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Democratic Governance
     

Democratic Governance

by James G. March
 
In this thought-provoking new work, long-term collaborators James March and Johan Olsen construct a brilliant foundation for thinking about the broad theoretical concerns of democratic governance. Building on the work that began with their seminal essay on "The New Institutionalism" in The American Political Science Review in 1984 and continued in

Overview

In this thought-provoking new work, long-term collaborators James March and Johan Olsen construct a brilliant foundation for thinking about the broad theoretical concerns of democratic governance. Building on the work that began with their seminal essay on "The New Institutionalism" in The American Political Science Review in 1984 and continued in Rediscovering Institutions, March and Olsen challenge key aspects of standard contemporary thinking. While conventional thought is based primarily on the premises of individualism and self-interest, the authors argue that exchange theories of democracy are incomplete, reflecting only a partial view of history and human action.


Going beyond democratic theory, March and Olsen draw on social science to examine how political institutions create and sustain democratic solidarity, identities, capabilities, accounts, and adaptiveness; how they can maintain and elaborate democratic values and beliefs -- and how governance might be made honorable, just, and effective. They show how democratic governance is both proactive and reactive -- creating interests and power as well as responding to them -- and how it shapes not only an understanding of the past and an ability to learn from it, but even history itself. By exploring how governance transcends the creation of coalitions that reflect existing preferences, resources, rights, and rules, the authors reveal how it includes the actual formation of these defining principles of social and political life.


Which institutions serve democracy best? March and Olsen do not offer neat answers. Instead, while recognizing the complications involved in fulfilling democratic ideals, they ask how individuals and societies can achieve institutions that can make politics civil, accountable, capable, and transformative.


In what is likely to be received as a seminal work, March and Olsen have established a comprehensive framework for discussion and debate that will continue to be read in management, political science, education, psychology, and sociology into the 21st century.

Product Details

ISBN-13:
9780028740546
Publisher:
Free Press
Publication date:
01/28/1995
Edition description:
New Edition
Pages:
256
Product dimensions:
6.40(w) x 9.78(h) x 1.03(d)

Read an Excerpt

Chapter 2 Perspectives on Governance

Governance presumes a perspective on politics and government, a way of thinking about how things happen in a polity. We contrast two different modern views of governance. The first is an exchange perspective built around ideas of coalition building and voluntary exchange among self-interested political actors. It assumes that individual action depends on the answers to three questions: What are the alternatives? What are the consequences that will follow from each alternative? What is the value, in terms of preferences of the decision maker, of the consequences? Collective action is based on exchanges among individuals acting on the basis of the answers to such questions. The second view is an institutional perspective built around ideas of identities and conceptions of appropriate behavior. It assumes that individual action depends on the answers to three different questions: What kind of a person am I? What kind of a situation is this? What does a person such as I do in a situation such as this? Collective action is based on combinations of answers to those questions.

Exchange Perspectives

Politics can be seen as aggregating individual preferences into collective actions by some procedures of rational bargaining, negotiation, coalition formation, and exchange (Riker, 1962; Coleman, 1966a, 1966b; Downs, 1967; Niskanen, 1971; Taylor, 1975). Ideas of politics as involving rational exchange are connected both to a long tradition of political thought and to current intellectual, political, and ideological fashion. Exchange visions of politics and governance have roots in the doctrines of Greek political theory and seventeenth-century social contract theory. They currently dominate a large fraction of the academic and policy discussions of governance. As we shall suggest below, these ideas seem to us incomplete, but they represent a familiar and coherent supplement to those with which we will be primarily concerned. Far from foolish or malevolent, they illuminate important truths about the governance of political systems.

Exchange Conceptions of Political Action

In an exchange conception, governance is seen as neutral among potential human preferences. It involves the facilitation of voluntary exchanges among political actors rather than the pursuit of a particular moral imperative or a particular constellation of individual wants. Theories in which exchange is the basis for living together are characteristic of many liberal traditions emphasizing political orders based on voluntary agreements among autonomous individuals. They seem almost self-evidently part of contemporary Western social and political life. The standard metaphors are metaphors of interests, bargaining, and coalition formation (Taylor, 1975; Riker, 1982).

Exchange theories of politics are special cases of rational actor theories of human behavior. They presume that individuals pursue their interests by considering alternative bargains in terms of their anticipated consequences for individual preferences and choosing those combinations of bargains that serve their preferences best. Political actors are imagined to have preferences, or interests, that are consistent, stable, and exogenous to the political system. Individual political actors are seen as assessing the probable consequences of any proposed policy (exchange) in terms of their own preference functions and agreeing only to those that promise subjective improvement for themselves relative to continuing the status quo. Collective action requires a willingness on the part of sufficient numbers of political actors to make a change. It depends on the negotiation of bargains and side-payments among potential trading partners (Harsanyi, 1977; Coase, 1994).

Modern exchange theories of politics are theories of bounded rationality. They assume that reality is only dimly perceived. Not all alternatives are considered, and not all consequences are known with certainty. As a result, theories of choice are theories of search, theories of the process by which actors reduce ignorance about available alternatives and their consequences (Cyert and March, 1963; March, 1988a). The presumption, not always stated, is that search activities reduce the disparity between what is believed to be true and what is actually true. Rational theories of search presume that since search is costly, rational actors will not insist on knowing everything but will act on the basis of incomplete information. They assume that investments in search will be made up to the point at which the expected marginal return from search is equal to its expected marginal cost in terms of other opportunities forgone.

Modern theories of rational exchange are also, for the most part, theories of strategic behavior. That is, they do not imagine a shared preference function or common will as a basis for action within a collectivity. Rather, they assume that there is conflict of interest among individual actors and that collective action stems from the coercion of mutual self-interest, not from shared values or preferences. Along the way to self-interested bargains, conflict produces a host of strategic actions -- lying, cheating, and stealing -- that are guided by calculations of their utility for the individual actor (Riker, 1982, 1984, 1986).

The ability of any particular actor to realize his or her desires in such a system of exchange depends on what the desires are, what exchangeable resources that actor possesses, and what political rights he or she has. Wants that are consistent with the wants of others are more easily satisfied than wants that compete with others. The greater the exchangeable resources (initial endowments) and the more rights to political voice, the stronger the trading position. One side of the exchange story emphasizes the Pareto-improving qualities of exchange and gains from trade -- the achievement of outcomes that make at least some people better off and no one worse off than before the exchanges (Axelrod and Keohane, 1985; Shepsle, 1986; Garrett and Weingast, 1993). A second side of the exchange story emphasizes the coercive qualities of "voluntary" exchange when initial endowments are unequal, in which case "exchange" means that one group of actors imposes its will on other groups by virtue of its trading advantage (Moe, 1990; Krasner, 1991; Sened, 1991; Olsen, 1992b).

Exchange Conceptions of Political Change

For the most part, rational actor ideas about political development interpret institutional and political change as driven largely by anticipated or experienced changes in the social and physical environment. Institutions come to match their environments (Shepsle, 1989). One variant of the matching idea sees changes as reflecting the imposition of the future on the present. Theories of rational action, including theories of rational conflict (e.g., game theory), theories of strategic action, and theories of power all assume that forms and procedures are shaped by expectations and intentions. Human expectations and wills enact the future (Shepsle and Weingast, 1987). A second variant of the matching idea portrays the present as a residue of the past. In theories of learning, culture, and natural selection, the present encapsulates the past. Present institutions are summaries of past experience (Baum and Singh, 1994).

The argument is not always made explicit, but the spirit is Spencerian. A process that encodes experience in a reasonably systematic and adaptive way is assumed to lead to improvement in fit and ultimately to the one best fit. Observed institutional structures are assumed to exist and persist because they are (or become) well adapted to their environments, producing favorable results. The basic idea is that expectations about the future and experiences of the past are efficient in converting environmental requirements into institutional forms and practices. Thus, it can be assumed that a population of institutions will come to match its environment and that differences between any two populations of institutions are attributable to differences between their environments. In such a formulation, institutional structure is implicit in the constraints of an exogenous environment (Moe and Caldwell, 1993).

Modern students of governance in the voluntary exchange tradition are of two minds with respect to whether this process can be assumed to result in a unique, stable match between institutions and environments. For some of them -- particularly those who wish to describe political institutions as necessary solutions to exogenous political problems -- the efficiency of historical processes is vital. The institutional rules, coalitions, and policies that evolve have to be seen as implicit in the political situation that exists. Such a position treats governance as part of an inexorable process, without an independent role (Downs, 1957; Shepsle and Weingast, 1987). A somewhat milder version of the position would emphasize the "long-run" efficiency of history but would allow for some "short-run" perturbations that might be of interest to "short-run" historians (Moe, 1984, 1990).

