externalities may be nonpecuniary, the sort that produce inefficiency in competitive markets, or pecuniary, creating inefficiency due to an absence of competitive conditions In this section, I begin with some broad observations about the econom erspective on public international law. Because systematic discussions of international law often imagine that states behave as if they have"preferences, " the first topic concerns the conceptualization of states as rational actors. The analysis proceeds to a general discussion of customary international law, to a discussion of the economics of treaties, and finally to consideration of the interface between domestic and national law. A States as Rational Actors Positive economic analysis of international legal regimes conventionally proceeds from an assumption that states behave as if they are rational maximizers over some set of preferences regarding the outcomes of their interaction. The specific assumptions that may be made in this regard are myriad. States may be assumed to behave as economic welfare maximizers. or to maximize a social welfare function that weighs the welfare of certain constituencies more heavily than others. The preferences of the state"may be assumed to be those of its political leaders, who may maximize votes, campaign contributions, or their personal welfare. Innumerable other variations can be imagined depending on the context Whatever precise assumption is made about the nature of preferences, it common to embody a further assumption that states act as if they "care"primarily or exclusively about their own welfare or interests and less or not at all about the welfare ol interests of other states or their political leaders. A divergence will then arise between the national maximand and the global maximand e pr maximizers is surely somewhat simplistic. States represent an aggregation of many different actors, whose preferences may well be at odds. The actor with the power to choose among alternatives may change over time, and the constraints imposed on actors with the power to make choices can change over time(in the United States, think of the President as the actor with the power to make choices on international matters, subject to constraints imposed by Congress). Even when it is plausible to assume that a pertinent decisionmaker has a preference ordering over the available alternatives at a point in time therefore, the notion that the"preferences"of the state are stable over time, or that they obey potentially important regularity assumptions, may be quite problematic Although one must acknowledge this problem, there is often little to be done about it in a tractable modeling framework beyond remaining attentive to its possible
externalities may be nonpecuniary, the sort that produce inefficiency in competitive markets, or pecuniary, creating inefficiency due to an absence of competitive conditions. In this section, I begin with some broad observations about the economic perspective on public international law. Because systematic discussions of international law often imagine that states behave as if they have “preferences,” the first topic concerns the conceptualization of states as rational actors. The analysis proceeds to a general discussion of customary international law, to a discussion of the economics of treaties, and finally to consideration of the interface between domestic and national law. A. States as Rational Actors Positive economic analysis of international legal regimes conventionally proceeds from an assumption that states behave as if they are rational maximizers over some set of preferences regarding the outcomes of their interaction. The specific assumptions that may be made in this regard are myriad. States may be assumed to behave as economic welfare maximizers, or to maximize a social welfare function that weighs the welfare of certain constituencies more heavily than others. The preferences of the “state” may be assumed to be those of its political leaders, who may maximize votes, campaign contributions, or their personal welfare. Innumerable other variations can be imagined depending on the context. Whatever precise assumption is made about the nature of preferences, it is common to embody a further assumption that states act as if they “care” primarily or exclusively about their own welfare or interests, and less or not at all about the welfare or interests of other states or their political leaders. A divergence will then arise between the national maximand and the global maximand. The assumption that states have preference orderings and act as rational maximizers is surely somewhat simplistic. States represent an aggregation of many different actors, whose preferences may well be at odds. The actor with the power to choose among alternatives may change over time, and the constraints imposed on actors with the power to make choices can change over time (in the United States, think of the President as the actor with the power to make choices on international matters, subject to constraints imposed by Congress). Even when it is plausible to assume that a pertinent decisionmaker has a preference ordering over the available alternatives at a point in time, therefore, the notion that the “preferences” of the “state” are stable over time, or that they obey potentially important regularity assumptions, may be quite problematic. Although one must acknowledge this problem, there is often little to be done about it in a tractable modeling framework beyond remaining attentive to its possible
