I thank Glenn Snyder, Jack Donnelly, Gary Marks, participants in the faculty seminar on comparative politics at the University of North Carolina, and the editor and reviewers of IO for their penetrating criticisms and helpful suggestions.

1. The theory appeared in embryonic form in Gilpin's, Robert “The Politics of Transnational Economic Relations,” in Keohane, Robert O. and Nye, Joseph S. Jr, eds., Transnational Relations and World Politics (Cambridge, Mass.: Harvard University Press, 1972), pp. 48–69Google Scholar.

2. Most of the scholarly attention given to the hegemonic stability theory has been focused on its suitability as an explanation for changes in the degree of openness of the international trading system. See, for example, Gowa, Joanne, “Rational Hegemons, Excludable Goods, and Small Groups: An Epitaph for Hegemonic Stability Theory?” World Politics 41 (04 1989), pp. 307–24CrossRefGoogle Scholar. In her article, Gowa seeks to rehabilitate the theory, if not its empirical accuracy, by arguing that (1) the dynamics of “limit pricing” (pricing to deter entry) militate against hegemons imposing optimal tariffs; (2) sanctioning of defectors from free trade is itself a collective action problem; and (3) oligopolistic collusion to enforce an open system equilibrium falls prey to the problem of reaching an agreement regarding which equilibrium among multiple equilibria should be supported. The following counterarguments could be made, however. (1) “Limit pricing” considerations suggest that the hegemonic state would impose low or no export tariffs. But if deterring entry into industrial production is the hegemon's objective, it would do well to retain high import tariffs on manufactures (perhaps even higher than the traditionally defined “optimal” tariff) while eliminating import tariffs on agriculture and raw materials. Although limit pricing can be a basis for deviations from the optimal tariff for some goods, it is not a basis for generalized free trade. (2 and 3) While free riding on others’ sanctioning efforts or difficulties in agreeing on an equilibrium could well be a problem in a nonhegemonic world where trade was governed by multilateral agreements, a network of bilateral agreements in which defection triggers the application of a punitive tariff solves the problem in principle (by converting the situation to one approximated by Axelrod's analysis) and solved it in practice as far as pre-1914 Europe was concerned. The limited amount of attention addressed to the theory's application to international monetary policy likewise reveals substantial empirical and theoretical difficulties. See Eichengreen, Barry, “Hegemonic Stability Theories of the International Monetary System,” in Cooper, Richard N. et al. , eds., Can Nations Agree? Issues in International Economic Cooperation (Washington, D. C.: Brookings Institution, 1989), pp. 255–98Google Scholar.

3. Kennedy, Paul, The Rise and Fall of the Great Powers: Economic Changes and Military Conflict from 1500 to 2000 (New York: Random House, 1987)Google Scholar.

4. See Holsti, Ole R., Hopmann, P. Terence, and Sullivan, John D., Unity and Disintegration in International Alliances: Comparative Studies (New York: Wiley, 1973)Google Scholar.

5. Friedberg's book, in which the Aesopian elements are obvious, has been reviewed by four authors. See Nye, Joseph S., “Before the Fall,” The New Republic, 13 02 1989, p. 37Google Scholar; Kennedy, Paul, “Can the U.S. Remain Number One?” The New York Review of Books, 16 03 1989, p. 36Google Scholar;Virts, Nancy, “Lessons from Britain's Fall,” Wall Street Journal, 25 05 1989, p. 16AGoogle Scholar; and Mayne, Richard, untitled review, Encounter, vol. 72, 04 1989, p. 52Google Scholar. Ferris has not been so fortunate, perhaps because the title of his book and its seemingly narrow focus led many to conclude that it had less to say about the larger questions than Friedberg's book did. However, this is a case in which appearances are definitely misleading.

6. Friedberg, , The Weary Titan, pp. 206 and 219Google Scholar.

7. Ibid., p. 223. The dilemma of whether to employ troops on the Continent or keep them at home for purposes of maintaining the “civil power” was considered at the highest levels of the British government in August 1914. See Wilson, Keith M., The Policy of the Entente: Essays on the Determinants of British Foreign Policy, 1904–1914 (Cambridge: Cambridge University Press, 1985), pp. 14–15CrossRefGoogle Scholar.

