Institutional rules
5.1 Institutional analysis
5.1.1 From institutionalism to neo-institutionalism Contemporary political science has been dominated by three successive paradigms dealing with the role of institutions. These paradigms are important for understanding the influence of institutional rules on the behaviour of actors and, consequently, on public policies. The traditional institutionalist paradigm assumes that democratic institutional rules determine individual and collective decisions. Homo politicus ‘makes policy’, but always in the context of constitutional institutions and in accordance with formal rules.The political scientist describes – mostly in legal language – the structures and procedures of the organs of parliament, government and the administration as well as the functioning of political parties and interest groups. However, traditional institutionalism gradually devoted itself to the identification of the legal aspects and organisational structures of (informal) rules that relate to collective decision making (Duverger, 1968, pp 7-8; Chevallier, 1981, pp 3-61).
Making a fundamental change from that paradigm with respect to the selected unit of analysis, the behaviourist paradigm assumes that the social roles, informal norms and personal values of
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individuals determine their political behaviour. In its more radical version, institutions are defined as ‘empty shells’ (Shepsle, 1989, p 133). The
Public policy analysis
paradigm of rational choice (for example, public choice and game theory) interprets political actions by applying the theories and methods of neo-classical economics. According to this approach, the field of politics corresponds to a market; collective decisions represent the equilibrium resulting from the aggregation of individual behaviour. Homo oeconomicus makes strategic political choices that aim to maximise personal utility (material and immaterial). The institutional arrangements do not influence the formation of individual preferences but may channel them and constitute a means of resolving collective action dilemmas (for example, ‘free-riding’, ‘the prisoner’s dilemma’ and ‘the tragedy of the commons’). Empirical applications of these theories deal with the electoral strategies of political parties (Downs, 1957), the maximisation of bureaucratic budgets and prestige (Niskanen, 1971), the creation of interest groups (Olson, 1965) and political decision making (Buchanan and Tullock, 1962).
Since the 1980s, it has been possible to observe the emergence of a new research trend that aims to integrate the ideas of the public or rational choice school with those obtained from the analysis of public institutions.This reorientation envisages a cumulative development of knowledge in the political sciences. While the supporters of the paradigm of rational choice emphasise the stabilising role of institutional rules, for example in parliamentary decisions (Shepsle, 1979; Riker, 1980)1, the proponents of the traditional institutional paradigm look at the strategic interactions between individuals within institutions, for example in interest groups (Moe, 1980;Walker, 1983)2.
Neo-institutionalism suggests, therefore, that actors and institutions influence each other.‘Embedded’ or ‘trapped’ in formal and informal institutional rules, homo institutionalus adopts political behaviours that are appropriate to the values and expectations conveyed by these rules, at the same time, modifying them gradually on the basis of his or her own decisions and actions. In order to account for this multi-causality, the political scientist simultaneously analyses the individual behaviour and the institutional structures or rules.
