Rational Choice and Dysfunctional Institutions

As stated elsewhere in this issue, we cannot claim to explain an institution's origin just by the functions it serves. In part thismay be because of the cognitive limitations of those actors who are instrumental in institutional formation and institutional change. But even more clearly, it is the case that rational instrumental choice does not imply functional institutions. Just as rational choice in a prisoner's dilemma may result in inefficient policies, rational choice by actors with conflicting preferencesfor institutions may result in institutions that are suboptimal. Examples of rational choice explanations of dysfunctional institutions are provided in the area of bureaucracy, regulation, healthcare, and budgeting. I argue that the paradoxes and impossibility results of rational choice theory offer the best insights currently available into the persistent inefficiencies of the world ofpolitics.     

The Limits of Rational Choice: New Institutionalism in the Test Bed of Central Banking Politics in Australia

This paper tests the explanatory capacities of different versions of new institutionalism by examining the Australian case of a general transition in central banking practice and monetary politics: namely, the increased emphasis on low inflation and central bank independence. Standard versions of rational choice institutionalism largely dominate the literature on the politics of central banking, but this approach (here termed RC1) fails to account for Australian empirics. RC1 has a tendency to establish actor preferences exogenously to the analysis; actors' motives are also assumed a priori ; actor's preferences are depicted in relatively static, ahistorical terms. And there is the tendency, even a methodological requirement, to assume relatively simple motives and preference sets among actors, in part because of the game theoretic nature of RC1 reasoning. It is possible to build a more accurate rational choice model by re-specifying and essentially updating the context, incentives and choice sets that have driven rational choice in this case. Enter RC2. However, this move subtly introduces methodological shifts and new theoretical challenges. By contrast, historical institutionalism uses an inductive methodology. Compared with deduction, it is arguably better able to deal with complexity and nuance. It also utilises a dynamic, historical approach, and specifies (dynamically) endogenous preference formation by interpretive actors. Historical institutionalism is also able to more easily incorporate a wider set of key explanatory variables and incorporate wider social aggregates. Hence, it is argued that historical institutionalism is the preferred explanatory theory and methodology in this case.     

The Limits of External Empowerment: EMU, Technocracy and Reform of the Greek Pension System

This paper seeks to explain an aborted attempt at reform of the Greek pension system, following a series of previous failures. It applies the framework of rational choice institutionalism in order to examine the strategy and setting of the relevant actors. The pension system had become a huge fiscal burden on the state, threatening Greece's position in the European Union. Moreover, its gross inequalities of provision and bureaucratic inefficiency were symptoms of the embedded clientelism and 'disjointed corporatism' that stood in the way of the government's self-proclaimed 'modernization' programme. In the event, though EMU entry requirements empowered the reform momentum, a combination of the strategic weakness of key actors and the entrenched opposition of sectoral interests dissipated the initiative. The failure suggests the relevance of the wider social setting to reform: in particular, the weakness of the technocratic community and the relative absence of a supportive 'advocacy coalition', beyond the dominance of the 'party state'. Faced with criticism, the political leadership sought to protect their electoral position and postponed pressing decisions. The case study raises important questions about the scope for such reform in Greece and the future stability of the 'Euro-zone'.     

Toward a theoretical explanation of premature cabinet termination

Abstract. We propose a rational choice model of premature cabinet termination involving considerations of expected gain in terms of electoral payoffs, policy payoffs, or portfolio payoffs. This approach, which distinguishes contextual variables that will generally affect the nature of cost-benefit calculations made by political actors from the factors that are most likely to have a direct impact on a particular decision to precipitate a cabinet crisis, leads us to several testable hypotheses. We provide a first illustrative test of our predictions with data from the Netherlands.     

