Globalization, Information, and Peace

Globalization is often seen as consisting of economic virtues and political vices. I provide a more optimistic interpretation of the effects of economic integration on international politics, arguing that autonomous global markets help to promote world peace. I use game theory to show that the claims of competing states can be made more credible by investors able to re-allocate capital across national borders. The model incorporates rational expectations, allowing investors to discount the general risk of a contest prior to investing. I also treat markets as if they have no special insights into state intentions. Even under these broad conditions, market behavior can provide leaders with disincentives to bluff, reducing uncertainty and the hazard of war. I thank Quan Li and Raphael Reuveny for comments and suggestions. The staff at the Saltzman Institute for War and Peace Studies, Columbia University, provided important clerical assistance. Assistant Professor. Department of Political Science. Email: [email protected]. web: www.columbia.edu/~eg589/. This document was prepared using the MiKTeX implementation of LTEX2e and the WinEdt text editor. The paper is a work in progress. Comments are welcome.