The essay will focus on three of the most prominent theories of “new institutionalism”: Rational choice institutionalism, Historical institutionalism, and Sociological institutionalism. These approaches offer different theoretical perspectives on how institutions originate, how they change and how they affect political and social outcomes. These distinctive approaches all bring useful contributions to the explanation of policy change, and although they have developed independently of one another it can be argued that they are complementary in some respects. The essay will analyze how these institutional approaches explain policy change and will review the values and limitations of these approaches. The first section will analyze rational choice institutionalism which offers a functional explanation of policy change and stresses the importance of goal-oriented political actors as the agents of change. The second section will examine historical institutionalism which focuses on concepts of path dependence and punctuated equilibrium to explain policy change. Finally, the last section will review sociological institutionalism which explains policy change in terms of a “logic of social appropriateness”. For the purpose of this essay, Dye’ definition of policy will be used: “anything a government chooses to do or not to do” (Dye, 1972: 2).
Rational Choice Institutionalism:
Rational choice institutionalism defines institutions quite broadly, as the rules of the game in a society and as a set of formal rules and procedures, or informal practices (Aspinwall, 1997: 2). According to Douglas North, institutions provide “the framework within which human beings interact. They establish the cooperative and competitive relationships which constitute a society” (North, 1981: 201). Rational choice institutionalism, similarly to other institutionalist theories in political science, aims to explain how institutions originate, how they affect human behavior and how they affect social and political outcomes. Rational choice institutionalists apply rational choice theoretical assumptions to the study of institutions and focus on the role of individuals, which they view as rational and self-interested. They employ a set of behavioral assumptions to the study of institutions in which they posit that “the relevant actors have a fixed set of preferences or tastes, behave entirely instrumentally so as to maximize the attainment of these preferences, and do so in a highly strategic manner that presumes extensive calculation” (Hall and Taylor, 1996: 12).
Rational choice institutionalism offers a distinctive approach in their explanation of how institutions originate. It is functionalist in its approach because it argues individuals create institutions to perform certain functions in order to gain benefits often conceptualized as gains from cooperation (Hall and Taylor, 1996: 13). According to Shepsle, institutions are no more than an accumulation of individual choices based on utility-maximizing preferences (Shepsle, 1989: in Lowndes, 2010: 63). Rational choice theorists assume that the process of institutional creation is controlled almost exclusively by the actors involved who have full information about the effects that follow from institutions’ existence (Hall and Taylor, 1996: 19). Other institutionalist theories are critical of this assumption, especially historical institutionalists (Steinmo et al, 1992; Thelen 1999) who argue that actors cannot predict all the effects of institutions which can have unintended consequences (Schmidt, 2006: 105). According to Hall and Taylor however, “this approach has real strengths for explaining why existing institutions continue to exist, since the persistence of an institution often depends upon the benefits it can deliver” (Hall and Taylor, 1996: 19). Furthermore, rational choice theorists argue that institutions are created to solve collective action problems. These occur because individuals act to maximize the attainment of their own preferences which produces collectively sub-optimal outcomes. Examples of such collective action dilemmas include the “prisoner’s dilemma” and the “tragedy of the commons” (Hall and Taylor, 1996: 12). It is argued that the rules imposed by institutions can solve collective action problems by constraining individual maximizing behavior to enable stable and predictable decision-making (Peters, 1996: 209). Indeed according to Peters, “they can help resolve the problem of reaching an equilibrium in a world composed of rational individualists” (Peters, 1996: 209).