For others -- particularly those who would give some role to conscious governance -- a political solution is subject to, but not uniquely specified by, constraints. Although institutional and normative rights and rules limit the set of possible political coalitions, practices, and policies, they do not determine them completely. Although distributions of preferences and resources among the politically active make some imaginable programs impossible to achieve, those distributions are consistent with a number of alternative outcomes. And although features of the environment require some response, they do not compel a unique response (March and Olsen, 1984; Krasner, 1988). The resulting indeterminacy in outcomes within a particular environmental context provides a possible role for deliberate political manipulation. It directs attention to such things as agenda effects, the order of presentation of alternative policies or coalitions (Riker, 1980, 1993; Kingdon, 1984). Some such confidence in the indeterminacy of environmental matching is necessary for political theorists who want to imagine that governance is something other than an elaborate human orchestration of necessary adjustments of political systems to environmental requirements.

Exchange Conceptions of Governance

The core artistry of politics in an exchange perspective is the crafting of winning coalitions and policies. A political system is judged by the ability of its institutions and practices to discover and implement changes in policies that leave at least one person better off and no person worse off, as measured by individual subjective preference functions (the Pareto-improving criterion). Democratic governance is seen as converting individual wants and resources into collective action by discovering and implementing policy coalitions that arrange Pareto-improving exchanges among citizens.

This process of coalition and policy formation depends on three features of the political world that are seen as exogenous to governance, as vital to the practice of politics but outside its ken. The first is the structure of rights and rules within which the process occurs. In this tradition, rights and rules may be seen as rational solutions to a longer-term meta game, but they are not generally treated as subject to contemporary conscious choice or influence (Axelrod, 1984; Sugden, 1986; Kreps, 1990; North, 1990). The second feature is the distribution of preferences (interests) among political actors. The process responds to preferences, but it neither creates nor affects them (Becker and Stigler, 1977). The third feature is the distribution of resources and capabilities among actors. As in any other voluntary exchange process, the outcomes of political bargaining and coalition formation depend critically on the distribution of exchangeable resources and capabilities. That distribution may be seen as subject to public policy, but it is treated as exogenous to the coalition formation and exchange process (Coase, 1994).

Governance within an exchange tradition is seen as the management of political exchange within those three constraints. Instead of imagining that political actors are always fully activated and always fully cognizant of all of their interests and the interests of others, they can be seen as operating within a reduced set of activated concerns and consciousnesses (Keohane, 1984; Coleman, 1990; Moe, 1990). Numerous opportunities exist for affecting the specific coalition that is organized or policy that is chosen, for discovering new possibilities for voluntary exchange and trade. The process by which some identities and interests become salient and others lose salience is, from this perspective, a central process of governance (Hall, 1989; Goldstein and Keohane, 1993). Similarly, governance involves influencing the process by which conflict is defined along some possible lines of cleavage rather than others (Schattschneider, 1960), and the process by which some alternatives are considered rather than others (Bachrach and Baratz, 1962; Kingdon, 1984; Stone, 1988). These conceptions of efficient voluntary exchange, contracts, and coalitions are now almost conventional in political thought.

Advocates and Governors

As long as preferences, resources, rights, and rules do not uniquely determine the coalition to be formed or the policy to be adopted, there is a role for conscious governance that attempts to influence the particular set of coalitions, programs, and policies that are realized, and through them the ultimate social outcomes that are achieved. We can distinguish two versions of governance in the exchange tradition. The first is what might be called the role of the advocate. The role of the advocate is to improve the chance that particular policies will be pursued by a winning coalition. An individual who looks for others to form a coalition to further his or her interests, or who engages in strategic action designed to improve the prospects for being on a winning coalition or for having the winning coalition adopt favorable policies, is intervening to further a particular set of interests.

The second role is what might be called the role of the governor. The role of the governor is to improve conditions for discovering and arranging winning coalitions. Unlike the advocate, the governor does not seek to organize a winning coalition around a particular preferred set of policies. Rather, the governor seeks to reduce limitations on the capabilities of political actors to organize winning coalitions. Thus, a strategy of information restriction that is attractive to some particular individual bargainer, or advocate, will not generally be attractive to a governor.

Exchange-based political institutions are justified by their successes in achieving political efficiency within existing constraints and opportunities, particularly the constraints imposed by constitutions, the distributions of individual preferences and resources, and the opportunities introduced by the shifting capabilities of institutions. Such successes are not routine. The complexity of modern society makes it easy for individuals and groups to overlook policies and exchanges that might be Pareto-preferred to existing arrangements. The design and realization of political agreements involves affecting complicated and often ambiguous understandings. Even more, shifts in individual tastes and changes in the capabilities of institutions, reflected particularly in improvements in the technology and organization of collective action, continually threaten the stability and efficiency of political coalitions and policies.

It is possible to imagine that competition among advocates effectively performs the role of governor, that ambition and cleverness in the service of contending interests assure an efficient process of discovery and implementation. Such a proposition, however, is a speculation to be demonstrated rather than assumed, and ordinary experience and observations speak against it. There are information restrictions on the search for possible coalitions and on the coordination and implementation of agreements. The political brokerage function often seems unable to discover winning coalitions, or slow to do so. It strains credulity and contradicts what is known about evolutionary and adaptive processes in general to imagine that existing political procedures are optimal solutions to the information problems of coalition discovery and implementation (Baum and Singh, 1994).

Within this view, the role of governance, therefore, is twofold: On the one hand, it is to reduce the chance that viable policies are overlooked, either because they are not considered or because information on their viability is misleading. On the other hand, it is to reduce the chance that an inferior policy portfolio preempts a superior one by virtue of some quirk in the process (e.g., the order of presentation). The problems and objectives are familiar both to standard books on parliamentary procedure and to modern game-theoretic treatments of majority-rule games.

For a political process to claim efficiency within this tradition it must assure that collective political actions represent the final step in a complex process in which all possible coalitions and policies have, in some sense, been discovered, that there exists no unconsidered coalition and policy portfolio that would have been chosen if considered. In order to make such assurances, it is necessary that the rewards for collusive suppression of a potentially winning set of policies be less than the rewards of political victory for at least one necessary party to the collusion; that the rewards for the effort of discovering and negotiating winning coalitions and policies be great enough to guarantee that all such policies are, in fact, considered; and that any potentially winning coalition and policy portfolio have sufficient access to the political system to be considered actively by the relevant political actors. Such assurances cannot be made in the real world of politics, but efforts to approximate them produce the paraphernalia of modern politics -- for example, political organizations, interest groups, lobbyists, the media. They constitute the indispensable institutional apparatus of a modern political system of exchange.

Voluntary exchange political systems depend on political brokerage for the discovery and negotiation of Pareto-improving political deals. The effectiveness of political brokerage depends on some fairly elementary factors (March, 1970). First, it depends on the size of the polity. The greater the number of political actors, the greater the brokerage requirements. Second, it depends on the political experience, education, and income of individuals. The greater the average political experience, education, and income of political actors, the more the brokerage function can be assumed by individuals rather than by special brokers. Third, it depends on the munificence of resources in the system. The greater the spare resources, the less brokerage time and talent required. Fourth, it depends on collective political experience. As a political system gains experience with political brokerage within a particular society, it becomes more competent at identifying and arranging trades. Fifth, it depends on social and political institutions that facilitate the enforcement of political bargains. Enforcement of political agreements depends on trust in their execution, trust that can be generated by a set of relations among individuals, as in a small homogeneous society, or by broad acceptance of a legal and administrative system.

Thus, with fixed rewards for political brokerage, exchange politics will function better in small polities than in large ones; better in polities populated by well-educated, rich individuals with extensive political experience than in those with less-educated, less experienced, and poorer citizens; better in good times than in bad; better in older democracies than in younger ones; and better where there is shared confidence in understandings than where there is not. Alternatively, we can observe that to maintain a fixed quality of the political process, governors must invest more in brokerage in large polities than in small ones, more in poor polities than in rich ones, more in inexperienced, poorly educated polities than in experienced, well-educated ones, more in bad times than in good, more in younger democracies than in older ones, and more where trust is low than where it is high. Unfortunately, it appears to be true that for the most part modern political systems do precisely the opposite.

Building Coalitions

Within the rational exchange framework, governance involves contributing to the discovery and implementation of winning coalitions among individuals whose desires are consistent with one another. The process of discovery is normally seen as involving search. Self-interested political actors look for others with complementary interests. They try to inhibit the discovery of complementarities that might exist between their partners and their competitors. At the same time, self-interested brokers of political coalitions look for coalitions to arrange, hoping to secure for themselves some fraction of the Pareto-improvement that they affect. The process of implementation is dominated by the difficulties of enforcing coalition agreements when the exchanges involved are made over time, may be difficult to specify in advance, may involve different people at different times, and may have to accommodate a shifting distribution of resources (Weingast and Marshall, 1988). The twin processes of discovery and implementation lead to a history of coalitions and public policies.

