1. Activities of the International System

Neoliberal international relations thinkers often employ game theory to explain why states do or do not cooperate;^[1] since their approach tends to emphasize the possibility of mutual wins, they are interested in institutions which can arrange jointly profitable arrangements and compromises.

Neoliberalism is a response to neorealism; while not denying the anarchic nature of the international system, neoliberals argue that its importance and effect has been exaggerated. The neoliberal argument is focused on neorealists' alleged underestimation of "the varieties of cooperative behavior possible within ... a decentralized system."^[2] Both theories, however, consider the state and its interests as the central subject of analysis; neoliberalism may have a wider conception of what those interests are.

Neoliberalism argues that even in an anarchic system of autonomous rational states, cooperation can emerge through the cultivation of mutual trust and the building of norms, regimes and institutions.

In terms of the scope of international relations theory and foreign interventionism, the debate between Neoliberalism and Neorealism is an intra-paradigm one, as both theories are positivist and focus mainly on the state system as the primary unit of analysis.

2. Development

Robert Keohane and Joseph Nye have been considered the founders of the neoliberal school of thought; Keohane's book After Hegemony is a classic of the genre. Other major influences are the hegemonic stability theory of Stephen Krasner and the work of Charles P. Kindleberger, among others.

3. Contentions

3.1. Keohane and Nye

Robert O. Keohane and Joseph S. Nye, in response to neorealism, develop an opposing theory they dub "Complex interdependence." Robert Keohane and Joseph Nye explain, "... complex interdependence sometimes comes closer to reality than does realism."^[3] In explaining this, Keohane and Nye cover the three assumptions in realist thought: First, states are coherent units and are the dominant actors in international relations; second, force is a usable and effective instrument of policy; and finally, the assumption that there is a hierarchy in international politics.^[4]

The heart of Keohane and Nye's argument is that in international politics there are, in fact, multiple channels that connect societies exceeding the conventional Westphalian system of states. This manifests itself in many forms ranging from informal governmental ties to multinational corporations and organizations. Here they define their terminology; interstate relations are those channels assumed by realists; transgovernmental relations occur when one relaxes the realist assumption that states act coherently as units; transnational applies when one removes the assumption that states are the only units. It is through these channels that political exchange occurs, not through the limited interstate channel as championed by realists.

Secondly, Keohane and Nye argue that there is not, in fact, a hierarchy among issues, meaning that not only is the martial arm of foreign policy not the supreme tool by which to carry out a state's agenda, but that there is a multitude of different agendas that come to the forefront. The line between domestic and foreign policy becomes blurred in this case, as realistically there is no clear agenda in interstate relations.

Finally, the use of military force is not exercised when complex interdependence prevails. The idea is developed that between countries in which a complex interdependence exists, the role of the military in resolving disputes is negated. However, Keohane and Nye go on to state that the role of the military is in fact important in that "alliance's political and military relations with a rival bloc."

3.2. Lebow

Richard Ned Lebow states that the failure of neorealism lies in its "institutionalist" ontology, whereas the neorealist thinker Kenneth Waltz states, "the creators [of the system] become the creatures of the market that their activity gave rise to." This critical failure, according to Lebow, is due to the realists' inability "to escape from the predicament of anarchy." Or rather, the assumption that states do not adapt and will respond similarly to similar constraints and opportunities.^[5]

3.3. Mearsheimer

Norman Angell, a classical London School of Economics liberal, had held: "We cannot ensure the stability of the present system by the political or military preponderance of our nation or alliance by imposing its will on a rival."^[6]

Keohane and Lisa L. Martin expound upon these ideas in the mid 1990s as a response to John J. Mearsheimer's "The False Promise of International Institutions," where Mearsheimer purports that, "institutions cannot get states to stop behaving as short-term power maximizers."^[7] In fact Mearsheimer's article is a direct response to the liberal-institutionalist movement created in response to neo-realism. The central point in Keohane and Martin's idea is that neo-realism insists that, "institutions have only marginal effects ... [which] leaves [neo-realism] without a plausible account of the investments that states have made in such international institutions as the EU, NATO, GATT, and regional trading organizations."^[8] This idea is in keeping with the notion of complex interdependence. Moreover, Keohane and Martin argue that the fact that international institutions are created in response to state interests, that the real empirical question is "knowing how to distinguish the effects of underlying conditions from those of the institutions themselves."^[7] The debate between the institutionalists and Mearsheimer is about whether institutions have an independent effect on state behavior, or whether they reflect great power interests that said powers employ to advance their respective interests.^[9]

Mearsheimer is concerned with 'inner-directed' institutions, which he states, "seek to cause peace by influencing the behavior of the member states." In doing so he dismisses Keohane and Martin's NATO argument in favor of the example of the European Community and the International Energy Agency. According to Mearsheimer, NATO is an alliance that is interested in "an outside state, or coalition of states, which the alliance aims to deter, coerce, or defeat in war." Mearsheimer reasons that since NATO is an alliance it has special concerns. He concedes this point to Keohane and Martin.^[10] However, Mearsheimer reasons, "to the extent that alliances cause peace, they do so by deterrence, which is straightforward realist behavior."^[11] In essence, Mearsheimer believes that Keohane and Martin "are shifting the terms of the debate, and making realist claims under the guise of institutionalism.^[11]

Mearsheimer criticizes Martin's argument that the European Community (EC) enhances the prospects of cooperation, particularly in the case of Great Britain's sanctioning of Argentina during the Falklands war, where it was able to secure the cooperation of other European states by linking the issues at hand to the EC. Mearsheimer purports that the United States was not a member of the EC and yet the US and Britain managed to cooperate on sanctions, creating an ad hoc alliance which effected change. "... Issue linkage was a commonplace practice in world politics well before institutions came on the scene; moreover, Britain and other European states could have used other diplomatic tactics to solve the problem. After all, Britain and America managed to cooperate on sanctions even though the United States was not a member of the EC."^[12]