5.1.2 Definitions of institutional rules (that is,
institutions)3
It is then appropriate to differentiate between the three neo-institutionalist schools – referred to as sociological, economic and historical – rather than speak of a theoretical approach that has
already been consolidated (Koelble, 1995; Goodin, 1996; Hall andTaylor, 1996; Lowndes,1996;Norgaard,1996) (seeTable 5.1).Each of these movements defines the concept of institutions or institutional rules in a specific
Table 5.1: Synopsis of neo-institutionalist schools Major authors March and Olsen (1989); Powell and Evans et al (1985); Hall (1986);
Steinmo Williamson (1985); Ostrom (1990);
Di Maggio (1991); Scott and Meyer (1994) et al (1992);Weaver and Rockman (1993)
North (1990) Analytical Cultural values, social norms, symbols, rites, Formal and informal procedures,
routines, Voluntary contracts or arrangements that
definition of habits and so on that limit the cognitive legal norms embedded in the structures are of
the result of repeated interaction between
institutional rules
capacities of actors who define the roles the political system that reflect the power
the actors that stabilise individual attempts
of the members of an organisation and relationships between actors and that
pre-ensuring a certain degree of predictability provide the social legitimacy of institutions define access to the decision-making
arena
to the results of collective actions Epistemological Independent variable (macro level): Independent and dependent variable Dependent variable (micro level):
status of (meso level):
institutional
rules Institutions individuals Individuals institutions Individuals institutions
Creation of Immanent: institutional rules (re)produced Contingent: rules develop among the Functional: institutional rules created to institutional
rules by individuals, groups and organisations existing institutional rules serve the interests of its members Institutional Institutional rules influence the world vision The institutional rules have, above all, a Institutional change aimed at
re-establishing change of actors who, during institutional change, stabilising effect while certain
institutional
the balance if actors’ preferences change adopt a new reference framework among constellations offer opportunities and in reducing the negative effects
caused
several options available for change at any given moment by former institutional rules
Strengths of Focus on organisational sociology and Combination of several decision-making Conceptual clarity and coherency, formal the approach on social attitudes and roles logics, taking into account structures and deductive theory
Weaknesses of Ambiguity with respect to the true nature Inductive approach not yet theoretically Limited capacity for explaining institutional
the approach of relationships between social norms and consolidated, risk of structural (non)-change, limits inherent in ‘public
(formal) political institutions determinism choice’ models, functionalism
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way and hence proposes different hypotheses with respect to their influence on individual actors and the conduct of public policies.
• Institutional rules as social norms: adopting a cultural approach, sociologists define institutions not only as the internal formal rules and procedures within an organisation, but also, and above all, as the latter’s value system, symbols, cognitive patterns and behavioural norms. Institutions are essentially cultural and they provide the members of an organisation with a frame of meaning that guides individual actions.Thus, social conventions predefine the role of actors at the same time as updating the legitimacy of organisations.
• Institutional rules as voluntary contract norms: in contrast, economists adopt a calculating perspective. Institutional rules are defined as voluntary arrangements between individuals.These (incomplete) contracts make it possible to reduce the uncertainty that is inherent in all collective decisions and stems from inaccurate information and the limited cognitive capacities of actors. In the absence of an institutional frame, the desire to resolve this uncertainty would involve excessive transaction costs.Therefore, individuals freely negotiate formal rules and/or accept informal codes of behaviour.
The aim of these institutional rules is to provide a certain degree of predictability with respect to the behaviour of other actors and the outcome of collective action.
• Institutional rules as state structures: historians turn to structuralist theories in their approach to institutions.
They apply them to the constitutional and legal norms, to the formal political- administrative procedures and to the informal conventions that define the rules governing the interaction between actors.The institutional rules of a democratic regime reflect the power relationships between the social groups and provide some of them with privileged access to the arenas of policy decision making and implementation. If they do not in themselves determine actor participation and the substantive results of state actions, they
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95 nevertheless offer opportunities for selective and distorted action. In reality, historical neo-institutionalism represents a happy medium between the cultural approach of the sociologists (‘logic of appropriateness’) and the calculating approach of the economists (‘logic of consequentiality’). The institutional rules affect the preferences and identity of individuals while, at the same time, the latter exploit them from a strategic point of view to assert their interests.
In addition to highlighting the differences between these three neo-institutionalist schools – deliberately presented here as ideal types – we note that the major authors agree on at least three points.
Firstly, all of these research movements define institutional rules as both structures and rules that are formal, explicit and generally legally formalised and as informal norms that are implicit but shared by the members of an organisation or community.
Consideration of both of these types of rules is necessary as the informal norms may replace the influence of formal rules or even prove to be more stable (more ‘mythical’) than the latter (see Knight, 1992, p 17; and also North, 1990, p 4). An MP may vote against the party line for personal and ethical reasons (for example, on abortion).Administrations sometimes also tolerate the breaching of their regulations for cultural reasons (for example, lax application of state regulations in certain French-speaking Swiss cantons, or certain French regulations in regions like Corsica).
Policy analysis must, therefore, accommodate this dual dimension and question the relative influence of formal and informal institutional rules on political behaviour, their respective stability and the conflicts that may arise between these two categories of rules.
