Liberalism and Neoliberal Institutionalism 87Neoliberal institutionalists arrive at the same prediction that liberals do—
cooperation— but their explanation for why cooperation occurs is dif er ent. For clas-
sical liberals, cooperation emerges from humanity’s establishing and reforming
institutions that permit cooperative interactions and prohibit coercive actions. For neo-
liberal institutionalists, cooperation emerges because when actors have continuous
interactions with each other, it is in their self- interest to cooperate. Institutions help pre-
vent cheating in other ways: they reduce transaction costs (costs incurred in making
an exchange), reduce opportunity costs (the costs of alternative possibilities), and
improve the flow of information— all benefits of cooperation.
Two other additions to neoliberal institutionalist thought also explain cooperation.
First, cooperation in one issue area may spill over into other areas. Thus, cooperation
on trade may over time lead to cooperation on security. Second, theorists such as
Robert Keohane argue that institutional cooperation can deepen to the point where it
may be said to have inertia: what ever the original conditions of its establishment, once
established, institutional cooperation can exist and even flourish— even if those initial
conditions vanish. Consider NATO: it was founded after World War II to prevent
Eu rope from being bullied or conquered by the Soviet Union, yet the Soviet Union
disintegrated in 1991. Why then does NATO still exist? Neoliberal institutionalists
would argue that the cooperation that originally made NATO pos si ble and efective
deepened over time to become an end in itself.
For neoliberal institutionalists, security is essential, just as it is for realists. But as
theorists like G. John Ikenberry argue, realism cannot explain the duration of post-
war stability following the collapse of the Soviet Union, while neoliberal institutional-
ism can.^16 Institutions such as NATO and the Eu ro pean Union’s Common Foreign
and Security Policy provide a guaranteed framework of interactions, and thus incor-
porate a power ful expectation of repeated interactions. The implication of these repeated
interactions is increased cooperation, not only on security issues but across a whole
range of international issues including economics and trade, human rights (a classic
liberal concern), the environment, immigration, and transnational crime.^17 Thus, for
neoliberals, institutions are critical: they facilitate, widen, and deepen cooperation by
building on common interests, thus maximizing the gains for all parties. Institutions
help shape state preferences, solidifying cooperative relationships.
liberalism today
With the end of the Cold War in the 1990s, liberalism as a general theoretical per-
spective has achieved new credibility. Two par tic u lar areas stand out. First, researchers
of the so- called demo cratic peace (discussed in more detail in Chapter 5) have been
trying to explain an empirical puzzle: although on balance, demo cratic states are as
warlike as authoritarian states, demo cratic states never attack each other. The question