The concept of legalization introduced in the previous chapter provides a valuable tool for capturing essential differences in institutional designs. It does not in itself, however, provide a framework for explaining the so-categorized variance in the design of international institutions nor does it attempt to do so. In fact, it is one of the major strengths of the concept that it is equally compatible with different rationalist theories including power-based, domestic politics, and functionalist approaches, as illustrated by the diverse contributions to the special volume of International Organization on the concept of legalization. This study remains rooted in the concept's rationalist orientation as it assumes that policymakers consciously choose among different design options when they establish a new international institution. Already the term “design” itself alludes to “intention-based theories of social change” (Goodin 1996: 28) and precludes the possibility of “spontaneous order” (Young 1983).

Within the school of rationalist theories, this study builds on the functionalist tradition – namely on transaction cost economics theory. However, the problem-tailored design model developed here deviates from two central tenets of the functionalist paradigm. First, this study does not share the functionalist assumption that international institutions necessarily generate Pareto efficiency gains. All cases studied here result in both winners and losers, and it remains questionable whether the institution created in each of these cases even results in Kaldor–Hicks efficiency improvements.