8. Ferris, , Men, Money, and Diplomacy, pp. 43–52Google Scholar.

9. Ibid., p. 46.

10. In The Policy of the Entente, Wilson makes a similar argument for the 1904–1914 period.

11. Churchill, Winston, cited in Ferris, , Men, Money, and Diplomacy, pp. 161–162Google Scholar.

12. Friedberg, , The Weary Titan, p. 14Google Scholar.

13. Ibid., p. 15.

14. Ibid., p. 16. One basis for Friedberg's criticism is work on the stability of public opinion performed by Deutsch, Karl W. and Merritt, Richard L. and reported in “Effects of Events on National and International Images,” in Kelman, Herbert C., ed., International Behavior: A Social-Psychological Analysis (New York: Holt, Rinehart and Winston, 1965), pp. 132–87Google Scholar. However, as Deutsch and Merritt themselves recognized, their work hardly provided definitive evidence on this point. A discussion of public opinion on military spending revealing the considerable instability of opinion can be found in Russett, Bruce and Starr's, HarveyWorld Politics: The Menu for Choice, 2d ed. (New York: Freeman, 1985), pp. 242–44Google Scholar. A second basis for Friedberg's criticism is Snyder and Diesing's finding that “background images” which decision makers hold of other nations change at most only marginally during the course of an international crisis. Even if this were true, it would not preclude the possibility that long-term belief change is more substantial. See Snyder, Glenn H. and Diesing, Paul, Conflict Among Nations: Bargaining, Decision Making, and System Structure in International Crises (Princeton, N. J.: Princeton University Press, 1977), p. 329Google Scholar.

15. It should be noted that models based on Bayesian theory and cognitive theory do not yield identical predictions about the manner in which estimates are updated and that proper experimental design can succeed in identifying the Bayesian model as an inferior predictor of actual human behavior. See Ward Edwards, “Conservatism in Human Information Processing,” and Gellys, Charles F., HI, Clinton Kelly, and Peterson, Cameron R., “The Best-Guess Hypothesis in Multistate Inference,” in Kahneman, Daniel, Slovic, Paul, and Tversky, Amos, eds., Judgement Under Uncertainty: Heuristics and Biases (Cambridge: Cambridge University Press, 1982), pp. 359–69 and 370–77Google Scholar, respectively. However, in the context of the case study approach chosen by Friedberg, it is hardly possible to defend the proposition that the observed rate of updating in the cases was too slow (or too fast) to be described by a Bayesian model.

16. See Fiorina, Morris, “Constituency Influence,” Political Methodology, no. 2, 1975, pp. 249–66Google Scholar, in which Fiorina notes how linear regression analyses of legislative roll-call voting can yield seriously misleading statistical results if the true underlying model of voting is an expected utility model.

17. See, for example, March, James G. and Simon, Herbert A., Organizations(New York: Wiley, 1958), pp. 149–71Google Scholar. A more recent discussion that is explicitly oriented to the question of the applicability of rational choice theories to organizational information processing is provided by March, James G. and Feldman, Martha S. in “Information in Organizations as Signal and Symbol,” Administrative Science Quarterly 26 (06 1981), pp. 171–86Google Scholar. An attempt to apply organization theory to the task of military threat assessment is made by Fischer, Gregory W. and Larkey, Patrick D. in “Organization Theory and Military Threat Assessment,” Research in Public Policy Analysis and Management, vol. 2, 1981, pp. 223–44Google Scholar.

18. See Williamson, Samuel R. Jr, The Politics of Grand Strategy: Britain and France Prepare for War, 1904–1914 (Cambridge, Mass.: Harvard University Press, 1969), pp. 370–71Google Scholar.

19. Friedberg, , The Weary Titan, p. 18Google Scholar.

20. Ibid., p. 281.

21. Ferris, , Men, Money, and Diplomacy, p. 1Google Scholar.

22. The “ten-year rule” has come to be understood as the planning postulate which the Treasury imposed on the armed services and which required them to assume that no large war would occur within the next ten years; it has acquired notoriety for its alleged role in dampening British rearmament in the 1930s. Ferris notes that this rule originally was not understood to be annually renewed and that it only began to have a significant effect on the services’ budgets when the Cabinet gave its consent to the Treasury's desire to interpret the rule as a rolling rule. Friedberg sometimes (most notably, in his treatment of the two-power standard for the British navy) discusses rules in a manner that recognizes their elastic nature, but he chooses not to draw any general conclusions from his observations.

23. Ferris, , Men, Money, and Diplomacy, p. 15Google Scholar.

24. A strand of organization theory that displays a considerable affinity to this approach to organizational rules is found in March, James G. and Olsen's, Johan P.Ambiguity and Choice in Organizations, 2d ed. (Bergen: Universitetsforlaget, 1979)Google Scholar.

25. Allison, Graham T., Essence of Decision: Explaining the Cuban Missile Crisis (Boston: Little, Brown, 1971)Google Scholar.

26. Kohl, Wilfred L., “The Nixon-Kissinger Foreign Policy System and U. S. -European Relations: Patterns of Policy Making,” World Politics 28 (10 1975), pp. 1–43CrossRefGoogle Scholar.

