Contemporary Perspectives on IPE

Contemporary Perspectives on IPE

Class 3 – Tuesday, 20 September 2011J A Morrison 1

Jerry Cohen Barry EichengreenLarry Summers

Contemporary Perspectives on IPE

I. Defining Our TermsII. IPE as a Social ScienceIII.IR “Schools”/“Theories”IV.Some Differentiating

QuestionsV. Reference to Empirics VI.Conclusion: How should we

study IPE? 2

Contemporary Perspectives on IPE

I. Defining Our TermsII. IPE as a Social ScienceIII.IR “Schools”/“Theories”IV.Some Differentiating

QuestionsV. Reference to Empirics VI.Conclusion: How should we

study IPE? 3

There are lots of “--isms” in the political

economy literature…

4

Autocracy

Socialism

LiberalismCommunism

DemocracyAuthoritarianism

Aristocracy

Capitalism

Since these terms are frequently used in

different ways, it will be valuable for us to be sure we use the terms in the same ways in this class.

5

I like to think about them as describing points along

various continua, as representing values for

particular variables.

6

I understand these terms in the context of the

following big questions…

7

Regime Type: Who holds the reigns of power?

Many One

AutocracyDemocracy Aristocracy

Few

Negative Liberty: What restrictions are placed on government authority?

Many None

AuthoritarianLiberal

Political-Economic System: What is the level of government intervention

in the economy?

Low High

Socialist/Managed

Capitalist/Free-Market

“Communism,” for me, denotes the political-economic system that Marx predicted would follow inevitably from

capitalism.

11

Remember, these questions relate to

variables.

Over time, we have observed various

combinations of these different values.

12

Observed Combinations

13

Country Regime-Type Liberality PE System

USSR (1945) Autocracy Authoritarian Socialist

China (Today) Aristocracy Authoritarian Mixed/Middle

US (Today) Democracy Liberal Capitalist

Venezuela Democracy Authoritarian Socialist

Sweden Democracy Liberal Socialist

Iraq (2000) Autocracy Authoritarian Capitalist

GB (1815) Aristocracy Liberal Managed

Of course, we might disagree about specific characterizations; but the point remains: different regime types, levels of liberality, and PE systems have been combined.

Theory versus Policy• Foreign Economic Policy (“FEP”)

– The policies designed to influence the relationship between the domestic economy and foreign markets and/or the global economy

– These are the policies that exist, not necessarily the theories

– Broad category: everything from tariffs to fertility policy

• Political Economic System (e.g. Mercantilist System)

– The proposed bundle of related theories concerning a state’s FEP

– Note: the proposed system may not always be fully adopted or implemented in practice; the PE systems are distinct from actual policy 14

Contemporary Perspectives on IPE

I. Defining Our Terms II. IPE as a Social ScienceIII.IR “Schools”/“Theories”IV.Some Differentiating

QuestionsV. Reference to Empirics VI.Conclusion: How should we

study IPE? 15

There’s a real question about the extent to which we do and should study

IPE as a science.

16

We’ll consider that question.

But, first, let’s discuss what it means to study

something “scientifically.” 17

Scientific study has several defining

features.

18

Scientific study is positive.

19

Concerned with what is (positive), not what ought to be (normative).

And scientific study relies on the

empirical testing of models to explain the relationship

between variables.20

Let’s unpack that.

21

Variables• Variables: factors of interest that

may vary in value• May be continuous, discrete, or a

“dummy” • Examples

– Volume of trade (continuous)– Type of Exchange Rate Regime

(discrete)– Status of membership in Int’l

Organization (dummy) 22

Theories and Models• Specify relationship between variables

– Value of independent (or “explanatory”) variable explains dependent variable

– E.g. Type of exchange rate regime (IV) explains the volume of trade (DV)

• May be correct or incorrect (i.e. may or may not align with reality)

• Endogenous: determined within the model

• Exogenous: determined outside of the model 23

Facts• Descriptions of reality• For our purposes, statements about

the value of variables• May be correct or incorrect• Examples:

– Hong Kong has a fixed exchange rate (correct)

– The volume of world trade has increased since 1945 (correct)

– The United States has a fixed exchange rate regime (incorrect) 24

Empirical Tests

• Theories/Models lead to testable hypotheses– E.g. Fixed exchange rate regimes lead to

greater volumes of trade.

• Hypotheses are predictions about the value of variables

• We test hypotheses by comparing predictions to observed reality– Do we observe that countries with fixed

exchange rate regimes have greater volumes of trade than countries with flexible exchange rate regimes?

25

Correlation ≠ Causation• Correlation: the values of two variables

vary together– E.g. When many students arrive to class

carrying umbrellas, overall attendance is poor

• Spurious correlation: correlation without causality– E.g. students do not avoid class because

they fear umbrellas!

• Or causality may be reversed– E.g. Perhaps high trade volumes lead to

fixed exchange rate regimes (rather than vice versa).

26

Scientific study relies on an

epistemology.

27

An understanding of what can be known and how to acquire knowledge.

Contemporary Perspectives on IPE

28

I. Defining Our Terms II. IPE as a Social ScienceIII.IR “Schools”/“Theories”IV.Some Differentiating

QuestionsV.Reference to Empirics VI.Conclusion: How should we

study IPE?

You hear a lot about the “schools” of IR

thought.

Realism, Constructivism, Idealism, Liberalism, Institutionalism, &c.

29

These terms, used tout court, mean almost nothing to

me.

30

There is simply too much variation

within these “schools” for these monikers to convey

much useful information.

31

Many of the “founders” of these

schools (Wendt, Mearsheimer) don’t even agree on who belongs where, let alone what defines

each school! 32

So, think in terms of either specific

theorists and/or specific theories—

meaning, responses to precise questions.

