Institutional theory seeks to understand the anomalies facing realist theory by building on, but going beyond, some premises that it has in common with realism. Institutional theory seeks to understand the existence of international institutions, and how they operate.
Institutions are defined as “persistent and connected sets of rules (formal and informal) that prescribe behavioral roles, constrain activity, and shape expectations.”17 They can take the form of formal intergovernmental or nongovernmental organizations, international regimes, and informal conventions. Following Douglass North, we conceive of organizations as actors or “players,” and institutions as rules that define how the game is played.18 Regimes are sets of rules and norms that may be formal or informal; conventions are informal understandings.
Early institutional theory sought to show that, even given realist assumptions, international institutions should be seen as significant for the policies followed by states, and thus for the realization of important values in world politics. Such authors as Robert Axelrod and Robert Keohane relied on analysis of mixed-motive games such as the Prisoners’ Dilemma to identify factors that would support cooperation, and drew attention to the role of reciprocity and information in allowing states to reach the Pareto frontier of efficient international
16. Below, we note that understandings of domestic institutions have substantially changed in recent years, so that the characterization of them as strong external enforcers of contracts and other agreements is no longer universally accepted.
17. Robert O. Keohane, International Institutions and State Power (Boulder, Colo.:
Westview, 1989), p. 3.
18. Douglass C. North, Institutions, Institutional Change and Economic Performance (New York: Cambridge University Press, 1990), pp. 4–5.
arrangements.19 These formulations shared the traditional realist conceptualization of states as rational actors pursuing self-interest.
In comparison to the liberal idealism that preceded it, and the constructivism that has followed, institutional theory constituted an incremental modification of realism. Advocates of institutional theory embraced, rather than abandoned, the three core assumptions that it shared with realism; even disagreements over the anarchy assumption were not fundamental to institutional theory. The crucial assumption of realism altered by institutional theory was implicit rather than explicit.
Changing this assumption, however, enabled institutional theorists to challenge the validity of the inferences about state behavior that realists had made on the basis of the shared assumptions.
The changed core assumption has to do with the informational environment of international relations. Realism assumes that information about the intentions of other states is pertinent, but of poor quality. States must therefore assume the worst, and thus behave in a defensive, wary manner.20 More importantly, realists assume that states cannot systematically improve the information conditions in which they operate. This assumption dates back to classical realism, being a major part of the analysis of E.H. Carr, for example.21 Scarce information, and the inability of states to do anything to improve the situation, force states to adopt worst-case scenarios when choosing their strategies.
19. Robert Axelrod, The Evolution of Cooperation (New York: Basic Books, 1984);
Robert O. Keohane, After Hegemony: Cooperation and Discord in the World Political Economy (Princeton, N.J.: Princeton University Press, 1984)
20. Mearsheimer, “Back to the Future”; Waltz, Theory of International Politics.
Charles Glaser, “Realists as Optimists: Cooperation as Self-Help,” International Security, Vol. 19, No. 3 (Winter 1994), pp. 50–90, has most directly examined this precept of realism, suggesting that under some conditions information is in fact not scarce, and that states can utilize signaling strategies to inform others of their intentions. He asserts that changing this assumption about information is consistent with realism.
21. Edward Hallett Carr, The Twenty Years’ Crisis, 1919–1939 (New York:
Harper & Row, 1939).
Institutional theory, in contrast, explicitly treats information as a variable. Most important, it treats information as a variable that can be influenced by human action. Institutional theory agrees with realism that scarcity of information will impede the efforts of states to engage in cooperative activities with one another. However, since institutional theory assumes that information can be changed by human agency, it argues that states will take steps to improve the informational en-vironment under these conditions, especially if scarcity of information is impeding the attainment of substantial mutual gains from cooperation. Institutional theory has focused on the role of institutions in improving the informational environment. They can do so in numerous ways, such as by providing information about the intentions and activities of others, by setting standards and identifying focal points, or by providing reliable causal information about the relationship between actions and outcomes. Institutional theory points out that states may be as concerned with providing information about themselves—hence bolstering their credibility and therefore the value of their commitments—as they are with acquiring information about others. States therefore construct institutions to improve both their information about others and their own credibility, to ameliorate the dilemmas and defensive stances otherwise dictated by realism’s hard core assumptions.
The shift from realism to institutional theory can be classified, in Lakatos’s terms, either as an inter-program problemshift or an intra-program problemshift, depending on whether one views as central the assumption implicit in traditional realist theory that the information content of the system is a constant. We leave that debate to others; in view of the ambiguity of Lakatosian theory and of the scope for argument over realist-institutionalist differences, it is not very important to us to debate whether institutional theory began as a separate research program or merely an attempt to construct what one of the present authors once called “modified structural realism.”22 As we have emphasized, there is much in common between realism and institutional theory, particularly in its early years. Indeed, the closeness
22. Keohane, “Theory of World Politics.”
of the links between institutional theory and realism is indicated by the fact that institutional theory at the outset adopted realism’s unitary actor assumption—although this decision was admittedly taken more for analytical convenience and rhetorical effect than out of deep conviction. It was a tactical decision, later reversed, rather than part of institutional theory’s hard core.23 As we argue below, this adoption of the unitary actor assumption had costs. Whether wise or not, it shows that, for better or worse, institutional theory is a half-sibling of realism.
Perhaps their closeness helps to explain the intensity of the disputes that have arisen between them.