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Bounded Rational Policy Diffusion: The Case of Bilateral Investment Treaties

Lauge Poulsen
The London School of Economics & Political Science
Lauge Poulsen
The London School of Economics & Political Science

Abstract

Given the sovereignty costs involved, it is a puzzle why practically all developing countries have signed up to bilateral investment treaties (BITs). Based on a critical review of existing accounts, the article suggests a novel explanation based on notions of bounded rationality. This follows recent literature on international policy diffusion using insights on systematic - and thus predictable - cognitive heuristics found in the behavioural economics discipline.