Week4 slides display

InstitutionsChris Hanretty

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‘Old’ institutionalism

Rational choice and institutions

Other institutionalisms

Institutional change

Applying institutionalisms

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#1:

‘Old’institutionalism

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Historical background

Study of specific constitutions inAristotle’s PoliticsPolitics as constitutional law: Bryce’sAmerican Commonwealth,Ostrogorski on political partiesObject: detailed description of explicitrules in organisation, typicallynation-states

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What’s wrong with ‘old’institutionalism (1)

Distinction between de jure and defactoDescription 6= explanationCan (almost) be carried out w/oreference to human beings, theirmotivation, or any mechanisms(Thus the behaviouralist reaction. . . )

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What’s wrong with ‘old’institutionalism (2)

Impoverished idea of what counts asan institutionMae West...

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Marriage is a wonderful institution. . .

[but] I’m not ready for an institution yet

• Why is this a pun?• What are the rules of marriage?• If no rules, can anything be aninstitution?

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Marriage is a wonderful institution. . .[but] I’m not ready for an institution yet

• Why is this a pun?• What are the rules of marriage?• If no rules, can anything be aninstitution?

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Marriage is a wonderful institution. . .[but] I’m not ready for an institution yet

• Why is this a pun?• What are the rules of marriage?• If no rules, can anything be aninstitution?

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One answerDoes it have (possibly unwritten) ruleswhich constitute the practice?Does it generate recognised status?Does this status depend onrecognition of the institution?Does status within an institution carrywith it permissions andresponsibilities?

If the answer to all these questions is yes,you have an institution (Searle, 2005).

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Are these institutions?

UEAMarriageWarDriving on the leftThe 9 to 5 office day

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#2:

Rational choiceand institutions

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Can rat. choiceaccommodate institutions?

Think about the Prisoner’s Dilemmait had permissible moves, and different(high-, low-status?) outcomesThink about the paradox of votingthe electoral system has permissiblemoves, and rules which affect thepay-offs

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A second attempt atdefinition

An institution is aset of rules which determinespermissible actions within a gameor choice situation and whichinfluences or determines thepay-offs available to the rationalactors situated therein

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An example (1)

#2Cooperate Silent

#1Cooperate -3,-3 0,-6

Silent -6,0 -1,-1

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An example (2)The broad class of institution: wagemechanismsThe different institutions: hourly rate,piece rate, performance-related payPermissible actions: complete npieces of workPay-offs: hourly rate, per piece rate,some combination of the aboveAssumptions about utility functionsstill required

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The right way to viewinstitutions?

Some action is routine (yes, but. . . )Some action is not motivated bypay-offs (yes, but. . . )Designing institutions in this wayyields errant predictionsChildcare example (Frey and Jegen,2001)

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#3:

Otherinstitutionalisms

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Sociological institutionalism

Emphasises change of questionRCT asks, what action will procure methe best consequences?That is, it follows a logic ofconsequencesSoc. inst. asks, what action is mostappropriate given my role?(A logic of appropriateness)

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• Who am I?• What is my role?• What actions areconsistent with thisrole?

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Mechanisms

Individuals preferences eitherI Unimportant, since trumped by role

considerationsI Internal to the theory, since people

internalize roles

Institutions ‘explain’ action becausethey carry roles, and roles cause actionRole descriptions may have formalbasis or may not

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Examples

Is there a doctor on the plane?Action clearly not ‘utility-maximizing’What would a doctor do?More realistic examples:

I Elliot Richardson and the Saturday NightMassacre

I career versus political appointments inState Dept.

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Historical institutionalism

Slightly different approachInstitutions still worthy of lengthydescriptionKey question becomes, not

I ‘what do I want?’ (rational choice theory)I nor ‘who am I?’ (sociological

institutionalism)I rather, ‘how did we get here?’

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Path dependence

Betamax in EuropeArguably a superior technology to VHSUS and Europe had diverged over TVtechnology before (PAL/NSTC)Choice depended on what wentbefore: US installed base of VHS largeSimilar stories for Qwerty (versusDvorak)

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Mechanisms?

Little in the way of mechanismsexplaining individual actionNothing predicting outcomesCould we look to evolution foranother non-predictive approach withpath dependence?

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#4:

Institutionalchange

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The problem

So far, we have used institutions toexplain human action.Where do the institutions come from?Don’t they also come from humanaction?

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The Goldilocks solution

Institutions need to be rigid enough tostructure human action. . . but not so rigid they never change,or change radicallyHistorical institutionalists havethought about this a lotThey have institutional changeprocesses

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Varieties of institutionalchange

1. Displacement: role of investment banking in many bigbanks

2. Layering: grafting additional components on; willacademies/free schools change the broader schoolsystem?

3. Drift: drive towards supra-nationalism in EC/EU,untended by MS

4. Conversion: disability benefits repurposed to reduceunemployment rates

5. Exhaustion: runaway cash-for-clunkers schemes(generally, expansion beyond limits)

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#5:

Applyinginstitutionalisms

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Stephen Lawrence InquiryStephen Lawrence murdered 22ndApril 1993Suspects arrested, never convictedInquiry into investigation, 1997-9Report concluded that “the [police]investigation was marred by acombination of professionalincompetence, institutional racismand a failure of leadership by seniorofficers’ 31 / 36

A rational choice explanationIncentives:

career incentives to ‘look the otherway’ (probability of detection)weak punishment for detected racistbehaviour (sanctions)

Selection:institutions get reputations for havingcertain types of attitudesrecruitment bodies tend towardshomophily

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A sociological institutionalistexplanation

The institution, not morals or society,determines appropriate actionnew members learn from others’example and are rule-followersBehaviours persist through informalrulesProblem is more than a few bad apples

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A historical institutionalistapproach

Institutions are slow to changeThe Metropolitan Police is an elderlyorganisation (1829)Societal changes unlikely to translateacrossNo key juncture where dramaticchange possible

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Conclusions

Institutions might matter in ways RCTcan’t captureKey insights about roles andappropriate action seem plausibleDifferences over ways in whichinstitutions are usedQuestions about processes ofinstitutional change

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References I

Frey, B. and Jegen, R. (2001). Motivationcrowding theory. Journal of economicsurveys, 15(5):589–611.

Searle, J. (2005). What is an institution?Journal of Institutional Economics,1(1):1–22.

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