Rational choice institutionalism also highlights the role of strategic interactions among individuals in the determination of political outcomes. Indeed actors’ behavior is driven by strategic calculations but it is also affected by actor’s expectations about how others are likely to behave. Such strategic interactions are structured by institutions which constrain decision-making processes and limit the range of alternatives on choice-agendas (Hall and Taylor, 1996: 12). This reduces uncertainty about the behavior of others and allows gains from cooperation which produces potentially better political and social outcomes. The constrains on decision-making processes explain why institutions tend to be enduring and self-reinforcing, which also limits policy change (Lowndes, 2010: 75). Rational choice institutionalism argues that institutional change occurs mostly when political actors’ benefits of changing institutions outweigh the costs of change, which according to Rothstein, include “the costs of learning how to operate with a new structure, of dealing with new sources of uncertainty, and of engaging in change” (Rothstein, 1996 in Lowndes, 2010: 75). For example, rational choice institutionalists explain the establishment of the Single European Act and the following emergence of European institutions with supranational powers as a strategic calculation by member state governments and big business (Aspinwall, 1997: 8). Indeed they perceived a collective decline in the competitive advantages of European countries and thus made intergovernmental agreements and created institutions to lower transaction costs associated with inter-state activity, which led to great policy change in European countries (Aspinwall, 1997: 8). This shows rational choice institutionalism explains institutional and policy change mostly in functional terms. This is criticized by the other two institutionalist theories (Sociological and historical), which argue functionalism does not depict institutional change satisfactorily, and that social and historical factors should also be taken into account (Hall and Taylor, 1996: 19).
Furthermore, rational choice institutionalism emphasizes the importance of goal-oriented political actors as the agents of policy change (Koelble, 1995: 240). For instance, the conditions necessary for policy change may come from societal pressures or from the opening of policy windows due to exogenous causes (Cortell and Peterson, 1999: 183). However, policy officials choose whether to respond to these conditions and to enact change. Politicians are also utility maximizers according to rational choice theorists, and make calculations about how enacting policy change will affect their ability to maintain or improve their power and position (Cortell and Peterson, 1999: 188). Tsebelis asserts that such political actors who have power over the enactment of policy change are “veto players”. He argues that “significant departures from the status quo are impossible when veto players are many, when they have significant ideological distances among them, and when they are internally cohesive” (Tsebelis, 2002: 13). However, according to Levi, policy change is likely to occur once “there is an increase in the effectiveness of individuals seeking change and a decrease in the blocking power of individuals whose interests are served by the current institutional arrangements” (Cook and Levi, 1990: 407).
Historical institutionalism, by and large, defines institutions as “the formal or informal procedures, routines, norms and conventions embedded in the organizational structure of the polity or political economy” (Hall and Taylor, 1996: 6). As opposed to rational choice institutionalism, it focuses most explicitly on the state and its institutional development and analyses the structures through which governing occurs (Schmidt, 2006: 104). Historical institutionalism aims to explain how institutions structure political and social behavior and how institutions originate and develop (Capoccia, 2016: 1096). It can be argued that historical institutionalists are eclectic in their approach to explain the relationship between institutions and human behavior. Indeed they take from both rational choice and sociological institutionalism by using both a calculus and cultural approach (Hall and Taylor, 1996: 8). Those who adopt the calculus approach contend, similarly to rational choice institutionalism, that human behavior is instrumental and based on strategic calculation and institutions affect human behavior and action by providing information relevant to the behavior of others (Hall and Taylor, 1996: 7). However, unlike rational choice institutionalists, they argue that institutions are the main determinants of preferences and choices. From the cultural perspective, they explain, similarly to sociological institutionalists, that human behavior is not fully strategic but bounded by individuals’ worldview and see individuals as “satisficers” rather than utility maximizers. In this approach, they argue that institutions affect behavior by providing “moral or cognitive templates for interpretation and action” (Hall and Taylor, 1996: 8). Thus, historical institutionalism stands between the two views and contend that human beings are both “norm-abiding rule followers, and self-interested rational actors” (Steinmo, 2008: 163). Hall and Taylor argue that the eclecticism of historical institutionalism has limitations because it has devoted less attention than the other schools to develop a sophisticated understanding of exactly how institutions affect behavior (Hall and Taylor, 1996: 17).
