Rational Choice Institutionalism (RCI) is a theoretical approach to the study of institutions arguing that actors use

institutions Institutions are humanly devised structures of rules and norms that shape and constrain individual behavior. All definitions of institutions generally entail that there is a level of persistence and continuity. Laws, rules, social conventions a ...

to maximize their utility, and that institutions affect rational individual behavior. Rational Choice Institutionalism arose initially from the study of congressional behaviour in the U.S. in the late 1970s. Influential early RCI scholarship was done by political economists at

California Institute of Technology The California Institute of Technology (branded as Caltech or CIT)The university itself only spells its short form as "Caltech"; the institution considers other spellings such a"Cal Tech" and "CalTech" incorrect. The institute is also occasional ...

University of Rochester The University of Rochester (U of R, UR, or U of Rochester) is a private research university in Rochester, New York. The university grants undergraduate and graduate degrees, including doctoral and professional degrees. The University of Roc ...

, and

Washington University Washington University in St. Louis (WashU or WUSTL) is a private research university with its main campus in St. Louis County, and Clayton, Missouri. Founded in 1853, the university is named after George Washington. Washington University is r ...

. It employs analytical tools borrowed from

neo-classical economics Neoclassical economics is an approach to economics in which the production, consumption and valuation (pricing) of goods and services are observed as driven by the supply and demand model. According to this line of thought, the value of a good ...

to explain how institutions are created, the behaviour of political actors within it, and the outcome of strategic

interaction Interaction is action that occurs between two or more objects, with broad use in philosophy and the sciences. It may refer to: Science * Interaction hypothesis, a theory of second language acquisition * Interaction (statistics) * Interactions o ...

. RCI explains the creation of institutions as an attempt to reduce

transaction costs In economics and related disciplines, a transaction cost is a cost in making any economic trade when participating in a market. Oliver E. Williamson defines transaction costs as the costs of running an economic system of companies, and unlike produ ...

of collective activity which would be significantly higher without such institutions. Institutions persist after their creation because they reduce uncertainty and allow gains from exchange. Rational Choice Institutionalism assumes that political actors within the institutional setting have a fixed set of

preferences In psychology, economics and philosophy, preference is a technical term usually used in relation to choosing between alternatives. For example, someone prefers A over B if they would rather choose A than B. Preferences are central to decision theo ...

. To maximize those preferences actors behave highly instrumental through systematic foresight and strategic cost-benefit calculation. Institutions lay down the 'rules of the game', define the range of available strategies and the sequence of alternatives. The actors' behaviour will be highly influenced by the expectation how other players will bargain. The institutional environment provides information and enforcement mechanism that reduce

uncertainty Uncertainty refers to epistemic situations involving imperfect or unknown information. It applies to predictions of future events, to physical measurements that are already made, or to the unknown. Uncertainty arises in partially observable or ...

for each actor about the corresponding behaviour of others. This 'calculus approach' explains how the institutional setting influences individual behaviour and stresses how strategic interaction determines policy outcomes. Erik Voeten writes that the strength of RCI approaches to institutions is that they allow "us to think about what institutions should look like if they were designed to optimally improve cooperation. This provides a normative benchmark." He argues that alternative perspectives cannot compete with RCI in terms of "its range of testable and generalizable implications."

Definition of institutions

RCI scholars tend to define institutions as "rules of the game". These rules structure the incentives of actors, and thus alters their behavior. One prominent RCI definition of institutions is provided by Jack Knight who defines institutions as:

sets of rules that structure social interactions in particular ways. These rules (1) provide information about how people are expected to act in particular situations, (2) can be recognized by those who are members of the relevant group as the rules to which others conform in these situations, and (3) structure the strategic choices of actors in such a way as to produce equilibrium outcomes.

According to Erik Voeten, rational choice scholarship on international institutions can be divided between (1) rational functionalism and (2) Distributive rationalism. The former sees organizations as functional optimal solutions to collective problems, whereas the latter sees organizations as an outcome of actors' individual and collective goals. Since individual and collective goals may conflict, the latter version of RCI accepts that suboptimal institutions are likely.

Explanations for suboptimal institutions

The Principal-Agent Model

A key concept of Rational Choice Institutionalism is the principal-agent model borrowed from Neo-classical economics. This model is used to explain why some institutions appear to be inefficient, suboptimal, dysfunctional or generally go against the intentions of the actors who created the institution. The concept assumes that the principal enters into a contractual relation with a second party, the agent, and delegates responsibility to the latter to fulfil certain responsibilities or a set of tasks on behalf of the principal. Problems occur due to an asymmetric distribution of information which favours the agent. The latter enables the agent to pursue its own interest and engage in opportunistic behaviour – shirking - at the cost of the principal's interest. The principal's problem is how to control and limit shirking by the agent.

Domestic politics

RCI scholars may also argue that international institutional dysfunction may stem from domestic politics, as governments use these institutions both to solve problems between states but also to achieve domestic political outcomes.

Limitations

Rational Choice Institutionalism is frequently contrasted with

Historical Institutionalism Historical institutionalism (HI) is a new institutionalist social science approach that emphasizes how timing, sequences and path dependence affect institutions, and shape social, political, economic behavior and change. Unlike functionalist the ...

and

Sociological Institutionalism Sociological institutionalism (also referred to as sociological neoinstitutionalism, cultural institutionalism and world society theory) is a form of new institutionalism that concerns "the way in which institutions create meaning for individuals." ...