27. See Art, Robert J., “Bureaucratic Politics and American Foreign Policy,” Policy Sciences 4 (12 1973), pp. 467–90CrossRefGoogle Scholar, in which Art notes that writings on bureaucratic politics in U. S. foreign and national security policy prior to Allison generally gave more attention to the relation of bureaucratic politics to the larger political system. Authors of studies focusing on Treasury control over military budgeting in the 1930s tend to take a similar view, though they do not stress it as heavily as does Ferris. Peden, for example, argues that “the services were not really emasculated by the Treasury, but by successive governments acting through the Treasury and its powerful organisation.” Shay takes a similar position. See Peden, G. C., British Rearmament and the Treasury, 1932–1939 (Edinburgh: Scottish Academic Press, 1979), p. 8Google Scholar; and Shay, Robert Paul Jr, British Rearmament in the Thirties: Politics and Profits (Princeton, N. J.: Princeton University Press, 1977)Google Scholar. In his discussion of Treasury control in an earlier era, Wright seems to take for granted that the rules imposed by the Treasury on government departments were the product of a political process and in turn shaped the interagency bargaining, tacit and otherwise, over budgets. See Wright, Maurice, “Treasury Control, 1854–1914,” in Sutherland, Gillian, ed., Studies in the Growth of Nineteenth-Century Government (London: Routledge & Kegan Paul, 1972), pp. 195–226Google Scholar.

28. For a concise review of commentary on Allison's work, see Bendor, Jonathan and Hammond, Thomas H., “Rethinking Allison's Models,” paper presented at the annual meeting of the American Political Science Association, Atlanta, Ga., 09 1989Google Scholar.

29. See Meyer, John W. and Rowan, Brian, “Institutionalized Organizations: Formal Structure as Myth and Ceremony,” American Journal of Sociology 83 (09 1977), pp. 340–63CrossRefGoogle Scholar. Meyer and Rowan argue that organizational rules are driven more by the need for social legitimation than by their desirable coordination and control properties. They also contend that conflicts within organizations cause rules and activities to become decoupled. More generally, the “human relations” school of organizational analysis arose out of the recognition that the formal procedures governing organizations often did not govern behavior within organizations nearly as effectively as did informal norms developed by the members of the organizations. See Mouzelis, Nicos P., Organization and Bureaucracy: An Analysis of Modern Theories (Chicago: Aldine, 1976), chap. 5Google Scholar.

30. See Anderson, Paul A., “Justifications and Precedents as Constraints in Foreign Policy Decision-Making,” American Journal of Political Science 25 (11 1981), pp. 738–61CrossRefGoogle Scholar.

31. Cited in Ferris, , Men, Money, and Diplomacy, p. 78Google Scholar.

32. See Friedberg, , The Weary Titan, pp. 80–81Google Scholar. For a survey of the literature on modeling tariff politics, see Hillman, Arye L., The Political Economy of Protection (New York: Harwood Academic Press, 1989)Google Scholar.

33. This occurred because British tariff rates were generally fixed, and the decline in the price level after the Napoleonic Wars led to an increase in the effective level of tariff protection. See Imlah, Albert H., Economic Elements in the Pax Britannica: Studies in British Foreign Trade in the Nineteenth Century (Cambridge, Mass.: Harvard University Press, 1958), pp. 117 and 120CrossRefGoogle Scholar.

34. Hilton, Boyd, Corn, Cash, Commerce: The Economic Policies of the Tory Governments, 1815–1930 (Oxford: Oxford University Press, 1977), p. 9Google Scholar.

35. See Hey, John, Economics in Disequilibrium (New York: New York University Press, 1981)Google Scholar.

36. This is precisely the scenario addressed by the public choice literature on “cycling” in coalition formation. A government's efforts can be further constrained by the lack of policy instruments to make side-payments and by the frictional inefficiencies of administering these payments. Although not very elegant from a theoretical standpoint, these difficulties may be of considerable practical importance, at least for a government such as that in nineteenth-Century Britain.

37. There is some evidence that those involved in tariff reform understood the situation this way. See, for example, the discussion of the reasons for the failure of Balfour to form a royal commission to investigate the tariff controversy in Coats, A. W., “Political Economy and the Tariff Reform Campaign of 1903,” Journal of Law and Economics II (04 1968), pp. 202–4Google Scholar. I am grateful to an anonymous reviewer for suggesting this source.

38. See Friedberg, , The Weary Titan, pp. 296–303Google Scholar. A “net assessment” involves appraising a government's own capabilities vis-a-vis those of its adversaries and explicitly estimating how its own capabilities can be degraded by its adversaries’ actions.

