Neoliberal institutionalism defined

Neorealism's assumptions of anarchy, conflict, the struggle for survivial etc. depict an international environment where cooperation is unlikely. However, the uncertainty and fear that characterizes neorealism's anarchic environment is viewed from a different perspective by neoliberal institutionalism.

Neoliberal institutionalists assert that international institutions can reduce states' uncertainty and fear in order to encourage cooperation between them. This IR theory finds its basis in a much more optimistic and idealistic tradition but shares several key concepts with neorealism, unlike its predecessor, classical liberalism, which opposed realist assumptions more rigorously.

First, neoliberals accept that states are the major actors in international relations but suggest that international institutions and regimes can play a larger role and effect their own autonomous impact upon state behavior. Neorealists dismiss all international institutions as merely tools of powerful states.

Neoliberals also accept that states are unitary and rational actors that make their decisions based on cost/benefit calculations. However, neoliberals reject the emphasis that neorealists place on conflict. Neoliberals cite growing levels of interdependence and new inclinations towards cooperation as evidence in support of their perspective.

While neoliberals also accept the concept of anarchy as central to understanding and explaining state behavior, their definition of this concept differs from neorealists in several important ways. To neoliberals, the concept of anarchy represents the lack of a central authority that can enforce agreements. States fail to cooperate because they fear defection (cheating) by other states. Because cooperation is a practice of collective action, states that choose to cooperate face the risk of “free riding” behavior or worse by other states. In this way, opportunities for cooperation are lost when international institutions are absent to prevent free riding, and this is the primary role that international institutions play for neoliberals: to prevent cheating.

Because of their different conception of international anarchy, neoliberals are much more optimistic about the possibility for international cooperation among states. International institutions help states work together by alleviating their concerns about cheating and free riding, by increasing the transparency of state actions, by reinforcing and institutionalizing reciprocity as a norm, by increasing the cost of cheating, and by decreasing the cost of cooperating.

By adopting several key concepts from neorealist theory, neoliberal institutionalism has been able to commandeer several important premises that have served neorealists well in explaining state behavior over time. If the progress towards integration across the global economy or within the EU, for example, begins to face fundamental challenges that cannot be overcome (e.g. France's recent "non" vote on the EU constitution), then the explanatory power of neoliberal institutionalist theory may begin to suffer. However, for the time being it has found a way to blend elements from neorealism and classical liberalism to produce a fairly plausible alternative roadmap for understanding international relations as they exist today.