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THE THEORY
I. Major TheoreticalAssumptions
Four major assumptionslie at the heart of thiswork. First,I assume
that the decision-makerswho make up each nation's governmentare
rationalin the sense thattheyare expected utilitymaximizers.Second, I
assume that,eitherbecause there is a dictatorin foreignpolicy matters
(Bueno de Mesquita 1981) or because the preferencesof the decision-
makersobey value restriction(Sen 1970; Allisonand Halperin 1972), the
preferencesof each set of decision-makersmakingup a governmentare
collectivelytransitive.Third, I assume thatno possiblealliance partneris,
a priori,irrelevantto any government.That is, the decision not to allyis
made in exactlythe same way as the decision to ally,by calculatingcosts
and benefits.Finally,I assume that the decision-makerswho make up
governments,when theymake such decisionsas joining or initiatingwars
or formingalliances, do so according to a simple Cournot type rule
(Fellner 1949). That is, when theyare faced witha choice, theyassume
NOTE: I would like to thank Mr. ChristopherBrown and Ms. Harriet Dhanak of the MSU
PolitimetricsLaboratory,withoutwhose help I would never have been able to testthe
theorypresentedin thispaper. I would also liketo thankJohnAldrich,Bruce Bu1 noode
Mesquita, Gary Miller and Jim Morrow for theirmany helpful comments.
'This assumptionmay not sit well withsome, especiallythose who prefera more dynamic,
game theoreticapproach to alliance formation.The assumptionof simpleCournot type
rationalityhas, however, proven quite powerful in other contexts (see, especially,
McGuire 1974, 1982) and seems quite appropriate as a firstcut.
2The analysis in this section and sections III, IV and V is adapted in large part from
Henderson and Quandt (1980).
3Thus, by"domesticwealth"I mean all moniesspentbythegovernmentwhichare notspent
on procurementof armaments.Further,although at least one study(Hollenhorstand
Ault 1971) has shown that defense spending may have positiveimpacts on the non-
defense economy I will,for analyticalpurposes, ignore these effects.
4For a detailed analysisof such situationssee Becker (1971: chs. 10 and 10*).
Conversely,
aS/aL
aS/aR
is the RTS of armamentsfor alliances and gives the rate at which the
governmentwould be willingto substitutearmamentsfor alliances per
unit of armaments.
IV. The Problemof Tradeoffs
In deciding on the specificmix of armamentsand alliances whichwill
be used to produce its desired level of security,each governmentmust
take into account the "price" of each factor of production. As James
Buchanan (1969: 42-43) has pointed out, "Cost is that which the
decision-takersacrificesor gives up when he makes a choice." Thus, the
"price" of each factorreallyoccurs in termsof somethingelse whichthe
governmentcannotconsume because ithas decided to produce increased
security.In particular,assuming finiteresources at any given time,any
marginalpurchase of armamentsmustreduce the totalresourcesavaila-
ble to the civilian economy thus reducing domestic wealth as I have
definedit.Thus, ceterusparibus,the"cost"of increasingsecuritythrough
arms purchases is computed in termsof lost wealth(a similartradeoffis
postulated by McGuire 1965: ch. 3.
While the price of armaments seems fairlyclear, the price of an
alliance is somewhat less straightforwardto assess. Some alliances, of
course (e.g., NATO), involvea considerableexpenditureof resourcesby
all parties on militarycommissions,joint planning,etc. Many alliances,
however, perhaps most, do not. What all alliances have in common,
though,is a promise by each side to take specificactions in the event of
specificcontingencies.Such promisesare usuallyconsidered to be legally
bindingand have, in the past, usually been kept. Altfeldand Bueno de
Mesquita (1979), forexample, findthatnationshavingdefense pactswith
other nations almost invariablycome to the aid of their partnerswhen
thosepartnersare attacked.Thus, alliancescan be seen as deprivingeach
partyof some of its freedomof action. In addition, alliances tend to tie
nationsmore broadlyto each others'positionson relevantissues so thatit
becomes difficult foreitherpartyto adopt policystandstoo different from
thoseof itsally (some examples of those who have adopted thisor similar
assumptionsinclude Organski 1968; Singer and Small 1968; Berkowitz
1983; Bueno de Mesquita 1975, 1981; Altfeldand Bueno de Mesquita
1979). I assume, then, that the cost of an alliance to a governmentis
computed in termsof the autonomywhichmustbe given up in order to
form the alliance. Furthermore,I will assume that some autonomy is
alwayslost in forminga new alliance and thatsome wealthis alwayslost
when armamentsare increased.