implications for each subject area. Such a framework proceeds in the tradition of other areas of economic analysis, which embrace their own simple assumptions about the objective functions of corporations, bureaucracies, and other large institutions. Here In those other areas the test is not whether the assumptions are fully descriptive of behavior, but whether they yield useful insights with empirical purchase Economic analysis of international law also has its normative side of course, which rests on assumptions about what states ought to be maximizing. Once again,a variety of possible objective functions might be assumed, although the conventional measure of economic welfare is often employed B. The Economics of Customary International Law and"Soft"Law A great deal of work has been done on the economics of"custom' in various contexts. Commentators have written about the of custom evidence to prove negligence in tort actions, the use of customary business practices as a basis for default rules in contract law, the efficiency of social norms, and the general phenomenon of order without lawin primitive or frontier societies. Such topics receive significant attention in other chapters in this Handbook Despite the attention to custom in other contexts, very little has been written about customary international law from an economic perspective. The most notable exception is Goldsmith Posner(1999& 2004) Recall the standard characterization of customary international law: it emerges when there is a high degree of convergence in the practice of states, and a belief that adherence to the practice has become a legal obligation. The latter requirement is know as opinio juris and is central to the existence of customary law according to traditional doctrine. Mere regularities in state behavior, without opinio juris, are not law. Goldsmith and Posner contend that this description of customary international law is largely incoherent. Their alternative theory begins by offering a positive theory of convergence is state practice, which they suggest may result from four distinct phenomena. The first is simple coincidence of interest, whereby all states behave the same way because it is in their unilateral interest regardless of the choices made by other states. They offer" ambassadorial immunity as a possible example(although this subject is governed by treaty as well as custom in modern times)states may protect the ambassadors of other states. even in times of conflict with them because the ambassadors perform a valuable function in facilitating communication with other governments. A second explanation for convergence of practice is pure coercion. Here, they suggest that
implications for each subject area. Such a framework proceeds in the tradition of other areas of economic analysis, which embrace their own simple assumptions about the objective functions of corporations, bureaucracies, and other large institutions. Here, as in those other areas, the test is not whether the assumptions are fully descriptive of behavior, but whether they yield useful insights with empirical purchase. Economic analysis of international law also has its normative side, of course, which rests on assumptions about what states ought to be maximizing. Once again, a variety of possible objective functions might be assumed, although the conventional measure of economic welfare is often employed. B. The Economics of Customary International Law and “Soft” Law A great deal of work has been done on the economics of “custom” in various contexts. Commentators have written about the use of custom evidence to prove negligence in tort actions, the use of customary business practices as a basis for default rules in contract law, the efficiency of social norms, and the general phenomenon of “order without law” in primitive or frontier societies. Such topics receive significant attention in other chapters in this Handbook. Despite the attention to custom in other contexts, very little has been written about customary international law from an economic perspective. The most notable exception is Goldsmith & Posner (1999 & 2004). Recall the standard characterization of customary international law: it emerges when there is a high degree of convergence in the practice of states, and a belief that adherence to the practice has become a legal obligation. The latter requirement is know as opinio juris and is central to the existence of customary law according to traditional doctrine. Mere regularities in state behavior, without opinio juris, are not law. Goldsmith and Posner contend that this description of customary international law is largely incoherent. Their alternative theory begins by offering a positive theory of convergence is state practice, which they suggest may result from four distinct phenomena. The first is simple coincidence of interest, whereby all states behave the same way because it is in their unilateral interest regardless of the choices made by other states. They offer “ambassadorial immunity” as a possible example (although this subject is governed by treaty as well as custom in modern times)—states may protect the ambassadors of other states, even in times of conflict with them, because the ambassadors perform a valuable function in facilitating communication with other governments. A second explanation for convergence of practice is pure coercion. Here, they suggest that