Ministerial Advisers and the Politics of Policy‐Making: Bureaucratic Permanence and Popular Control

The advent of ministerial advisers of the partisan variety – a third element interposing itself into Westminster's bilateral monopoly – has been acknowledged as a significant development in a number of jurisdictions. While there are commonalities across contexts, the New Zealand experience provides an opportunity to explore the extent to which the advent of ministerial advisers is consistent with rational choice accounts of relations between political and administrative actors in executive government. Public administration reform in New Zealand since the mid 1980s – and in particular machinery of government design – was quite explicitly informed by rational choice accounts, and normative Public Choice in particular. This article reflects on the role of ministerial advisers in the policy‐making process and, on the basis of assessments by a variety of political and policy actors, examines the extent to which the institutional and relational aspects of executive government are indeed consistent with rational choice accounts of the ‘politics of policy‐making’. The reader is offered a new perspective through which to view the advent, and the contribution of ministerial advisers to policy‐making in executive government.     

Endogenous Beliefs in Models of Politics

In the standard rational choice model, actors have exogenously given beliefs that perfectly match objective probabilities. As such, these beliefs cannot be optimistic or motivated by preferences, even though substantial empirical evidence indicates that human beliefs routinely satisfy neither of these criteria. I present a tractable Endogenous Beliefs Model and apply it to three different political environments from across the subfields of political science. In the model, players form beliefs that maximize a utility function that represents preferences over outcomes and the anticipatory experience of uncertainty. Applications include voter turnout, taxation and collective choice, and crisis bargaining. The model captures the empirical evidence about belief formation much better than the standard model. Moreover, these applications show how rigidly insisting on the standard rational choice model rejects otherwise reasonable explanations by fiat, precisely because of its implausible assumptions about beliefs.     

The Punjab Revenue Authority: Meeting the challenges of a new institution

New institutions generally face many challenges that can inhibit their ability to succeed. The institutionalist literature can serve as a guide, informing important actors of the challenges they are likely to face when founding a new institution. We examine the Punjab Revenue Authority (PRA) in Pakistan to assess the extent to which the challenges posited by the various streams of institutionalism surfaced as real problems that leaders in Punjab Province had to deal with when establishing the PRA. We found that rational choice institutionalism, historical institutionalism, and sociological institutionalism all identified problems that the PRA had to address. We conclude that the PRA's early successes are a function of its ability to navigate these challenges effectively.     

Municipal Capital Budgeting: An Examination

The state of capital budgeting theory is going through its growing pains. While traditional literature on capital budgeting is grounded in rational decision-making, Nunn (1990) has suggested that such an approach is too limited to be of significant value. New theories, he argues, need to reflect differences in capital demand and differences in approaches to local policy, thereby reflecting both the economically-rational and other components of capital budgeting. In this study, we examine the rigor of the traditional rational approach and the typology put forth by Nunn. Based on a broad cross-sectional analysis of municipal finance directors, we find that capital budgeting is more complex than usually presented. Yet contrary to the argument by Nunn, we also find that the process is restricted more to internal participants, with limited and targeted participation by the public and other external actors.     

Extending the rational choice model from the economy to society

That the extension of the rational choice model beyond the economy to all society can finally lead to integration of social theory is often claimed by the model’s advocates. The underlying assumption is that this model is valid for both the economy and society, in the form of an economic approach to, or a utilitarian paradigm of, all social behaviour. The meta-theoretical presupposition or injunction that agents are (should be) profit-seekers or utility-optimizers is therewith given the mission to integrate and ‘save’ contemporary social science. However, such extensions of the rational choice model from the economy to society neglect the fact that this presupposition has been partly mitigated and compromised within economics itself. If so, then suspicion is strong that the rational choice model would be even less appropriate for the other social sciences and thus fall short of achieving its self-designated role of integration of social theory. The conclusion of an interdisciplinary analysis drawing both from economics and sociology is that rational choice is far from being an integrative model of the economy and society.     

Rational Choice and Politics

The rational-choice approach brings scientific deductive methods to bear on politics. Appropriate methods are derived from physics, when actors interact probabilistically but non-rationally, and from game theory when they interact rationally. Collective action problems occur in the provision of public goods. As policies are themselves public goods, this leads to the game-theoretic analysis of voting, bureaucracy and lobbies. It is inconsistent to believe that economic actors are basically self-interested but that political actors are not. Rather, one should treat people as equally (not necessarily wholly) self-interested in each sphere. The paradoxes of social choice are then shown to have important implications for political science.     

