Economics might be a dismal field but try International Relations

Economics might be a dismal social science. But in its normative analysis economics asks policy-makers to do what is in the public good – even if economists might disagree on exactly how to achieve that social advancement.

(Some readers have accused me of attacking the entire field of International Relations in what follows – which I certainly do not intend and that I feel would be a totally ridiculous thing to do anyway. I’ve titled this blog entry what I have, not because that title is exhaustively descriptive. Instead, it is because I couldn’t put in the title all the qualifying statements that make what I’m about to say coherent and useful, at least in my view.  To be clear, the key word in the title, “dismal”, in economics doesn’t mean bad or disappointing. It just means taking a realistic view of humanity. It means hypothesising that individuals in society are motivated to do what’s good for themselves, that no one is altruistic. Both economics and International Relations [in Realism] share this feature as a badge of honour. But if, as a reader, you do feel offended by the title and by what you think this blog entry is going to go on to say, still please bear with me, and let me try to clarify in what follows.)

Economics applies this principle of normative analysis ruthlessly, in every problem and situation it examines, whenever it considers policy-makers and policy-making.  The field of International Relations, in many parts, uses the same lens of analysis. The magnificent work of Robert Keohane, for instance, deals with fostering cooperation in the community of nations, to achieve good international outcomes, whether through benevolent hegemony or explicit institutions. John Ikenberry speaks eloquently of the US building an inclusive, rules-based, democratic, and transparent world order, open to all nations who share its noble ideals. Henry Kissinger describes how Harry Truman and successors in the US were proudest of their having put together a community of nations “observing common rules and norms, embracing liberal economic systems, forswearing territorial conquest, respecting national sovereignty, and adopting participatory and democratic systems of governance.”  International Relations carries a vast and growing subfield on global climate change, in many ways more deeply embedded than in economics. In all this, International Relations analysis puts at its core advancing the well-being of the world.

But that isn’t always the norm. Indeed, in what many would agree to be the key issue of the 21st century – the rise of China and the possible emergence of a new world order – the perspective is quite different.  On this important problem, some of the world’s leading International Relations scholars seem completely comfortable arguing not for the good of global society, but for who should be the number 1 country (surprise, yes, their own). This is so even if that sometimes entails setting up multiple, inconsistent standards for the conduct of different nation states – the US, China, Europe, all the other countries on Earth – without the slightest acknowledgment of cognitive dissonance. Disagreement is over whether being number 1 involves either conflict between the great powers or, instead, peaceful co-existence.

2015.07.09-W.Callahan-The-Diplomat-Image-Reuters-Petar.KujundzicAs an example, take the excellent and thought-provoking documentary film by my LSE colleague Bill Callahan. This work features two iconic International Relation theorists. John Mearsheimer, the extreme realist, is convinced China cannot continue its claimed peaceful rise. Confrontation with the US is inevitable. In the video at 07:00 Mearsheimer says “From China’s point of view, it makes perfect sense to want to dominate Asia, the way the US dominates the Western Hemisphere.” At 16:22 he says, of course, “The US has a deep-seated interest in doing everything it can to prevent China from dominating Asia.”

Mearsheimer is scrupulously even-handed in his discussion of both the US and China. China will want to dominate Asia, exactly as the US has dominated the US. The unspoken implication by symmetry is that China will seek to dislodge the US from its domination of the West. The vista is entirely great-power centred. There is no recognition whatsoever that the 5bn people who live outside the US and China count, or that they together with many Americans and Chinese themselves might seek a vision that aspires to noble, universalist instincts. Where now are the ideals Keohane and Ikenberry sought? What has happened to the inclusive international order in which US Presidents since Truman took pride, that Kissinger described?

I’m not suggesting there is anything uniquely American to this.  The Chinese academic Xuetong 2011.11.21-Xuetong.Yan-NYT-Image-by-Edel.RodriguezYan provides, in mirror image, exactly the same discourse: both in the even-handedness with which he thinks through the position of the US and China, and in his insistence that conflict is inevitable: “China’s quest to enhance its world leadership status and America’s effort to maintain its present position is a zero-sum game.”  (How China Can Defeat America, New York Times, 21 November 2011). One will gain only to the extent the other loses.

