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«EUI Working Papers RSCAS 2012/23 ROBERT SCHUMAN CENTRE FOR ADVANCED STUDIES Global Governance Programme-18 MULTILEVEL GOVERNANCE OF INTERDEPENDENT ...»

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Source: Kaul and Conceição (2006, p. 12) The policy interdependence among countries generated by GPGs Many, perhaps even most GPGs emerge from a summation process that brings together required national-level inputs, notably national public goods provided in a harmonized and concerted manner, complemented by international-level inputs. The latter could include elements like an international agreement that provides the common policy framework for the decentralized provision of national-level contributions. International-level inputs could also concern the creation of an international-level good like, for example, the establishment of an international organization to serve as a meeting and negotiating venue and secretariat. 6 Three main types of provision paths can be distinguished. Besides the above mentioned summation process they also include a weak-link process and a best-shot approach. Whereas in the case of a summation process the overall availability of the GPG depends on each actor’s contribution, it is the contribution of the weakest element of the supply chain that, in the case of a weak-link process, determines the good’s overall availability. Dyke building is an example of a weak-link effort. A best-shot approach results, when one actor, an individual, firm or any other entity, produces the good. An example is an invention like that of the wheel. Once invented and left in the public domain, it need not be reinvented.

–  –  –

Source: Kaul and Conceição (2006, p. 14) It is because many GPGs emerge from a summation process of primarily national-level inputs that more and more policymakers, even those of the most powerful countries, are beginning to recognize that no country alone can tackle GPG-type challenges. Meeting these challenges requires international cooperation.

Thus, GPGs entail consumption interdependence among countries, because they may affect all; and they entail provision or policy interdependence, because all may have to act, even if only one country wishes to change the current provision status of a GPG.

In Sum: What is New and Different about GPGs While GPGs share with national public goods the key property of being public in consumption, they differ from their national counterparts in terms of the complexity – the multi-actor, multi-sector, multilevel nature – of their provision path, as well as in terms of the policy interdependence they entail,

Global Public Goods: Explaining their Underprovision

namely the compulsion for policymakers to engage in international cooperation in order to ensure the availability of a desired GPG to national constituencies.

So, why do the present governance systems fail to address GPG-type challenges more effectively than appears to be the case at present? Do GPG-specific aspects matter? Or, is the underprovision of these goods symptomatic of problems that also affect other kinds of policy issues?

Why GPG Provision May Fail When searching for possible causes of GPG underprovision, it might be useful to rely, for a preliminary identification of possible impediments, on insights from the various literatures that study policy processes, including, among others, political science and international relations theories;

behavioural, institutional and public economics; and issue-specific literatures like those on global environmental, financial, trade or health issues.

Judging from these different strands of literature, a host of factors is likely to contribute to the global challenges we are confronting today. 7 So, the possible impediments discussed below do, in no way, constitute a comprehensive list. Rather, they have been selected because of their potential to affect GPG provision on a cross-issue basis.

The list includes: dual – economic and political – market failure in the presence of public goods;

fairness and efficiency deficits in the political markets, that is, in the international negotiation processes; organizational or public-management constraints; policy-change stalemates; and incompatibility among GPGs.

Dual – Economic and Political – Market Failure in the Presence of Public Goods As empirical studies have shown and public economics theory predicts, public goods are at risk of being underprovided because the very fact of their being public and available for all tempts individual actors into free-riding. This means that individual actors may not reveal their true preference and demand for a public good, lest they are asked to contribute to its provision. They avoid this commitment in the hope that others will step forward and provide the good, which they will then also be able to use and benefit from – free of charge. This is why public goods – in a manner similar to the spill over effects (or externalities) that arise from private consumption and production activities – make economic markets fail, providing a potential justification for state intervention, that is, for the state to step in and encourage or, if necessary, even coerce us as individual actors to contribute what is expected of us in terms of behavioural change, taxes, or both. 8 But, as alluded to, standard public goods theory focuses on the national context. At the international level, the institution of the state has no full equivalent. Only a few international organizations, among them the United Nations Security Council and the World Trade Organization It is perhaps useful to note that the utility of a public good, including that of a GPG can suffer not only due to the good being underprovided, i.e. incompletely supplied. It could also suffer due to malprovision – that is, due to how the good is being supplied and shaped. For example, law and order can be enforced through extensive policing or it can be created through measures that foster community development and social cohesion. Also, in the case of some goods, it is possible to determine whether or not they are adequately or fully provided. An example is polio eradication. It either is or is not achieved. Yet, adequate provision in the case of a good like “free multilateral trade” may be a moving target. Depending on how the world is developing, new aspects of free trade may have to be tackled, improvements in existing rules may have to be made possible, or change in decision-making patterns may have to become desirable.





It is important to emphasize that economic theory speaks of a potential corrective role of the state because, as public choice theorists remind us, politicians and bureaucrats can also fail (see, for example, Mueller, 2003).