Since the processes by which coalitions are discovered and implemented can be specified in several different ways, it is hard to say anything very general about them. It would be convenient if it were possible to assume historical efficiency, that is, that a coalition uniquely appropriate to environmental conditions would necessarily appear ultimately. However, the conditions for a unique equilibrium are fairly restrictive. Under rather general conditions, the discovery and implementation of political coalitions fail to reach a stable equilibrium, reach one of many quasi-stable local equilibria, or take so long to reach a stable equilibrium that the chance that the external conditions will remain unchanged is nil (Riker, 1980; Shepsle, 1986). As a result, the winning coalitions and resulting policies that will be realized in particular historical moments are not uniquely determined by the constraints or prior conditions but appear to depend on somewhat indeterminate paths of coalition discovery and implementation. It is precisely these indeterminacies that make governance an important concern within exchange theories of politics.

Shaping Policies

The central process involved in building a political coalition is the creation of an agreement among political actors that specifies the trades among them. These agreements may involve a variety of understandings, threats, and promises, but they are typically imagined to be organized around a set of public policies that will be adopted by a coalition if it is successful in gaining power. Thus, contemporary theories of politics are theories of policy construction. Each potential policy, program, or manifesto is a portfolio of commitments to action. It is supported by a coalition having certain political resources and rights to political authority. A necessary, but not sufficient, condition for a policy to be adopted is that its portfolio have support from individuals with political rights adequate to satisfy the rules defining a winning coalition (e.g., in a majority-rule system, that it be able to secure a majority vote).

Types of coalition policies. There are three quite different pure forms of such policies (March, 1994b). The first is a policy that finds support among a group of like-minded people. All want the same thing, what they want is captured by the policy, and their combined political resources are adequate to ensure its adoption and implementation. If we ignore, as we should not ultimately, various forms of strategic action that complicate the simple picture, this kind of policy seems a straightforward manifestation of the shared-interest spirit of politics.

The second pure form of policy is one that reflects a weighted average of the wants of similar people. The wants of each are arrayed along some continuum, the policy reflects the weighted average of the winning coalition members' wants where the weights are proportional to their political resources, and the resulting policy is acceptable to members of a coalition having collective resources adequate to win. There are strategic issues that complicate this picture also, but this kind of policy seems a straightforward manifestation of the preference-pooling or power-weighting spirit of politics (Dahl, 1956).

The third pure form of policy is a policy portfolio that finds support among a group of people, each of whom is indifferent to the policies desired by others. Each of the individual wants is captured by one element in the portfolio, and the combined political resources of the coalition are adequate to ensure the adoption and implementation of the portfolio, provided there are no defections. Through such a portfolio, a political actor with a special interest in a smoke-free environment may join with another who has a special interest in a football stadium to make what amounts to a contract to support each other's proposals. Once again, there are complications of strategic behavior, but in a general way this kind of policy seems a straightforward manifestation of the logrolling spirit of politics (Ferejohn, 1974, 1986).

Logrolls combine individuals with complementary interests into viable coalitions, but they are invitations to disappointment. Support that is strategic (as most support in a logroll is) tends to be unreliable. Coalitions that are created to make a decision cannot be relied on to deal effectively with postdecision complications. Logrolls create a need for trust, but they are structured in such a way as to remove a primary basis for trust -- the sharing of values. They involve individuals who are mutually indifferent to each other's concerns and are bound together simply by the incentive structure of the coalition. Perhaps for this reason, logrolls appear to be less common in politics than might be expected (Weingast and Marshall, 1988).

Each of these forms can be seen as a variation on an exchange perspective. Clearly, any conception of coalition through exchange gives an advantage to coalitions involving individuals with complementary demands. A coalition among like-minded people is probably the most efficient, provided the like-mindedness can be sustained. A coalition among individuals with mutually indifferent demands is a close contender. Preference pooling (the second form) is more complicated but can be seen as a variation on a Newtonian power model in which resources are exchanged to gather power, and advantage goes to individuals with resources desired by others.

Complications in policy coalitions. These simple forms of policy portfolios are considerably complicated in practice by a host of real-world features. As examples, we mention three critical complications: First, most portfolios are mixtures of talk and action. The talk includes declarations of intent, proclamations of public virtue, and assertions of public policy whose main impact is on the symbolic standing of particular values or groups. The action includes specific allocations of resources, specific implemented regulations, and specific creations of institutions. Both talk and action are important politically, and their relative importance varies over time, over political actors, and over kinds of policies. Some things can be said politically but not done; others can be done but not said (Brunsson, 1985, 1989).

Second, winning coalitions involve the mobilization of resources as well as the possession of them. Political actors have many demands on their attention. Not everything can be attended to. Some people and issues have easier access to some political arenas than to others. As a result, a winning coalition in one arena at one time is quite likely to be a losing coalition in another arena or at another time. Policies are adopted but not implemented. Inconsistent policies are adopted. This instability is experienced as frustrating to almost all political actors, but it gives a certain advantage to those who can maintain attention persistently over time and space (Cohen, March, and Olsen, 1972; March and Olsen, 1976).

Third, political bargains often involve trades across time in which the exact terms are difficult to specify in advance and the capabilities of the partners to fulfill expectations in the future are uncertain. This produces some characteristically ambiguous features of political exchange. Since political actors have highly unpredictable needs for future support, they are likely to be willing to "bank" favors -- to offer current support in return for vaguely specified expectations of possible future support. Since such favors are subject to substantial ambiguity and discounting over time, politics can become a vast insurance scheme in which many more favors are provided than are requested (March, 1981b).

Exploiting indeterminacies. The willingness and capability of citizens to object to the policies and practices of coercive governmental institutions play a critical role in regulating governmental power. The significance of consent has been demonstrated repeatedly in modern times, particularly in societies with pretensions to democracy. Even such powerful instruments of coercion as armies, secret police, and prisons are dependent on some measure of popular tolerance. Consent is provided, however, in a world in which the indeterminacies produced by ambiguity, attention, and the mixture of talk and action are embedded in a broader property of policy portfolio politics. None of these forms of policy guarantees that any viable policy will be found or that, if a viable policy is found, only one such policy will be found. The number of alternative policy portfolios and the number of alternative possible coalitions are both very large. The number of winning combinations of portfolios and coalitions is much smaller -- indeed may be zero. It is unlikely to be precisely one.

Because winning coalitions and associated policies are unlikely to be unique, the definition and discovery of alternatives can be shaped so as to influence which winning coalition is actually formed and which policy is actually enacted. Opportunities for shaping the discovery and implementation of winning coalitions and policies are not limited to formal authorities, of course, and one of the responsibilities of governance is to provide competitive arenas for the development of coalition and policy options. Students of governance are particularly concerned with identifying techniques for developing and maintaining an inventory of alternative coalitions and policies and for focusing political attention on a few alternatives within that inventory (Kingdon, 1984; Baumgartner and Jones, 1993).

Many of these techniques, however, give an advantage to existing governmental authorities. They can exploit the power of government to proclaim, interpret, and enforce specific policy solutions. The same coercive capabilities that allow legislatures, courts, and governmental agencies to function as effective instruments of the rule of law and popular sovereignty generally give them the capability to manage choices within the set of viable policy alternatives. They bind future actions through laws, enforceable contracts, and path-dependent histories. They can preempt consideration of many alternatives, as long as the advantages of coordinated collective action are substantial and the level of prior agreement on a particular alternative is small.

The institutions and realities of democracy described here narrow the meaning of consent as a defining principle. In particular, the requirement of consent is different from a requirement of prior conscious approval. Governance is made significant not by the fact that governments can do whatever they choose, because they cannot, but by the fact that there are policies and practices that will be accepted if proclaimed and enforced even though they will not be chosen through undirected debate or majority vote. Similarly, actions that secure the consent of the governed at one time effectively limit the options for objection by the governed at a subsequent time. In any democracy, the vast majority of ongoing collective rules are consented to in a way that gives a substantial advantage to the status quo. This "first mover" advantage also exists within the process of debate and voting. Control over the agenda and over the sequence of presentation of alternatives is an important factor in determining the policies adopted within a legislative system (Riker, 1980, 1993).