. Historical Institutionalism emphasizes how small events and accidents may create paths from which it is hard to turn back from. Examining the actors involved in creating an institution and the contexts that they were operating in may provide better explanations for why particular institutions were created. Critical junctures – which can be small events and accidents – may lead to institutional change or set institutions on paths from which it is hard to turn back from. This is in contrast to Rational Choice Institutionalism where the creation of institutions, as well as institutional change, reflects optimal and efficient outcomes for actors. Historical institutionalists would rebut that by noting that many institutions are inefficient, and that these inefficiencies can be better explained through path dependency. Both sociological institutionalism and historical institutionalism would argue against the suggestion that we can assume that actors have exogenous preferences (the notion that we can assume the preferences of actors). They would argue actors do not have stable and consistent preferences, and that scholars cannot assume that they hold a given set of preferences. As a consequence, these other approaches argue that it is unreasonable to assume that a Pareto-optimal equilibrium solution exists to collective action problems.

William H. Riker William Harrison Riker (September 22, 1920 – June 26, 1993) was an American political scientist who is prominent for applying game theory and mathematics to political science. He helped to establish University of Rochester as a center of behav ...

, a political scientist prominent for his application of game theory and mathematics in political science, argued that a key problem with RCI scholarship was the so-called "inherability problem", which referred to an inability to distinguish whether outcomes resulted from institutions or from the preferences of actors, which made it impossible to predict optimal outcomes. Terry Moe argues that RCI neglects to consider the ways in which political institutions differ from other institutions, and that RCI neglects the role of power in shaping outcomes. In other words, Moe argues that RCI accounts of political institutions as structures of voluntary cooperation, mutual gains and solutions to collective action problems are unrealistic. Historical institutionalists make a similar critique as they argue that politics is shaped by policy feedbacks and path dependencies which mean that past policies cement or increase power asymmetries, which shapes the kinds of outcomes that are possible in the future. In the context of Latin American politics, Kurt Weyland has argued that Rational Choice Institutionalism is overly focused on politics as it is conducted in legislative institutions and elections, as well as the formal rules and formal institutions of politics. He also argues that it insufficiently accounts for political change and crises, and overly focuses on microfoundations. In an influential article (and later book),

George Washington University , mottoeng = "God is Our Trust" , established = , type = Private federally chartered research university , academic_affiliations = , endowment = $2.8 billion (2022) , preside ...

political scientists Michael Barnett and

Martha Finnemore Martha Finnemore (born 1959) is an American constructivist scholar of international relations, and University Professor at the Elliott School of International Affairs at George Washington University. She is considered among the most influential int ...

argue rationalist accounts of institutions (such as those emphasizing principal-agent problems) cannot fully account for institutional pathologies. They provide a sociological institutionalist account of institutional dysfunction whereby institutions have powers derived from their rational-legal authority, and that these powers and autonomy may give rise to suboptimal outcomes.

Alexander Wendt Alexander Wendt (born 12 June 1958) is an American political scientist who is one of the core social constructivist researchers in the field of international relations, and a key contributor to quantum social science. Wendt and academics such as Ni ...

has argued that rationalist accounts of institutional design often lack

falsifiability Falsifiability is a standard of evaluation of scientific theories and hypotheses that was introduced by the philosopher of science Karl Popper in his book ''The Logic of Scientific Discovery'' (1934). He proposed it as the cornerstone of a sol ...

: it is not clear how one would demonstrate that an institution was not rationally designed. Alexander Wendt and

Paul Pierson Paul Pierson (born 1959) is an American professor of political science specializing in comparative politics and holder of the John Gross Endowed Chair of Political Science at the University of California, Berkeley. From 2007-2010 he served at UC ...

have also argued if actors are guided by a logic of appropriateness, rather than a logic of consequence, then the institutions that they design are not truly optimal. Both of them question that the actors that create institutions are capable of designing functional institutions (institutions that achieve the founders' goals).

James March James Gardner March (January 15, 1928 – September 27, 2018) was an American political scientist, sociologist, and economist. A professor at Stanford University in the Stanford Graduate School of Business and Stanford Graduate School of Ed ...

and Herbert Simon criticize rational approaches to institutions, arguing that it is problematic to assume that actors have ordered preferences, actors understand the alternative choices available to them, and that actors pursue optimal alternatives (rather than satisficing alternatives). They argue that actors rely on routinized responses to problems that emerge, as opposed to evaluating and deliberating on the optimal response. This can be seen during episodes of uncertainty when actors respond in routinized ways, rather than craft original solutions to the newly emergent problems.

Hendrik Spruyt Hendrik Spruyt is a Dutch political scientist. He is the Norman Dwight Harris Professor of International Relations at Northwestern University. He is known for his research on state formation and sovereignty. Spruyt has advanced arguments for the eme ...

argues that the "pure rational choice variant of

methodological individualism In the social sciences, methodological individualism is the principle that subjective individual motivation explains social phenomena, rather than class or group dynamics which are illusory or artificial and therefore cannot truly explain marke ...

" (such as functionalist RCI approaches) is flawed because "we cannot simply deduce institutional outcomes from preferences or impute preferences from observed outcomes."

References

{{reflist Political science terminology Subfields of political science Institutionalism Rational choice theory Public choice theory