Full lecture notes Governance
Theories
Lecture 1: Syllabus
10/11/2020
Lecture 2: Institutional rational choice
13/11/2020
Definitions - what’s an institution
Institutions are collections of rights, rules, and decision-making procedures that give rise to social
practices, assign roles to the participants in these practices, and guide interactions among the
participants. Institutions are prominent features of governance systems at all levels of social
organization.
Regimes are institutions specialized to addressing functionally defined topics (e.g., health care, pollution,
and trade) or spatially defined areas (e.g., Antarctica, the North Pacific, and Western Europe) (Young
1982a). Regimes constitute a proper subset of institutions. All regimes are institutions, but not all
institutions are regimes.
Transaction costs are the costs given in the agreements of an organization contract (can be within one
organization or amongst different organizations) - eg: cost of hold up or agency problems. This lays in
the notion that humans are not 100% rational, which than makes the contracts not perfect - increasing
the transaction costs
Mancur Olson
Rational choice institutionalism
Collective action is the pursuit of a goal or set of goals by more than one person
One person cannot (or very difficultly) achieve that goal
Problematic when the benefits associated with that goal cannot be made exclusive
Others – who have not participated in C.A. - can benefit, too --> free riders
Operating in a context of collective action is costly, unless you have a proper set of institutions
Douglas North
Rational choice institutionalism
“institutions are the rules of the game in a society, or more formally, are the humanly devised
constraints that shape human interaction”
Institutions structure incentives in human exchange (political, social, economic)
Institutions reduce uncertainty and thus, transaction costs
Ronald Coase
Rational choice institutionalism
, Picture a rancher whose cattle stray onto the cropland of his neighbor
If the rancher is made to restrict his cattle, he is harmed just as the farmer is if the cattle remain
unrestrained
Solution: property rights --> an institutional solution
Coasian bargaining
Oliver Williamson
Rational choice institutionalism
Costs of transactions
Repeated base-by-vase bargaining (e.g. repeated purchasing of coal from a spot market to meet
the daily needs of an electric utility)
Relationship—specific contracts (e.g. utility forms ongoing relationships with a specific supplier,
and the economics of the relationship-specific dealings will be importantly different)
Elinor Ostrom
Rational choice institutionalism
Tragedy of the commons
Perceptions that humans use to organize all forms of repetitive and structured interactions
Position rules (who holds what position, why?)
Boundary rules (how are participants chosen?)
Scope rules (what outcomes may be affected?)
Authority rules (what actions are allowed?)
Aggregation rules (how are individual decisions aggregated into a final outcome?)
Information rules (how does information travel?)
Payoff rules (how are costs and benefits distributed?)
Readings
1. How do the different branches define institutions?
2. What are their main postulates of human behavior?
3. What are the main areas of studies?
Historical institutionalism
How does historical institutionalism define institutions?
Formal & informal procedures, routines, norms, and conventions embedded in the
organizational structure of polity & economy
Range from constitutional orders to operating procedures
Applied to bureaucracies to trade union conventions
What are the main postulates of human behavior and individual & public choice?
1. Calculus approach
a. Strategic calculation: individuals seek to maximize utility; preferences are given
exogenously to the institutional analysis
2. Cultural approach
a. Rational, purposive behavior; Established routines & familiar patterns; satisficing rather
than maximizing
, What are the themes in historical institutionalism?
Power & Asymmetric relations:
o World does not consist of freely contracting actors
o Institutions give some interests disproportionate access to decision-making
Path dependency
o Opponent of the postulate that the same operative forces will generate the same
results, always
o Institutions – inherited from the past; the result from past choices – explain variations in
outcomes
Rational choice institutionalism
How does rational choice institutionalism define institutions?
The rules-of-the-game
(This is the home of North, Williamson, etc.)
What are the main postulates of human behavior and individual & public choice?
1. Relevant actors have a fixed set of preferences
2. (transitivity principle: whenever A > B and B > C, then also A > C)
3. Actors behave instrumentally so as to maximize utility
4. They do so in a strategic manner
What are the themes in rational choice institutionalism?
Property rights; Rent-seeking; Transaction costs
Collective action - what prevents actors from taking a collectively superior course? (e.g. the
study of prisoner’s dilemmas and the tragedy of the commons)
Origin & development of institutions
Sociological institutionalism
How does sociological institutionalism define institutions?
Not just formal rules, procedures or norms...
..also symbol systems, cognitive scripts, moral templates...
...provide “frames of meaning” and guide human action
What are the main postulates of human behavior and individual & public choice?
Individuals act purposively, goal-oriented, and rational
However, what they see as “rational” is socially constructed
Goals are defined in broader terms than how the economist’s cost-benefit maximizer would
Individuals & organizations seek to express & define their identity in a socially appropriate way,
rather than seeking to maximize material well-being
What are the themes in sociological institutionalism?
