Hierarchy Amidst Anarchy: A Transaction Costs Approach to International Security Cooperation

Abstract

This article provides an interest-based explanation for hierarchy in international politics. The study suggests that-even in a self-help system-selfinterested actors voluntarily curtail their sovereignty to obtain needed assurances, yet that these actors have a choice among cooperative security arrangements with different degrees of "bindingness." The key to understanding countries' international institutional choices is in focusing on economic theories of organization and, more specifically, transaction costs.The study begins with the conceptualization of a continuum of cooperative security arrangements with different degrees of bindingness. It then examines different bodies of literature-the traditional realist model and economies-of-scale arguments-and claims that both fail to account for hierarchical security structures in the international system. Recognizing that economists explain hierarchy amidst market anarchy by examining transaction costs, the study makes use of this insight by developing an analogous argument for hierarchy in international politics. Finally, to test the propositions advanced in this article, a brief case study examines plans for the creation of a European Defense Community.Why do states create the type of international security structures they do? What causes states to choose an entente over a confederation, or a nonaggression pact over a more formal alliance? In short, what determines the varying degrees of hierarchy found amidst anarchy?The field of international relations is built on a conception of autonomous and self-interested states interacting in an anarchic environment. And yet the history of international politics is replete with security arrangements that are hierarchical, that is, they require the curtailment of some freedom of action, and that display different degrees of institutionalization. The main schools of thought in the field cannot explain the emergence of such hierarchical arrangements, that is, they cannot explain why states choose to confederate or even why they develop very institutionalized and binding alliances. , and several anonymous reviewers for their critical comments and valuable suggestions on earlier drafts. I gratefully acknowledge financial support from the SSRC Berlin Program for Advanced German and European Studies and the University of California's Institute on Global Conflict and Cooperation.

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