39. Ferris, , Men, Money, and Diplomacy, p. 31Google Scholar.

40. This is, of course, more likely if all factors of production are already fully employed and the spending is not implemented in such a way that consumption rather than investment is suppressed. Much of this literature is reviewed by Chan, Steve in “Military Expenditures and Economic Performance,” in U. S. Arms Control and Disarmament Agency, World Military Expenditures and Arms Transfers, 1986 (Washington, D. C.: Government Printing Office, 1987), pp. 29–38Google Scholar. For additional references, see Deger, Saadet, Military Expenditure in Third World Countries: The Economic Effects (London: Routledge & Regan Paul, 1986)Google Scholar; and Dunne, Paul and Smith, Ron, “Military Expenditure and Unemployment in the OECD,” Defence Economics: The Political Economy of Defence Disarmament and Peace 1 (01 1990), pp. 57–73CrossRefGoogle Scholar.

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44. See Drummond, Ian M., The Floating Pound and the Sterling Area, 1931–1939 (Cambridge: Cambridge University Press, 1981), pp. 237–42CrossRefGoogle Scholar.

45. In the critical period 1934–1938, Germany increased military expenditures by 470 percent, Japan by 455 percent, and Italy by 56 percent. In contrast, the Russians increased spending by 370 percent, the British by 250 percent, and the French by only 41 percent. See Brown, A. J., Applied Economics: Aspects of the World Economy in War and Peace (London: Allen & Unwin, 1947), p. 41Google Scholar; quoted in Milward, Alan S., War, Economy and Society, 1939–1945 (Berkeley: University of California Press, 1977), p. 47Google Scholar.

46. See Shay, , British Rearmament in the Thirties, pp. 92–133Google Scholar. For a useful exploration of the counterfactual possibilities, see Shay, Robert Paul Jr, “Had Baldwin Resigned in 1936: A Speculative Essay,” in Mommsen, Wolfgang J. and Kettenacker, Lothar, eds., The Fascist Challenge and the Policy of Appeasement (London: Allen & Unwin, 1983), pp. 89–99Google Scholar.

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52. See Davis, Lance and Huttenback, Robert A., Mammon and the Pursuit of Empire: The Political Economy of British Imperialism, 1860–1912 (Cambridge: Cambridge University Press, 1986)Google Scholar; and Oneal, John R. and Oneal, Frances H., “Hegemony, Imperialism, and the Profitability of Foreign Investments,” International Organization 42 (Spring 1988), pp. 347–73CrossRefGoogle Scholar. The research of Oneal and Oneal also suggests that the variability of investment in empire was no greater than that of investment in the developed world.

53. See de Cecco, Marcello, Money and Empire: The International Gold Standard, 1890–1914 (Oxford: Basil Blackwell, 1974)Google Scholar.

54. See ibid.; Smith, Steven Reginald Burdett, “British Nationalism, Imperialism and the City of London, 1880–1900,” Ph.D. diss., University of London, 1985Google Scholar; and Wilson, The Policy of the Entente.

55. See Friedberg, , The Weary Titan, pp. 206 and 219Google Scholar; and Ferris, , Men, Money, and Diplomacy, p. 184Google Scholar.

56. Skidelsky, Robert, “Going to War with Germany: Between Revisionism and Orthodoxy,” Encounter 39 (07 1972), p. 58Google Scholar.

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59. For example, in The War Trap (New Haven, Conn.: Yale University Press, 1981)Google Scholar, Bruce Bueno de Mesquita postulates government-as-unitary-dictator precisely in order to avoid this issue.

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61. March, James G., “The Power of Power,” in Easton, David, ed., Varieties of Political Theory(Englewood Cliffs, N. J.: Prentice-Hall, 1966), pp. 39–70Google Scholar.

62. See the following studies by Paul Anderson, A.: “Decision Making by Objection and the Cuban Missile Crisis,” Administrative Science Quarterly 28 (06 1983), pp. 201–22CrossRefGoogle Scholar; “What Do Decision Makers Do When They Make a Foreign Policy Decision? The Implications for the Comparative Study of Foreign Policy,” in Hermann, Charles F., Kegley, Charles W. Jr, and Rosenau, James N., eds., New Directions in the Study of Foreign Policy (Boston: Allen & Unwin, 1987)Google Scholar.

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66. These models are briefly surveyed by Barry O'Neill in “A Survey of Game Theory Models on Peace and War,” in R. Aumann and S. Hart, eds., Handbook of Game Theory(forthcoming). See also Downs, George W. and Rocke, David M., Tacit Bargaining, Arms Races, and Arms Control (Ann Arbor: University of Michigan Press, forthcoming)CrossRefGoogle Scholar. One model that is not explicitly game-theoretic and is therefore not included in O'Neill's survey is developed by Ellsberg, Daniel in “The Quagmire Myth and the Stalemate Machine,” in Ellsberg, Daniel, ed., Papers on the War (New York: Simon & Schuster, 1973), pp. 41–141Google Scholar.

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