33

And think in terms of multiple

dimensions—not just a simple, one-dimensional continuum.

34

(Don’t think the way my mother does: “liberals” versus “conservatives.”)

Contemporary Perspectives on IPE

I. Defining Our TermsII. IPE as a Social ScienceIII.IR “Schools”/“Theories”IV.Some Differentiating

QuestionsV. Reference to Empirics VI.Conclusion: How should we

study IPE? 35

Here are some of the essential questions we

might ask.

Each question constitutes a dimension along which we might organize different

theorists & theories.36

IV. DIFFERENTIATING QUESTIONS

1. Where’s all the action?2. Does process matter?3. What makes us tick?4. What is the nature of our world?

37

The Levels (Images) of IP

• At what level should we look for the key variables?

• The Levels (Images)– Individual (1st): Hitler liked war– Unit/State (2nd): Germany was

Autocratic; Autocracies are bellicose– System (3rd): There wasn’t a hegemon

(single dominant power) to check Germany’s rise

38

The Primary Actors in IP

• Who are the primary actors in IP? What ought to be our “units of analysis”?

• Potential Units of Analysis– States– Individuals– International Institutions & Organizations– Interest Groups and NGOs– Socio-Economic Classes– Transnational Social Movements (e.g.

Feminism, Environmentalism, &c) 39

The Types of Variables• What types of variables matter?• Material Factors

– Power– Wealth– Geography– Material interests (income, &c)

• Ideational Factors– Values– Perceptions & Understandings– Assumptions, Expectations, & Identities

40

IV. DIFFERENTIATING QUESTIONS

1. Where’s all the action?2. Does process matter?– What makes us tick?– What is the nature of our world?

41

Static versus Dynamic Models

• Static Models– “Snapshot” of current situation– History, momentum, &c., do not matter– Many variables treated as exogenous

• Dynamic Models– Process matters– Virtually all variables could be

endogenous– E.g. The economic situation Obama faces

must be understood in the context of previous administrations

42

Why use static models at all?

parsimony—dynamic models are quite unwieldy. – E.g. Did Andrew Jackson’s administration

help to generate the current financial crisis?

- The question: which variables can we assume to be exogenously determined?

- Disagreement arises over answers43

IV. DIFFERENTIATING QUESTIONS

1. Where’s all the action?2. Does process matter?3. What makes us tick?– What is the nature of our world?

44

Logics of Human Behavior

• Consequentialist (Functionalist)– Actions chosen based on expected

consequences

• Appropriateness (Normative)– Actions chosen based on normative

standards of right & wrong

Which mode did Locke, Smith, & Marx use?

45

Narrowness of Our Interests

• Egoism– Almost total emphasis on one’s own

welfare

• Altruism– Considerable weight given to the

welfare of others

Which view did Locke, Smith, & Marx hold?

46

Source of Our Interests

• Rationalism– Preferences are exogenously

determined

• Constructivism– Preferences are endogenous to

interaction

Are we social or unitary/atomistic actors?

47

IV. DIFFERENTIATING QUESTIONS

1. Where’s all the action?2. Does process matter?3. What makes us tick?4. What is the nature of our world?

48

Do Markets Work?

• Market Failure– Without active management, markets

often produce suboptimal outcomes

• Invisible Hand– Markets produce best outcomes when

intervention is minimized (laissez-faire)

49

Compatibility of Interests• Mutual Benefit

– Pursuit of private interest serves public good– “Private vices are public benefits” (Mandeville)– E.g. Competition between producers better

products at lower prices

• Zero-Sum– Benefits can only come at others’ expense– E.g. Allocation of rival goods; pursuit of status

What areas of the market face which circumstance?

50

So…

There are a lot of different questions to consider; and there are a lot of different

ways to group scholars and approaches to IPE.

51

Contemporary Perspectives on IPE

I. Defining Our TermsII. IPE as a Social ScienceIII.IR “Schools”/“Theories”IV.Some Differentiating

QuestionsV. Reference to Empirics VI.Conclusion: How should we

study IPE? 52

Remember that our theories specify the relationship

between variables.

We test our theories using empirical evidence.

53

Throughout the term, we’ll rigorously examine a range

of empirical cases.

This will help you to build a universe of cases upon

which you can draw as you attempt to develop and test

theories about IPE.54

I’m going to talk a lot about the “Anglosphere”—the

English-speaking part of the world.

Here’s why…

55

Why focus on the Anglosphere?

1.Important– Historical influence of British state

and empire– Influence of British thinkers– Familiar case in the literature

• Accessible– Writing is in English– Rich array of sources,

perspectives on context, &c.– This is the case I know best!

56

Some of this you will have to know because that history

was influential.

But in this class—and every other—you should evaluate theory using the cases you

know best.

Combine what we study here with what you already know.57

Contemporary Perspectives on IPE

I. Defining Our TermsII. IPE as a Social ScienceIII.IR “Schools”/“Theories”IV.Some Differentiating

QuestionsV. Reference to Empirics VI.Conclusion: How should we

study IPE? 58

Today, I’ve tried to briefly introduce some of the major issues and perspectives in

the study of IPE today.

I want to emphasize, though, that there continues to be disagreement about how

(and what!) we should study in this field.

59

(Think: Cohen on the British & American Schools;

Eichengreen on Economics versus IR)

60

What should the study of IPE look like?

61

Should we consider normative questions? Or

just positive ones?

62

How scientific should our inquiry be?

How rigorous should our empirical standards be?

Should we only formulate refutable hypotheses?

63

Whom should we study?

How much emphasis should we place on the state

(versus individuals, NGOs, MNCs, &c)?

64

We’ll continue to engage these questions throughout

the term…

65