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Groups of countries to know for the mid-term:

• “G5” – top shareholders of the IMF/World Bank

United States, Japan, Germany, France, United Kingdom

• G20

G7 + BRIC + EU + MAKTISAS

• “G4” – Countries seeking permanent membership on the UNSC

Brazil, Germany, India, Japan • P5

United States, France, United Kingdom, Russia, China

• Swiss bloc

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Reading regression tables: The cheat sheet 1. What is the dependent variable? (Maybe in the title)

2. Consider the number of observations – What is the unit of analysis?

3. What are the “explanatory”/independent variables?

4. Consider the coefficient for each variable– Is it positive/negative?– (Don’t be too persuaded by the magnitude – the real effect

depends on how the variable is measured… and whether the model is “linear”)

5. Consider the SIGNIFICANCE– Standard error < about ½ the size of the coefficient– |T-stat or Z-stat| > 1.96– P-value < 0.05– Or… lots of * (stargazing!)

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Table 5.6: The effect of UNSC membership on African Development Bank lending

Pre-1982 1982 and onward:Variable AfDF AfDFUNSC Member -0.104 1.717***

(0.06) (3.55)UNSC Member, unimportant year

1.59 0.713(0.75) (1.12)

UNSC Member, somewhat important year

-1.84 2.327**

(0.84) (2.04)UNSC Member, important year

2.531***(4.23)

Pariah state6.193*** 6.184*** 0.904 1.05

(4.43) (4.55) (0.48) (0.52)War

0.072 -0.091 -1.519** -1.27

(0.04) (0.05) (2.05) (1.64)ln(GDP per capita, PPP)

6.582** 6.469** 1.368 1.858

(2.14) (2.10) (0.90) (1.22)Political regime

-0.043 -0.045 0.026 0.019

(0.29) (0.33) (0.44) (0.32)

Number of observations 355 355 1,338 1,289

R-squared 0.39 0.40 0.07 0.08

Notes: All regressions include country and year fixed-effects and regional quartics (for North Africa and Africa South of the Sahara). Numbers in parentheses are the absolute values of t-statistics.

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Reading quantitative social science articles: The cheat sheet

1. Study the abstract

2. Read intro & conclusion

3. Study the stats tables

4. Look up the definitions of variables

5. Skim the rest

6. Read the abstract one more time 5

TODAY:The United Nations Security Council Reform...

a new permanent seat for Japan?

Or…?

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Today is really about an analytical tool:

• The Commitment Problem

• One version:– The Schelling Conjecture:

Tying your hands increases your bargaining leverage

• Another version:– Time-inconsistent preference problems

• For both versions we need a– CREDIBLE constraint or – “CREDIBLE COMMITMENT” MECHANISM

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Plan• The Schelling Conjecture

• Weiss’s argument:– Japan's UNSC seat & domestic politics

• The Schelling Conjecture reversed?

• Credible commitments & democratization

• Ὀδύσσεια– The Odyssey

• Kidnapping

• Government expropriation

• Central Banks (The Federal Reserve)

• Your exam as a credible commitment device

• Marriage 8

Let’s start with the Weiss story

Tell me about it!

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Puzzle

Anti-Japanese protests in ChinaSometimes allowedSometimes prevented

Why?

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Typical Schelling Conjecture

• 2 actors negotiating at the international level– (e.g., over tariffs)

• One actor is constrained by a domestic legislature– (e.g., protectionist legislature)

• The other actor is a dictator with no constraints

• Who has the better bargaining position?

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Pres*Aut* L* SQNSQ

A little animation

P?

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Line represents some generic policy space (e.g., total free trade on left, total protectionism on right. Two governments – an authoritarian and a democratic country – are negotiating.

Aut*= Ideal point of an “Authoritarian” government

Pres*= Ideal point of a democracy’s President

SQ=Status quo

P?=A proposal from the authoritarian government, which seems plausible for the democratic government – in the absence of the legislative constraint…

L*=Ideal point of the democracy’s legislature

NSQ=The new status quo – the best deal the authoritarian government can get, given the credible legislative constraint

Most have argued…

• The Schelling Conjecture favors DEMOCRACIES

• They have the CREDIBLE CONSTRAINT

• E.g., the LEGISLATURE

• More generically:

• AUDIENCE COSTS

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Weiss turns this around!

• US announces support for Japan

• So, audience costs are in place for backing down!

