An actor has an absolute advantage in the production of a good or service if it can produce that good or service with fewer resources than other actors.
One of qualities which we can use in evaluating and comparing theories, referring to the probability that the theory will provide the correct answer.
ad valorem tariff
A tariff where the duty charged is a proportion of the value of the good (e.g. five percent of the good’s declared value).
A type of exchange rate regime where rates are fixed, but countries retain the right to change rates whenever they see fit. See exchange rate.
The basic starting point for a causal theory. Something assumed to be true; a simplification, used to bring clarity to a complex situation or relationship.
A situation where there are no international economic transactions taking place.
balance of payments
A nation’s accounting records, which tracks its international economic transactions.
Balance of payments adjustment
This refers to the way in which states settle their bills.
balance of power
A term with many meanings, it usually refers to either any distribution of power (it doesn’t matter if power is evenly distributed or not), or a perfectly even distribution of power.
A policy intended to transfer unemployment problems from one country to another via protectionism.
Those who believe that the proper way to construct and to test theories involves making many observations of variables, aggregating the information, and applying methods of data analysis (statistics) to interpret the evidence. This view is contrasted with that of the Traditionalists.
A set of beliefs about how the world works, and/or how it ought to work. See ideology.
One of several different possible distributions of power; in this case, a distribution where two states or alliances have power concentrated in their control.
Bolstering occurs when a decision-maker stops engaging in the broad search for information and instead of exploring the full range of policy options, merely searchs for information that supports the choice he or she has already made.
One of the commonly used levels of analysis; theories in this group concentrate their explanations for state policy on divisions within the state itself, which pit one bureaucracy against another.
A subset of the balance of payments, which records the borrowing, selling, or purchasing of assets.
The earliest form of Liberalism, which promised that national wealth would be increased if individuals were free to compete against each other (pursuing their own narrow self-interest), as opposed to having the state interfere with the market
The earlist form of Marxism, which emphasized that social classes are the most important actors in domestic or international politics. See Marxism.
The earliest version of Realism, which, in order to counter the arguments of Idealists, assumed human nature to be selfish and driven by a desire for power.
An argument describing possible situations where problems with externalities can be overcome, even in the absence of government. The Coase Theorem states that if (1) there is a legal framework to establish liabilities, (2) there is perfect information (and also everyone understands their own preferences) and (3) there are zero negotiating costs, actors can resolve problems arising from externalities through deal-making.
An early version of Liberalism, which argued that free trade was not only beneficial to individuals in an economic sense, and therefore economically beneficial to states (since states are merely agglomerations of individuals), but would also provide the basis for a harmony of interests in the international system. See Liberalism.
If two actors have different opportunity costs for producing a good or service, the one with the lower opportunity cost has a comparative advantage in that good or service.
A reduction in the vcalue of a currency in order to gain a competitive advantage in trade.
An approach developed by Keohane and Nye in the 1970s, to open up the realms of theorizing away from the narrow assumptions of Realism.
Concert of the Great Powers
The management of the European state system after the defeat of Napoleon in 1815, through a conscious coordinated effort by the most powerful states.
A characteristic of a currency, referring the faith people place in it as a store of value.
A commonly used paradigm in international relations. It poses questions which come prior to the analysis undertaken in most paradigms. Key concepts such as interests have no meaning without establishing actors’ identities and placing actors and interests in social context, argue the Constructivists.
The ability to switch from a currency to another currency or asset.
A type of exchange rate regime where rates are fixed only for the very short run, with many frequent small changes in rates. The intention is to prevent any large changes. See exchange rate.
Most definitions of an international crisis include (1) a high threat to something valued very highly, (2) surprise, (3) and the need for a quick response.
A set of characteristics shared by a group of individuals or a nation; this has been used as a causal factor for explaining international outcomes.
A subset of the balance of payments, denoting net changes in a country’s claims on foreigners.
One method of reasoning, which involves first postulating a logical relationship between cause and effect, then making repeated observations to evaluate and refine the relationship. See inductive theorizing.
Defensive procrastination occurs when someone refuses to deal with a problem in the hopes that the problem will resolve itself.
A decline in the average level of prices.
The variations of the dependent variable depend upon the variations of the independent variables.
One of the basic tasks of a causal theory; the act of forming a representation.