Secondly, and as demonstrated by the empirical work carried out by the historical school of neo-institutionalism, institutional rules establish structures and procedures that facilitate or limit the political participation of individuals and groups (for example, the right to launch a popular initiative or facultative referendum in Switzerland, the right to a hearing in an administrative procedure, the right of a linguistic minority to be represented in the Swiss government) and the efficacy of policies (for example, inequalities in implementation associated with federalism of execution, compromise solutions negotiated to avoid appeals). Furthermore, they substantiate and define in temporal terms the power relationships between the social groups (for example, under- representation of women in executive and legislative bodies, clientelistic relationships between an administration and an interest group, consultation of employees in the context of collective agreements).
Even if they appear to display a very high level of stability, institutions are not, however, completely frozen and immovable.
Developments may prompt changes in social reality (for example, recognition of the right of appeal of environmental protection organisations, granting of the right to vote to women and foreigners) or repeated statements on the inefficacy of the institutional rules in place (for example, reform of consultation
procedures, revision of the Constitution and democratic rights, attempts at reform by the government and parliament).Without going into the reasons for the stability and transformation of
institutional rules in detail here, it should be noted that with regard to policy analysis this involves understanding both of these stages in the life cycle of an institution as well as the reasons for the selection of one institution over another (‘institutional design’
according to Brandl, 1987; Weimer, 1995; Goodin, 1996).
Finally, a consensus emerges with respect to the necessity to interpret political behaviour as actions that are strategic and guided by social norms. Understood in its broadest sense, the rationality of actors is, therefore, limited in cognitive terms (‘bounded rationality’) and in institutional terms (‘bound rationality’). In other words, individuals are rational to the extent that they have concrete and rational aims and try through their behaviour to forge a social identity for themselves and to win the recognition of a group or an organisation.As Norgaard (1996) suggests with his concept of ‘reasonable rationality’, political actors act in an intentional and reflexive manner.They also formulate their strategies on the basis of the opportunities provided by institutional rules. Thus, what we need to establish is how the institutional rules influence this double motivation. For each concrete case, it is a question of determining whether an institution influences a specific individual behaviour by increasing the information and knowledge available to actors, from a perspective of institutional transformation (strategic behaviour), and/or in suggesting a behaviour that is compatible with the conveyed social norms, from a perspective of cohesion and socialisation.The relative weight of these two mechanisms appears of equal importance in explaining not only the individual decisions and actions, but also the institutional transformations. In this respect, Lowndes (1996, p 195) for example, suggests that strategic actions are decisive for initiating an institutional change while the behaviours guided by social norms tend to strengthen the institutional rules in force.
Three elements (at least) of institutional rules must be kept in mind when analysing a given policy: it is necessary to differentiate between formal and informal rules, between stable and dynamic institutions and between strategic behaviour and behaviour that is guided by social norms.The intersection of these three analytical elements enables the formulation of several concrete hypotheses.
One could, for example, suppose that the institutional changes are prompted by the existence of an excessive gap at a given time between the formal and informal institutional rules, or that different formal rules offer more or less scope for manoeuvre to individuals to adopt strategic behaviour that social conventions do
not do (for example, the impact of whether ballots are secret or open on adherence to official lines taken by political parties).
5.1.3 Institutional changes
How do institutional rules originate and evolve over time? Several alternative theoretical propositions have been formulated to explain the emergence, stability and transformation of institutions. We will refer to four main arguments influenced by the neo-institutionalist schools described above (see Table 5.1).
1. Opportunistic calculations and institutional heritage. Firstly, the authors inspired by the public choice rationale explain the emergence of an institution as the intentional choice of individuals to maximise the predictability of their interactions.Thus, by means of a voluntary act, the actors create an institution representing “an ex ante bargain, the objective of which is to enhance various forms of co-operation and to facilitate the enforcement of agreements.