Agent-based modeling, public choice, and the legacy of Gordon Tullock

The future of modeling in public choice may be glimpsed by examining its evolution in economics. For problems that are influenced by heterogeneity of actors, social networks, or emergence—the arising of a complex system from simple phenomena, such as Adam Smith’s “invisible hand”—economists increasingly are turning to agent-based modeling. Agent-based modeling is a form of computational analysis that focuses on agents rather than on aggregates. In his long career as a founding scholar of public choice, Gordon Tullock repeatedly followed the agent-oriented approach of methodological individualism. Many of Tullock’s models are thus highly amenable to further exploration using that method. As agent-based modeling becomes more and more popular, the importance of Tullock’s work will continue to grow.     

Political Marketing

ABSTRACT

Political marketing is a relatively new approach to analysing political activity that draws upon management marketing assumptions to describe political behaviour. These assumptions are explicitly grounded in neoclassical economic assertions about behaviour. In political science these assumptions are utilised by orthodox rational choice theory. Thus, political marketing can be located within this perspective. Rational choice provides a series of analytic models through which ontological implications can be derived, and predictions made. Yet, the political marketing approach seeks to build upon orthodox rational choice accounts, by introducing a normative element to this perspective, prescribing the internalisation of these assumptions in order to achieve the desired objective. Further, this normative aspect claims that the adoption of marketing improves the democratic process. However, rational choice is an analytical ‘toolkit’ which does not seek to make normative claims. Indeed, normative arguments are inconsistent with rational choice, which seeks to provide a scientific, value-free approach to political analysis, and, consequently, the analytical and normative aspects of political marketing need to be rendered explicit and such normative aspects challenged.     

UNSC Resolution 1325 national action plans in Liberia and Sierra Leone: An analysis of gendered power relations in hybrid peacebuilding

This paper considers how the use of ‘hybridity’ in the peacebuilding literature overlooks the gendered dimensions of hybrid interactions. It does so by examining the United Nations Security Council (UNSC) Resolution 1325 national action plans (NAPs) for Liberia and Sierra Leone. By asking the gendered questions of ‘who participates?’ and ‘how do they participate?’ it draws from Mac Ginty’s conception of hybridity and traces the compliance and incentivizing power in hybridized peace, as well as the ability of local actors to resist and provide alternatives. However, Mac Ginty’s model is found to be inadequate because of its inattention to the gendered nature of power. It is found that with a gendered approach to hybridity, it is easier to trace the processes of hybridization of NAPs in post-conflict states where their implementation is limited. In asking the questions of ‘who’ and ‘how’, three conclusions about the gendered nature of hybrid peacebuilding are drawn: international intervention relies upon the ‘feminization’ of local actors; issues framed within the realm of the ‘masculine’ are more likely to get attention; and the Resolution 1325 agenda in post-conflict states can be subverted by framing it as a ‘soft’ issue.     

The organization of influence on the EC's common agriculturalpolicy: A network approach

The common agricultural policy of the EC with its market regulations is decided at EC level by a multilevel system of government, in which the Commission and the parliamentary parties of the European Parliament play the supranational role and the national ministries of agriculture act as parts of the intergovernmental system of the Council of Ministers. National interest groups have thereby three major access routes to the EC system, first through their national governments, or second indirectly, transmitted by their European peak organizations, or third directly to the supranational EC actors. The network approach is applied to study empirically the densities of access through these various routes. The links between actors in the agricultural policy domain are conceptualized as links for the exchange of resources, the most important resource of a policy domain being the final control of policy decisions. The political actors of the governance system originally hold full control of this valuable resource which they exchange for influence resources possessed by the interest groups, as public support or expert knowledge. Empirically, answers to the network questions depend on the type of resource and the viewpoint of the interviewed actors. An index is developed which indicates the resource flows between actors and the distribution of equilibrium control of policy decisions. It is shown that the national ministers of agriculture depend very much on the support and expertise of their national farmers' lobby, whereas the Commission relies more on contacts within the political sector itself. Multilevel systems need a lot of political coordination, so that the political actors within such systems, especially at the supranational level, seem to deal first of all with each other and not so much with the demand side of politics, compared to the national ministers of agriculture.     

