International Institutions: Two Approaches

In this article, Keohane emphasizes that international institutions are an important variable in world politics, worth studying. Since they facilitate cooperation that is not always benign and without institutions there will be little cooperation. While sticking to liberal institutionalism, Keohane discusses two different approaches to institutions. He concludes that both approaches need further research and modification.
The chief argument in this article is that students of international institutions should direct their attention to the relative merits of two approaches: reflective and interpretive approaches.
Keohane draws attention to difference between cooperation, harmony, and discord. When harmony prevails, actors’ policies automatically facilitate the attainment of others’ goals. When there is discord, actors’ policies hinder the realization of others’ goals, and are not adjusted to make them more compatible. Cooperation requires that the actions of separate individuals or organizations –which are not in pre-existent harmony - be brought into conformity with one another through a process of policy coordination.
International cooperation does not have to be altruistic or idealist. Rich countries can devise joint actions to extract resources from poor ones,predatory governments can form aggressive alliances.
Rationalist theory can be used to explore the conditions under which cooperation takes place, and it seeks to explain why international institutions are constructed by states. Rationalist writers emphasize that individuals, local organizations, and even states develop within the context of more encompassing institutions. Institutions do not merely reflect the preferences and power of the units constituting them; the institutions themselves shape those preferences and that power. Institutions are therefore constitutive of actors as well as vice versa. Preferences of individuals are not given exogenously.
Keohane labels scholars of this thought as “interpretive” since they emphasize the importance of historical and textual interpretation and the limitations of scientific models in studying world politics. Keohane also labels some scholars as “reflective” who emphasize the importance of human reflection for the nature of institutions and ultimately for the character of world politics.
He defines institutions as persistent and connected sets of rules (formal or informal) that prescribe behavioral roles, constrain activity, and shape expectations.
Rationalistic Study of International Institutions
Rationalistic theories of institutions view institutions as affecting patterns of costs. Specifically, institutions reduce certain forms of uncertainty and alter transaction costs: that is, the costs of specifying and enforcing the contracts that underlie exchange. Even in the absence of hierarchical authority, institutions provide information (through monitoring) and stabilize expectations. They may also make decentralized enforcement feasible, for example, by creating conditions under which reciprocity can operate.
In world politics, transaction costs are never negligible because it is always difficult to communicate, to monitor performance, and especially to enforce compliance with rules. According to this theory, one should expect international institutions to appear whenever the costs of communication, monitoring and enforcement are relatively low, compared to the benefits to be derived from political exchange.
Rationalistic theory has not been used to explain why international institutions exist in some issue areas rather than in others. Nor has this theory been employed systematically to account for the creation or demise of such institutions.
Reflective Approach
Scholars of this approach argue that institutions are often not created consciously by human beings but rather emerge slowly through a less deliberative process, and that they are frequently taken for granted by the people who are affected by them. In this view the assumption of utility maximization does not tell us much about the origins of institutions.
International institutions emerge from prior institutionalized  contexts, the most fundamental of which cannot be explained as if they were contracts among rational individuals maximizing  some utility function.
The greatest weakness of the reflective school lies not in deficiencies in their critical arguments but in the lack of a clear reflective research program that could be employed by students of world politics.
Both rationalistic and reflective approaches share a common blind spot: neither pays sufficient attention to domestic politics.