Delivering the inaugural lecture of the Robert A. Kindler Professorship of Law on October 17, Alan Sykes, the holder of that chair title, applied economics principles to an analysis of international law in his talk, “When Is International Law Useful?”
Sykes, an international law and economics expert who joined the faculty this fall from Stanford Law School, confessed that, as a Yale Law School student, he had considered international law “largely pointless,” a legal area without real enforcement teeth: “When international law asks nations to behave in ways that they would not otherwise, it will fail, I thought, because it lacks the sort of enforcement mechanism that gives much of domestic law its bite.”
He changed his mind, however, when he began working on international trade matters as an Arnold & Porter associate in the early 1980s and recognized the striking similarities between domestic and international law, with U.S. trade statutes having been amended to reflect negotiated agreements under the multilateral General Agreement on Tariffs and Trade (GATT), the predecessor to the World Trade Organization (WTO). “The system appeared to be one in which there were some disputes and some noncompliance, but the overwhelming majority of obligations were respected.”
Without a central enforcer or formal sanctions, Sykes wondered, how can a system of law succeed? He described the economic theory of repeated games, which governs strategic interaction among institutions or individuals that repeats itself over time (for example, a long-term contract). Both parties, he said, are better off if both honor their agreement, whereas if both sides cheat then both are worse off. Such a scenario helps explain why international legal systems without obvious “enforcement” can work.
Along with co-author Eric Posner, Sykes formulated an “algorithm” in a new book, Economic Foundations of International Law, addressing the ability of international law to orchestrate cooperation in a variety of situations, and suggesting broadly when cooperation can succeed and when it won’t. The algorithm involves identifying the source of gains from international cooperation, asking whether and how those gains can be distributed so each cooperating state can benefit, and examining whether a particular system can be made to be self-enforcing. Within that last element lie three “subconsiderations,” namely, whether governments are patient enough to forego cheating, whether the agreement has no fixed endpoint (if it doesn’t, each side is less likely to cheat in the twilight of the agreement), and whether it is reasonably easy to define what constitutes cooperation and to detect what counts as reneging. After applying his algorithm to WTO and GATT, Sykes considered how the theory might be used in security matters, immigration, and international human rights law to assess the likely success of multilateral agreements in those areas.
Among those in attendance was Law School Trustee Robert A. Kindler ’80, vice chairman and global head of mergers and acquisitions at Morgan Stanley, who endowed the new chair. Before moving into investment banking in 2000, Kindler was a senior partner at Cravath, Swaine & Moore.
Watch the full video of the event (1 hr, 10 min):
Posted on November 6, 2012