the custom of"free ships, free goods, " whereby all property on neutral ships is immune from seizure (including enemy property ) is at times illustrative--powerful states may espect the principle because the seizure of neutral ships to capture enemy property is not worth the bother, while weaker states may respect the principle for fear of retaliation by powerful states. The third possible reason for convergence arises when a common practice represents the solution to an iterated Prisoners Dilemma, which can be sustained over time by states with open-ended time horizons and sufficiently low discount rates They again offer ambassadorial immunity as a possible illustration, suggesting that an exc ange of ambassadors amounts to an exchange of hostages, and that the prospect o retaliatory acts against ones own ambassador can dissuade any temptation to interfere with the ambassadors of others. Finally, convergence may arise in the face of a pure coordination problem or otherwise where a"focal point is useful. They suggest that the convergence on a three-mile limit for territorial waters is an example here. For a variety of reasons including security, nations have an interest in claiming dominion over waters along their coast but the exact limits of territorial waters is to a degree a matter of indifference--a three mile limit supplies a focal point that all nations can accept In short, Goldsmith and Posner argue that convergence in state practice occurs for reasons of pure national self interest, albeit not the same reason every time. They further suggest that continued adherence to customary practice happens because the self- interested reasons for convergence remain in place, not because of any independent sense of legal obligation. Opinio juris, they suggest, is a fiction, and what legal scholars refer to law"" is really no more than a descriptive account of certain regularities in the behavior of states To bolster this latter claim goldsmith and posner document how ostensible rules of customary law are frequently violated when states have an interest in deviating. They further illustrate how rogue states, which they suggest have shorter time horizons and higher discount rates, are more likely to deviate than others. Because historical violations and breakdowns of custom can be linked to self-interested reasons for them Goldsmith and Posner find anecdotal empirical support for the claim that customary practices are mere regularities of self-interest, and that customary law per se exerts no tug on state behavior The proposition that customary international law'" generally emerges from the self-interested interaction of states, and that it promotes with their mutual interest for one reason or another, seems rather unremarkable. It would indeed be odd if a customary practice emerged on a large scale that made its adherents worse off over an extended period of time. While this aspect of Goldsmith and Posner's analysis seems compelling,a
the custom of “free ships, free goods,” whereby all property on neutral ships is immune from seizure (including enemy property), is at times illustrative—powerful states may respect the principle because the seizure of neutral ships to capture enemy property is not worth the bother, while weaker states may respect the principle for fear of retaliation by powerful states. The third possible reason for convergence arises when a common practice represents the solution to an iterated Prisoner’s Dilemma, which can be sustained over time by states with open-ended time horizons and sufficiently low discount rates. They again offer ambassadorial immunity as a possible illustration, suggesting that an exchange of ambassadors amounts to an exchange of hostages, and that the prospect of retaliatory acts against ones own ambassador can dissuade any temptation to interfere with the ambassadors of others. Finally, convergence may arise in the face of a pure coordination problem or otherwise where a “focal point” is useful. They suggest that the convergence on a three-mile limit for territorial waters is an example here. For a variety of reasons including security, nations have an interest in claiming dominion over waters along their coast, but the exact limits of territorial waters is to a degree a matter of indifference—a three mile limit supplies a focal point that all nations can accept. In short, Goldsmith and Posner argue that convergence in state practice occurs for reasons of pure national self interest, albeit not the same reason every time. They further suggest that continued adherence to customary practice happens because the selfinterested reasons for convergence remain in place, not because of any independent sense of legal obligation. Opinio juris, they suggest, is a fiction, and what legal scholars refer to as customary “law” is really no more than a descriptive account of certain regularities in the behavior of states. To bolster this latter claim, Goldsmith and Posner document how ostensible rules of customary law are frequently violated when states have an interest in deviating. They further illustrate how rogue states, which they suggest have shorter time horizons and higher discount rates, are more likely to deviate than others. Because historical violations and breakdowns of custom can be linked to self-interested reasons for them, Goldsmith and Posner find anecdotal empirical support for the claim that customary practices are mere regularities of self-interest, and that customary law per se exerts no tug on state behavior. The proposition that “customary international law” generally emerges from the self-interested interaction of states, and that it promotes with their mutual interest for one reason or another, seems rather unremarkable. It would indeed be odd if a customary practice emerged on a large scale that made its adherents worse off over an extended period of time. While this aspect of Goldsmith and Posner’s analysis seems compelling, a
skeptic might argue that they have not fully made their case on the nonexistence of opinio juris. Even if customary international law had some force of its own quite apart from the narrow self-interest of a state regarding a particular custom, one might still observe the same anecdotal bits of evidence that Goldsmith and Posner catalog. Nations might still deviate when their self-interested reasons were strong enough, for exampl and rogue states might still be the most likely to deviate. All that would be required is that the behavioral force of opinio juris be limited, so that counter-incentives of sufficient strength could override it. Thus, although Goldsmith and Posner are surely right that the traditional scholars cannot prove the existence of opinio juris by pointing to conformity with custom, neither can the detractors of the traditional view prove its nonexistence merely by pointing to self-interested deviations from custom If the empirical evidence is inconclusive, it remains to ask whether opinio juris can be given any theoretical content. Why would states feel any obligation to observe a custom that is no longer in their self interest? Traditional international law scholars suggest that once a practice becomes law, it infuses the morality of national bureaucrats, who then feel a sense of obligation to obey it. One might restate the proposition as a suggestion that"law" has expressive force and alters the preferences of pertinent national actors, leading them to prefer to obey it(or that they simply have an exogenous preference to obey all" law. )The difficulty with this account, as even noneconomic scholars have noted, is its circularity. Law exists only after the sense of legal obligation arises according to the definition of customary law, yet the sense of legal obligation is said on this account to follow after the emergence of" law a possible alternative account is suggested by Guzman(2002), who relies on the idea that violations of international law may damage a state's reputation. He suggests that international strategic interaction on narrow issues is generally embedded within a larger games, and that players' willingness to cooperate with other players on current issues may then turn on whether a player has developed a reputation for cooperation in the past. Under the usual assumptions that prevent backwards unraveling of cooperation (an infinite or open-ended time horizon) and that limit the short terms gains from defection(such as a low discount rate), Guzman argues that reputational considerations ne possibility of an equilibrium in which mutual cooperation is sustained over time in what might otherwise appear to be a one-shot game with defection as the Nash outcome The addition of reputation to the analysis suggests a possible economic interpretation of opinio juris. One might define it simply as a tendency to obey customary law due to the damage that defection does to a state's reputation as a cooperator, costs
skeptic might argue that they have not fully made their case on the nonexistence of opinio juris. Even if customary international law had some force of its own quite apart from the narrow self-interest of a state regarding a particular custom, one might still observe the same anecdotal bits of evidence that Goldsmith and Posner catalog. Nations might still deviate when their self-interested reasons were strong enough, for example, and rogue states might still be the most likely to deviate. All that would be required is that the behavioral force of opinio juris be limited, so that counter-incentives of sufficient strength could override it. Thus, although Goldsmith and Posner are surely right that the traditional scholars cannot prove the existence of opinio juris by pointing to conformity with custom, neither can the detractors of the traditional view prove its nonexistence merely by pointing to self-interested deviations from custom. If the empirical evidence is inconclusive, it remains to ask whether opinio juris can be given any theoretical content. Why would states feel any obligation to observe a custom that is no longer in their self interest? Traditional international law scholars suggest that once a practice becomes “law,” it infuses the morality of national bureaucrats, who then feel a sense of obligation to obey it. One might restate the proposition as a suggestion that “law” has expressive force and alters the preferences of pertinent national actors, leading them to prefer to obey it (or that they simply have an exogenous preference to obey all “law.”) The difficulty with this account, as even noneconomic scholars have noted, is its circularity. Law exists only after the sense of legal obligation arises according to the definition of customary law, yet the sense of legal obligation is said on this account to follow after the emergence of “law.” A possible alternative account is suggested by Guzman (2002), who relies on the idea that violations of international law may damage a state’s reputation. He suggests that international strategic interaction on narrow issues is generally embedded within a larger games, and that players’ willingness to cooperate with other players on current issues may then turn on whether a player has developed a reputation for cooperation in the past. Under the usual assumptions that prevent backwards unraveling of cooperation (an infinite or open-ended time horizon) and that limit the short terms gains from defection (such as a low discount rate), Guzman argues that reputational considerations create the possibility of an equilibrium in which mutual cooperation is sustained over time in what might otherwise appear to be a one-shot game with defection as the Nash outcome. The addition of reputation to the analysis suggests a possible economic interpretation of opinio juris. One might define it simply as a tendency to obey customary law due to the damage that defection does to a state’s reputation as a cooperator, costs