Historical institutionalism focuses more specifically on historical and socio-economic contexts to explain behavior, institutional development, and political outcomes. It argues that it is essential to treat all political action in their appropriate context (Steinmo, 2008: 166). For example, Steinmo (2008) argues that historical institutionalists, in their explanation of the causes of the war in Iraq in 2003, would focus on the historical context, including America’s past military victories against Germany and Japan which led policymakers to believe they could assert American power and bring successful democracy and capitalism to a former dictatorship, rather than explaining its causes simply as a product of power politics (Steinmo, 2008: 166). Similarly, historical institutionalism explains the origins of institutions as the legacy of historical processes and as the outcomes of particular historical moments (Thelen, 1999: 382). This argument is embedded in their “path dependent” approach to continuity and change in public policy, which contends that past institutional choices delimit institutional choices and policy choices thereafter (Lowndes, 2010: 75). This is because institutions push historical developments along a set of paths. Moreover, new institutions are created in a world replete with institutions, therefore existing structures affect the development of new ones (Hall and Taylor, 1996: 21).
Historical institutionalism, according to models of path dependency, argues that institutions are likely to persist over time because once established, they are difficult to change. As a consequence, policy continuity is more likely than policy change. Indeed, they argue, according to Hall and Taylor, that “past lines of policy condition subsequent policy by encouraging societal forces to organize along some lines rather than others, to adopt particular identities, or to develop interests in policies that are costly to shift” (Hall and Taylor, 1996: 9). Also, they argue that the institutionalization of policies produce feedback effects, which occurs when a policy generates an outcome that works towards the continuation of the policy (Sorensen, 2014: 21). For instance, according to Sorensen, public pension systems are classic examples of feedback effects because “they create an ever-growing constituency of voters whose self-interest lies in maintaining and even strengthening the system as they are paying into it every year” (Sorensen, 2014: 21). Thus the historical institutionalist approach tends to view polices as difficult to change because of path dependence and thus argue that policy continuity is more likely to occur over time.
Historical institutionalism also explains policy change, in terms of a punctuated equilibrium approach. According to this approach, the flow of historical events is divided into periods of continuity punctuated by “critical junctures” (Hall and Taylor, 1996: 10). Critical junctures often occur due to moments of crises such as economic depressions or military conflicts, which discredit existing institutions and leads to substantial institutional change thereby moving historical development onto new paths (Cortell and Peterson, 1999: 184). Thus, according to this approach, policy change is likely to be episodic, with long periods of policy continuity marked by rare moments of dramatic shifts in which new policies and ideas become embodied in institutional form (Krasner, 1984 in Lowndes, 2010: 75). However, a limitation of the historical institutionalist explanation of institutional and policy change is that it explains change mainly according to exogenous factors, which does not explain when policies change and when they will be durable. Also, it does not provide a complete theory of endogenous institutional change (Capoccia, 2016: 1100).
Sociological institutionalism defines institutions more broadly than the other institutional approaches. Indeed, they define them not just as “formal rules, procedures or norms but the symbol systems, cognitive scripts, and moral templates that provide the ‘frames for meaning’ guiding human action” (Hall and Taylor, 1996: 14). Sociological institutionalism defines culture itself as institutions and contend that organizational structures and culture are both important institutional frameworks (Hall and Taylor, 1996: 15). Sociological institutionalism aims to explain how and why organizations adopt certain procedures, routines, beliefs, and structures and how such practices diffuse over time (Miller and Banaszak-Holl, 2005: 195). Sociological institutionalism has a distinctive approach to its explanation of how institutions affect individual behavior, how they develop, how they change and how this affects policy change in different settings.
Sociological institutionalism argues that institutions affect individual behavior by providing social norms and cognitive scripts which, according to March and Olsen, “leads individuals to behave according to a set of rules and procedures which define the appropriateness of their action” (March and Olson in Koelble, 1995: 233). It does not reject the rational choice contention that individuals are goal-oriented and act rationally, however, it criticizes the rational choice perspective for omitting the role of social and cultural factors and argues that human rationality is socially constituted (Hall and Taylor, 1996: 16). Moreover, Powell and DiMaggio use the “theory of embeddedness” to show that individuals are embedded in many social, economic, political, cultural and cognitive relationships beyond their control which limits the possibility of individual utility-maximizing behavior (Powell and DiMaggio in Koelble, 1995: 235). Rather it leads individuals to behave according to established routines and therefore conform to established institutional frameworks. This limits individuals ability to conceive of alternative institutional arrangements than the ones they are already conforming to and thus limits institutional change (Powell and DiMaggio in Koelble, 1995: 235). Sociological institutionalism also argues that the relation between institutions and individual action is highly interactive and mutually constitutive. This is because actors adopt certain norms of behavior and cognitive templates in order to reinforce the social legitimacy and appropriateness of their action, but by doing so they also reinforce the importance and legitimacy of the institutional arrangements that provide social norms which reinforces the stability of institutions and the continuity of policies (Hall and Taylor, 1996: 16).