Given thatthe costsof armamentsreallytake place in termsof wealth
and autonomyrespectively,I can establishtwofunctions,W = Gi(R) and
A = G2(L), whichrelatewealthto armamentsand autonomyto alliances.
Further,I assume thatthe derivativesof Gi and G2 are alwaysnegativeso
that the amount of civilian wealth available declines as the amount of
armamentsproduced increases,whiletheamountof autonomywhichthe
RESEARCH DESIGN
I. The NatureoftheTest
In order fullyto testthetheoryof alliance formationpresentedabove,
I would need to develop measures forthe marginalutilityof security,the
marginalutilityof domesticwealth,the marginalutilityof autonomy,the
marginal product of alliance, and the marginal product of armament.
!' It is,of course, possible,forany of the goods in thisanalysisto be treatedas inferiorto the
point of showing"Giffen"typeeffectsby some governmentsat some times.However,
unlike potatoesor other"market"examples of such goods, it is not at all clear whichof
the goods included in thisanalysiswillbe treatedin thisway by whichgovernmentsat
what times. This will depend on the specificcharacter of each government'sutility
functionwhich,of course, would be difficult to specifyto thisextent.In addition,with
specificregard to alliances (the focusof thisstudy)such instances,to the extentto which
theyoccur at all, are likelyto be veryrare, especiallyamong the major powers. The
reason forthisis thatalliances are two partytrades.The kind of trade resultingfroma
Giffentype effectfor alliances would require one partyto give up autonomy to gain
securitywhiletheothergivesup securityto gain autonomy.This impliestheexistenceof
a veryasymmetrictypeof relationshipsuch as thatbetweena major and minorpower
ratherthanone betweentwomajor powers. For bothof thesereasons I choose to ignore
such possibleeffectsin thisanalysis.I should pointout,however,thatshould such effects
exist forany given trade, thattrade should show up as a mis-predictedcase. Further-
more, if such effectsare common, the theorypresented here will simplynot predict
alliances that formverywell.
Country Dates
Austria-Hungary 1816-1900
Prussia/Germany 1816-1900
Russia 1816-1900
France 1816-1900
Italy 1860-1900
United Kingdom 1816-1900
0As some readers are no doubt aware, there are certaindifferencesbetween the alliance
data as given in Small and Singer (1969) and as given in the up-dated 1979 data-tape
available fromthe Correlatesof War Project.Where these differenceswere relevant,I
used the alliances as given in the 1979 version of thisdata-set.
I. TestingtheNecessaryCondition
Having now developed an indicatorof the marginal product of an
alliance, I can proceed directlyto a test of the necessarycondition for
alliance formationdiscussed above. To testthisconditionI separated the
FIGURE 1
Minimum Minimum
AS>O AS<O
Form A
Alliance
Do Not C D
Form
Alliance
FIGURE 2
Minimum Minimum
AS>O AS<0
Form 24 2 26
Alliance
566 139
Yule's Q = .504
CONCLUSION
APPENDIX 1
Solution of the Constrained
MaximizationProblem
13: R
aU//R -dW
aU/ia dR
14: au aS
aS aL -dA and
aU/aA dL
15: au aS
as aR -dW
aU/aR dR
APPENDIX 2
New Dyadic Alliances Among European
Major Powers, 1824-1900
Year Dyad Alliance
1827 UK, FRN Entente
1827 UK, USR Entente
1827 FRN, USR Entente
1833 GMY, USR Entente
1833 AUH, USR Entente
1834 UK, FRN Defense Pact
1840 UK, GMY Defense Pact
1840 UK, AUH Defense Pact
1840 UK, USR Defense Pact
1844 UK, USR Entente
1850 GMY, AUH Defense Pact
1850 GMY, USR Entente
1850 AUH, USR Entente
1861 UK, FRN Entente
1863 GMY, USR Defense Pact
1873 GMY, AUH Entente
1873 AUH, USR Defense Pact
1881 GMY, USR NeutralityPact
1881 AUH, USR NeutralityPact
1882 GMY, ITA Defense Pact
1882 AUH, ITA Defense Pact
1887 UK, AUH Entente
1887 UK, ITA Entente
1891 FRN, USR Entente
1897 AUH, USR Entente
1900 FRN, ITA Entente
APPENDIX 3
where:
Pi is i's perceptionof the probabilitythat i wins the bilateralwar withj.