On a floating exchange rate, a situation where a state has intervened in the market to set its exchange rate at a level it desires. See exchange rate.
division of labor
The breaking up of the stages of production into different tasks. See specialization.
One of the commonly used levels of analysis; theories in this group concentrate their explanations for state policy on domestic characteristics of countries, or on the politics which takes place within their borders. See societal level.
Selling a good in foreign markets at a price lower than the price charged in the home market.
. An epistemic community is defined as a group of experts whose consensus on what constitutes knowledge creates a shared view of an issue.
dollars held by banks outside the U.S. government’s jurisdiction.
The price of one national currency in terms of another. Systems of exchange rates are either fixed (i.e. the prices are set and not allowed to vary very much) or floating (i.e. the prices fluctuate as in most other markets).
export-oriented industrialization (EOI)
A strategy for developing a country’s industrial sector by selling its output abroad, rather than relying on domestic demand. See import-substitution industrialization (ISI).
Situations where the market fails to cover the entire set of costs and benefits associated with a particular transaction.
Externalization occurs when a society is becoming unstable, and in order to reconsolidate their control, elite policy-makers instigate an international incident, crisis, or conflict, to divert the population from domestic problems or domestic differences.
Extraterritoriality is the extension of national jurisdiction beyond a nation’s own borders.
The ease with which a factor of production can be moved form one application to another.
factors of production
The inputs necessary for producing a good or service. In the most simple models, the factors are capital and labor.
One of qualities which we can use in evaluating and comparing theories. It refers to our ability to test a theory; if a theory is falsifiable, there are explicit terms under which the theory could be said to fail.
foreign direct investment (FDI)
International investment involving the direct ownership and operation of the venture. See portfolio investment.
One of qualities which we can use in evaluating and comparing theories, referring to how widely the theory can be applied.
The observation that bad money will drive good money out of circulation.
A geopolitical notion developed by Mackinder to describe the center of the Eurasian landmass, which he considered to be the most important strategic terrain in the world. See Rimland.
Heckscher-Ohlin (H-O) model
A model intended to explain the content and direction of trade flows. It expects each country to export goods which intensively use the locally most abundant factor(s), and to import goods whose production required intensive use of the locally scarce factor(s) of production.
hegemonic stability theory
A realist explanation for the creation and maintenance of international regimes; according to this view, regimes are an outcome of the exercise of power. Therefore regimes are only strong and stable when international power is concentrated in the hands of one state (a hegemonic power) which supports the international regime in question.
One strategy for expansion of a firm; it entails monopolization of one step in the production process.
A thought or belief; recently being used as a causal factor in theories in international relations.
A commonly used paradigm in international relations. It was the first dominant paradigm to emerge (after World War I). Idealism stresses the possibility of perfecting the behavior of man (usually through the creation of institutions or laws), and thus perfecting the actions of states, thereby reaching international peace and harmony.
A set of beliefs about how the world works, and/or how it ought to work. See belief-system.
import-substitution industrialization (ISI)
A strategy for developing a country’s industrial sector by blocking imports of industrial goods, forcing domestic demand to support national industries. See export-oriented industrialization (EOI)
The causal factor in a theory.
A diagram showing the possible mix of two goods, which then depicts on a curve all the points between which an actor is indifferent.
One of the commonly used levels of analysis; theories in this group concentrate their explanations for state policy on idiosyncratic characteristics of individuals.
One method of reasoning, which involves first making repeated observations, then inferring the logical relationship between cause and effect. See deductive theorizing.
A rise in the average level of prices.
A recently developed paradigm which was developed originally to explain the persistence of regimes, outside of hegemonic stability theory. Institutionalists argue that if regimes deliver benefits to the participants, the participants would have reasons to maintain or even create international regimes. (Also referred to as Rationalist Institutionalism.)
A version of Marxism, made popular by Lenin, which focuses on explaining the actions of states, but views states as instruments of the interests of each country’s capitalists. See Marxism.
Interdependence can be defined as a situation where changes or events in any single part produce some reaction or have a significant consequence in other parts of the system, or more simply, as the mutual contingency of policies.
international political economy
The analysis of the interaction of power and the processes of wealth creation at the international level.
According to Krasner, an international regime is a set of “principles, rules, norms and decision-making procedures around which actors’ expectations converge.”