Sociological institutionalism argues that institutional change occurs when individuals, groups, and organizations adopt new institutional practices to enhance their social legitimacy, which can happen when existing frameworks no longer perform this function. Also, according to Hall and Taylor, “new institutional practices might emerge from a process of discussion among actors in a given network about shared problems and how to interpret them and how to solve them” (Hall and Taylor, 1996: 17), which confers legitimacy to alternative institutional frameworks as the appropriate structures to solve problems and to make policies. In these networks, the actors develop “shared cognitive maps, often embodying a sense of appropriate institutional practices, which are then widely deployed” (Hall and Taylor, 1996: 17). This will affect policy change, according to sociological institutionalism, because policy-making will have to conform to new norms of appropriateness leading to new policies. For example, Fligstein, according to a sociological approach, explains the diversification of American firms in the 1950s and 1960s, by arguing that managers embraced diversification not as a functional response to economic exigency, but rather because of “the value that became associated with it in professional forums at the time and the validation it offered for their broader world views” (Hall and Taylor, 1996: 16). Thus according to the sociological approach, policy change such as the diversification of American firms in the 1950s and 1960s, can be closely linked to a ‘logic of social appropriateness’ (Hall and Taylor, 1996: 16).
Sociological institutionalism also analyzes institutional continuity and change in terms of models of isomorphism. For instance according to mimetic isomorphism, “organizations copy prominent organizations considered to be legitimate and successful” (Miller and Banaszak-Holl, 2005: 196). Indeed, because of the bounded rationality of policy-makers, they cannot deal with all information sources and evaluate every option concerning solutions to public-policy problems. Therefore one common strategy is “to make policy by analogy whereby state officials copy policies adopted by similarly situated states” (Miller and Banaszak-Holl, 2005: 197). For example, according to Aspinwall and Schneider, such concepts from the sociological perspective might be adapted to explore how certain features of a “regional culture” in the European Union, attract member states, such as a European model of capitalism and social democracy which are some of the perceived characteristics of a western “developed state”. Thus he argues, “these features of the EU have attracted new members, particularly from southern and eastern Europe, who are eager to bolster their legitimacy as developed states of the West” (Aspinwall and Schneider, 2000: 20). Thus, according to this approach, organizations will adopt culturally accepted policies to increase their organizations’ social legitimacy, which provides a useful explanation as to why policy change might occur (Miller and Banaszak-Holl, 2005: 197).
The three approaches to institutionalism reviewed in this essay, argue that institutions tend to be stable and difficult to change which makes policy continuity more likely. Nevertheless, they offer distinctive approaches to the explanation of institutional and policy change. Rational choice institutionalism explains policy change in functional terms and argues that policy change occurs when the benefits of change are greater than its costs. Historical institutionalism explains policy change in terms of a punctuated equilibrium approach and argues that policy change occurs as a result of critical junctures. Finally, sociological institutionalism explains policy change in terms of a “logic of appropriateness” whereby policy change occurs to reinforce an organization’s social legitimacy. It can be argued that these distinctive approaches have limitations and would benefit from more interchange. Indeed, the rational choice approach lacks an explanation of how culture, values, and beliefs influence institutions and behavior. In this sense, sociological institutionalism provides an important contribution to the institutional analysis due to its focus on these factors. However, it is also limited because it does not pay much attention to the role of rational calculations on policy change. Moreover, historical institutionalism lacks an explanation of endogenous change. Although all three approaches provide equally important contributions to the study of policy change, additional interchange among these approaches could be mutually beneficial.