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Routledge Handbook of Comparative Political Institutions








Rok: 2015
Edycja: 1
Wydawca: Routledge
Język: english
Liczba stron: 512
ISBN 10: 0415630886
ISBN 13: 9780415630887
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Routledge Handbook of
CompaRative politiCal

behavior and explain important outcomes, drawing on the perspective of comparative politics.
The Handbook is organized into three sections:



emerge among scholars defining, measuring, and analyzing institutions.
to institutions.

political behavior, and comparative politics.
King’s College London.

With a stellar line-up of brilliant authors and a wide range of chapter topics, the Handbook of
Comparative Political Institutions should be indispensable to all scholars of comparative politics and
political institutions.
Anna Gryzmala-Busse,
University of Michigan
From the birth of modern political science in the early 20th century to contemporary rational
choice institutionalism, political institutions have been a defining subject of our discipline. This
Handbook covers the full terrain of analytical ideas and empirical regularities discovered by this
great tradition and also points the way forward for future scholarship. This is a “must have” for
any serious political science collection.
Simon Hix,
London School of Economics
Gandhi and Ruiz-Rufino have brought together an outstanding set of scholars to provide a comprehensive treatment of political institutions and their impact. This volume will be essential reading
for those interested in exploring the variety of ways in which the formal (and sometimes informal)
rules of the game affect political, economic and social outcomes. A major contribution.
Daniel Posner,
University of California

Routledge Handbook
of CompaRative
politiCal institutions

Edited by Jennifer Gandhi and Rubén Ruiz-Rufino

First published 2015
by Routledge
and by Routledge
711 Third Avenue, New York, NY 10017
© 2015 selection and editorial material, Jennifer Gandhi and Rubén
Ruiz-Rufino; individual chapters, the contributors
The right of Jennifer Gandhi and Rubén Ruiz-Rufino to be identified as
authors of the editorial material, and of the individual authors as authors of
their contributions, has been asserted by them in accordance with sections
known or hereafter invented, including photocopying and recording, or in
any information storage or retrieval system, without permission in writing
from the publishers.
Trademark notice: Product or corporate names may be trademarks or
registered trademarks, and are used only for identification and explanation
without intent to infringe.
British Library Cataloguing in Publication Data
A catalogue record for this book is available from the British Library
Library of Congress Cataloging in Publication Data
Routledge handbook of comparative political institutions / edited by
Jennifer Gandhi, Rubén Ruiz-Rufino.
pages cm
Summary: “The Routledge Handbook of Comparative Political
to our accumulated knowledge and the cutting edge of scholarship about
political institutions in the comparative context. It differs from existing
handbooks in that it focuses squarely on institutions but also discusses how
they intersect with the study of mass behaviour and explain important
outcomes, drawing on the perspective of comparative politics”– Provided
by publisher.
JF51.R588 2015
ISBN: 978-0-415-63088-7 (hbk)
ISBN: 978-1-315-73137-7 (ebk)
Typeset in Bembo
by Cenveo Publisher Services


List of tables
List of figures
List of contributors


1 Introduction
Jennifer Gandhi and Rubén Ruiz-Rufino


Part I

approaches to studying institutions


2 The new economic institutionalism in historical perspective
Margaret Levi and Victor Menaldo


3 Studying institutions
Tom Clark and Jennifer Gandhi


4 Endogenous change of institutions
Adam Przeworski


5 Formal and informal institutions
Hans-Joachim Lauth


6 Equilibrium analysis of political institutions
Milan W. Svolik


7 Using field experiments to study political institutions
Guy Grossman and Laura Paler



Part II

Comparative political institutions


8 Constitutions as political institutions
Tom Ginsburg


9 From Duverger to Rokkan and back: progress and challenges
in the study of electoral systems
Gabriel L. Negretto


10 Parties and party systems
Noam Lupu


11 Legislative organization and outcomes
Eduardo Alemán


12 Executive-legislative relations
Sebastian M. Saiegh


13 Coalition formation and policymaking in parliamentary democracies
Lanny W. Martin and Georg Vanberg


14 Judicial institutions
Julio Ríos-Figueroa


15 Federalism
Pablo Beramendi and Sandra León


16 Bureaucracy
Victor Lapuente


17 Election administration, election observation, and election quality
Susan D. Hyde and Kevin Pallister


18 The military’s role in politics
Aurel Croissant and David Kuehn


19 Authoritarian institutions
Clara Boulianne Lagacé and Jennifer Gandhi


20 Fiscal institutions
Joachim Wehner




21 Labor market institutions and economic performance
Irene Menendez and David Rueda
22 Domestic politics and international institutions: cooperation,
sacrifice, and change
James Raymond Vreeland



Part III

the effects of comparative institutions


23 Voting behavior and political institutions
Ian McAllister


24 Ethnicity and elections
Rubén Ruiz-Rufino


25 Political mobilization and institutions
Erica Chenoweth


26 Political violence: an institutional approach
Laia Balcells


27 The institutional context of transitional justice
Monika Nalepa


28 The institutional components of political corruption
Miriam A. Golden and Paasha Mahdavi


29 Political institutions and economic development
Luz Marina Arias







Formal and informal institutions
Map of informal institutions
Type of government by constitutional structure (frequencies)
Governments’ legislative passage rates: multivariate analysis
Formal models of EMB independence (percentage of countries)
Selection criteria of independent and mixed EMBs
Selection process and criteria of independent and mixed EMBs
Average lifespan of political regimes and coup frequency (1946–2008)
Civil-military relations in 42 third wave democracies (as of 2010)
Corruption by regime type and income group