Politivcal Right and Rules

In a rational exchange definition of a political order, there is conflict of interest among political actors. Individuals are self-interested and seek the best possible personal outcome, given the distribution of preferences and resources. They participate in politics in order to make favorable bargains. Through politics, preexisting interests are organized into winning coalitions that improve the lot of their members. Political systems embody a structure of rights, rules, norms, and procedures that regulate this process of bargaining, coalition, and exchange (North, 1990; Garrett and Weingast, 1993). Rights and rules include rights to legitimate formal authority and the rules determining a winning coalition, especially the extent to which the requirements for victory depend not only on the level of popular support but also on the nature of the proposed public policy. They include rules regulating the conversion of nonpolitical resources (e.g., money) into political resources (e.g., votes). They include rules enforcing agreements among coalition partners. Political rules for regulating political exchange are manifested not only in formal institutions but also within the political culture of the community. Differences in the position of the rule of law, the sanctity of elections, and the honesty of officials are not due entirely to differences in formal rules but come from political traditions. In some societies, people obey traffic laws, pay taxes, and abandon public office gracefully after political defeat. In others, they do not.

Rules regulating legitimate authority. Systems of democratic governance organize consent through a system of constitutional rights and rules that regulate the formation of coalitions and specify the bases of legitimate power. For example, democracies provide current citizens with a right to vote and make decisions by some procedure that counts votes without regard to the identity of the voter. The details of the rules vary from one system to another in important ways, and so consequently do the resulting processes. Governance within a parliamentary system based on single-member constituencies with plurality elections is different from governance within a list system of proportional representation. And both are different from governance within a system of single-party rule or a plebiscitary monarchy.

Much of the technical discussion of governance within a voluntary exchange vision confines itself to a minimal specification of rules, typically to a one person/one vote, majority-rule system and to minimal restrictions on exchange beyond the Pareto-preferred criterion rules. Most theorists of democratic political orders, on the other hand, would expand the specification to include an assortment of other rules. For example, Dahl (1980) mentions several fundamental rights and rules necessary for a democratic process: open inquiry, discussion, enlightened understanding, equal consideration, effective participation, and a decision reached by some system of voting that respects the essential equality of the citizens.

Rules regulating coalition formation. Systems of voluntary political exchange require some shared understanding of what are, and are not, exchangeable commodities. In general, the rules of politics make policy support an exchangeable commodity. It is normally, though not always, assumed to be appropriate for two political actors to enter into an agreement by which each is bound to support some specific project of the other. Similarly, it is normally assumed to be appropriate to enter into more general agreements by which each member of a group is bound to support the policies adopted by a majority of the group. On the other hand, money is not a legitimately exchangeable commodity in political coalition-building in most democratic systems. It is not normally appropriate to trade political action for money or to trade policy support for money. Although such exchanges occur often and in some cases appear to be endemic (e.g., bribery of voters or officials in some systems, political campaign contribution investments in legislators in others), they are generally viewed as illegitimate or unfortunate.

Modern political systems have clouded the prohibition of political trading in money (i.e., the distinction between political corruption and political bargaining) by emphasizing the creation of policy portfolios that have direct financial consequences for individual citizens. Certain kinds of actions that offer concrete financial rewards to coalition members (e.g., the buying of support) are discouraged in many polities, but other kinds (e.g., redistributional taxation, subsidies) are not. The usual distinction is between explicit particularistic alienation of a political right by an individual citizen, which is ordinarily discouraged, and implicit revocable leasing of a right by a group of citizens, which is more likely to be condoned.

Rules regulating political contracts. Realizing the terms of political trade requires the enforcement of trading agreements. Political actors interact as strangers united by contracts and alliances. Institutional rules secure their obedience because they reduce uncertainty and transaction costs, and make it possible to capture gains of trade. Some assurance must be provided that the person making the first "payment" can be confident of receiving the agreed-upon "return." The prototype is the simultaneous exchange of hostages, but that procedure is often awkward or impossible, so in practice parties seek some guarantor, often the state.

Effective guarantees of agreements with exchange systems depend on the existence of a reliably enforceable contract between the parties or the existence of a high level of trust. Political negotiation involves trades that are difficult to specify completely at the time they are made, for example, the exchange of specific support now for some unspecified support at some unspecified future date. Formal contracts are difficult to write. The result has been a heavy dependence on political trust, along with considerable doubt about its existence. Some traditional political institutions, most notably political parties and parliamentary codes of procedure, can be seen as making the enforcement of agreements more reliable (Krehbiel, 1991; Cox and McCubbins, 1993; Gilligan and Krehbiel, 1993).

Contemporary political systems have further complicated this already relatively fragile structure of rules for exchange. The complications are seen most vividly in discussions of the so-called implementation problem, the concatenation of political maneuver after formal adoption of a law or policy (Pressman and Wildavsky, 1974; Bardach, 1977; Brodkin, 1990). The rule of law and informal political understandings are strained by the inclination of the political system to be continually reinterpreting and renegotiating political agreements. This strain, in turn, leads to political "contracts" that must be negotiated with only modest expectation of the reliability of exchanges over time, a feature that particularly reduces the options for organizing coalitions that involve long-term commitments.

Rules as solutions to an optimization problem. It is tempting to imagine that the processes by which the rules of politics have evolved make them optimal solutions to problems of institutional design. Insofar as we can assume that the processes of rule evolution shape rules in a uniquely optimal way, we are inclined to give a privileged position to existing rules. Different rules will arise in different contexts, reflecting different solutions to different problems -- each uniquely appropriate to its own situation. They can be seen as encoding historical experience in a way that gives them greater intelligence than can be understood explicitly by contemporary analysts. As a result, we look for rational intelligence in existing rules, and finding some plausible rational interpretation of them, come to view such an interpretation as having validity (McCubbins, Noll, and Weingast, 1987; Weingast and Marshall, 1988).

Such presumptions have had appeal not only for generations of conservative political theorists but also for their contemporary cousins, rational choice theorists of political institutions and functionalist theorists of society. Since there is intelligence in the processes of rationality, learning and selection, the instinct to look for manifestations of that intelligence in existing rules and institutions seems unexceptionable. But, as we shall observe below, the optimal matching of rules and institutions to environments can not be guaranteed.

Limits to Exchange Criteria for Governance

Any treatment of governance must include substantial elements of an exchange perspective to be plausible. Individual political actors sometimes pursue objectives and calculate consequences. Processes of change sometimes lead to relatively stable, unique equilibria. A significant part of governance consists in negotiating and sustaining winning coalitions based on mutually acceptable exchanges, and in facilitating such political brokerage by others. Many features of rights, rules, and resources can be treated as given exogenously, taken for granted and not explained.

Nevertheless, we think those perspectives are seriously incomplete, that they need to be modified and supplemented. From the point of view of political theory, efficient exchange visions of governance are particularly limited by the criterion for collective action that the theory postulates. Legitimate collective action is restricted to Pareto-preferred deviations from the status quo, and any such deviations are seen as desirable. There are numerous objections to exclusive emphasis on such a criterion as a definition of politics, most notably:

1. Among the large number of dramatically different "Pareto optimal solutions," the one that an efficient exchange process discovers is notoriously dependent on the initial distribution of endowments (resources, capabilities). Disparities in wealth, power, and competence make voluntary trades suspect as a basis for social action (Anderson, 1990, p. 122). Major considerations of the appropriateness of initial endowments are sacrificed to relatively minor considerations of finding voluntary trades. This treatment of initial endowments not only puts distributional questions off the political agenda, it exaggerates the importance of current citizens. It sustains initial inequities and subordinates political actors of the future to those of the present.
2. The inviolate position of voluntary exchange is questionable (Walzer, 1983). Most theories of government assume the appropriateness of restrictions on voluntary trade in the name of the inalienability of certain rights and restrictions on intersector (e.g., economic-political or economic-judicial) exchange. And involuntary exchanges, based on some form of interpersonal comparison of preferences and judgments about the commonweal, are usually seen as fundamental to political action.
3. In some circumstances an exchange-based political system -- even if operating perfectly in a technical sense -- will lead to unfortunate results in a moral sense (Polanyi, 1944). Many students of political philosophy insist on a moral criterion for collective action, asking that a system of governance contribute not only to voluntary exchange of prior endowments but also to justice, a good society, beauty, harmony. There is no guarantee that virtue is correlated perfectly with the distribution of endowments (Sen, 1990).
4. The emphasis on self-interested exchange as the basis for interpersonal relations has the potential advantage of being consistent with a self-seeking human nature, but it has the potential disadvantage of creating or accentuating that nature. Some philosophies of human existence portray self-interest as the highest moral principle (Mandeville, 1755; Smith, 1776), but the more common claim is that the pursuit of self-interest is an unavoidable limitation of human motivation. From the latter point of view, a focus on self-interested exchange is a necessary accommodation to a flawed human nature. If human nature is seen less as an immutable gift from God than as a consequence of the expectations we have for it, political institutions cannot take human nature as a given but must accept responsibility for their involvement in its creation.