In Search of Culture: Lessons From the Past to Find a Role for the Study of Administrative Culture

H. Eckstein could say a few years ago that “political culture theory may plausibly be considered one of two still viable general approaches to political theory and explanation proposed since the early fifties to replace the long-dominant formalism-legalism of the field — the other being political rational choice theory” (1988, 789). For the last two decades, the rational choice approach has been dominant and thriving in many fields of political science, whether in international relations, political sociology, public administration or public policy; it has greatly reinforced the theoretical and empirical basis of the explanation of human freedom of action. But it has recently shown some signs of intellectual fatigue. Critics now underscore that, assuming that individuals compare expected benefits and costs of actions prior to adopting strategies for action, is valid and useful only in relatively simple choice situations where information is easily available and interpretable (Elster 1989; Dunleawy 1991). Some neo-institutionalists have claimed that rationality comes not as means-end calculus prior to action but rather as an ex-post justification after choice (March, Olsen 1989; Hall 1986, 15–20). Others have come to say that the rational choice approach, which explains how people ought to act in order to achieve aims and not what these aims ought to be, totally misses the central question of why it is that people have “preferences” and pursue some aims rather than others (Wildavsky 1987; Cook, Levi 1990; Wildavsky 1994). It does not mean that the rational choice approach should be discarded: there should rather be a “contextualization” of rationality which explains both why the same man in different situations or contexts adopts different rationalities, and why in the same context two men can adopt different rationalities (Wildavsky 1994). But the rational choice approach is also showing its limits in the very field where it was born and has blossomed: economics. In a recent issue of a French national newspaper, two articles dealing with economics and development were pointing at the same problem: cultural explanations of economic behavior are needed. In the first article, the former General Secretary of the United Nations, now President of the UNESCO-UNO World Commission on Culture and Development, J. Perez de Cuellar, advocated a cultural approach of the economic development of the Third World countries in order to find, at last, an enduring and practical solution to their endemic problems (1994). In the second article, a journalist reflecting on why the same hard economic therapies have worked in Poland but not in Russia could only refer to the “specific economic culture of Russia” described by economists (Vernholes 1994). These clear limits imposed upon the rational choice approach have brought culturalist theory back into favor among social scientists. Does this mean that a well-built culturalist theory might be a new “explanatory panacea, a universal nostrum” (Thompson, Ellis, Wildavsky 1992, 516)? The aim of this article is to try to unravel the cultural approach and assess its potential in the specific field of public administration. To do this, we shall draw on two close but relatively separate disciplines — political science and organizational theory — which we believe (should) meet to give a richer account of administrative reality. Our purpose is to question the recent interest in and utilization of the cultural metaphor(s) by bureaucrats, politicians, “special advisers” and authors in the analysis and implementation of administrative reform. The reason for this inquiry is that, contrary to analysts of private sector organizations, specialists of public sector organizations have not yet seriously addressed a culturalist theory of public administration while acknowledging that there is or there are public administration culture(s). We therefore hope to evaluate the usefulness of a culturalist theory for public administration. In this rather complex theoretical field, we prefer to take the simple solution to try to explain first the classical culturalist theory, and second, the new culturalist theory. Third, we should see whether there is or should be anything specific about administrative culture and a culturalist theory of public administration.     

The rise and fall of support for political parties: a dynamic analysis

The dynamics of political systems are explained by writers in the Schumpetarian tradition in terms of such things as moods, tastes, animal spirits, fashions and irrational impulses. This paper takes the idea of a non-rational choice explanation seriously and explores some of its implications. It develops a model of how voters might behave if their actions were not rational. It shows that, under certain broad conditions, a system made up of voters that act on impulse produces cycles in party support. The analysis also raises some questions about time and continuity in the analysis partys support. I also suggest an empirical test of the theory.     