Stage dynamics
Optimal institutional change
Optimal and equilibrium change when dictators extract rents
Optimal institutional change when the elite is taxed under democracy
Probability of institutional breakdown given the number of past alternations
Electoral fragmentation in advanced democracies, 1950–2010
Ethnic diversity and ethnic party strength
Electoral volatility in old and new democracies
Gatekeeping and setter games
Distribution of chief executives’ box scores
Box scores by government status
Bill initiation and statutory achievements
Riots and passage rates
Coalition compromise vs. ministerial autonomy
Probability of watchdog junior minister appointment as function of party size
Index of policing strength for sixteen European parliaments
Subnational tax revenues and expenditures (% over total), 2011
Degree of merit-recruitment in the public sector and GDP per capita
in the OECD
Historical legacies of administrative structures and GDP per capita for
30 OECD countries
Meritocracy and QoG for OECD countries
Trends in national elections over time
The number of military coup d’états, 1950–2010
The number of military regimes, 1946–2008
Ratio of power in international organizations—“Great powers” to the
“Rest of the world”
Post-electoral conflict, fraud and ethnicity
Ethnicity, electoral institutions and the quality of elections




27.1 Strategic transitional justice under closed rules with certainty:
the TJ space and game
27.2 Equilibrium outcomes in the strategic transitional justice game
27.3 Hypotheses 1–6 from most general to most specific
28.1 Scatterplot of corruption and per capita GDP (2012) for 183 countries
by regime type (2008)
28.2 Geographical variation in FCPA violations across the world, 2006–12,
and Transparency International Corruption Perceptions Index, 2012



notes on

Eduardo Alemán is Associate Professor, Department of Political Science, University of
Luz Marina Arias is Assistant Professor, Division of Economics, Centro de Investigación y
Docencia Económica (CIDE), Mexico City.
Laia Balcells is Assistant Professor, Department of Political Science, Duke University.
Pablo Beramendi is Associate Professor, Department of Political Science, Duke University.
Clara Boulianne Lagacé is a PhD Candidate, Department of Political Science, Emory University.
Erica Chenoweth is Associate Professor, Josef Korbel School of International Studies, University
of Denver, and Associate Senior Researcher, Peace Research Institute of Oslo.
Tom Clark is Asa Griggs Candler Professor, Department of Political Science, Emory University.
Aurel Croissant is Professor, Institute of Political Science, University of Heidelberg.
Tom Ginsburg is Leo Spitz Professor of International Law and Professor of Political Science,
and Ludwig and Hilde Wolf Research Scholar, University of Chicago Law School.
Miriam A. Golden is Professor, Department of Political Science, University of California–Los
Guy Grossman is Assistant Professor, Department of Political Science, University of


Notes on contributors

Susan D. Hyde is Associate Professor, Department of Political Science, Yale University.
David Kuehn is Research Fellow, Institute of Political Science, University of Heidelberg.
Victor Lapuente is Associate Professor, Department of Political Science, University of
Gothenburg, and Research Fellow, Quality of Government Institute.
Hans-Joachim Lauth is Professor, Department of Political Science and Sociology, University
of Würzburg.
Sandra León is Lecturer, Department of Politics, University of York.
Margaret Levi is Director, Center for Advanced Study in the Behavioral Sciences (CASBS),
Professor, Department of Political Science, Stanford University, and Jere L. Bacharach Professor
Emerita of International Studies, Department of Political Science, University of Washington.
Noam Lupu is Assistant Professor and Trice Faculty Scholar, Department of Political Science,
University of Wisconsin–Madison.
Ian McAllister is Distinguished Professor of Political Science, School of Politics and International
Relations, Australian National University.
Paasha Mahdavi is a PhD candidate, Department of Political Science, University of California–
Los Angeles.
Lanny W. Martin is Associate Professor, Department of Political Science, Rice University.
Victor Menaldo is Assistant Professor, Department of Political Science, University of
Irene Menendez is a PhD candidate, Department of Politics and International Relations,
Nuffield College, Oxford University.
Monika Nalepa is Associate Professor, Department of Political Science, University of Chicago.
Gabriel L. Negretto is Professor, Division of Political Studies, Centro de Investigación y
Docencia Económica (CIDE), Mexico City.
Laura Paler is Assistant Professor, Department of Political Science, University of Pittsburgh.
Kevin Pallister is Lecturer, Department of Political Science, University of Massachusetts–
Adam Przeworski is Carroll and Milton Petrie Professor of Politics and Economics, Department
of Politics, New York University.
Julio Ríos-Figueroa is Professor, Division of Political Studies, Centro de Investigación y
Docencia Económica (CIDE), Mexico City.

Notes on contributors

David Rueda is Professor of Comparative Politics, Department of Politics and International
Relations, Oxford University, and Fellow, Nuffield College, Oxford University.
King’s College London.
Sebastian M. Saiegh is Associate Professor, Department of Political Science, University of
California–San Diego.
Milan W. Svolik is Associate Professor, Department of Political Science, University of Illinois at
Georg Vanberg is Professor, