George Mason University SCHOOL of law THE ROLE OF RECIPROCITY IN INTERNATIONAL LAW 02-08 francesco Parisi and nita ghei LAW AND ECONOMICS WORKING PAPER SERIES This paper can be downloaded without charge from the Social Science Research Network Electronic Paper Collection http://ssrn.com/abstractid=307141
George Mason University SCHOOL of LAW INTERNATIONAL LAW 02-08 Francesco Parisi and Nita Ghei LAW AND ECONOMICS WORKING PAPER SERIES This paper can be downloaded without charge from the Social Science Research Network Electronic Paper Collection: http://ssrn.com/abstract_id=307141 THE ROLE OF RECIPROCITY IN
THE ROLE OF RECIPROCITY IN INTERNATIONAL LAW Francesco Parisi and Nita ghei INTRODUCTION contented with so much liberty against other men as he would allow other men against himsel/'6 [A] man be willing, when others are too, as far forth for peace and defense of himself, The concept of reciprocity assumes peculiar importance in a world where there is no external authority to enforce agreements, that is, in a world that exists in Hobbesian state of nature Historically, norms of reciprocity have been vital is escaping lives that would otherwise be"solitary poor, nasty, brutish and short. Reciprocity generally involves returning like behavior with like In Robert Axelrod's terminology, reciprocity is a tit-for-tat strategy. Such a strategy permits cooperation in a state of nature, when no authority for enforcement of agreements exists International law, in this sense, exists in a state of nature- there is no overarching legal authority with compulsory jurisdiction to enforce agreements. Inevitably, reciprocity has become an important element in the practice of sovereign nations and in the body of existing international law This paper begins with setting up a taxonomy of social interactions in a game-theoretic framework,t Professor of Law and Director, International Business Law Program, George Mason University School of Law, Co-Director, James M. Buchanan Program in Economics and the Law Robert A. Levy Fellow in Law and Liberty. George Mason University School of Law. J D. candidate lay 2002, George Mason University School of Law, Ph. D, 1992, Department of Economics, University of Maryland, College Park; B.A. (Honors)in Economics, 1985, Delhi University, India The second law of nature, according to Hobbes. THOMAS HOBBES, LEVIATHAN, (1651)(Liberal Arts Press 1958)at 110 See hobbes supra note I at 107 See generally ROBERT AXELROD, THE EVOLUTION OF COOPERATION (1984). Axelrod demonstrates the superiority of a cooperative strategy when people undertake repeated interactions over a strategy that would seemingly be rational in a Prisoner's Dilemma situation, discussed infra Part I.C. An earlier, somewhat different, version of this taxonomy is found in Francesco Parisi, The Cost of the ame: A Taxonomy of Social Interactions, 9 Eur J. L. Econ. 99(2000)(hereinafter Parisi, Taxonomy)
* Professor of Law and Director, International Business Law Program, George Mason University School of Law; Co-Director, James M. Buchanan Program in Economics and the Law. **Robert A. Levy Fellow in Law and Liberty. George Mason University School of Law. J.D. candidate, May 2002, George Mason University School of Law; Ph.D., 1992, Department of Economics, University of Maryland, College Park; B.A. (Honors) in Economics, 1985, Delhi University, India. 1 The second law of nature, according to Hobbes. THOMAS HOBBES, LEVIATHAN, (1651) (Liberal Arts Press 1958) at 110. 2 See Hobbes supra note 1 at 107. 3 See generally ROBERT AXELROD, THE EVOLUTION OF COOPERATION (1984). Axelrod demonstrates the superiority of a cooperative strategy when people undertake repeated interactions over a strategy that would seemingly be rational in a Prisoner’s Dilemma situation, discussed infra Part I.C. 4An earlier, somewhat different, version of this taxonomy is found in Francesco Parisi, The Cost of the Game: A Taxonomy of Social Interactions, 9 Eur. J. L. Econ. 99 (2000) (hereinafter Parisi, Taxonomy). 