Posner and Sykes Book Symposium: Comment by Andrew Guzman

[Andrew Guzman is Professor of Law and Director of the Advanced Law Degree Programs at Berkeley Law School, University of California, Berkeley.]

This is a superb book.  I say this without the slightest bit of surprise, as that is what one would expect from these authors.  In addition to the quality of the content, the book is all the more important because there is no comparable tour of international law from a law and economics perspective.  I have disagreements with some of the content of the book – it would be impossible to produce a serious book with respect to which other scholars were in total agreement – but this should now be a central part of the canon, not only of the law and economics of international law, but of international more broadly.

It is perhaps a sign of a maturing discussion within international law that the book does not bother to include a discussion of why studying international law from an economic perspective is useful.  This area of legal scholarship has been slow to embrace analytical approaches and for many years anyone writing in that style felt the need to defend the methodology itself.  It would be wonderful if we have moved past that point.

That said, it is worth noting that one of the benefits of an economic approach is that it encourages us to make clear our assumptions and models of behavior.  In so doing we more fully disclose our intellectual commitments which, in turn, allows others to challenge or build on our claims.  When we disagree, we can more effectively examine one another’s arguments and identify the precise points in dispute.

In my brief comment, I would like to take advantage of this feature and build off of some of what Posner-Sykes say to make a point about international cooperation in general and, more explicitly, in the area of climate change.  I do not know if the authors would agree with my views, but the discipline imposed by an economic approach should, at a minimum, make clear why we disagree.

Let me begin with one of the earliest points made in the book – why humanity has chosen to live in a world with almost 200 states rather than in a world with many more or many fewer.  Posner and Sykes (P-S) explain this as a balance between the need for government to be responsive to local interests on the one hand and the benefits of scale on the other.

A state should stop growing when the marginal benefit of a representative citizen from adding another citizen due to scale economies falls below the marginal cost to a representative citizen of higher governance costs.  (p. 17).

This point is surely correct.  It perhaps runs the risk of descending into truism as everything that is deemed relevant (e.g., ethnic divisions) is lumped under the category of “governance costs,” but, given the scope of the book, P-S cannot reasonably be expected to provide a complete unpacking of this theory.  They state, correctly, that “[t]he book aims for breadth, not depth.”

So the existence of many states is explained at least in part by governance costs.  It follows to ask how these states interact with one another and how they address common problems.  The traditional international answer here is that states use law (customary international law and treaties) as well as a host of other strategies to manage their interactions.

Among these other strategies is the use of international institutions.  Here we see an apparent puzzle. The need for unanimity in treaty-making, along with the significant hurdles to constructing effective side-payments, frustrates efforts at value-increasing cooperation.  “Here again, a robust legal system is foiled by the requirement of consent.” (p. 80).  An obvious solution would be delegation.  States could assign authority to institutions to make decisions through some form of process that is less demanding than unanimity.  This is a common strategy is virtually all forms of human organization, from student councils to neighborhood associations, to national legislatures.

Yet we see almost no such delegation internationally.  Why not?  P-S conclude that the costs outweigh the benefits:

 The only explanation is that states do not trust international agencies to act in their interests: agency costs are too high. (p. 84)

At a sufficiently high level of generality, this must be true, almost as a matter of definition.  It does not follow, however, that the existing level of delegation is optimal.  It seems likely to reflect a combination of historical path dependence and rent-seeking by national authorities (who do not want to surrender any of their authority) in addition to the agency costs triggered if an international institution deviates from the interests of states.

This is all somewhat abstract, but it has important implications for the modern world where international externalities are larger than ever and where a failure to generate effective cooperation could have cataclysmic consequences.

The easiest (though not the only) illustration of this reality is climate change.  Climate change presents an unprecedented threat to humanity and challenges our ability to work collectively.  The problem, as P-S note, is a classic collective action problem that cries out for international cooperation, yet virtually nothing of importance has been achieved internationally.  P-S identify four reasons for the failure to make progress: (i) uncertainty about how high temperatures will ultimately rise and other specifics; (ii) asymmetric impacts from climate change; (iii) ill will among many states on the topic; and (iv) problems of monitoring.  They conclude with the grim assessment that “there is not a lot of basis for optimism.”

All of this seems correct, but notice the tension between, on the one hand, an explanation of international institutions that relies on the notion that deeper cooperation does not exist because delegation (and other) costs are too high and, on the other hand, the problem of climate change where a lack of cooperation threatens disastrous outcomes for all states.

It is hard to believe that the threat of over-reaching by an international institution is so severe that states should prefer a continued failure to address climate change over exposure to that risk.  A more likely explanation is that more effective forms of cooperation are needed – a view that bring us back to the paralyzing effect of consent.

We human beings have organized ourselves into states.  This may or may not have been an efficient strategy at some point in human history, but states have never been good at internalizing global externalities like those presented by climate change (or nuclear proliferation, or fisheries, or terrorism, to name a few).  This mattered little a hundred years ago when such externalities were small.  As they have grown larger, however, so have the costs of a consent-based system of international cooperation.  With respect to climate change at least, it seems clear that the disastrous consequences of a failure to cooperate far outweigh the speculative risks of non-consensual rule-making or delegation.

The world has changed, and so must international law.  States must accept increased deference to and delegation to international institutions.  This is not because the costs associated with those institutions have shrunk or vanished.  It is, instead, because the benefits of cooperation (or the costs of a failure to cooperate) have grown so very much larger.