John A. C. Conybeare

Local commons and global interdependence : heterogeneity and cooperation in two domains

Introduction - Robert O Keohane and Elinor Ostrom PART ONE: THEORETICAL PUZZLES The Problem of Scale in Human/Environment Relationships - Oran R Young The Politics of Scope - Duncan Snidal Endogenous Actors, Heterogeneity and Institutions Heterogeneity, Linkage and Commons Problems - Lisa L Martin PART TWO: EVIDENCE FROM THE LABORATORY Heterogeneities, Information and Conflict Resolution - Steven Hackett, Dean Dudley and James Walker Experimental Evidence on Sharing Contracts PART THREE: EVIDENCE FROM THE FIELD Constituting Social Capital and Collective Action - Elinor Ostrom The Conditions for Successful Collective Action - Gary D Libecap Self-interest and Environmental Management - Kenneth A Oye and James H Maxwell Heterogeneities at Two Levels - Ronald B Mitchell State, Non-state Actors and Intentional Oil Pollution

A Portfolio Diversification Model of Alliances

The theory of finance demonstrates that diversified investment portfolios produce superior combinations of risk and return, and that investors may choose a portfolio reflecting their preferred mix of risk and return. These techniques may be applied to military alliances. The rate of return and risk of an ally follows a positive linear relationship, as predicted by capital asset pricing theory. Random diversification of allies will, as with investment portfolios, reduce the country-unique components of alliance risk toward that which is inherent in the system as a whole. Some alliances will be more efficient at producing greater return and lower risk. The most efficient alliances will be those in which variations in ally effort move in opposite directions. Development of the demand side of portfolio analysis may predict which alliances are optimal, and therefore most likely to form. These principles are applied to the Triple Entente and Triple Alliance between 1879 and 1914. It is suggested that the Entente had superior efficiency characteristics and that ally choices were consistent with demand patterns.

The Portfolio Benefits of Free Riding in Military Alliances

When the collective effort of a military alliance has the characteristics of a public good, the total effort may be suboptimal because of free riding, causing losses in the allocative efficiency of the alliance. However, the same low correlation of ally effort that indicates the presence of free riding also produces portfolio efficiency benefits in the form of a gain in military returns and a lower risk than the constituent allies would experience on their own. A measure of these portfolio gains is suggested and applied to NATO and the Warsaw Pact fbr the period 1963-1988, and both are compared to the Triple Entente and Triple Alliance for the period 1879-1914. NATO and the Entente exhibited larger portfolio gains than their adversarial alliances. The public or collective good model suggests that alliances may produce a suboptimal effort. Yet these efficiency losses may be offset by consequences of the very conditions that lead to public good suboptimality. Free riding on the alliance implies a low positive (or even negative) correlation of the military efforts of allies, and this in turn reduces the overall risk of the alliance effort and hence the risk associated with each countrys share of the benefit from that effort. Alliances are like diversified investment portfolios, providing each member with a better combination of risk and return than they would be able to achieve by themselves. When allies free ride on each other they actually lower the overall risk of the alliance, offsetting part of the public good losses entailed by free riding. Previous work on modelling alliances as analogous to investment portfolios specified and measured proxies for the risk and return of individual countries, and the absolute benefits to the representative ally of sharing purely private military effort with other countries, using the Triple Alliance and the Triple Entente as examples (Conybeare, 1992). The present effort extends this work both theoretically and empirically. The theory of alliance portfolios is broadened to include the conjecture that alliances may provide full or partial public goods, suggesting that free riding losses may be at least partly recouped through portfolio benefits. Empirically, the application of the portfolio model is applied to two more alliances (NATO and the Warsaw Pact, between 1963 and 1988), a new measure of alliance return is offered (weighting a countrys military

Barbarians at the Gates: State Control of Global Mergers and Acquisitions

Cross-border mergers and acquisitions are a major and often politicised component of foreign direct investment. Using data on individual transactions between 1970 and 2006, we examine the restrictions countries place on mergers and acquisitions, whether they use these controls to discriminate against foreigners seeking to acquire domestic firms, and what factors may predict the propensity to block foreign entry by this method of direct investment. Drawing partly on the existing literature, we test hypotheses that state intervention can be explained by characteristics of the countries whose firms are targeted by acquirers, including per capita income, democracy, trade exposure, market size, government share of national income and industrial structure. Although democracy, trade exposure and high government expenditure are associated with more stringent merger control laws, none of these attributes cause states to discriminate against cross-border mergers. Countries with high per capita incomes, large markets and strict merger control laws, do use those regulations to discourage foreign acquirers. A second set of tests, based on observations of individual deals, rather than national aggregates, reveal that governments are particularly averse to foreigners acquiring firms that are bankrupt or in the defence sector. Overall, governments do treat cross-border mergers and acquisitions differently, and use their merger control laws to discriminate against foreign investors, particularly with respect to certain types of transactions.

