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Why did states establish the Financial Stability Forum (FSF) in 1999, when numerous inter-governmental institutions, including the International Monetary Fund, World Bank and Organization for Economic Co-operation and Development, were available to promote financial stability? Why did states create the Proliferation Security Initiative (PSI) in 2003 instead of modifying the United Nations Convention on the Law of the Sea, even though doing so left them without authority to interdict high-seas shipments of weapons of mass destruction? Why did states form the Financial Action Task Force (FATF) in 1989 to combat money laundering, despite the availability of capable institutions including the IMF, OECD and regional security organizations? Why did the World Bank, with member state approval, partner with private sector participants in the Prototype Carbon Fund (PCF) in 1999 to support market-based climate change mitigation mechanisms, instead of acting through the Bank itself or the United Nations Framework Convention on Climate Change? In all these cases, states chose to address emerging cooperation problems not by assigning them to incumbent formal intergovernmental organizations or multilateral treaties, but by creating new institutions of different types, including informal intergovernmental organizations (PSI and FATF), a trans-governmental network (FSF), and a transnational public-private partnership (PCF).

These examples point to a larger trend. Over the past three decades, the number of informal intergovernmental organizations (IIGOs) rose from 27 to 72, a 167% increase (see Vabulas and Snidal 2013); transnational public-private partnerships (TPPPs) increased from 26 to 167, a 542% increase (see Westerwinter 2016: 2); and trans-governmental networks (TGNs) expanded from 25 to 141, a 464% increase (see Abbott et al. 2018: 10). At the same time, the adoption of multilateral treaties has stagnated: while some 35 treaties were deposited with the UN in each decade between 1950 and 2000, only 20 were deposited between 2000 and 2010, and none between 2011 and 2013 (Pauwelyn et al. 2014: 734-735).

In a forthcoming paper, we propose to treat IIGOs, TGNs and TPPPs as important members of a common and distinct class of transnational institutions we call “low-cost institutions” (LCIs). In this article, we outline why it is analytically fruitful to treat these seemingly diverse institutional forms as a common class. More precisely, we explain what different forms of LCIs have in common, why governance actors choose to create them, and how their proliferation impacts global governance.

What Do LCIs Have in Common?

All types of LCIs share two characteristic institutional features. First, they are relatively informal, compared to treaty-based institutions. Informality reflects two major traits. LCIs are created by non-binding agreements or understandings, not by legally-binding treaties; by implication, they also have authority to adopt only non-binding standards, not legally-binding rules. And LCIs feature decision-making formalities and operating procedures that are less elaborate and complicated than those of treaty-based institutions. The second characteristic feature of LCIs is participation by executive, bureaucratic and societal actors, rather than or in addition to states. Together, these features constitute LCIs as a distinct class of international institutions, in spite of the differences among individual forms.

Why Do States and Other Governance Actors Choose to Create LCIs?

Decisions to address emerging cooperation problems through LCIs instead of incumbent treaty-based institutions are based on four common rationales, which reflect the common institutional features of LCIs introduced above.

First, the costs of creating, operating and changing LCIs, as well as the sovereignty costs they impose and the costs of exit from them, are all, on average, substantially lower than those of treaty-based institutions. All of these low costs derive primarily from LCIs’ informality: their reliance on non-legally binding obligations and relatively uncomplicated operating procedures. In the G20, for example, “states are unencumbered by procedures and less concerned that their commitment will be strongly binding” (Viola 2015:27). Informality reduces both the international transactions costs and the domestic approval costs of forming new LCIs.

Second, LCIs provide specific governance benefits – not equally available through treaty-based institutions – that derive directly from their low costs. These include malleability, flexibility and reduced risk, as well as relaxed constraints on state action. Participation by executive, bureaucratic and societal actors (in IIGOs, TGNs and TPPPs respectively) contributes governance competencies........

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