Rational-Choice Theory as a Way of solving Specific Puzzles Not all of the papers in this volume express skepticism about certain interpretations of a general class of phenomena(such as moralistic talk), or sketch out causal mechanisms whose implications could apply to a wide variety of actions or institutions. Instead, some of the papers focus on very specific empirical puzzles, and explain specific institutional arrangements in the World Trade Organization. These o seek to use rational-choice theory to solve them. Roessler, Schwartz and Sykes seek to arrangements enable states to suffer limited retaliation rather than to change their laws to comply with rulings of the Dispute Settlement System; furthermore, they delay the imposition of sanctions and limit their permissible extent. Guided by transaction cost theory, Guzman and Simmons explore the conditions under which states settle disputes without recourse to a dispute settlement panel Solving specific puzzles requires the analyst to engage in some empirical work either anecdotally, as in the paper by roessler and his colleagues, or with systematic data, variables in the causal mechanism and to assess, in one way or another, the . explanatory as in the Guzman -Simmons paper. The research design is to identify the ke impact on the chosen dependent variable of these explanatory variables Often, as in the paper by roessler et al., such analyses rely heavily on general descriptions of patterns of behavior and of institutions, and no alternative theories are considered. Underlying the logic of such an analysis is a functional theory, in which(in the rational-choice version )anticipated effects explain causes. Such a theory is not in principle invalid, but in the absence of independent confirming evidence, it is subject to the post hoc ergo propter hoc fallacy. Another way of stating this problem is to emphasize the Folk Theorem of game theory: that strict game-theoretic analysis, without restrictive assumptions, typically predicts multiple equilibria, sometimes involving cyclin between different states of the world vang. The point is that, ex post, behavior can be interpreted, and modeled, in a large assumptions about common knowledge and constraints introduced to produce unique p of ways. The very plasticity of rational choice modeling-dependent, as it is, on equilibria-facilitates a variety of possible interpretations. So the demonstration that observed behavior could be a strategic equilibrium of an extensive-form game does not demonstrate that it is. I am reminded of Tweedledee's statement in Through the Looking Glass "lf it was so, it might be: and if it were so, it would be; but as it isnt. it aint. That's logic G. A Cohen, Karl Marx's Theory of History: A Defense(Princeton: Princeton University Press, 1978) For a fuller discussion of the virtues and pitfalls of functional theory, see Keohane, After Hegemony (supra, fn. 2) Lewis Carroll, Through the Looking Glass, chapter 4 77 Rational-Choice Theory as a Way of Solving Specific Puzzles Not all of the papers in this volume express skepticism about certain interpretations of a general class of phenomena (such as moralistic talk), or sketch out causal mechanisms whose implications could apply to a wide variety of actions or institutions. Instead, some of the papers focus on very specific empirical puzzles, and seek to use rational-choice theory to solve them. Roessler, Schwartz and Sykes seek to explain specific institutional arrangements in the World Trade Organization. These arrangements enable states to suffer limited retaliation rather than to change their laws to comply with rulings of the Dispute Settlement System; furthermore, they delay the imposition of sanctions and limit their permissible extent. Guided by transaction cost theory, Guzman and Simmons explore the conditions under which states settle disputes without recourse to a dispute settlement panel. Solving specific puzzles requires the analyst to engage in some empirical work, either anecdotally, as in the paper by Roessler and his colleagues, or with systematic data, as in the Guzman-Simmons paper. The research design is to identify the key explanatory variables in the causal mechanism and to assess, in one way or another, the impact on the chosen dependent variable of these explanatory variables. Often, as in the paper by Roessler et al., such analyses rely heavily on general descriptions of patterns of behavior and of institutions, and no alternative theories are considered. Underlying the logic of such an analysis is a functional theory, in which (in the rational-choice version) anticipated effects explain causes.19 Such a theory is not in principle invalid, but in the absence of independent confirming evidence, it is subject to the post hoc ergo propter hoc fallacy.20 Another way of stating this problem is to emphasize the Folk Theorem of game theory: that strict game-theoretic analysis, without restrictive assumptions, typically predicts multiple equilibria, sometimes involving cycling between different states of the world. The point is that, ex post, behavior can be interpreted, and modeled, in a large variety of ways. The very plasticity of rational choice modeling – dependent, as it is, on assumptions about common knowledge and constraints introduced to produce unique equilibria – facilitates a variety of possible interpretations. So the demonstration that observed behavior could be a strategic equilibrium of an extensive-form game does not demonstrate that it is. I am reminded of Tweedledee’s statement in Through the Looking Glass: “If it was so, it might be; and if it were so, it would be; but as it isn’t, it ain’t. That’s logic.”21 19 G. A. Cohen, Karl Marx’s Theory of History: A Defense (Princeton: Princeton University Press, 1978): 278. 20 For a fuller discussion of the virtues and pitfalls of functional theory, see Keohane, After Hegemony (supra, fn. 2). 21 Lewis Carroll, Through the Looking Glass, chapter 4