Legitimacy (e.g. institutional change & development originates from new ideas about social
legitimacy)
Organizational variation & similarity (e.g. The structural-organizational similarity of Ministries of
Educations, around the world)
What has IRC taught us, so far?
Lessons learned
, Olson: what institutional arrangements facilitate or hinder the organization of collective action?
Coarse and Williamson: h ow do institutions determine the organization of production processes
(e.g. firms) under capitalism?
Buchanon and Tullock: how are decision processes in the formal political domain shaped by
institutions?
Riker, Baumgartner and Jones: how do political coalitions form and develop? How do coalitions
alter institutional settings? How do institutions affect coalition dynamics?
Arrow and Black: public choice, or the amalgamation of individual preferences into group
preferences
Cheung and Milgrom: the importance of contracts in economic exchanges
Demsetz, Alchian, Eggertsson and Bratzel: importance of property right for the organization of
economic, political and social exchange relations
Ostrom: institutional development in a context of self-governance
Lecture 3: The Advocacy Coalition Framework
17/11/2020
Basics of ACF
Foundation stones
1. Macro-level: policymaking occurs among specialists within a policy subsystem, but their
behavior is affected by factors in the broader political, socio-economic context
a. Policy subsystem is functional/substantive and territorial
b. Policymaking and negotiations occur within policy subsystems
c. Subsystems is iron triangle (legislators, agency officials, interest group leaders) +
researches and journalists
d. Subsystem usually consists of 2-3 policy coalitions (1 dominant, 1 or more minority
coalitions)
e. Identifying the scope of policy subsystem is an important aspect of ACF, by focusing on
the institutions that structure interaction
f. Stable factors which rarely change
i. Basic attributes of the problem
ii. Fundamental socio-economic conditions
iii. Constitutional structures
g. Dynamic factors – necessary for policy change to occur
i. Changes in socio-economic conditions
ii. Changes in governance coalitions
2. Meso-level: the multiplicity of actors in sub-systems are aggregated into policy coalitions
a. Policy participants will seek allies who hold similar policy core beliefs
b. Allies can be legislators, agency officials, interest groups, leaders, judges, researchers,
intellectuals from multiple levels of government
c. Coalitions share > 2-3 policy core beliefs
d. Usually, 2-5 coalitions in 1 policy subsystem
3. Micro-level: individual, based on social psychology
Theories
Lecture 1: Syllabus
10/11/2020
Lecture 2: Institutional rational choice
13/11/2020
Definitions - what’s an institution
Institutions are collections of rights, rules, and decision-making procedures that give rise to social
practices, assign roles to the participants in these practices, and guide interactions among the
participants. Institutions are prominent features of governance systems at all levels of social
organization.
Regimes are institutions specialized to addressing functionally defined topics (e.g., health care, pollution,
and trade) or spatially defined areas (e.g., Antarctica, the North Pacific, and Western Europe) (Young
1982a). Regimes constitute a proper subset of institutions. All regimes are institutions, but not all
institutions are regimes.
Transaction costs are the costs given in the agreements of an organization contract (can be within one
organization or amongst different organizations) - eg: cost of hold up or agency problems. This lays in
the notion that humans are not 100% rational, which than makes the contracts not perfect - increasing
the transaction costs
Mancur Olson
Rational choice institutionalism
Collective action is the pursuit of a goal or set of goals by more than one person
One person cannot (or very difficultly) achieve that goal
Problematic when the benefits associated with that goal cannot be made exclusive
Others – who have not participated in C.A. - can benefit, too --> free riders
Operating in a context of collective action is costly, unless you have a proper set of institutions
Douglas North
Rational choice institutionalism
“institutions are the rules of the game in a society, or more formally, are the humanly devised
constraints that shape human interaction”
Institutions structure incentives in human exchange (political, social, economic)
Institutions reduce uncertainty and thus, transaction costs
Ronald Coase
Rational choice institutionalism
, Picture a rancher whose cattle stray onto the cropland of his neighbor
If the rancher is made to restrict his cattle, he is harmed just as the farmer is if the cattle remain
unrestrained
Solution: property rights --> an institutional solution
Coasian bargaining
Oliver Williamson
Rational choice institutionalism
Costs of transactions
Repeated base-by-vase bargaining (e.g. repeated purchasing of coal from a spot market to meet
the daily needs of an electric utility)
Relationship—specific contracts (e.g. utility forms ongoing relationships with a specific supplier,
and the economics of the relationship-specific dealings will be importantly different)
Elinor Ostrom
Rational choice institutionalism
Tragedy of the commons
Perceptions that humans use to organize all forms of repetitive and structured interactions
Position rules (who holds what position, why?)
Boundary rules (how are participants chosen?)
