Foreign and Defense Policy Adverse Selection and Moral Hazard Problems Adverse Selection When a principal chooses an agent with different preferences Moral hazard problem A situation in which an actor who is at least partially protected from risk acts differently than if she were not protected from risk Standard Operating Procedures Screening and Outcome Based Incentives Outcome based incentive schemes Reduce moral hazard problems Standard operating procedures Specific guidelines on what to do in a given situation Principal Agent Problems and Foreign Policy Gambling for Resurrection o Downs and Rocke 1994 best way for public to control president is to focus on outcomes Ex do not reelect president if war is going poorly o Gamble for resurrection When a president adopts extreme measures in the hope that things will turn around o Presidents are more likely to increase involvement in a war when it is going poorly Public Opinion and Foreign Policy o Party activists Core constituents of a party Principal Agent Theory and the Iraq War Core values an individual s primary beliefs The Surge A popular name for President Bush s new strategy for an additional 20 000 troops to go to Iraq Diversionary Foreign Policy According to diversionary theory domestic political problems provide an incentive for the use of force abroad as away to divert the public s attention away from domestic problems and increase public approval Rally around the flag effect Refers to an increase in presidential popularity when the country is attacked or attacks another country Fordham 1998 Republican presidents are more likely to use force when unemployment is high while Democratic presidents use force when inflation is high Strategic conflict avoidance Leaders in other states know when the US President has a diversionary incentive to use force and is more cooperative at these times Bargaining Failure and War War occurs because of uncertainty A credible commitment problem exists when one actor has an incentive to renege on an agreement Strategies for Promoting Peace ensure you are not bluffing o Mutual assured destruction o Costly signal An action that imposes a cost on oneself the sender to Guaranteed that the cost of any direct war between the Soviet Union and the US would be very costly making it easier to compromise Crisis Bargaining o States do not always get what they most desire International Trade Comparative advantage A state has a comparative advantage when the opportunity cost of a producing a product is cheaper in that state than in another state Ricardo Viner model Workers in more competitive industries will benefit from trade while workers in less competitive industries will suffer from trade Collective Action Institutions and Protectionism o Protectionism Any policy meant to restrict trade or alter who is trading what to whom Tariffs Taxes on imports Non tariff barriers Quotas subsidies labor standards etc o Fast Track trade authority Gives the President authority to negotiate a trade agreement and then vote the agreement up or down
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