(I-Pi) is i's perceptionof the probabilitythat i loses the bilateralwar withj.
Anid,
Pikis measured as theratioof thesum of i's and k'scapabilitiesto thesum of i's,
k's and j's capabilities.
Pjk is measured as the ratioof the sum of k's and j's capabilitiesto the sum of
k's,j's and i's capabilities.
Uiki is measured as the rank order correlationbetween i's and k's alliance
statuseswithall nations in the region includingeach other.
Uikj is measured as the rank order correlationbetweenj's and k's alliance
statuseswithall nations in the region includingeach other.
Thus, again, any change in i's alliance statuseswillbe reflectedin a change in
the measured value of Uiki and will thus result in a change in the measured
amountofaid or oppositionwhichi can expectto receivefromeach kin a warwith
j; thatis, it will resultin a change in the measured value of .E(Ui)ki.
k
Having now explained how a nation'sutilityforwar withsome othernationis
computed, I can state the definitionof securityemployed in this paper.1'
The overall securitypositionof each major power is simplyitsaverage utility
for a war against all other major powers in the European region. This average,
designated S, is computed as:
n-I
E E(Ui)j/(N- 1)
j= 1
Where N is the numberof major powersin theEuropean region'; and eachj is
a major power which i mighthave to fight.
In order to compute AS, the change in a nation'ssecuritydue to a proposed
newalliance,I assume the newalliance to have been made and determinehow that
change in foreignpolicyaffectsS throughitsaffectson Uij, Uiki and Uikj.17The
I' In computingE (Ui) Bueno de Mesquitaincludescorrections foruncertainty and risk-
takingbehavior.MajorPowersare assumedto behaveas iftheywererisk-acceptant
Underconditions
underbothriskand uncertainty. of risk.all thirdparties'potential
tothewarareincludedinthecomputation
contributions oftE(Ui)ki.Underconditions
of uncertainty,only those third parties for whom Uiki>O and Uikj<O or for whom
Uiki<0 and Uikj>0 are includedin thiscomputation.These correctionsareemployedin
thisstudy.Discussionof themhas been omittedfromthetext,however,so as notto make
an already complex discussioneven more so. The reader who is interestedenough to
havecomethisfarshouldsee Buenode Mesquita( 1981:59-64)fora discussion
ofthis
rule.
I'iIn assessingeach greatpower'ssecurity,I calculate itssecurityonlyagainsttheothergreat
powers. Further,when computingeach greatpower's utilityforwar againsteach other
great power, I only consider the aid which each side may receive fromother great
powers.I do thisbecause(a) I assumethatminorpowerssimplycannotdo muchto
affectthe outcome of a major power war and, (b) I assume thatalliances made among
the great powers are directed primarilyagainst the other great powers.
7In computing due toa newalliance,I adoptthefollowing
thechangeinsecurity conven-
tions:
is alwaysa defensepact.Thisis
(a) I assumethatthenewalliancebeingcontemplated
because thedefensepactresultsin thegreatestincreasein themeasured utilitywhichthe
twopartieshave foreach other'spolicypositions.It should, therefore,offerthe greatest
marginal increase in securityto the parties.
(b) In computinga nation'ssecurityafterthe assumed formationof a new alliance, I
take intoaccount the nation'sutilityforwar againstall othergreat powers includingits
potentialally. I do thisbecause, as I have already noted, allies tend to fightfar more
often than one would expect by chance.
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