1 THE ROLE OF RECIPROCITY IN INTERNATIONAL LAW Francesco Parisi* and Nita Ghei** INTRODUCTION [A] man be willing, when others are too, as far forth for peace and defense of himself, . .. , be contented with so much liberty against other men as he would allow other men against himself.1 The concept of reciprocity assumes peculiarimportance in a world where there is no external authority to enforce agreements, that is, in a world that exists in Hobbesian state of nature. Historically, norms of reciprocity have been vital is escaping livesthat would otherwise be “solitary, poor, nasty, brutish and short.”2 Reciprocity generally involves returning like behavior with like. In Robert Axelrod’s terminology, reciprocity is a tit-for-tat strategy.3 Such a strategy permits cooperation in a state of nature, when no authority for enforcement of agreements exists. International law, in this sense, exists in a state of nature - there is no overarching legal authority with compulsory jurisdiction to enforce agreements. Inevitably, reciprocity has become an important element in the practice of sovereign nations and in the body of existing international law. This paper begins with setting up a taxonomy ofsocial interactionsin a game-theoretic framework,4
to examine the role of reciprocity in the functioning of international law and whether reciprocity is in effect. a meta-rule for the law of nations Part I defines the characteristics of specific types of interactions between countries in a game theoretic framework. Part II sets out definitions for different forms of reciprocity found in international law. We then examine the international law settings where reciprocity constraints would yield an optimal outcome, and when such constraints would be ineffective. Part Ill sets out specific examples from international law, and see where they fit in the taxonomy of the games formulated. This makes clear that the principle of reciprocity is of vital importance in achieving efficient outcomes in many circumstances. Finally, in Part Iv, we conclude that despite the occasional failure, reciprocity is important enough to be considered a meta-rule of the system of international law- an essential element in its functioning . RECIPROCITY THROUGH THE LENS OF GAME THEORY. A TAXONOMY Game theory is a useful tool for the study of international law and the relations between sovereign states, since it focuses on interactions where parties can determine only their own strategies and thus have no direct control of the outcome. The outcome results from the joint interaction of the strategies chosen by independent players. That is, parties can choose their strategies but cannot directly determine the outcome by their own actions. For the purpose of our analysis, we distinguish five broad categories of relevant interactions, which provide a useful taxonomy for the fina/ou The general world of game theory is one where a player can control only their own strategies, but not the ome. See, e.g, THOMAS SCHELLING, THE STRATEGY OF CONFLICT(1980 ed)(discussing issues of war and strategy ) For a very brief and basic introduction to game theory, see ROBERT COOTER aND THOMAS ULEN, LAW AND ECONOMICS(3 ded. 2000)at 34-39
5 The general world of game theory is one where a player can control only their own strategies, but not the final outcome. See, e.g., THOMAS SCHELLING, THE STRATEGY OF CONFLICT (1980 ed) (discussing issues of war and strategy). For a very brief and basic introduction to game theory, see ROBERT COOTER aND THOMAs ULEN, LAW AND ECONOMICS (3rd ed. 2000) at 34-39. 2 to examine the role of reciprocity in the functioning of international law and whether reciprocity is, in effect, a meta-rule for the law of nations. PartI definesthe characteristics ofspecific types ofinteractions between countriesin a gametheoretic framework. Part II sets out definitions for different forms of reciprocity found in international law. We then examine the international law settings where reciprocity constraints would yield an optimal outcome, and when such constraints would be ineffective. Part III sets out specific examples from international law, and see where they fit in the taxonomy of the games formulated. This makes clear that the principle of reciprocity is of vital importance in achieving efficient outcomes in many circumstances. Finally, in Part IV, we conclude that despite the occasional failure, reciprocity is important enough to be considered a meta-rule of the system of international law - an essential element in its functioning. I. RECIPROCITY THROUGH THE LENS OF GAME THEORY: A TAXONOMY Game theory is a useful tool for the study of international law and the relations between sovereign states, since it focuses on interactions where parties can determine only their own strategies and thus have no direct control of the outcome.5 The outcome results from the joint interaction ofthe strategies chosen by independent players. That is, parties can choose their strategies but cannot directly determine the outcome by their own actions. For the purpose of our analysis, we distinguish five broad categories of relevant interactions, which provide a useful taxonomy for the
understanding of international relations. In each case, the payoff for Player A is represented by the first number in a cell; the payoff for Player B is represented by the second figure. Each player has three possible payoffs. Generally, the greater the level of cooperation, the greater the combined pay off Strategy I represents full cooperation; strategy II represents partial cooperation; and strategy Ill represents a situation where neither party chooses to cooperate Imposing a reciprocity constraint means that the choice of strategy is determined mutually hus, if Player A chooses to cooperate, under a reciprocity constraint, Player B will have to cooperate, If Player A chooses Strategy Ill, and not cooperate, Player B will also choose Strategy Ill Both parties know that the imposition of a reciprocity constraint limits interaction, so that options on the diagonal. as shown in Figure 2. are left available A. Pure Common-Interest Situations In game theory, this group of situations are represented as positive sum games with a single dominant strategy that leads to efficient outcomes. This optimal outcome is achievable by the parties in a stable Nash equilibrium. This category has been categorized by Thomas Schelling as a pure common interest game. As the optimal outcome is a Nash equilibrium, where the party's incentives are perfectly aligned, any implicit or explicit agreement between the parties becomes self-enforcing, in the sense that no party has an interest to deviate unilaterally. a sample pay-off matrix in such a game could take the following form: This draws heavily on Parisi, Taxonomy, supra note 4 A Nash equilibrium is a situation where no individual player can do better by changing strategy, as long as the other party does not change strategy. Thus, neither party has any incentive to change the choice made. See Cooter and Ulen, supra note 5 at 37. See Schelling supra note 5 at 88
6 This draws heavily on Parisi, Taxonomy, supra note 4. 7A Nash equilibrium is a situation where no individual player can do better by changing strategy, as long as the other party does not change strategy. Thus, neither party has any incentive to change the choice made. See Cooter and Ulen, supra note 5 at 37. 8 See Schelling supra note 5 at 88. 3 understanding of international relations.6 In each case, the payoff for Player A is represented by the first number in a cell; the payoff for Player B is represented by the second figure. Each player has three possible payoffs. Generally, the greater the level of cooperation, the greater the combined payoff. Strategy I represents full cooperation; strategy II represents partial cooperation; and strategy III represents a situation where neither party chooses to cooperate. Imposing a reciprocity constraint means that the choice of strategy is determined mutually. Thus, if Player A chooses to cooperate, under a reciprocity constraint, Player B will have to cooperate, If Player A chooses Strategy III, and not cooperate, Player B will also choose Strategy III. Both parties know that the imposition of a reciprocity constraint limits interaction, so that options on the diagonal, as shown in Figure 2, are left available. A. Pure Common-Interest Situations In game theory, this group of situations are represented as positive sum games with a single dominantstrategy that leadsto efficient outcomes. This optimal outcome is achievable by the parties in a stable Nash equilibrium.7 This category has been categorized by Thomas Schelling as a pure common interest game.8 As the optimal outcome is a Nash equilibrium, where the party’s incentives are perfectly aligned, any implicit or explicit agreement between the parties becomesself-enforcing, in the sense that no party has an interest to deviate unilaterally. A sample pay-off matrix in such a game could take the following form:
II III I4,22,10.0 Figure(1): A Pure Common Interest Game Both parties, following individually rational strategies which maximize payoffs would choose to follow Strategy I, for a payoff of 6 units each. The outcome remains unchanged if a reciprocity constraint is imposed
4 Figure (1): A Pure Common Interest Game Both parties, following individually rational strategies which maximize payoffs would choose to follow Strategy I, for a payoff of 6 units each. The outcome remains unchanged if a reciprocity constraint is imposed: