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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 2

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!) 3

Table 5.6: The effect of UNSC membership on African Development Bank lending Pre and onward: VariableAfDF UNSC Member *** (0.06)(3.55) UNSC Member, unimportant year (0.75)(1.12) UNSC Member, somewhat important year ** (0.84)(2.04) UNSC Member, important year 2.531*** (4.23) Pariah state 6.193***6.184*** (4.43)(4.55)(0.48)(0.52) War **-1.27 (0.04)(0.05)(2.05)(1.64) ln(GDP per capita, PPP) 6.582**6.469** (2.14)(2.10)(0.90)(1.22) Political regime (0.29)(0.33)(0.44)(0.32) Number of observations355 1,3381,289 R-squared 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. 4

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…? 6

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 7

Plan The Schelling Conjecture Weiss’s argument: –Japan's UNSC seat & domestic politics The Schelling Conjecture reversed? Credible commitments & democratization Ὀ δύσσεια –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! 9

Puzzle Anti-Japanese protests in China Sometimes allowed Sometimes prevented Why? 10

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? 11

Pres*Aut*L*SQNSQ A little animation P? 12 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 13

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 14

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 15

International constraints? Look back at CLASS 5 notes, slide 24 International constraints to gain domestic leverage 16

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? 17

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 18

‘‘That minority still controls the police, the army, and the economy. If we lose them, we cannot address the other issues.’’ 19

Now onto the 2 nd version: Time-inconsistent preference problems 20

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 Time 1 to choosing State Time 2? Is there a CREDIBLE COMMITMENT? 21

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… 22 American Weekly, Temptaions of Ulysses: Sirens (1948) Pogany – om/pogany,w.htm tanford.edu/philol og/2009/10/home rs_odyssey_in_ar t_sirens_f.html

Hostages would like to commit to not pressing charges. H Promise Not K Free Kill H Testify Not (–,1) (0,1) (T,-10 years) Time 1Time 2 23

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? 24

G Offer Not F Invest Not G Expropriate Not (0,0)(-S,S)(1,1) (T,0) Time 1Time 2 Suppose that T>1>S>0 25

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. 26

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: 27

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. 28

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? 29

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 30

Thank you WE ARE GLOBAL GEORGETOWN! 31

Suggested further readings Elster, Jon Ulysses and the Sirens: Studies in Rationality and Irrationality. New York: Cambridge University Press. Elster, Jon Ulysses Unbound. New York: Cambridge University Press. 32