The only significant difference I see might be in that however the Western Hemisphere feels about being dominated by the US, Asia has not had the same decades to work through its feelings on its imminent China domination. A western observer might say this structure of domination is only to be expected of the autocracy that is China. It’s harder to square with the Lockean ideal of “consent by the governed” that is referred to in the beautiful second paragraph of the US Declaration of Independence. True, the Western Hemisphere does not comprise citizens of the US. But that cuts both ways in this narrative: if the US does not have to seek their consent, perhaps neither should it dominate them.

Many economists recognise easy kinship in this hypothesising that the actors under study look out for only themselves.  That framework is the one in which economists work, and have done ever since Adam Smith.  Yes, obviously, it’s the nation state here; while it’s consumers and businesses in economics – but it’s not the identities that matter.  It’s the idea that players are self-seeking that both economists and international relations scholars share comfortably. We don’t do altruism.

But an economist – who understands basic theory and thinks about these actions as policy-making – would ask further, Where is the market failure that world order should now, in light of China’s rise and current US hegemony, seek to solve? How does China’s growing weight in the world affect the calculation of global well-being? What are these large state actors doing to promote the global public good?

International Relations scholars who I deeply admire and respect often ask me what theory underlies my observations about world order.  Those questions I’ve just posed? That’s the theory.  And, to be clear, as economics also hypothesises that players are self-seeking and not altruistic, these challenges raised are not for any one nation to solve – they are for the global system we design to tackle.

Joe Nye, who I hold in the highest esteem and with whom I have been lucky enough to engage on a number of occasions, is identified in Bill’s film as being in the opposite corner from Mearsheimer.  In the film, Joe argues that peaceful co-existence is possible through diplomacy and international organisations – as he has done consistently, gently, and persuasively in his professional life.  Callahan describes Nye’s views as a mixture of Realism and Liberalism.

That’s it. Mearsheimer versus Nye: those are the two opposites identified in the film, with Yan and others arrayed around them.

I think that if, on this question of world order – the place of the US, the rise of China – analysis took more on board the lessons of economics – welfare economics and mechanism design – the discourse on world order might well turn out different. We all recognise there is a collective action problem: individual nations are self-seeking; all want to free-ride; none wants to undertake the costly action to provide global public goods. The question for scholars and researchers is, do we then say, fine, let’s just do the best we can, taking the system as given? There is certainly a need to address this question, and many of International Relations’s most outstanding scholars do exactly that on this question of the rise of China and global power shift.

Or instead we might ask, how can we put in place a better-designed system, so that even though that system asks individual nations only to look out for themselves, and no one needs to be altruistic, nonetheless, the system generates a surprising, emergent outcome that advances the well-being of all humanity? In a different setting and for a different purpose, economists do know exactly such a mechanism: it’s called Adam Smith’s Invisible Hand, or the Fundamental Theorem of Welfare Economics. What is the counterpart of that fundamental theorem for world order? Such an economics-driven design for world order might better serve all of humanity than trying to determine who remains or has just become number 1.

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12 Comments.

  1. An IR student

    Dr. Quah,

    Is this necessarily a fair and accurate way in which to characterise these two disciplines? If this perspective were to be adopted in reverse and economics were to be portrayed as simply being a conflict between, say, free marketeers and pro-interventionists exclusively within first world Western policy circles, there would be cries of outrage – and rightly so! Economics as a discipline, after all, is the site of debates spanning the breadth of the world itself and beyond, with the recent refocusing on the problem of societal inequality one of many examples of that plurality of thought, focus and debate in action.

    International Relations in this regard is much the same; it is popularly perceived as the ivory tower conflict between optimists and pessimists dealing exclusively with the problem of great power welfare, but is in reality populated as an academic field by a great plethora of complex, occasionally enmeshed and constantly conflicting debates. Professors Mearsheimer and Nye aren’t simply the two extremes of this variegated discipline – they are the tip of a considerable iceberg.

    This multiplicity also extends across nations; while there is an American tradition of thinking in IR that is perhaps best represented worldwide, there is, for example, a well-established English school of thinking that objects to the portrayal of the world as simply being a playground for Western states governed by a straightforward law of ‘might is right’, or a fast developing Chinese school of IR that seeks (amongst other things) to object to the image of the US as a global hegemon and to understand China’s own needs and imperatives in turn. Again, this is simply the tip of the iceberg.