By emphasizing the arrangement of Pareto-improving coalitions and policies, exchange theories tend to lose sight of those aspects of governance that focus on the development and transformation of constraints, on the ways the rights, rules, preferences, and resources that structure political outcomes are created, sustained, and reformed. They eliminate from the agenda for research and discussion much of what political science has traditionally found interesting (Moe, 1990; Petracca, 1991).

Institutional Perspectives

Historically, analyses of politics and political systems have involved more an interweaving of metaphors than a coherent theory or even an arena for competition among alternative theories. Those analyses have taken the traditions of Aristotle and Tocqueville combined with those of Hobbes and Bentham and grafted onto those roots elements of the ideas of Freud, Marx, Durkheim, Adam Smith, and Darwin. In recent years this pragmatic approach to ideas has been expressed most conspicuously in efforts to reconcile the exchange conception of politics just outlined with an institutional conception that builds on jurisprudential, sociological, and psychological conceptions of identity, and modern organization theory. In textbook writings about political institutions the term "institution" often refers only to systems that are organized formally, such as a national legislature or courts. We use the term in a more general sense to refer not only to legislatures, executives, and judiciaries but also to systems of law, social organization (such as the media, markets, or the family), and identities or roles (such as "citizen," "official," or "individual").

The Basic Ideas

Contests over the meaning of the word "institutional" are easy to see not only among academic disciplines and research traditions but also within them (March and Olsen, 1984). The word is clearly evocative enough to have captured attention, but "institutional" seems more notable for its capacity to engender variations and typologies of meaning than for its precision. Nevertheless, most people who write about institutions or the new institutionalism in social science share a few key ideas. An institutional supplement to voluntary exchange conceptions of politics and governance is built around:

1. A view of human action as driven less by anticipation of its uncertain consequences and preferences for them than by a logic of appropriateness reflected in a structure of rules and conceptions of identities.
2. A view of change and history as matching institutions, behaviors, and contexts in ways that take time and have multiple, path-dependent equilibria, thus as being responsive to timely interventions to affect the meander of history and susceptible to deliberate efforts to improve institutional adaptiveness.
3. A view of governance as extending beyond negotiating coalitions within given constraints of rights, rules, preferences, and resources to shaping those constraints, as well as constructing meaningful accounts of politics, history, and self that are not only bases for instrumental action but also central concerns of life.

In an institutional perspective, governance involves creating capable political actors who understand how political institutions work and are able to deal effectively with them (Anderson, 1990, pp. 196-97). It involves building and supporting cultures of rights and rules that make possible the agreements represented in coalition understandings. It involves building and supporting identities, preferences, and resources that make a polity possible. It involves building and supporting a system of meaning and an understanding of history.

Institutional Conceptions of Political Action

Institutional theories supplement exchange theories of political action in two primary ways: First, they emphasize the role of institutions in defining the terms of rational exchange. Rational action depends on subjective perceptions of alternatives, their consequences, and their evaluations. Pictures of reality and feelings about it are constructed within social and political institutions (March and Simon, 1958; Cyert and March, 1963). Second, without denying the reality of calculations and anticipations of consequences, institutional conceptions see such calculations and anticipations as occurring within a broader framework of rules, roles, and identities (North, 1981, 1990; Shepsle and Weingast, 1987; Shepsle, 1989, 1990). At the limit, self-interested calculation can be seen as simply one of many systems of rules that may be socially legitimized under certain circumstances (Taylor, 1985, ch. 7; Nauta, 1992).

Institutional Bases of Rational Exchange

In exchange theories, political action (decision-making, resource allocation) is a result of bargains negotiated among individual actors pursuing individual interests. Institutional theories focus on the behavioral and social bases of information and preferences in rational choice. They picture preferences as inconsistent, changing, and at least partly endogenous, formed within political institutions. Interests are seen as shaped by institutional arrangements and maintained by institutional processes of socialization and co-optation (Selznick, 1949; Lipset and Rokkan, 1967; Eisenstadt and Rokkan, 1973; Wildavsky, 1987; Sunstein, 1990; Greber and Jackson, 1993). Institutional theories similarly emphasize the ways in which institutions shape the definition of alternatives and influence the perception and construction of the reality within which action takes place. Institutional capabilities and structures affect the flow of information, the kinds of search undertaken, and the interpretations made of the results (Cyert and March, 1963; March and Olsen, 1989; Olsen and Peters, 1995a).

Awareness of the embedding of rationality in an institutional context has led to a considerable restructuring of theories of rational exchange, including political theories based on an exchange perspective. This restructuring has come to picture rational exchange as framed by and dependent on political norms, identities, and institutions. Insofar as political actors act by making choices, they act within definitions of alternatives, consequences, preferences (interests), and strategic options that are strongly affected by the institutional context in which they find themselves. Exploring the ways in which institutions affect the definition of alternatives, consequences, and preferences; the cleavages that produce conflict; and the enforcement of bargains has become a major activity within modern choice theory (Laitin, 1985).

Rules and Identies

Institutional conceptions of action, however, differ from rational models in a more fundamental way. The core notion is that life is organized by sets of shared meanings and practices that come to be taken as given. Political actors act and organize themselves in accordance with rules and practices that are socially constructed, publicly known, anticipated, and accepted. Actions of individuals and collectivities occur within these shared meanings and practices, which can be called identities and institutions (Meyer and Rowan, 1977; March and Olsen, 1984, 1989; North, 1986). Institutions and identities constitute and legitimize political actors and provide them with consistent behavioral rules, conceptions of reality, standards of assessment, affective ties, and endowments, and thereby with a capacity for purposeful action (Douglas, 1986; Thompson, Ellis, and Wildavsky, 1990).

In the institutional story, people act, think, feel, and organize themselves on the basis of exemplary or authoritative (and sometimes competing or conflicting) rules derived from socially constructed identities and roles. Along the way, political institutions create rules regulating the possession and use of political rights and resources. Even the conception of an autonomous agent, with a particularistic way of self-understanding, feeling, acting, and expression, is a conception of an acquired identity, a socialized understanding of self and others (Taylor, 1985, p. 205). In such an institutional perspective, the axiomatics for political action begin not with subjective consequences and preferences but with rules, identities, and roles; and a theory that treats intentional, calculative action as the basis for understanding human behavior is incomplete if it does not attend to the ways in which identities and institutions are constituted, sustained, and interpreted (Friedrich, 1950; Tussman, 1960; March, 1994b).

Action is taken on the basis of a logic of appropriateness associated with roles, routines, rights, obligations, standard operating procedures, and practices (Burns and Flam, 1987). Appropriateness refers to a match of behavior to a situation. The match may be based on experience, expert knowledge, or intuition, in which case it is often called "recognition" to emphasize the cognitive process of pairing problem-solving action correctly to a problem situation (March and Simon, 1993, pp. 10-13). The match may be based on role expectations, normative definitions of a role without significant attribution of moral virtue or problem-solving correctness to the resulting behavior (Sarbin and Allen, 1968, p. 550). The match may also carry with it a connotation of essence, so that appropriate attitudes, behaviors, feelings, or preferences for a citizen, official, or farmer are those that are essential to being a citizen, official, or farmer -- essential not in the instrumental sense of being necessary to perform a task or socially expected, nor in the sense of being an arbitrary definitional convention, but in the sense of that without which one cannot claim to be a proper citizen, official, or farmer.

Action as rule-based. Political institutions and rules matter. Most people in politics and political institutions follow rules most of the time if they can (Searing, 1991). The uncertainties they face are less uncertainties about consequences and preferences than they are uncertainties about the demands of identity. Rules and understandings frame thought, shape behavior, and constrain interpretation. Actions are expressions of what is appropriate, exemplary, natural, or acceptable behavior according to the (internalized) purposes, codes of rights and duties, practices, methods, and techniques of a constituent group and of a sell

The legal system, one of the key institutions of democratic polities, seeks to subject human conduct to rules that are general, stable, known, understandable, operational, and neither contradictory nor retroactive, rather than to the discretion and arbitrary power of authorities or those with exchangeable resources (Fuller, 1971). Institutionalized identities create individuals: citizens, officials, engineers, doctors, spouses (Dworkin, 1986). Institutionalized rules, duties, rights, and roles define acts as appropriate (normal, natural, right, good) or inappropriate (uncharacteristic, unnatural, wrong, bad).

