International Institutions and the Rise of Asia

Abstract

This article applies a game-theoretical analysis of institutions to the international institutional architecture, of which the G20 is treated as a central element. The article argues that international institutions such as the World Trade Organization or the International Monetary Fund are best understood as mechanisms for coordinating and supporting equilibria in repeated games played among policy-makers in the world's largest economies. The growth of the emerging economies, particularly in Asia, has altered these games, and there is no guarantee, with these new entrants and new issues that have emerged, that the old equilibrium strategies are still viable. The G20, it is argued, is best understood as an attempt to respond to this change and coordinate play on a new set of globally welfare-enhancing equilibria in these games.