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Countries that trade with each other fight each other less often. But is the relationship causal? This lecture provides one explanation. Increasing trade increases the opportunity cost for war---it's hard to trade with another country when your soldiers are killing each other on the battlefield. Under most mechanisms that cause conflict, higher costs imply greater peace. This helps explain the observed relationship.

0:00 What Is Economic Interdependence?
1:52 How Trade Increases the Costs of War
3:52 How Trade Simplifies Bargaining
5:58 Implementing Interdependence after World War II
6:59 The Bretton Woods Conference
7:53 The World Bank, International Monetary Fund, and World Trade Organization
9:14 Exchange of Information
11:46 Changing Preferences

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