The impact of rules of appropriateness and standard operating procedures in routine situations is well known (March and Simon, 1958; Cyert and March, 1963). But the logic of appropriateness is by no means limited to repetitive, routine worlds. It is also characteristic of human action in ill-defined, novel situations (Dynes, 1970; Quarantelli and Dynes, 1977). Civil unrest, demands for comprehensive redistribution of political power and welfare, as well as political revolutions and major reforms often follow from identity-driven conceptions of appropriateness more than conscious calculations of costs and benefits (Lefort, 1988; Elster, 1989b). Appropriateness has overtones of morality, but it is in this context primarily a cognitive concept. Rules of action are derived from reasoning about the nature of the self. People act from understandings of what is essential, from self-conceptions and conceptions of society, and from images of proper behavior. Identities define the nature of things and are implemented by cognitive processes of interpretation and forming accounts (March and Olsen, 1989).

Rule-following can be viewed as contractual, an implicit agreement to act appropriately in return for being treated appropriately. Such a contractual view has led game theorists and some legal theorists to interpret norms and institutions as meta-game agreements (Shepsle, 1990; Gibbons, 1992), but the term "contract" is potentially misleading. The terms are often unclear enough to be better called a "pact" (Selznick, 1992) than a "contract," and socialization into rules and their appropriateness is ordinarily not a case of willful entering into an explicit contract (Van Maanen, 1976).

As a result, identities and rules assure neither consistency nor simplicity (Biddle, 1986; Berscheid, 1994). Defining an identity and achieving it require energy, thought, and capability. Fulfilling an identity through following appropriate rules involves matching a changing (and often ambiguous) set of contingent rules to a changing (and often ambiguous) set of situations. As a result, institutional approaches to behavior make a distinction between a rule and its behavioral realization in a particular instance (Apter, 1991; Thelen and Steinmo, 1992, p. 15). As they try to understand history and self, and as they try to improve the often confusing, uncertain, and ambiguous world they live in, individuals and collectivities interpret what rules and identities exist, which ones are relevant, and what different rules and identities demand in specific situations or spheres of behavior. Individuals may have a difficult time resolving conflicts among contending imperatives of appropriateness and among alternative concepts of the self. They may not know what to do. They also may know what to do but not have the capabilities to do it. They are limited by the complexities of the demands upon them and by the distribution and regulation of resources, competencies, and organizing capacities, that is, by the capability for acting appropriately.

The elements of openness in the interpretation of rules mean that while institutions structure politics, they ordinarily do not determine political behavior precisely. The processes through which rules are translated into actual behavior through constructive interpretation and available resources have to be specified. Processes of constructive interpretation, criticism, justification, and application of rules and identities, are processes familiar to the intellectual traditions of the law (Dworkin, 1986; Sunstein, 1990; Teubner, 1993). Such processes give specific content in specific situations both to such heroic identities as patriot or statesman and to such everyday identities as those of an accountant, police officer, or citizen (Kaufman, 1960; Van Maanen, 1973; Spradley and Mann, 1975).

Identities and emotions. Emotion is an aspect of human behavior. People have feelings. They experience joy and sorrow. They love and hate, cry and laugh. They feel anxiety, remorse, exhilaration, fear, regret, anticipation. They have emotional pains and excitements to which they respond and which they try to control. They have attachments that link their own emotions to others. Despite their manifest importance, emotions fit into rational theories of politics only with difficulty. They are treated as part of the irreducible irrational error of human existence, perhaps buried in biology. Like other persistent irrationalities, they create a problem for the theory. If it is to be believed that competitive pressures tend to eliminate irrationalities in the genetic and social bases of behavior, the conspicuous endurance of emotions and emotionality is prima facie a puzzle.

Emotions are more easily accommodated in theories of identity-based action, though such theories tend to endorse a conception of emotions different from that of some psychological and biological students of the phenomenon. Institutions organize hopes, dreams, and fears, as well as purposeful actions. Institutionalized rules proscribe or prescribe emotions and expression of emotions (Flam, 1990a, 1990b). Sentiments of love, loyalty, devotion, respect, and friendship, as well as hate, anger, fear, envy, and guilt are made appropriate to particular identities in particular situations. In this conception, emotions are rule-based interpretations of identity. The reason girls exhibit joy at differ ent times and in different ways from boys is because the codes of gender identity provide rules about emotion or the expression of emotions. The distinction between emotions and their expression is a source of dispute in emotion research: Do emotions exist independent of their expression or communication? The answer from the point of view of most students of rule-based, identity-based action is that there may well be some sense in postulating emotions as existing prior to and independent of their expression, but emotion is heavily influenced by the rules surrounding its expression. The dictum "Real men don't cry" can be interpreted as an identity rule about feelings or as an identity rule about communicating feelings.

In either case, an identity-based theory of politics encompasses feelings as an important component of identity. The identities of public officials (like those of professionals) are often interpreted as requiring a censoring of feelings. The interpretation is not quite correct. What such identities commonly require is the subordination of private feelings, the feelings associated with personal identities. Most public identities, in fact, mandate appropriate feelings. Witness, for example, the speeches of judges to convicted criminals, the reaction of political leaders to civic outrages, the welcomes by public officials to championship football teams, and the ritualized emotional celebration of military, legislative, and judicial victories.

Rules, shared meanings, and cultures. Institutional conceptions of politics emphasize shared meaning as a basis for political systems and for governance of them. There are, however, two varieties of shared meanings, both important, that are sometimes confused. The first is shared meanings about values, perspectives, and worldviews, understandings about the nature of things. These shared meanings are often associated with a homogeneous "culture." They underlie systems of governance that emphasize mutual sympathy, trust, and awareness among citizens. Shared values and mutual trust lead to government through consensus and congruence.

The second variety of shared meanings emphasizes institutions. Institutions are collections of interrelated practices and routines, sometimes formalized into formal rules and laws and sometimes less formally specified. Those practices and routines, as well as their interpretations, must be built on shared understandings of the behaviors they mandate or permit, but such understandings do not necessarily require the kind of shared values and cognitive frames reflected in homogeneous cultures. Institutions buffer and regulate conflict of values and cognitions. As a result, institutions are substitutes for deeper levels of agreement. They are likely to be particularly elaborated in heterogeneous societies in which formal rules, bureaucratic control, and formal contracts substitute for informal coordination based on shared values and cognitions.

The longer-run dynamics of the relation between shared understandings of values and shared understandings of practices and routines are not easy to specify. Several quite different stories can be told. First, it seems clear that a certain amount of value consensus is essential to shared routines, and a certain amount of shared understanding of rules is essential to maintaining value understandings. Second, it also seems likely that shared understandings of practices and routines tend to substitute for shared understandings of values and identities. As capabilities for acting coherently without shared values are elaborated and improved through systems of laws and rules, experience with social and individual rehearsals and reinforcements of shared values is reduced. This, in turn, is likely to require agreement on a broader structure of routines. Third, it also seems likely that an escalation of routinization and heterogeneity will be echoed by a similar process involving escalation of informality and homogeneity. Value understandings and trust substitute for and lead to reduced elaboration of and experience with formal rule systems, thus to a decay in the sharing of their interpretation and in their effectiveness.

Identities, interests, and the common good. Some of the more celebrated differences between exchange theories of politics and institutional theories concern the concept of the "common good," the idea that individuals might -- in some circumstances -- act not for the sake of individual or group interest but for the sake of the good of the community. Exchange traditions downplay the significance, or meaning, of the common good and doubt the relevance of social investment in citizenship. The assumption is that self-oriented interests cannot (and should not) be eliminated or influenced. The object is to provide an arena for voluntary exchange among them. If leaders wish to control the outcomes of this self-seeking behavior, they should do so by designing incentives that -- as much as possible -- induce self-interested individuals to act in desired ways (Hart and Holmström, 1987; Levinthal, 1988). Political norms are seen as negotiated constraints on fundamental processes of self-serving rationality rather than as constitutive (Coleman, 1986; Shepsle, 1990).

From this perspective, a community of virtuous citizens is Gemeinschaftschwärmerei -- a romantic dream (Yack, 1985). The fantasy in some democratic thought that modern society can be held together by, and that conflicts can be resolved through, reference to either a moral consensus or a shared conception of the common good is deemed to be wrong as a description and pernicious as an objective. For example, although both Habermas (1992a, 1992b, 1994) and Rawls (1993) seem to suggest that citizens may share some aims and ends that do not make up a comprehensive doctrine, as well as basic rules for regulating their political coexistence in the face of persistent disagreements and different ways of life, they criticize models that overburden citizens ethically by assuming a political community united by a comprehensive substantive doctrine. The dream can be seen not only as romantic but also as dangerous. Developing a community based on a shared moral purpose and a common identity has been the aspiration of tyrants, and the use of government to manage desires, beliefs, and identities can make governmental responsiveness to those elements a democratic fraud (Perry, 1988; Sunstein, 1990).

