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Third World debts are relatively secure and are unlikely to be rescheduled en masse. There are serious obstacles to smooth debt servicing. Richard Hill, chairman of the First National Bank of Boston, offers a particularly clear appraisal of the International Monetary Fund's (IMF) role: "Sophisticated borrowers and lenders increasingly look to the Fund to set standards for economic stabilization and adjustment. Ironically, the most forceful advocates are the US commercial banks, the same banks that vigorously objected to a strong IMF at its inception. The commercial lenders, attentive to asset management, liked access to the IMF's detailed country analyses and the data on which they were based. This issue was raised in 1977 when Gabriel Hauge, chairman of Manufacturers Hanover Trust, suggested a formal connection between commercial banks and the IMF. The growing cooperation between the Fund and large commercial banks hinges on the IMF's crucial role in providing liquidity and discipline in debt crises.

In this article we summarize the empirical results of the Rational Design project. In general the results strongly support the Rational Design conjectures, especially those on flexibility and centralization; some findings are inconclusive (in particular, those addressing scope) or point toward a need for theoretical reformulation (in particular, the membership dimension). We also address the broader implications of the volume's findings, concentrating on several topics directly related to institutional design and its systematic study. First, we consider the trade-offs in creating highly formalized models to guide the analysis. Second, our discussion of the variable control is a step toward incorporating “power” more fully and explicitly in our analysis. We also consider how domestic politics can be incorporated more systematically into international institutional analysis. Finally, we initiate a discussion about how and why institutions change, particularly how they respond to changing preferences and external shocks. We conclude with a discussion of the forward-looking character of rational design.

Why do international institutions vary so widely in terms of such key institutional features as membership, scope, and flexibility? We argue that international actors are goal-seeking agents who make specific institutional design choices to solve the particular cooperation problems they face in different issue-areas. In this article we introduce the theoretical framework of the Rational Design project. We identify five important features of institutions—membership, scope, centralization, control, and flexibility—and explain their variation in terms of four independent variables that characterize different cooperation problems: distribution, number of actors, enforcement, and uncertainty. We draw on rational choice theory to develop a series of empirically falsifiable conjectures that explain this institutional variation. The authors of the articles in this special issue ofInternational Organizationevaluate the conjectures in specific issue-areas and the overall Rational Design approach.

(1996). American support for Israel: History, sources, limits. Israel Affairs: Vol. 2, U.S.—Israeli Relations of the Crossroads, pp. 128-146.

Informal agreements are the most common form of international cooperation and the least studied. Ranging from simple oral deals to detailed executive agreements, they permit states to conclude profitable bargains without the formality of treaties. They differ from treaties in more than just a procedural sense. Treaties are designed, by long-standing convention, to raise the credibility of promises by staking national reputation on their adherence. Informal agreements have a more ambiguous status and are useful for precisely that reason. They are chosen to avoid formal and visible national pledges, to avoid the political obstacles of ratification, to reach agreements quickly and quietly, and to provide flexibility for subsequent modification or even renunciation. They differ from formal agreements not because their substance is less important (the Cuban missile crisis was solved by informal agreement) but because the underlying promises are less visible and more equivocal. The prevalence of such informal devices thus reveals not only the possibilities of international cooperation but also the practical obstacles and the institutional limits to endogenous enforcement.

International institutions vary widely in terms of key institutional features such as membership, scope, and flexibility. In this 2004 book, Barbara Koremenos, Charles Lipson, and Duncan Snidal argue that this is so because international actors are goal-seeking agents who make specific institutional design choices to solve the particular cooperation problems they face in different issue-areas. Using a Rational Design approach, they explore five features of institutions - membership, scope, centralization, control, and flexibility - and explain their variation in terms of four independent variables that characterize different cooperation problems: distribution, number of actors, enforcement, and uncertainty. The contributors to the volume then evaluate a set of conjectures in specific issue areas ranging from security organizations to trade structures to rules of war to international aviation. Alexander Wendt appraises the entire Rational Design model of evaluating international organizations and the authors respond in a conclusion that sets forth both the advantages and disadvantages of such an approach.