    As befits such a discipline, there is no easy way in which to assert that normative analysis exists in one form or another. Naturally, the liberal wing of the traditional ‘optimist-pessimist’ debate is more at ease making normative prescriptions than their counterparts opposite, simply by virtue of their belief that the relations between states are in fact governable, and malleable, and that security concerns and power aspirations can be reconciled through the creation of mechanisms of common understanding; the diagnosis is an uncertain world, the ideal is a world where states cooperate, the prescription is thus coordination and communication. There is a clear and palatable normative analysis in this.

    And, naturally, beyond this commonly observed bifurcation, international relations scholars the world over are constantly engaged in the observation of problems and prescription of responses. In seeking to stem the ongoing environmental degradation of the world, for example, IR scholars are actively engaged in the evaluation of existing measures at all levels of analysis, proposing potential institutional changes, further realms of international cooperation, and exploring the problems that might underlie the continuing failure of states and governments to decisively respond to this issue thus far. The same problematisation of phenomena and prescription of responses is observable across IR, confronting issues ranging between post- and neo-colonialism to the relationship between state and market (both IR foci well represented at the LSE).

    In fact, even within the realm of neorealist analysis (that most pessimistic of paradigms), it would be distinctly unfair to characterise it as simply being a yes-man for the hegemony of the West and the wanton abuse of US power. The ability of neorealists to set a normative agenda is constrained greatly by its portrayal of international politics; states are portrayed as fundamentally insecure in an anarchic world, prone to hoarding power to varying degrees as an effective survival mechanism. It is difficult to offer up constructive normative analyses when your base portrayal of the world is both set in stone (‘systemic theory’) and brutally pessimistic. Prof. Mearsheimer does indeed speak of the US in terms of its use (and abuse) of power, and what he believes to be the inevitability of a US-China confrontation, but it is worth noting that he describes this and other similarly pessimistic scenarios as the ‘tragedy’ of great power politics (as per the title of his magnum opus). ‘Bad things happen in the world’, the neorealists seem to say, ‘and very little can be done about them’. As such, the apparent lack of normative analysis in the case of this very particular school of international relations is less a function of IR’s seeming failure to incorporate normative analysis into the discipline, and more the difficulty of reconciling such analyses with the systemic pessimism inherent in the accounts that academics such as Prof. Mearsheimer give of the world.

    This does not, however, stop them from trying. Prof. Mearsheimer, for example, recently authored an erudite analysis of the crisis in Ukraine (https://www.foreignaffairs.com/articles/russia-fsu/2014-08-18/why-ukraine-crisis-west-s-fault) that explained (from this neorealist perspective of the world) that blame had to be apportioned to the US and its allies for their post-Cold War ideological expansionism, an argument that hardly marks him out as an apologist for American expansionism.

    The late and great Kenneth Waltz, meanwhile, was arguably the architect of contemporary pessimism in IR; he nonetheless argued that the inevitable consequence of the continued wanton application of military might by the US was the adoption of nuclear weapons by nations across the globe as the only reliable deterrent against such overwhelming force – his prescription was to find ways to ‘contain and moderate the use of military force by the United States’ (http://www.theory-talks.org/2011/06/theory-talk-40.html).

    Neorealism is certainly one extreme of this IR iceberg, and there are countless other ways in which the discipline characterises the state and problems of the world. However, even within this most pessimistic of paradigms, efforts are in fact being made to problematise salient aspects of international politics and to prescribe solutions – even with their hands shackled behind their backs by their ‘tragic’ or ‘dismal’ perception of the world as governed by selfish states and unbridled power competition, there is a normative aspect to neorealist analyses that is often and unfairly overlooked.

    That is, of course, simply the tip of the iceberg. Rejecting neorealist pessimism and seeking to solve the problems not of individual nations but the people of the world? For many IR academics of all persuasions, that would be a job description.

    My apologies for this haughty, long-winded tirade! Thank you very much for your many informative contributions both here and elsewhere – I am, without doubt, a fan.

    • Dear IR student – thank you for this very helpful comment (not at all a haughty tirade). I agree with your points. I have tried to sharpen what I say in response, in particular, that I am not commenting on all IR scholarship. I give examples now that work against what might appear my principal argument. Nor am I trying to suggest anyone mentioned in my writeup is being an apologist for any one nation; I am just illustrating my points with concrete examples as best I could. I hold in the highest regard and respect all the scholars I mentioned, But I hope you don’t mind my keeping our points of disagreement, for your comment is beautifully written.

  2. Chris Hughes

    It is great to see my colleague and friend Danny Quah engage with International Relations – because it is always good to see an economist look at the real world. But like many economists who try to understand the international system, they end up being hopeless idealists I am afraid – starting with the notorious folly of Norman Angell’s The Great Illusion, which argued in 1910 that Britain and Germany were economically so interdependent that war between them would be impossible. Of course, many idealists since then have tried to wish away the realities of power politics, and continue to do so, especially in R theory. What is so great about Mearsheimer is that he is a Realist. And to understand why it is better for the global good to be a Realist than an Idealist Danny should start with EH Carr’s The Twenty Years Crisis. If only all those post 1918 idealists had been right, that war could be abolished and interdependence would lead to a world of peace and harmony. What an irony that IR has to bring economics down to reality – but then, looking at the current escalation of tension in the Asia Pacific, I guess Mearsheimer’s predictions have proven better than those of all the economists who failed to see 2008 coming! I look forward to Danny’s book with great interest. I hope he is right, but I suspect a good dose of IR would make his arguments more realistic.

    • Chris – thank you for these very helpful, constructive remarks. I agree with you completely on how badly economics has served the world in significant dimensions. And to be clear in scholarship I too greatly value Realism. All economists do – it fits well the model of individualist, self-seeking behaviour we take as our baseline hypothesis. So, your and my underlying assumptions don’t actually differ. But we do end up diverging. In this writeup I attributed it to my seeking a normative analysis. That remains my working hypothesis, but my discussions with your other IR colleagues and students suggest that isn’t the final explanation either. I am keen to track that down, and hope to have greater clarity as our disciplines engage further.

  3. Chris Hughes

    Thanks for your response Dannny. Just one follow up point: in the revised version of your blog posting you praise Keohane for fostering international cooperation. Keohane gave a talk on the possibilities for world democracy this year at the LSE which was very pessimistic. It aint gonna happen, and the thought of it is far from desirable given the behaviour of the actors that are supposed to go beyond state agency so far. Where do we look for the global actors who you hope are going to change what Mearsheimer calls the “tragedy” of great power politics: The EU? – ask the Greeks; the IMF?, ask the Greeks and just about any developing country that has come under IMF rule; the UN? ask the Syrians et al.; China …. ask any of its neighbours. I wish Mearsheimer was wrong – and he wishes he was wrong. But lets be Realistic.

    Chris

  4. Nick Kitchen

    I enjoyed this, but since I think you’re a touch unfair in the piece Danny I will take up the unfamiliar challenge of defending IR theory (at least a little bit!). The reason IR doesn’t ask the types of questions you as an economist want to is that standard (US) IR theory denies the existence of a sovereign mechanism to correct market failure, whereas economics has the state. And unlike money, IR’s units of analysis (states) really aren’t value neutral: I think most IR scholars would be happy to say that some forms of polity are morally better than others (and most would rank the US higher up that scale than China).

    Having said that, there’s enormous dissatisfaction in IR with these mainstream approaches, and there are other branches of IR that are closer to doing the things you suggest: cosmopolitanism, peace studies etc. Now they may be pigs-might-fly theories, but they are there.

    Perhaps more saliently, there’s also a good deal of disquiet about the dominance of the Mearsheimer-Nye dialectic on this particular issue. There are more nuanced approaches out there (Barry Buzan for example) that emphasise deeper changes in the international system that go beyond the US and China. They point towards a world in which the kind of dominant states driven by power and survival that we saw in the 20th Century are becoming obsolete, with great power war as good as finished as a tool of statecraft, and an increasing willingness to delink issues. Indeed, US-China is a good example of that: the paradox is that the South China Sea looks like Mearsheimer’s world, but on climate change, Islamic State, and most issues of trade it looks much more like Nye’s. Can’t they both be right?

    • Nick – many thanks for your remarks. They are very helpful.