that are incurred not in the simple game in which defection is contemplated but in al Traditional international law scholars will find little solace in the reputational interpretation of opinio juris, however, because concern for reputation is no less self- interested than concern for payoffs in a narrower strategic interaction. Further, reputational considerations may be of minimal significance as a practical matter in many settings as both Goldsmith and Posner and Guzman argue. This general issue receives further attention below Aside from its examination of opinio juris, the law and economics literature makes a number of other useful points about the role of customary law. The commentators seem to agree that the ability of customary international law to orchestrate cooperation is limited to narrow circumstances. Problems that require complicated solutions are unlikely to be solved by implicit cooperation express negotiation and communication will probably be necessary. Further, problems that require the simultaneous cooperation of large numbers of nations will also be difficult to solve because of free rider problems in the enforcement mechanism. Even when a practice appears "customary"on a global scale, therefore, and is thought to represent mutual hat it is usuall than a recurring regul bilateral interaction Guzman makes the further point that if reputation is what creates some"force of law, then there is no reason to limit our conception of" to customary international law and treaties. Reputational concerns may be quite important to a world leader who gives her word to another, whether or not it is done in any formal fashion and whether or not it concerns some practice that is widespread in the international community. The raditional line between"hard law"(binding treaties and customary law) on the one hand and"soft law"(such as informal agreements and statements of intention) on the other may thus be quite misleading. Depending on context, states may be considerably more likely to comply with soft law than with hard law, and there is no reason to think that hard law is always preferable for orchestrating cooperation In short, economic thinking about customary international law calls into question the very meaning of the concept. It suggests that practices termed"lawin various interaction between states facing similar problems. The codification of customary law merely serves to publicize focal points, and to write down the rules of any game to facilitate future adherence to them. The capacity of customary"law to solve important problems that require cooperation or coordination is quite limited, and will tend to be
that are incurred not in the simple game in which defection is contemplated but in all other games where reputation affects the strategies played by other states. Traditional international law scholars will find little solace in the reputational interpretation of opinio juris, however, because concern for reputation is no less selfinterested than concern for payoffs in a narrower strategic interaction. Further, reputational considerations may be of minimal significance as a practical matter in many settings as both Goldsmith and Posner and Guzman argue. This general issue receives further attention below. Aside from its examination of opinio juris, the law and economics literature makes a number of other useful points about the role of customary law. The commentators seem to agree that the ability of customary international law to orchestrate cooperation is limited to narrow circumstances. Problems that require complicated solutions are unlikely to be solved by implicit cooperation—express negotiation and communication will probably be necessary. Further, problems that require the simultaneous cooperation of large numbers of nations will also be difficult to solve because of free rider problems in the enforcement mechanism. Even when a practice appears “customary” on a global scale, therefore, and is thought to represent mutual cooperation, the suggestion is that it is usually no more than a recurring regularity of bilateral interaction. Guzman makes the further point that if reputation is what creates some “force of law,” then there is no reason to limit our conception of “law” to customary international law and treaties. Reputational concerns may be quite important to a world leader who gives her word to another, whether or not it is done in any formal fashion and whether or not it concerns some practice that is widespread in the international community. The traditional line between “hard law” (binding treaties and customary law) on the one hand and “soft law” (such as informal agreements and statements of intention) on the other may thus be quite misleading. Depending on context, states may be considerably more likely to comply with soft law than with hard law, and there is no reason to think that hard law is always preferable for orchestrating cooperation. In short, economic thinking about customary international law calls into question the very meaning of the concept. It suggests that practices termed “law” in various quarters are no more that behavioral regularities that emerge from self-interested interaction between states facing similar problems. The codification of customary law merely serves to publicize focal points, and to write down the rules of any game to facilitate future adherence to them. The capacity of customary “law” to solve important problems that require cooperation or coordination is quite limited, and will tend to be