The organization of influence on the EC's common agricultural policy: A network approach

Abstract The common agricultural policy of the EC with its market regulations is decided at EC level by a multilevel system of government, in which the Commission and the parliamentary parties of the European Parliament play the supranational role and the national ministries of agriculture act as parts of the intergovernmental system of the Council of Ministers. National interest groups have thereby three major access routes to the EC system, first through their national governments, or second indirectly, transmitted by their European peak organizations, or third directly to the supranational EC actors. The network approach is applied to study empirically the densities of access through these various routes. The links between actors in the agricultural policy domain are conceptualized as links for the exchange of resources, the most important resource of a policy domain being the final control of policy decisions. The political actors of the governance system originally hold full control of this valuable resource which they exchange for influence resources possessed by the interest groups, as public support or expert knowledge. Empirically, answers to the network questions depend on the type of resource and the viewpoint of the interviewed actors. An index is developed which indicates the resource flows between actors and the distribution of equilibrium control of policy decisions. It is shown that the national ministers of agriculture depend very much on the support and expertise of their national farmers' lobby, whereas the Commission relies more on contacts within the political sector itself. Multilevel systems need a lot of political coordination, so that the political actors within such systems, especially at the supranational level, seem to deal first of all with each other and not so much with the demand side of politics, compared to the national ministers of agriculture.     

Rational Choice and Interpretive Evidence: Caught between a Rock and a Hard Place?

Following Green and Shapiro's critique, debate about the value of rational choice theory has focused upon the question of its relationship to what we call 'external', largely quantitative, empirical evidence. We argue that what is most striking about rational choice theory is, however, its neglect of interpretive evidence. Our survey of 570 articles, published in the American Political Science Review and the American Journal of Political Science between 1984 and 2005 employing rational choice theory, revealed that only 139 made even the most cursory use of interpretive evidence. Does this matter? We argue that the absence of interpretive evidence undermines rational choice's explanatory credentials. However, we also argue that the admission of interpretive evidence risks rendering redundant the rational choice element of any explanation. This is the rock and the hard place between which rational choice is caught. In the final part of the article we distinguish those cases where rational choice may prove useful, namely those circumstances in which interpretive evidence either cannot be relied upon or does not subsume that which an explanation is intended to achieve.     

Q&A in legislative oversight: A framework for analysis

Parliamentary questions are an essential tool of legislative oversight. However, the extent to which they are effective in controlling the executive remains underspecified both theoretically and methodologically. This article advances a systematic framework for evaluating the effectiveness of parliamentary questions drawing on principal–agent theory, the public administration literature on accountability and communication research. The framework is called the ‘Q&A approach to legislative oversight’ based on the premise that the study of parliamentary questions (Q) needs to be linked to their respective answers (A) and examined together (Q&A) at the micro-level as an exchange of claims between legislative and executive actors. Methodologically, the Q&A approach to legislative oversight offers a step-by-step guide for qualitative content analysis of Q&A that can be applied to different legislative oversight contexts at different levels of governance. It is argued that the effectiveness of Q&A depends on the strength of the questions asked and the responsiveness of answers provided, which are correspondingly operationalised. To illustrate the merits of the approach, the article includes a systematic case study on the relationship between the European Parliament and the European Central Bank in banking supervision (2013–2018), showing the connection between specific institutional settings and the effectiveness of parliamentary questions.     

The Application of Game-Theory in the Study of Hierarchical Decision-Making*

The article discusses hierarchical decision-making within a rational-choice framework. The interaction between Superior and Subordinate is assumed to be influenced by three types of uncertainty regarding preferences, choice and ‘what happened’. A game-theoretical analysis indicates that the Control Game may represent the decision situation of the superior and the subordinate actors, particularly when modelled as a one-shot game with simultaneous moves. As this game has no Nash-equilibrium, it is difficult to predict an outcome. A rather tentative empirical testing is performed. Using data from the budgetary process in the city of Oslo, it seems that the agencies do not exploit strategic opportunities to increase spending. This supports the theoretical presumption that it is rational bureaucratic self-interest to comply with superior preferences, even under a non-controlled decision situation.