• China – at first – does not object

• Then “releases” the protests

• Now China has a credible constraint

• And the US backs down!

• A dictatorship uses audience costs against a democracy

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Credible commitment?

• Always ask this question!

• Here:

– China can control when protest STARTS

– But cannot put the genie back in the bottle

• If China can stop protests as easily as it can prevent them, then the constraint is not credible

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International constraints?

• Look back at CLASS 5 notes, slide 24

• International constraints to gain domestic leverage

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Government’s Chief Executive

(eg, Prez, PM, etc.)

Without the IMF

With the IMF

Veto player

(eg, Congress)

Accept

Reject

Payoff to veto player

-1 (change policy)

0 (maintain the status quo)

-r (reject the IMF)

Figure 1: The logic of bringing in the IMF

Veto player

(eg, Congress)

Accept

Reject

-1 (change policy) + loan

How does bringing in the IMF help push through economic reform?

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A pure domestic setting?

• Boix’s story of democracy

• Do the poor have a credible commitment not to expropriate/tax the rich?

• Do the rich have a credible exit threat?

• All hinges on – repression costs– income distribution– asset specificity

• Explains political regimes in the Middle East – it’s OIL, not Islam or Arabic culture

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‘‘That minority still controls the police, the army, and the economy. If we lose them, we cannot address the other issues.’’

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Now onto the 2nd version:

Time-inconsistent

preference problems

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The generic problem of time-inconsistent preferences:

Individual’s preferences over time:

• Time 1: U(A)>U(B)

• Time 2: U(B)>U(A)

• Anticipating the change in preferences, can the individual COMMIT @ Time 1 to choosing State A @ Time 2?

• Is there a CREDIBLE COMMITMENT?

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Examples:• Classic: Ulysses & the Sirens

• Time 1=Before listening to the Sirens.

• Time 2=While listening to the Sirens.

• State A=Sailing home…

• State B=Belly of the beast…

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American Weekly, Temptaions of Ulysses: Sirens (1948) Pogany – 033http://www.americanartarchives.com/pogany,w.htm

http://traumwerk.stanford.edu/philolog/2009/10/homers_odyssey_in_art_sirens_f.html

• Hostages would like to commit to not pressing charges.

H Promise

Not

K Free

Kill

H Testify

Not

(–,1) (–, 1) (0,1)

(T,-10 years)

Time 1 Time 2

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Under democracy:

• Time 1: Voters elect a government that offers incentives to firms to invest.

• Time 2: Voters elect a government to tax the firm (expropriate the benefits from investment).

• Solution: Credible property rights?

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G Offer

Not

F Invest

Not

G Expropriate

Not

(0,0) (-S,S) (1,1)

(T,0)

Time 1 Time 2

Suppose that T>1>S>0

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Another common example:

• Principal: Government.

• Agent: Central bank.

• If the central bank is not independent of the government, it may be subject to pressures to lower interest rates before elections…leading to inflation and long-run economic problems.

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• Principal=student.

• Delegates to agent=professor.

• Time 1: Beginning of the semester.

• Time 2: Any Thursday night.

• State A: State of knowledge.

• State B: State of… (Tombs).

• Solution: Your agent (me) will give you a bad grade if you do poorly on the exam– Credible commitment?

• REPUTATION!!!

Education:

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Marriage:• Not needed if there is “true love” or “happily ever after.”

• Needed because we anticipate the possibility of “Time 2.”

• Time 2: U(B)>U(A)

• State A=Together

• State B=Sirens, Tombs, etc…

• “Richer,” “health,” & “better” added for symmetry.

• “Poorer,” “sicker,” “worse” are the kickers.

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• The COMMITMENT problem pervades many political, economic, and other relationships.

• The analytical tool of CREDIBLE COMMITMENTS can be applied well outside of the study of international relations.

What did you learn today?

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Take-aways

• Constraints strengthen negotiation posture– (The Schelling Conjecture)

• Usually interpreted as favoring democracies

• Weiss turns this around (also see J. Weeks, Cornell)

• Constraints only work if they’re CREDIBLE

• Recalls “The Commitment Problem”

• Credible commitments can solve “time-inconsistent” preference problems

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Thank youWE ARE GLOBAL GEORGETOWN!

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Suggested further readings

• Elster, Jon. 1990. Ulysses and the Sirens: Studies in Rationality and Irrationality. New York: Cambridge University Press.

• Elster, Jon. 2000. Ulysses Unbound. New York: Cambridge University Press.

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