The study of politics involving an international dimension; relations between states and external actors (states and non-state actors), as well as between non-state actors and other external actors (states and non-state actors), or involving the formulation of a policy which has repercussions for actors outside the country.
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A national currency which plays the role of international money.
A view of macroeconomics which prescribes an active, positive role of government in managing the economy through manipulation of fiscal and monetary policy.
Laws are connections between variables of which we have repeated observations, of such strength and number that we can safely expect the relations to continue into the future.
The paradoxical results produced in empirical analysis of the imports and exports of U.S. , which seem to disconfirm the Heckscher-Ohlin model.
levels of analysis
A method for grouping theories together, based on the types of assumptions made about the most important actors.
One of qualities which we can use in evaluating and comparing theories. The ability to explain as much as possible with as little as possible.
A commonly used paradigm in international relations, which bases its arguments on the actions of rational utility-maximizing individuals.
A characteristic of a currency, referring to its availability, which in turn determines how well it can serve as a medium of exchange.
A commonly used paradigm in international relations, which bases its explanations of politics on the relationships between social classes.
A practice in foreign economic policies of the seventeenth and eighteenth centuries that entailed a set of policies designed to maintain an inward flow of money, but these policies were barriers to trade and international investment.
A set of works which blend history, sociology and political science to develop a deeper understanding of the historical development of the international political economy. It is rooted within Marxist traditions, and looks at actors at several levels of analysis.
A market in which there is only one seller.
clause A clause in a trade treaty which commits a country to impose no greater barriers to imports of the signatory than it imposes on imports from any other country.
multinational corporation (MNC)
A corporation which carries on business operations in several countries.
One of several different possible distributions of power; in this case, a distribution where more than three states or alliances have power concentrated in their control.
One of the commonly used levels of analysis; theories in this group concentrate their explanations for state policy on characteristics of the country, or on internal political economic activities. See societal level.
A recent version of Realism, which recognizes the importance of other goals which states might have by modifying the assumption that states seek to maximize power.
non-tariff barrier (NTB)
A broad concept, used to denote impediments to trade (excepting tariffs).
One of the basic tasks of a causal theory. A vision of the way things ought to be.
A market in which there are only a few sellers.
The amount that an input could earn in its next best possible application; the alternative foregone when something is produced.
Here, the argument is that bureaucratic organizations are entirely flexible, and thus may affect the implementation of policy; policy may be rationally formulated, but then bureaucracies and organizations may not be able to carry them out as originally intended, making policy appear irrational.
An example which others copy and employ as well, or a set of core assumptions (often established in a single example which theorists drawn on) which are shared by many similar theories. The set of core assumptions define a grouping of theories, and separates one paradigm from another.
One of the qualities we can use in evaluating and comparing theories. It refers to the degree of simplicity; it reflects the ability to explain much of the variation in the dependent variable with as little information or theory as possible
A diagram used to portray the relationship between inflation and unemployment.
A concept developed by P. Hall, which he defines as an overarching set of ideas that specify how the problems facing them are to be perceived, which goals might be attained through policy and what sorts of techniques can be used to reach those goals.
An indirect investment -- one where ownership or investment does not entail direct management of the economic activity resulting from their investment.
In political science, power is usually defined as control over actors, especially their actions (i.e. the ability to get an actor to do something which he/she otherwise wouldn’t do).
A term originated by Organski to identify a period when internally driven changes rapidly alter a country’s strength, thereby altering the systemic distribution of power.
One of the basic tasks of a causal theory, referring to the act of foretelling an event.
One of the basic tasks of a causal theory, referring to the act of providing advice or direction.
An example from game theory, which illustrates a situation where two egoistic actors interact yet fail to attain their harmony of interests.
An argument developed by Vernon to explain when FDI takes place; it is based on the notion that products go through a characteristic life-cycle, reflecting the varying ability of firms to produce the good over time.
Production Possibility Frontier
A curve illustrating the limits of output which can be produced with various combinations of inputs.
A good characterized by both nonexcludibility and non-rival consumption.
A typical barrier to trade, which limits the volume of goods coming into a country.
A concept used to identify the tendency for domestic differences to be set aside in a foreign policy crisis.
rate of transformation
The rate at which production can be shifted from one product to another.
