the 1800s. “Mercantilists saw states as locked in a competition for relative power and for the wealth that underpins that power” (11).
“While the liberal and the realist arguments display critical differences, they possess one important similarity: the causal logic of both perspectives is founded on an individual state’s decision-making process. That is, while the two camps freely use the term ‘interdependence,’ both derive predictions from how particular decision-making units—states—deal with their own specific dependence” (12).
“The main difference between liberals and realists has to do with their emphasis on the benefits versus the costs of interdependence” (12).
“…these theories [realism and liberalis] lack an understanding of how rational decision-makers incorporate the future trading environment into their choice between peace and war” (16).
“For the purposes of forging strong theories, however, trading patterns cannot be simply assumed a priori to match the stipulations of either liberalism or of realism. Trade levels fluctuate significantly over time, both for the system as a whole and particularly between specific trading partners, as the last two centuries demonstrate” (16-7).
“From consideration of the expectations-of-future-trade variable along with a state’s level of dependence, one can derive a consistent deductive theory of state decision-making showing the conditions under which high interdependence will lead to peace or to war” (17).
On page 24 there is a very nice overview of the difference between liberal, realist and trade expectations theory.
The theory is then applied to Germany and WWI and Germany and WWII.
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