Nevertheless, virtually all institutional theories of politics give importance to the idea of community. Humans (or their institutions) are seen as able to share a common life and identity and to have concern for others. Either what is good for one individual is the same as what is good for other members of the community, or actions are supposed to be governed by consideration of the community 'as a whole. Although the idea of a common good is plagued by the difficulty of defining what is meant by the term and by the opportunities for exploitation of individual gullibility that lie in an uncritical embrace of hopes for community values, many institutional theorists criticize presumptions of autonomous, individual, self-interested behavior that are standard in the rational tradition (Mansbridge, 1990; Mulhall and Swift, 1992; Chapman and Galston, 1992),

Good government is seen as impossible if citizens and officials are concerned only with their self-interest and ignore the common good. Governance relying only on self-interest, incentives, and a balance of power among interests is too contingent and may collapse under the pressure of changing circumstances or shifts in the balance of power (Rawls, 1987). Proper citizens are assumed to act in ways consistent with common purposes that are not reducible to the aggregation of their separate self-interests (Spragens, 1990). Good citizens are pictured as willing to reason together. They deliberate on the basis of a sense of community that is itself reinforced by the processes of deliberation. From this perspective, the real danger to a polity comes when no controlling standard of obligation is recognized and politics becomes the unchecked pursuit of interests (Wolin, 1960). As a result, the processes by which identities, roles, and interests are created, nurtured, transformed, and implemented are a critical concern of governance, and the civic basis of identities is intrinsic to the concept of a person, citizen, or public official. Giving priority to private interests and preferences is seen not merely as a corruption of the political process but also as a corruption of the soul and a fall from grace. Social identities are among the building blocks of the self. Anyone incapable of achieving an identity based on constitutive attachments -- if such a person could be imagined -- should be described not as a free and rational agent but as a being without character or moral depth, a nonperson (Sandel, 1982, 1984).

In large parts of this tradition, citizenship or membership in the polis is the most important and inclusive identity. It is the highest form of association, responsible for the common good of society. Being a citizen and holding public office are constitutive belongings integrating and shaping other allegiances and particular identities derived from social affiliations like the family, voluntary associations, class, or one's market position. Citizens and officeholders are presumed to act according to norms associated with their roles rather than in pursuit of personal advantage and interests. They are presumed to respond to the dictates of their identities (Walzer, 1983; Barber, 1984; Mouffe, 1992). Realizing that such education and indoctrination may not be completely effective, that individuals may not always fulfill their citizenship identities, democracies also seek to provide concrete incentives that make being a good citizen attractive to a self-interested individual. The hope of governance is to encourage ordinary people, with their usual mix of identities and interests, to attend to the obligations of citizenship.

The folding of communitarian values into institutional theories of politics is almost universal in modern discussions of political democracy, and it leads to a tendency to confuse two related but distinct notions. The first notion is the idea that political democracy requires a sense of community. Exactly what constitutes a sense of community varies from one communitarian author to another, but a common element is the idea that individuals might (and should) have empathic sympathy for the feelings and desires of others and in some circumstances might (and should) subordinate their own individual or group interests to the collective good of the community (Sabine, 1952; Olsen, 1990). The second notion is the idea that democracy is built upon visions of civic identity and a framework of rule-based action-what we have called a logic of appropriateness. Embedded in this notion are ideas about the duties and obligations of citizenship and office, the commitment to fulfill an identity without regard to its consequences for personal or group preferences or interests. The self becomes central to personhood, and civic identity becomes central to the self (Turner, 1990).

The two notions share some common presumptions, but they have quite different perspectives about the fundamental basis for democratic action. The communitarian ideal of shared preferences, including a preference for the common good, presumes that individual action is based on individual values and preferences. The model is a model of individual, consequential, preference-based action. Strategies for achieving democracy emphasize constructing acceptable preferences. The civic identity ideal presumes, on the other hand, that action is rule-based, that it involves matching the obligations of an identity to a situation. Pursuit of the common good is not so much a personal value as a constitutive part of democratic political identities and the construction of a meaningful person. The community is created by its rules, not by its intentions. Strategies for achieving democracy emphasize molding rules and identities and socializing individuals into them (Elster and Slagstad, 1988; Elster, 1989a). In this sense, the argument over individual interests and the collective good with which we began this section is often framed incorrectly. In a rule-based polity, the potential conflict is not between the individual pursuit of preferences based on conceptions of private gain and the individual pursuit of preferences based on conceptions of collective good. The conflict is, in the first instance, between a preference-based consequential logic and an identity-based logic of appropriateness; and, in the second instance, between the claims of particularistic identities and the claims of citizenship and officialdom.

The distinctions are worth maintaining. When they are confounded, there is a tendency to see the problems of modern polities as lying primarily in the value premises of individual preference-based action rather than in a structure of political rules, institutions, accounts, and identities. In fact, many of the greatest dangers to the democratic polity come not from individual self-seeking but from deep, group-based identities that are inconsistent with democracy, for example, strong feelings of ethnic, national, religious, and class identities. Efforts to build a personal set of communitarian values enhancing concern for the common good will be of little use -- even if successful -- if antidemocratic action stems primarily not from preferences and their associated values but from commitments to identities that are inconsistent with democratic institutions.

Institutional Conceptions of Political Change

Although their many different manifestations allow numerous variations on theories of history, institutional and exchange conceptions of politics tend to mirror a grand debate in historical interpretation. On one side in that debate is the idea that politics follows a course dictated uniquely by exogenous factors. From such a perspective, history is efficient in the sense that it matches political institutions and outcomes to environments uniquely and relatively quickly. This side of the debate is typical of exchange theories, theories of rational choice, and many versions of comparative statics drawn from them. Exchange theories of political change are largely theories of the adjustment of political bargains to exogenous changes in interests, rights, and resources. When values change, political coalitions change. For example, when attitudes with respect to the role of women in society shifted, so also did political parties. When resources are redistributed, political coalitions change. For example, when the age composition of society shifted in the direction of older citizens, so also did political programs. The presumption is that political bargains adjust quickly and in a necessary way to exogenous changes.

On the other side of the debate is the idea that history follows a slower, less determinate, and more endogenous course. From such a perspective, history is a path-dependent meander. This side of the debate is typical of institutional theories. Students of political institutions are generally less confident of the efficiency of historical processes in matching political outcomes to exogenous pressures. They see the match between an environment of interests and resources on the one hand and political institutions on the other as less automatic, less continuous, and less precise. They see a world of historical possibilities that includes multiple stable equilibria. They see the pressures of survival as sporadic rather than constant, crude rather than precise. They see institutions and identities as having lives and deaths of their own, sometimes enduring in the face of apparent inconsistency with their environments, sometimes collapsing without obvious external cause (Krasner, 1988; March and Olsen, 1989).

History as Efficient

Seeing political institutions as instruments for political action and assumptions about efficient institutional histories are appealing to democratic theorists. Competitive selection is seen as a mechanism securing historical efficiency. If institutions do not adapt, they are expected to deteriorate and wither away as people stop observing, and as governments stop enforcing, the rules. Although the precise way in which this selection takes place and institutions came to match their environments is often left obscure, some version of a matching theory is an important part of traditional comparative statics as applied to political institutions. Why do political institutions differ from one country to another? Because the social and economic environments of the countries differ. How are differences in specific institutions to be explained? By pointing to specific differences in their environments.

As long as history is efficient in this way, variations in institutional structures can be predicted without identifying the underlying processes of change (Furubotn and Richter, 1984). It is not necessary to decide whether the primary mechanism is rational choice, adaptation of individual institutions, or variation and selection among unchanging institutions. There is no need to understand either the actions of reformers trying consciously to adapt an institution to its environment or the institutional processes by which changes are effected. The specific ways in which institutions orchestrate their transformation may be of interest to a student of political interpretation and dramaturgy, but the outcome itself is dictated by environmental conditions. Such confidence in efficient histories is one of the reasons that students of populations of institutions are often relatively unconcerned about establishing that any particular story of adaptation is uniquely capable of explaining their observations.

In modern theories of efficient histories, the pressures of the environment are most commonly related to technical capabilities, the effectiveness of an institution in using operational and organizational technologies to meet physical, political, and economic demands. Some versions of transaction cost economics, for example, seek to predict organizational form from the costs to organizers of alternative forms, assuming that the processes of history will eliminate more costly forms. The most common modern story involves the shaping of political and economic institutions to match global variations and changes in the scale of organization and technologies of communication and coordination.

Institutional survival is also often related to the ability to match "institutionalized environments," norms and beliefs about how an institution should be organized and run. Those norms are particularly compelling in highly developed social systems where an institution depends on a network of relations with other institutions that simultaneously depend on it. Forms and practices sustain themselves through epidemics of legitimacy. Professional associations and associations of similar institutions create and approve standard practices and thereby make them necessary. An institution survives because its structures, processes, and ideologies match what society finds appropriate, natural, rational, democratic, or modern (Meyer and Rowan, 1977; Meyer and Scott, 1983; Thomas et al., 1987; Scott and Meyer, 1994).