A common assumption made about actors in our theories, which states that actors will try to attain their highest preferences at the least cost. The assumption of rationality contains three conditions: first, the actor is assumed to have perfect information -- it is assumed the actor knows all its options, and to know all the costs and benefits (the ramifications) associated with each option; second, the actor must understand the causal effect of each possible choice; third, the actor must be able to rank its choices, which requires that it be able to relate what it values into some sort of schedule of preferences.
A commonly used paradigm in international relations. Realism emerged as the dominant paradigm in the 1940s until recent years. It has stressed the importance of power in international relations, and the continuity in states’ behavior. It also emphasizes the anarchic nature of the international system, which allows states to use power to resolve differences.
A very recent version of Institutionalism, which argues that existing institutions and norms shape the ways in which actors’ preferences are defined. The Institutionalists using a reflectivist approach stress that international regimes are rarely the product of purely rational design, but instead are shaped by existing norms and institutions.
A version of Liberalism which emphasizes the political aspects of Liberalism by arguing that republics behave differently; where individuals have a say in the formulation of national policy, national policy will be peaceful and pursue the creation of wealth. See Liberalism.
Commodities or assets held as backing for a currency.
A geopolitical notion developed by Spykman to describe the outer edge of the Eurasian landmass, which he considered to be the most important strategic terrain in the world, due to the concentration of economic and industrial power in these regions. See Heartland.
See bureaucratic politics.
An assumption made in some trade models concerning the ability of an input to be deployed into different industries. If there is high sector-specificity for a factor of production, it means that factor is best suited for use in that industry. This shapes its preferences on trade policy – tying its interests to that sector. See the competing ideas of the Stolper-Samuelson Theorem.
A concept used to describe relations between sovereign states in the context of international anarchy, where each state treats its neighbors as the potential source of threats; as each increases its power, it makes the other insecure. The overall result is competition for power and insecurity.
The act of concentrating production on one type of good, or even one stage in the production of a good, to exploit comparative advantage.
One of the commonly used levels of analysis; theories in this group concentrate their explanations for state policy on characteristics of the country’s society, or on internal political economic activities. See national level.
Sovereignty refers to the ability to exercise the ultimate legitimate political authority.
A situation where an economy suffers both high inflation and high unemployment.
standard operating procedures
In order to function smoothly, large organizations such as government bureaucracies must practice routine operations; the range of maneuvers a bureaucracy can perform may constrain policy choice, or affect the way policy is actually implemented. See organizational processes.
One of the commonly used levels of analysis; theories in this group concentrate their explanations for state policy on characteristics of the country overall, such as the type of governing institutions it has.
A concept borrowed from sociology, which denotes differences in the status an actor is accorded in the various facets of interactions with other actors. Inconsistency in the levels of status may be the root of frustrations and aggressive behavior.
A Theorem developed to understand the distribution of gains and losses from international trade. The relatively scarce factor of production in the will lose real earnings when trade levels rose, while the relatively abundant factor of production will gain real earnings.
strategic trade policy
A policy intended to change the benefits from trade, either by altering the position of particular firms, or by changing the position of their economies in the international division of labor
A version of Marxism which explains the actions of states by arguing that states act politically to maintain the overall political economic structure of capitalism.
A version of Realism laid out by Waltz in Theory of International Politics (1979). It stresses the characteristics of the structure of the international system in its explanations of state behavior.
Structure is a way of depicting the relations of the units, or the composition of a system.
One of the commonly used levels of analysis; theories in this group concentrate their explanations for state policy on characteristics of the international system.
A typical barrier to trade, which is a tax on goods as they cross a border.
A speculative process for explaining observed relationships between variables.
Those who believe that the best way to construct theories is to make detailed observations of a few cases, relying more on historical analysis and seeing the uniqueness of each event. This view is contrasted with that of the Behavioralists.
One of several different possible distributions of power; in this case, a distribution where three states or alliances have power concentrated in their control.
One of several different possible distributions of power; in this case, a distribution where one state or alliance has power concentrated in its control. Also possibly described as hegemonic.
A term created by George to describe situtations where policies may entail trade-offs in values which a decision-maker would rather not face.
A term used in our construction of theories, which can refer to the forces or factors of both cause and effect.
One strategy for forming a large firm; it entails capturing the various stages of production within one firm.
A central concept in economics, referring to affluence and/or abundance.