Third World debt grew very rapidly in the 1970s. Many states, faced with sharply higher costs for energy and manufactured imports, borrowed aggressively in unregulated offshore capital markets. But what constrains sovereign states to repay this debt to commercial banks? Creditors do not turn to their home states to enforce payment; rather, the supervision of sovereign debt is largely a function of commercial banking arrangements, especially lenders' syndicates, and the International Monetary Fund's conditional lending. This political structure, which involves unified private sanctions, has ensured that no state defaults unless it is insolvent or is willing to accept a radical rupture in its international commercial relationships. When the problem is insolvency, creditors routinely convene ad hoc conferences. In conjunction with an IMFapproved stabilization program, creditors can renegotiate debt-service schedules and provide new financing if necessary. These arrangements are distinctive among international economic regimes because they rely on nonstate actors as the primary source of rules, norms, and procedures.

As part of the Marshall Plan, the United States Government developed a state-sponsored program of insurance against currency inconvertibility in Western Europe, which grew slowly into a worldwide program insuring US-based multinational corporations against expropriation, war and revolution as well as inconvertibility. Two hypotheses—one based on corporate preferences, the other on state initiatives—can be used to predict the program's development between 1948 and 1974. While there is some independent scope for state policy, corporate preferences appear to be crucial: state policy on this issue has served corporate interests, and state initiatives on expropriation insurance are constrained by private investment decisions. The basic harmony between private investors and the state on expropriation insurance issues is explained by their shared goal of private capital accumulation.

The study of international political economy is distinguished not only by its substantive focus but also by its continuing attention to cooperative, or at least rule-guided, arrangements. These cooperative arrangements are defined variously: as an open world economy by Robert Gilpin and Stephen Krasner, and as strong international regimes by Robert Keohane and Joseph Nye. But in either case, the problems of cooperation and order are not approached simply as tactical alliances or as limiting cases of international anarchy. Instead, close attention is paid to the possibilities for rule making and institution building, however fragile and circumscribed they may be. By this view, the absence of a Hobbesian “common power to keep them all in awe” does not preclude the establishment of some effective joint controls over the international environment. Elaborating on this perspective, Brian Barry argues that “international affairs are not a pure anarchy in which nobody has any reason for expecting reciprocal relations to hold up. In economic matters, particularly, there is a good deal of room for stable expectations.”

Regimes can be analyzed both as ‘outcomes to be explained’ and as mediating social institutions that affect international transactions. In the case of postwar trade, the changing outcomes can be predicted simply and with rough accuracy by a hegemonic model. Yet that model cannot explain the continuing reduction of tariffs, the development of new nontariff codes, and the persistence of crucial norms, rules, and institutions. These durable features of modern trade suggest that the logic of regime maintenance is distinct from that of regime initiation. Nor can the hegemonic model account for the regime's highly uneven weakening. The most prominent trade barriers are in mature, basic industries; the least prominent are in industries with differentiated products and extensive research and development expenditures. One explanation (which usefully complements a hegemonic model) is that sectors differ systematically in their capacity to adapt competitively to imports, and hence in their need to preserve their position by trade barriers. Despite the regime's uneven weakening, trade volumes have continued their secular growth. In sectors where the regime remains strong, it has stimulated two-way trade in similar products (intraindustry trade). Where the regime is weaker, new nontariff barriers diminish hypothetical trade growth but rarely aim at a permanent rollback in market shares or trade volume.

Since 1959 Congress has tried to protect U.S. direct foreign investments from expropriation by quite explicit amendments to various foreign assistance acts. Probably the most important of these legislative efforts, the Hickenlooper amendment, the Gonzales amendments, and the effective repeal of the Hickenlooper amendment, are contradictory and have been applied only sporadically. By developing testable hypotheses that can accurately and parsimoniously predict these varied legislative and diplomatic policies, this article attempts to demonstrate the value of a radical analysis of American foreign policy. After those hypotheses are evaluated, they are compared with propositions derived from pluralist and bureaucratic analysis. Finally, the policy history is reconsidered to show that changes in the external environment, particularly the rise of economically powerful nationalist regimes, have let to a significant evolution in the policy preferences of large multinational firms.

Cooperation among creditors has been the foundation of international debt arrangement! and is critical to preserving the value of foreign capital. Such cooperation is inherently difficult because every debt rescheduling involves hundreds of banks worldwide, each witr its own financial interests. Nevertheless, large money-center banks have been able to devisi common negotiating positions and conclude rescheduling agreements. Their cooperation i based partly on their extensive daily interactions, which permit both reciprocity and retal iation. In addition, most large banks are permanent fixtures in international capital markets; their ties to other banks and foreign borrowers could be jeopardized if they obstructed a rescheduling. Smaller banks, which lack these international ties, are more apt to hold out from joint arrangements. To secure their agreement, creditor committees (composed of large banks) rely on their domestic ties to these smaller institutions, which is occasionally reinforced by support from central banks.