Mearsheimer's realism principles: compatible with economics?

Mearsheimer’s Realism Principles

I already posted about John Mearsheimer’s realism in a previous post. This time I want to discuss Professor Mearsheimer’s realism theory more explicitly. In this video, he explicitly lays out the 5 assumptions of his theory, which I think makes the discussion more systematic (see around minute 12 of the video).

The 5 foundational assumptions of Mearsheimer’s theory of international politics:

1. States are the highest authority; nothing exists above them (anarchy).
2. Every state has different military capabilities.
3. We can never truly know a state’s intentions. There are no permanent friends or foes.
4. The fundamental goal of every state is survival. If the state collapses, no other objective can be achieved.
5. Decisions made by states are the result of rational (i.e., strategic) thinking.

I think these 5 assumptions are simple enough yet perfectly capture all the analyses he has offered over the years. They can be examined together and are interconnected. According to Prof. Mearsheimer, these 5 assumptions are what make the world a terrifying place, as every state competes to become the most powerful. In an anarchic system, the only path to security is being the strongest. Because there is no institution above the state that we can rely on for help. We may have friends, but friends have their limitations too. Look at Myanmar during the military coup, or the Philippines when harassed by China. Who helped? ASEAN? Lol.

“God only helps those who help themselves.”

Connection to Microeconomic Assumptions

For economists, the assumptions above are not that hard to digest. This is mainly because we learn similar things in micro- and macroeconomics. Well, especially in microeconomics. The foundational principle of microeconomics is consumer theory, which also requires preliminary assumptions. In consumer theory, the assumption is typically that each individual maximizes their own consumption. This mirrors Mearsheimer’s assumption 4: people (and states) do not care much about others’ survival.

Now, when aspiring economists start learning Walrasian Equilibrium, they encounter some new assumptions. Walrasian equilibrium involves more than one person. What happens when an economy consists of 2 people? Walrasian equilibrium says Pareto optimality can be achieved if we let these two people trade with each other, without any intervention from a higher authority. In other words, even in anarchy, two people can achieve extra happiness without hurting anyone – just by trading. No central planner like a state is needed to dictate what these two people should do. We learn all of this in the first year of university.

Wait – in the “anarchic” world depicted by Walrasian equilibrium, everyone is happy. But in John Mearsheimer’s anarchic world, the outcome is gloomy?

Walrasian Equilibrium exists in a beautiful world. Several assumptions are in fact violated in reality – violations that John Mearsheimer has already addressed. The first assumption is that in microeconomics, there is still an institution stronger than any individual. That institution is the state. If we only care about our own consumption, then a better strategy than trading would be to rob the other party. In the Walrasian world, robbery – or “unfair exchange” – would be blocked by the harmed party. But what if the robber is stronger? In the Walrasian world, there is the state. There is the police, protecting citizens’ basic rights. In other words, the existence of this stronger actor (assumed to maintain security and order) violates Mearsheimer’s assumption #1.

Second, in the Walrasian world, there is perfect/complete information. We know for certain our neighbor’s intentions, what goods they have, and the quality of those goods. No need to worry about being cheated because all information is transparent and all intentions are clear. In economics, we eventually learn about asymmetric information, which makes market outcomes suboptimal (i.e., violates the Walrasian equilibrium). This type of information problem is also something typically addressed through government intervention.

Third, there is the price taker assumption. Everyone is a crumb compared to the vastness of the market. Nobody can dictate the market. This clearly violates Mearsheimer’s assumption #2, where some states are powerful and others are weak. This assumption is also relaxed in subsequent semesters of economics.

In principle, if we relax all the Walrasian assumptions to accommodate reality, the outcome aligns with John Mearsheimer’s thesis: the world is a cruel place. Anarchy is a cruel place. Both economists and realists know this. The difference is that economists are in a better position: we still have the state. We still have an institution above all members of society that can potentially correct all the market failures described above. Economists do not truly operate in anarchy because government policy can influence markets. For international politics, policy options that influence the world may not be as feasible as those available to economists. Well, at least as long as economists are being heard, which is not always the case.