Page 103 - Global Political Economy_Understanding The International Economic Order

CHA PTER F OUR
ers are accused of a crime and held separately. If they both confess to
the crime of which they are accused, they will both be punished. If
neither confesses—that is, if in essence they cooperate with one an-
other—they will both be punished, but less severely. However, if only
one confesses (or defects)and the other does not confess, the latter
will be punished more severely. Thus, although each has an incentive
to cooperate with the other by not confessing, each also has an incen-
tive to confess (defect). Uncertainty regarding what the other player
will do could lead to a less than optimal outcome for both players.
This type of mixed motive game in which the players have a motive
to cooperate and also a motive to defect is characteristic of almost
every aspect of international politics and certainly of international
economic affairs. Although the players would gain from cooperation,
each might gain even more by defecting (cheating); yet both would
lose if both cheat. For example, a nation might be able to increase its
own relative gains in the international trading regime by exporting to
other markets at the same time that it keeps its own markets closed;
however, if others retaliate and close their markets, everyone would
lose. In a monetary regime, a nation could increase its international
competitiveness by unilaterally devaluing its own currency. However,
if other countries simultaneously devalue their own currencies, every-
one loses. Therefore, everyone is better off, at least in absolute terms,
as a result of cooperation. Yet the possibility of increasing one’s own
relative gains by cheating or successfully “free-riding” always pro-
vides a powerful temptation in international affairs. 27
A number of attempts have been made by economists and other
scholars to solve the Prisoner’s Dilemma. Proposed solutions entail
methods or techniques designed to increase the likelihood that players
will cooperate and not cheat; they include creation of norms of reci-
procity, making each move in the game less distinct, and linking is-
sues to one another. Such techniques attempt to lessen the incentive
to cheat in a particular instance so that the players learn how to coop-
28
erate. The most noteworthy effort to solve the Prisoner’s Dilemma
has been the concept of iterative games developed by Robert Axelrod
29
and others. This concept leads to the conclusion that, if a game is

27
Bruno S. Frey has a valuable analysis of the “free-rider” problem and why interna-
tional cooperation is so difficult in his International Political Economics (Oxford: Basil
Blackwell, 1984), Chapter 7.
28
An important discussion of this subject is Kenneth A. Oye, ed., Cooperation under
Anarchy (Princeton: Princeton University Press, 1986), 2–24.
29
Robert M. Axelrod, The Evolution of Cooperation (New York: Basic Books,
1984).
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