[...] The ex ante rational institutional choice is the one which the collective believes, on average, will generate the least ex post regret” (Shepsle, 1989, p 139). Created for a functional end, an institution will survive for as long as it produces more benefits for the interested individuals and groups than the competing institutional forms; if this is no longer the case, the existing institution is abandoned in favour of a more efficient institution (for example, reform of ad hoc parliamentary committees in Switzerland in favour of permanent commissions that offer greater weight in the legislative process and better information for their members; see Lüthi, 1997). Thus, in the final analysis, institutional changes can be explained by the fact that an institution gives rise to negative effects in the long term that were not predicted in the short term. Out of concern for efficacy and the correction of these negative effects, the actors engage in processes of institutional change.The success of these reforms in itself depends on the resources of the coalitions that have a specific interest in operating them.
This voluntarist interpretation of institutional changes is in line with an institutional Darwinism. It was partly challenged by North’s theory (1990) on changes dependent on the path taken (‘path dependence’). If there were no transaction costs (or a perfect situation with respect to information) the interactions between the actors would be direct and there would be no need for institutions. Similarly, if the transformation of institutions does not give rise to any costs,
the institutional changes would be immediate. Despite obvious dysfunctionality, both the existence
of institutional rules and their great stability must be confirmed. The stability of institutions and their incremental reforms can hence be explained in terms of the costs accepted by the initiators of the proposed change.The innovators should be prepared to pay dearly for breaking with a social norm (for example, reform of popular ‘sacrosanct’ rights) or for the losses associated with the possible negative long-term effects of a new institution (for example, instrumentation of the optional referendum by all-powerful sectoral interest groups). According to North, institutional progress only clears a way for itself very slowly.This stems either from the migration of certain actors, who in a quest for efficiency, move towards more effective institutional systems, or from imitation, through a process of emulation of the most efficient systems. The most effective institutions do not automatically undermine the less efficient ones; the development tends instead to unfold as a ‘shaky-handed evolutionism’ (Dockès, 1997).
For these two economic approaches to the evolution of institutions, institutional creation and reform are ultimately explained by the motivations and actions of individuals and groups. The authors of this school of thought confirm, nonetheless, the existence of a significant hiatus between the initial intentions of actors during the creation of institutional rules and their theoretical trend, institutional innovations are explained by inconsistencies, at a given moment in history, between different institutional rules (for example, collisions between federalist and democratic principles according to Germann, 1991) and/or between one given institution and others in social reality (for example,political non-representation of certain social groups).This time-lag is due to the fact that political and social structures do not
necessarily evolve at the same speed. Thus, the stabilising, or conservative, effects of an institution can no longer respond to the social demands expressed.This inadequacy may also concern both the efficacy of the results of the collective action and its legitimacy and that of its members. A critical situation of this nature necessitates institutional reform that translates as a bifurcation in the historical development.The creation, stability and institutional changes are thus interpreted as alternation between long phases
of equilibrium and shorter phases of imbalance and institutional crises (Krasner, 1984).
This approach explains institutional change mainly in terms of the non-satisfaction of (new) demands made by certain social groups. However, it stresses two reasons why institutions tend to resist change. First, they often structure how decisions about their eventual reform may be taken (for example, a popular vote as obligatory for the reform of the instruments of direct democracy). Second, the power relationships that are contained in the institutional rules limit the opportunities for certain social groups that are excluded from the decision-making arena from participating in institutional transformation.This argument tends, therefore, to explain why inadequacies between the social demands and institutional responses may certainly emerge but may not be resolved quickly.
March and Olsen (1989, p 168) stress that institutional changes translate primarily into processes of adaptation and learning. Given the structuring effects of the institutional rules in place, it is above all necessary to expect incremental changes.The proactive exploration of alternative institutions proves less common than changes on the periphery.This hypothesis is strengthened further by the fact that a specific institution often finds itself in a position of interdependency with other institutional rules. Hence, it is not just a question of improving the efficacy of an institution, but also of ensuring that the institution in question is compatible with the principles rooted in other institutions (for example, the trade-off that exists between the rights of direct democracy and electoral rules in parliamentary systems; see Linder, 1994, p 133).
3. External pressures and internal mediation. A third hypothesis assumes that institutional change is prompted by external shocks to a political system (for example, the impact of the evolution of
3. External pressures and internal mediation. A third hypothesis assumes that institutional change is prompted by external shocks to a political system (for example, the impact of the evolution of