Global Economy
Semester 2
(1): International institutions
and their role in the global
economy
What they are?
What they do?
Which are them?
Criticism
What are international institutions?
Formal institutions
Legal system
Political system
Economic system
Education system
Health care system
Informal institutions
Culture: morals, customs, norms
Approaches to emergence of institutions
1. Efficiency: people will choose least costly way of transacting
2. Accidental: institutions result from random/unpredictable
influences
3. Cultural: societies/groups/religions hold beliefs that determine
institutional rules
4. Conflict: different beliefs create conflict which determines
institutional development
What are international institutions?
An institutional agreement between members of an international
system in order to achieve objectives according to systematic
conditions, reflecting attributes, aspirations + concerns of its members
o Elements: institutional agreement, international member
states, international system/law, serves a purpose
o Form the basis of global governance
1
,Global Economy
Global governance
Totality of institutions, policies, norms, procedures + initiatives which
states + their citizens try to bring more predictability, stability and
order to their responses to transnational challenges
Implies absence of central authority + need for cooperation
Demand for global governance
Functions of the state
1. Military defence
2. Preventing physical violence among citizens
3. Infrastructure
4. Relief from + protection against national disasters + disease
5. Education
6. Poverty relief
7. Securing property rights
Why do states fail to provide these functions? Role of
global institutions
Interdependence: co-ordination
Resource deficiency: assistance + substitution
Unwillingness
Free riding: monitoring + sanctioning
Supply of global governance
3 dimensions to classify international institutions
(Koenig-Archibugi 2003)
1. Publicness: nature of active participants in governance
arrangement e.g. private actors (NGOs) or governments
2. Delegation: nature of the functions that can be performed by the
institution
o Scope: functions delegated to organisations – legislative
delegation, executive delegation and judicial delegation
o Independence: level of autonomy + discretion institution has
All policies decided through negotiation and implemented by
participating actors e.g. IPCC vs. legislative/exec/judicial
functions performed by autonomous supranational agencies
e.g. EU
3. Inclusiveness: refers to share of individuals with decisional power
o Access: share of actors affected by rule/policy that participate
actively in determining its content
o Weight: how equally influence is distributed among active
participants
2
,Global Economy
IMF
G7: Group of Seven
3
, Global Economy
4 main functions of International Organisations
Authorising the use of force e.g. UNSC, NATO
Manipulating domestic politics e.g. membership to UNHRC or CRC
Developing bureaucratic expertise e.g. IMF + WTO
Adjusting disputes e.g. ICJ + ICC
A game theoretic approach
to the role of international
institutions
Why states comply with their cooperative agreements?
How international agreements are created?
How should states cooperate?
3 generations of theoretical models to understand
international cooperation and international institutions
1st Simple 2 x 2 models to understand why states need
generation to cooperate + why they comply with their
cooperative agreements
2nd Tailor made models to address neorealist-neoliberal
generation debate
o Main questions: how international agreements
are created? How domestic political division
affect international cooperation?
Introduced domestic politics + bargaining
3rd Increasingly refined models to answer more specific
generation questions. Looks at effect of international institutions
on domestic political power + bargaining process that
shapes characteristics of an agreement
Distribution: which countries gain more from
international negotiations + why?
Depth: are deeper agreements more effective?
Flexibility: when should rules be rigid + when
should they be flexible to allow some cheating?
Multilateralism: how does size of membership of
agreement affect depth of cooperation?
4
Semester 2
(1): International institutions
and their role in the global
economy
What they are?
What they do?
Which are them?
Criticism
What are international institutions?
Formal institutions
Legal system
Political system
Economic system
Education system
Health care system
Informal institutions
Culture: morals, customs, norms
Approaches to emergence of institutions
1. Efficiency: people will choose least costly way of transacting
2. Accidental: institutions result from random/unpredictable
influences
3. Cultural: societies/groups/religions hold beliefs that determine
institutional rules
4. Conflict: different beliefs create conflict which determines
institutional development
What are international institutions?
An institutional agreement between members of an international
system in order to achieve objectives according to systematic
conditions, reflecting attributes, aspirations + concerns of its members
o Elements: institutional agreement, international member
states, international system/law, serves a purpose
o Form the basis of global governance
1
,Global Economy
Global governance
Totality of institutions, policies, norms, procedures + initiatives which
states + their citizens try to bring more predictability, stability and
order to their responses to transnational challenges
Implies absence of central authority + need for cooperation
Demand for global governance
Functions of the state
1. Military defence
2. Preventing physical violence among citizens
3. Infrastructure
4. Relief from + protection against national disasters + disease
5. Education
6. Poverty relief
7. Securing property rights
Why do states fail to provide these functions? Role of
global institutions
Interdependence: co-ordination
Resource deficiency: assistance + substitution
Unwillingness
Free riding: monitoring + sanctioning
Supply of global governance
3 dimensions to classify international institutions
(Koenig-Archibugi 2003)
1. Publicness: nature of active participants in governance
arrangement e.g. private actors (NGOs) or governments
2. Delegation: nature of the functions that can be performed by the
institution
o Scope: functions delegated to organisations – legislative
delegation, executive delegation and judicial delegation
o Independence: level of autonomy + discretion institution has
All policies decided through negotiation and implemented by
participating actors e.g. IPCC vs. legislative/exec/judicial
functions performed by autonomous supranational agencies
e.g. EU
3. Inclusiveness: refers to share of individuals with decisional power
o Access: share of actors affected by rule/policy that participate
actively in determining its content
o Weight: how equally influence is distributed among active
participants
2
,Global Economy
IMF
G7: Group of Seven
3
, Global Economy
4 main functions of International Organisations
Authorising the use of force e.g. UNSC, NATO
Manipulating domestic politics e.g. membership to UNHRC or CRC
Developing bureaucratic expertise e.g. IMF + WTO
Adjusting disputes e.g. ICJ + ICC
A game theoretic approach
to the role of international
institutions
Why states comply with their cooperative agreements?
How international agreements are created?
How should states cooperate?
3 generations of theoretical models to understand
international cooperation and international institutions
1st Simple 2 x 2 models to understand why states need
generation to cooperate + why they comply with their
cooperative agreements
2nd Tailor made models to address neorealist-neoliberal
generation debate
o Main questions: how international agreements
are created? How domestic political division
affect international cooperation?
Introduced domestic politics + bargaining
3rd Increasingly refined models to answer more specific
generation questions. Looks at effect of international institutions
on domestic political power + bargaining process that
shapes characteristics of an agreement
Distribution: which countries gain more from
international negotiations + why?
Depth: are deeper agreements more effective?
Flexibility: when should rules be rigid + when
should they be flexible to allow some cheating?
Multilateralism: how does size of membership of
agreement affect depth of cooperation?
4