State-Sponsored Violence as a Tragedy of the Commons: England's Privateering Wars with France and Spain, 1625-1630

AbstractThe “tragedy of the commons” is the familiar problem that open access to a common property resource leads to overexploitation and to zero profits. A commons model is applied to an example of state sponsored private violence, the practice of privateering or licensed piracy. It is predicted that the presence of uncertainty about the value of the prey will reduce the amount of exploitation effort, and that industry profits may be positive due to both uncertainty and heterogeneous exploiters. Using data from Englands wars with France and Spain between 1625 and 1630, the model suggests that the commons, represented by enemy merchant shipping, was not overexploited and that privateering profits were positive. The dynamic paths of privateering effort, ships seized, and individual firm profits were, however, consistent with the normal expectation that commons exploitation will peak and fall, as competition drives down returns through entry. “England was never richer than when at war with Spain.”Sir Edward Coke

A Random Walk Down the Road to War: War Cycles, Prices and Causality,"

Many scholars believe that war and the economy move in a regular, connected cyclical pattern over time. Using data on war and prices for a 481 year period, spectral analysis produced no evidence for such cycles. Both series are stationary when differenced once: war is a random walk and prices are a simple moving average. Causality was examined with an error correction representation of the Granger test for causality. Though there are ambiguous indications that the two series might be cointegrated, the evidence for causality between them is weak. Since there is a permanent level of war in the great power system, the lack of strong causality from war to prices was to be expected.

Efficiency, entitlements and deservingness: Perspectives on international distributive justice

ABSTRACT The paper offers a three-fold typology for comparing and assessing arguments about the political economy of international distributive justice. Economists use aggregative criteria, specifying economic fairness as a subset of efficient allocations. The political philosopher suggests moral side constraints to place on distributions, a category that encompasses much recent scholarship, including the Rawls–Nozick debate. The third approach addresses the deservingness of different claimants to resources and issues of fair compensation, often in the context of specifying legal rules. Though these traditions are not uniquely international in focus, it is that aspect that is addressed here, both with respect to theoretical relevance to international affairs and practical applications to international redistribution, including specific arguments such as aid to poor countries and reparations for damages. The attractiveness of each group of arguments depends on the issue at hand and the goals of the proponent. Each offers independent but not mutually exclusive principles that might provide the basis for an integrated approach to international distributive justice.

Democracy, Institutionalization, and Corporate Alliances

The authors bring together and extend three strands of existing research: the propensity of democracies to ally with each other, the effects of alliances being institutionalized, and the causal impact of democracy in promoting investment. This literature is applied to corporate alliances, predicting the probability that announced alliance contracts will be completed by the participants. The authors find that democratic political regimes generate rules that create corporate shareholder democracy and that the latter promotes the institutionalization of corporate alliances. Corporate democracy and alliance institutionalization will both, controlling for transaction costs, increase the probability that corporate alliances will be completed. The findings suggest a positive association among democratic corporate governance, the willingness of corporate alliance partners to accept institutionalized ties, and the creation of an environment conducive to commercial investment commitments through alliances. Overall, corporations appear to respond to some of the same alliance incentives as sovereign states.

Weak Cycles, Length and Magnitude of War: Duration Dependence in International Conflict

Standard statistical tests have provided little evidence for the existence of war cycles. Cycle theorists argue that these tests are inappropriate because such cycles are inherently irregular. Duration analysis provides a means of testing for the presence of somewhat irregular weak cycles, by determining the extent to which measures of war duration cluster around a mean value, a phenomenon known as positive duration dependence or increasing hazard. Tests are performed on a 500-year data set. Turning points in long cycles of war intensity do manifest a weak cycle of 50 years, when the cycle is measured from peak to peak. The length and magnitude of individual wars exhibit no common durations and appear prone to an anti-cyclical process of negative duration dependence, whereby the probability of war termination declines with the time and magnitude duration of the war.

Survivor: Is There an Optimal Country Size?

Contemporary manifestations of international integration and national disintegration have stimulated speculation on the optimal size of a country. Economic theories focus on efficient resource allocation, and empirical work on partial equilibrium tests correlating size with variables (limited by data availability to recent times) selected from theoretical models of optimal size. This article questions the assumption that there is an optimal size, offering a test using data covering 500 years. The existence of an optimum, determined by efficiency or other goals, will be revealed by a size category generating an increasing proportion of world income, as more states move into that category. The results of this “survivor” test do not indicate the emergence of an optimal country size, despite data limitations that prevent cross-sectional analysis over a long time period. The absence of evolution toward optimal size suggests alternative directions in the research on country size.