      I welcome how there are approaches such as those our colleague (yours, Chris’s, mine) Barry Buzan investigates. Indeed, one of the schemes I’m investigating exactly de-couples policy issues as you describe. Concretely, my scheme says, Why should we expect a global hegemon to provide all global public goods? Why not just have the US in charge of security but some other state in charge of climate change, yet another to set the rules of international finance, and so on. This is a divide-and-conquer scheme. I hope to encounter and study more. But I understand here the point that both you and Chris make, that these are unRealistic.

      More generally, this discussion helps me understand what your community of scholars finds permissible to consider change, and what not. An example of what I mean is in your first paragraph. To see no mechanisms around right now to correct market or social failure is different from the proposition that no such mechanism will ever be found. After all, if such a mechanism were already extant, then there wouldn’t be a problem for us to be discussing, right? What analysts need to do is to study, understand, and propose such mechanisms, not just say one doesn’t exist right now in the world, and therefore we can fall back to zero-sum thinking. Even within nation states in the current system, not all liberal democracies align to the same degree on the “consent of the governed” narrative that is beautifully written into the US Constitution. Yet we agree to get along; we don’t have to agree about everything.

      Again, many thanks. What you and your colleagues are shedding light on in this discussion is extremely valuable.

      • Nick Kitchen

        “What analysts need to do is to study, understand, and propose such mechanisms, not just say one doesn’t exist right now in the world, and therefore we can fall back to zero-sum thinking.”

        I guess John Mearsheimer would say “good luck” to that, because he’s not saying a mechanism doesn’t exist right now, he’s saying it can’t exist: an a priori conclusion that derives from a particular analysis of human nature, state formation and international anarchy. His analysis is not that we can fall back on zero-sum, but that we must: if we don’t, we put our survival at risk (an analysis that applies to everyone).

        Fortunately, even if John’s understanding of the world is correct in the final analysis, there are myriad things out there in the real world that get in the way of arriving at a final analysis. And so we muddle along, and that works just about OK.

  5. Dear Danny:

    I am no IR expert so you have to discount my views accordingly. I do understand the problem of collective action and the potential (and limits) of mechanism design so I am interested in the very important question that you pose.

    On matters of security – say US – China relations, I agree with you that there is more to the zero sum game. This is an area that has become intellectually bankcrupt. I have written a paper to reframe the debate on the future of US-China relations as a mechanism design question – in particular a credible commitment problem – rather than the conventional zero sum game that realists would have it. I would be glad to send you a copy and let me know what you think.

    On matters of trade, I agree that the mechanisms of diplomacy and international organisations + the invisible hand + mechanisms to enforce commitment (WTO, international arbitration) are some appropriate mechanisms.

    On matters of other global public goods such as climate change – I can imagine Olson’s privileged group (or coalition of the willing) +the invisible hand (green energy) + diplomacy (ICCC) + norms + mechanisms to enforce commitments (Kyoto) are some examples of mechanism design.

    You will notice that on maters of security, I did not include the invisible hand as a mechanism but I did for both trade and global goods. In all three dimensions, I included mechanisms to enforce commitments (which can be diplomacy, norms, reputations, international organisations). In the case of US-China relations, the problem of credible commitment can be addressed by diplomacy (think of strategic talks), power balancing, and other mechanisms I discussed in my paper.

    The invisible hand in IR is a weak unstable mechanism in the absence of credible mechanisms to enforce commitments.

    That IR has often been portrayed as either realist or liberal or constructivist speaks volumes on the intellectual bankruptcy of the field. So yes, lets hear from the economists and mechanism design theorists!

  6. Callahan is full of shit.

    I am afraid Dr. Quah is reifying the neo-neo synthesis which is overwhelmingly familiar to the disciplinary development in economics. In fact, Waltz’s (1979) intention was to systematize international politics much like Smith had done. Keohane and Ikenberry have followed suit by engaging in the same project but within neoliberal IR. Not only Keohane and Ikenberry, but also Nye have deep and intricate relationships and standing in the knowledge-power nexus of American academia and American foreign policy. They are not only scholars, but also political agents. No wonder parochialist academic approaches, supporting national interests occur. Ikenberry, Nye, Waltz, and Keohane are part of the American IR industrial-complex.

    To reduce the discipline of IR into American IR, and within it, American foreign policy, is of course going to render the field insular and parochialistic.

    Check out LSE’s Buzan and Lawson (2015) to address questions on the status of international relations as a discipline.

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