Bounded Rationality and the Diffusion of Modern Investment Treaties

Given the considerable sovereignty costs involved, the adoption of modern investment treaties by practically all developing countries presents somewhat of a puzzle. Based on a review of leading explanations of investment treaty diffusion, the article advances a new theory using behavioral economics...

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Bibliographic Details
Published in:International studies quarterly 2014-03, Vol.58 (1), p.1-14
Main Author: Poulsen, Lauge N. Skovgaard
Format: Article
Language:English
Subjects:
Behavioral economics
Behavioural economics
Bilateral investment treaties
Bounded rationality
Cognition
Cognitive-behavioral factors
Developing countries
Economic models
Foreign investments
Government
Heuristic
Heuristics
International agreements
International law
Investment
Investments
Investors
LDCs
Public investments
Rationality
REGIMES AND INTERNATIONAL AGREEMENTS
Sovereignty
Treaties
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Summary:Given the considerable sovereignty costs involved, the adoption of modern investment treaties by practically all developing countries presents somewhat of a puzzle. Based on a review of leading explanations of investment treaty diffusion, the article advances a new theory using behavioral economics insights on cognitive heuristics. In line with recent work on policy diffusion, it suggests that a bounded rationality framework has considerable potential to explain why, and how, developing countries have adopted modern investment treaties. To illustrate the potential of this approach, the case of South Africa is studied in depth.
ISSN:0020-8833
1468-2478
DOI:10.1111/isqu.12051