Inge Kaul

(WTO) have been endowed with limited coercive powers. 9 For the most part, international cooperation among states has to happen voluntarily. In fact, when appearing internationally, states, or more precisely, their national negotiating teams, tend to pursue national, particular (and hence, quasiprivate) interests that may not necessarily be in line with global exigencies and goals. Moreover, during these negotiations, states bargain over the exchange of policy commitments. Accordingly, international venues can be likened to markets – be viewed as political markets. 10 As a result, GPGs may even face a higher risk than national public goods of being exposed to freeriding, because they may cause economic market failure as well as state or political market failure.11 Problems of such dual market failure could especially occur in the case of global challenges that have diffuse public effects and depend for their adequate provision on changed behaviour of a large number of actors as, for example, climate change does.12 Fairness and Efficiency Deficits in the International Negotiation Processes However, not all reluctance to cooperate on the part of states necessarily reflects a collective-action problem like free-riding. Rather, it could signal that additional conditions exist which tend to make political markets fail. For example, international relations could be – and, in fact, were, and in some respects, still are – marked by unipolarity (resembling monopolistic conditions in economic markets), alliances among the major powers (resembling oligopolies), information asymmetries, or poorly defined rights and obligations of the transacting parties. These conditions are known to cause economic markets to fail; and most likely, they will also distort the functioning of political markets.

As long as global power relations were marked by bipolarity and unipolarity, and hence, the existence of a clear global divide between policy-defining and policy-taking countries, international cooperation was very much driven by power politics. But even then, judging from international relations studies, the effectiveness of international cooperation suffered from problems like reneging, shallow compliance, or flexible interpretation of international agreements (Howse and Teitel, 2010;

Raustiala and Slaughter, 2006), because agreed-upon policy decisions had not fully taken into account the often wide disparities in the preferences and priorities of different country groupings. As a result, fairness of process and fairness of outcome may have been lacking. Yet, as international relations scholars have emphasized for many years (Hardin, 1982; Axelrod, 1984), clear and significant netbenefits are important for international cooperation to work, because it has to happen voluntarily;

therefore, it needs to be incentive compatible – all must be genuinely motivated to support, and act on, what was jointly decided (on the issue of process fairness, see, among others, Albin, 2003).

In the case of the United Nations (UN), for example, only very few decisions are of a binding nature, namely those taken by the UN Security Council under Chapter VII of the UN Charter (Malone, 2007). Another exception to the generally non-binding nature of international agreements is the Dispute Settlement System of the World Trade Organization.

On the concept of political markets, see also Furubotn and Richter (2003, p.420).

It should be noted that the type of state failure referred to here is not to be confounded with the government failure on which public choice scholars tend to focus and which is due to self-interested behavior of individual politicians and bureaucrats. The state failure identified here is of a systemic nature. It has its roots in the present world order that is still very much centered on the principles of national policymaking sovereignty.

To illustrate, carbon emissions are diffuse externalities. Once emitted into the atmosphere they cannot be traced back to the emitter, although, of course, it is possible in other ways to assess the carbon footprint of countries. Diffuse externalities also tend to be substitutable so that a corrective action by one party could be offset by inaction on the part of others, a fact that makes it so important for all countries to move in tandem. However, at the same time, worldwide concerted action not only by all countries but by all people in all countries is difficult to achieve. Due to the large number of actors involved, its risk of suffering from free-riding is especially high, because each actor may view her/his contribution as not mattering a lot, and therefore, not be strongly motivated to contribute. Yet, if a large number of people acted in this way, a high level of underprovision would result.

Global Public Goods: Explaining their Underprovision

Lack of effective follow-up may give rise to inefficiency, especially where the costs of delayed action outstrip those of corrective action and renegotiations of previously discussed issues entail high transaction costs, as, considering large-scale, complex processes like the climate changes negotiations, they are likely to in many cases (Conceição and Mendoza, 2006, present an overview of issue-specific case studies on the costs of inaction and action; see also Nkonya et al., 2011; N. H. Stern, 2007).

With the recent shift towards multipolarity issues of fairness have become more important.

Especially the emerging-market countries, and with their support, also other developing nations, are no longer prepared to accept proposals for international cooperation that do not offer them the clear and significant net-benefits that they consider to constitute a fair bargain. Evidently, political markets are becoming more competitive. This may also enhance their efficiency. But, how efficient are they today? Have they become more incentive-compatible? Do countries, notably the conventional major powers take full account of the policy interdependence that has resulted from increased economic openness and the globalization of public goods – that in order to enjoy a particular GPG at home they depend on the effective cooperation of other countries?

Thus, it could be that the current underprovision of GPGs reflects two facts that relate to the structure and functioning of international political markets. First, the severity of some of the challenges may indicate that these markets have not been working efficiently for quite some time and a reform backlog exists; and second, it could signal that problems of getting the ‘price’ right, of making international cooperation incentive-compatible, persist.

Organizational Constraints Global public goods tend to be positioned at the crossroads of the public-private and nationalinternational axes; and they straddle across multiple scientific disciplines and multiple economic sectors. They require an issue-specific policy and management approach that mobilizes inputs from actor groups that have, conventionally, been quite separate.

Thus, GPG provision may not fit easily into conventional governance systems that were created during, and thus often for, a world order of sovereign states that, until not too long ago, pursued a policy of relatively closed national borders, and organized policy affairs mainly along geographic and sector lines.

As the conventional divide between foreign and domestic affairs still appears wide in many countries, it must be expected to impede the vertical – national/international – policy integration that many GPGs require. Similarly, the conventional organization of policy fields by sector could interfere with the smooth functioning of inter-sector cooperation, nationally and internationally.



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