In these conceptions of history, politics is an instrument for matching the institutions of a society to an exogenous social, economic, technical, and normative environment. Changes in the environment produce dislocations in the political system, which are translated into new political interests and resource distributions, which, in turn, are translated into new political coalitions, institutions, and policies. For example, as normative fashions in procedures for dealing with criminals change in a population of political systems, each individual system experiences a transformation of political institutions and policies that brings judicial and penal institutions into step with social norms.

History as Inefficient

The conditions under which political development is driven quickly to a unique outcome in which the match between a political system and the political environment has some properties of unique survival advantage seem relatively restricted (Kitcher, 1985; Baum and Singh, 1994). There is no guarantee that the development of identities and institutions will instantaneously or uniquely reflect functional imperatives, normative concerns, or demands for change (Carroll and Harrison, 1994). Political institutions and identities develop in a world of multiple possibilities. Moreover, the path they follow seems determined in part by internal dynamics only loosely connected to changes in their environments (Amenta and Carruthers, 1988; Wood, 1992).

Even in an exogenous environment, there are lags in matching an environment, multiple equilibria, path dependencies, and interconnected networks of diffusion. Besides, environments are rarely exogenous. Environments adapt to institutions at the same time as institutions adapt to environments. Institutions and their linkages coevolve. They are intertwined in ecologies of competition, cooperation, and other forms of interaction. And institutions are nested, so that some adapting institutions (e.g., bureaus) are integral parts of other adapting institutions (e.g., ministries).

The complications tend to convert history into a meander (March, 1994a). The path of development is produced by a comprehensible process, but because of its indeterminate meander the realized course of institutional development is difficult to predict very far in advance. There are irreversible branches, involving things like experimentation, political alliances, communication contacts, and fortuitous opportunities. Wars, conquests, and occupation are significant in changing political directions and organization (Tilly, 1975, 1993; Giddens, 1985). The direction taken at any particular branch sometimes seems almost chance-like, however decisive it may be in its effect on subsequent history (Brady, 1988; Lipset, 1990).

In general, neither competitive pressures nor current conditions uniquely determine institutional options or outcomes (Herzog, 1986; North, 1990). Institutional forms also depend on the historical path of their development (Berman, 1983). The proposition is a general one in evolutionary theory. In discussing optimization ideas in evolutionary theory, Oster and Wilson (1984, p. 284) conclude: "As systems become more complex, the historical accidents play a more and more central role in determining the evolutionary path they will follow." Political technologies and practices are stabilized by positive local feedback leading to the endurance of institutions, competency traps, and misplaced specialization (Levitt and March, 1988). The adaptation of identities and institutions to an external environment is shaped and constrained by internal dynamics, by which identities and institutions modify themselves endogenously.

Inefficient histories have implications for theories of political development. Much of the style of political science is basically comparative statics, the exploration of the ways in which individual behavior, institutional practices, and cultural norms match the demands of the environments in which they are found. The basic strategy is to predict features of the units of adaptation (individuals, institutions, cultures) from attributes of their environments. The "invisible hand" of efficient historical development is imagined to provide the link. Meandering, locally adaptive histories are inconsistent with that strong "functionalist" tone of many modern interpretations of comparative institutions and institutional change. Such ideas attribute differences among institutions not only to differences among their contemporary environments but also to differences among their histories of interaction with changing path-dependent environments.

The course of a meandering history is created by the sequence of particular historical branches that are realized along the way. Since small, precise changes can be imagined to produce large, permanent effects, "timely interventions" at historical junctures may make a difference. The possibilities have attracted people from cattle breeders to philosophers of science, from environmental and political activists to consultants in strategic management. If small, well-timed interventions can be multiplied by spontaneous historical forces, the possibilities for governance may be substantial; but control of political history is limited by the kinds of branches that arise fortuitously. The ability to create change, therefore, does not guarantee that any arbitrary change can be made at any time or that changes will ultimately turn out to have consequences consistent with prior intentions (March, 1981a). There is no assurance that occasions will arise to achieve any particular desired outcome through opportunistic exploitation of moments in history, and institutions that have been established to serve specific interests have sometimes meandered in ways that serve them poorly in the long run (Rothstein, 1992).

Institutional Conceptions o[ Governance

From an institutional perspective, democratic governance is more than the management of efficient political coalition-building and exchange within prior constraints. It also involves influencing the process by which the constraints are established (Wendt, 1994). It involves molding social and political life -- shaping history, an understanding of it, and an ability to learn from it. To speak of governance as affecting history is to assume that history is neither completely determined nor entirely random, that human control is imaginable. To speak of governance as affecting an understanding of history is to assume that interpretations of history are not inherent in the events of history, that neither civic contentments nor civic discontents are completely determined by objective conditions. To speak of governance as sustaining an ability to learn from history is to assume that history can be made to serve the society.

The constraints of identities, capabilities, and accounts are subject to change in two principal senses. First, the constraints are often defined in terms of necessary change. The transformation of a human into a fish or a democratic government into a totalitarian one is excluded by the conception of what it is to be a human or a democracy. But the transformation of a human from a child to an adult is part of the "constraint" of being human, and the transformation of a democratic government from the control of one party to another is part of the "constraint" of being democratic. As a result, governance that seeks to shape children into adults or social democratic regimes into conservative regimes faces a remarkably easier task than would be involved in trying to convert humans into fishes or democracies into totalitarian regimes. Changes that are defined as natural, normal, or legitimate are easier to accomplish than those that are not.

Second, the constraints are themselves transformed at varying rates. What it means to be human or democratic changes. The meanings of political and social identities -- democrat, citizen, English, liberal, bureaucrat -- are contested. There are debates over what an identity is or can be, what accounts are appropriate and valid, what capabilities matter and how they should be distributed. The constraints of identities, accounts, and capabilities change slowly within institutional contexts (families, churches, educational systems, armies, political movements, mass media) that are themselves changing. Some parts of those constraints change more rapidly than others. Those parts of the constraints that are slowest to change can be described as "core" elements of meaning, as long as it is recognized that their "coreness" is observable primarily through their slow rate of change.

From an institutional perspective, therefore, the craft of governance is organized around four tasks:

1. Governance involves developing identities of citizens and groups in the political environment. Preferences, expectations, beliefs, identities, and interests are not exogenous to political history. They are created and changed within that history. Political actors act on the basis of identities that are themselves shaped by political institutions and processes. It is the responsibility of democratic government to create and support civic institutions and processes that facilitate the construction, maintainance, and development of democratic identities, and to detect and counteract institutions and processes that produce identities grossly inconsistent with democracy and therefore intolerable from a democratic point of view.
2. Governance involves developing capabilities for appropriate political action among citizens, groups, and institutions. Democracy requires that political actors act in ways that are consistent with and sustain the democratic system, fulfilling the expectations of the relevant rules, norms, and duties, and adapting them to changing experience. Acting appropriately and learning from experience, however, require not only a will to do so but also an ability. Capabilities define potentials to affect politics, to exercise rights, and to influence the course of history. Democratic governance must accept responsibility not only for responding to the distribution of capabilities in the polity but also for modifying that distribution to make it more consistent with the requirements of democratic identities.
3. Governance involves developing accounts of political events. Accounts define the meaning of history, the options available, and the possibilities for action. Accounts are used both to control events and to provide reassurance that events are controllable. Meanings and histories are socially constructed. Political myths are developed and transmitted. Accounts of what has happened, why it happened, and how events should be evaluated provide a key link between citizens and government. They underlie democratic efforts to secure control and accountability. Democratic governance involves contributing to the development of accounts and procedures for interpretation that improve the transmission, retention, and retrieval of the lessons of history and the use of such accounts to improve democracy.
4. Governance involves developing an adaptive political system, one that copes with changing demands and changing environments. It involves creating accounts of history that make learning possible and providing resources and capabilities adequate for executing, interpreting, and learning from experiments. Manipulating the level of risk taking, or the salience of diversity relative to unity, or the amount of institutional slack are conspicuous examples of ways by which history can be affected by changing the level of variation or the effectiveness by which lessons and opportunities of the environment are exploited.

The remainder of this book outlines some ideas about how such an institutional perspective on governance is implemented within a democratic context. We ask whether it is imaginable that citizens can realize political institutions that not only work but justify their commitment to them. What sort of citizens and institutions does it take to constitute a democratic society? How can such institutions and citizens be fostered?

Copyright © 1995 by James G. March and John P. Olsen

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