Scope rules (what outcomes may be affected?)
Authority rules (what actions are allowed?)
Aggregation rules (how are individual decisions aggregated into a final outcome?)
Information rules (how does information travel?)
Payoff rules (how are costs and benefits distributed?)
Readings
1. How do the different branches define institutions?
2. What are their main postulates of human behavior?
3. What are the main areas of studies?
Historical institutionalism
How does historical institutionalism define institutions?
Formal & informal procedures, routines, norms, and conventions embedded in the
organizational structure of polity & economy
Range from constitutional orders to operating procedures
Applied to bureaucracies to trade union conventions
What are the main postulates of human behavior and individual & public choice?
1. Calculus approach
a. Strategic calculation: individuals seek to maximize utility; preferences are given
exogenously to the institutional analysis
2. Cultural approach
a. Rational, purposive behavior; Established routines & familiar patterns; satisficing rather
than maximizing
, What are the themes in historical institutionalism?
Power & Asymmetric relations:
o World does not consist of freely contracting actors
o Institutions give some interests disproportionate access to decision-making
Path dependency
o Opponent of the postulate that the same operative forces will generate the same
results, always
o Institutions – inherited from the past; the result from past choices – explain variations in
outcomes
Rational choice institutionalism
How does rational choice institutionalism define institutions?
The rules-of-the-game
(This is the home of North, Williamson, etc.)
What are the main postulates of human behavior and individual & public choice?
1. Relevant actors have a fixed set of preferences
2. (transitivity principle: whenever A > B and B > C, then also A > C)
3. Actors behave instrumentally so as to maximize utility
4. They do so in a strategic manner
What are the themes in rational choice institutionalism?
Property rights; Rent-seeking; Transaction costs
Collective action - what prevents actors from taking a collectively superior course? (e.g. the
study of prisoner’s dilemmas and the tragedy of the commons)
Origin & development of institutions
Sociological institutionalism
How does sociological institutionalism define institutions?
Not just formal rules, procedures or norms...
..also symbol systems, cognitive scripts, moral templates...
...provide “frames of meaning” and guide human action
What are the main postulates of human behavior and individual & public choice?
Individuals act purposively, goal-oriented, and rational
However, what they see as “rational” is socially constructed
Goals are defined in broader terms than how the economist’s cost-benefit maximizer would
Individuals & organizations seek to express & define their identity in a socially appropriate way,
rather than seeking to maximize material well-being
What are the themes in sociological institutionalism?
Legitimacy (e.g. institutional change & development originates from new ideas about social
legitimacy)
Organizational variation & similarity (e.g. The structural-organizational similarity of Ministries of
Educations, around the world)
What has IRC taught us, so far?
Lessons learned
, Olson: what institutional arrangements facilitate or hinder the organization of collective action?
Coarse and Williamson: h ow do institutions determine the organization of production processes
(e.g. firms) under capitalism?
Buchanon and Tullock: how are decision processes in the formal political domain shaped by
institutions?
Riker, Baumgartner and Jones: how do political coalitions form and develop? How do coalitions
alter institutional settings? How do institutions affect coalition dynamics?
Arrow and Black: public choice, or the amalgamation of individual preferences into group
preferences
Cheung and Milgrom: the importance of contracts in economic exchanges
Demsetz, Alchian, Eggertsson and Bratzel: importance of property right for the organization of
economic, political and social exchange relations
Ostrom: institutional development in a context of self-governance
Lecture 3: The Advocacy Coalition Framework
17/11/2020
Basics of ACF
Foundation stones
1. Macro-level: policymaking occurs among specialists within a policy subsystem, but their
behavior is affected by factors in the broader political, socio-economic context
a. Policy subsystem is functional/substantive and territorial
b. Policymaking and negotiations occur within policy subsystems
c. Subsystems is iron triangle (legislators, agency officials, interest group leaders) +
researches and journalists
d. Subsystem usually consists of 2-3 policy coalitions (1 dominant, 1 or more minority
coalitions)
e. Identifying the scope of policy subsystem is an important aspect of ACF, by focusing on
the institutions that structure interaction
f. Stable factors which rarely change
i. Basic attributes of the problem
ii. Fundamental socio-economic conditions
iii. Constitutional structures
g. Dynamic factors – necessary for policy change to occur
i. Changes in socio-economic conditions
ii. Changes in governance coalitions
2. Meso-level: the multiplicity of actors in sub-systems are aggregated into policy coalitions
a. Policy participants will seek allies who hold similar policy core beliefs
b. Allies can be legislators, agency officials, interest groups, leaders, judges, researchers,
intellectuals from multiple levels of government
c. Coalitions share > 2-3 policy core beliefs
d. Usually, 2-5 coalitions in 1 policy subsystem
3. Micro-level: individual, based on social psychology
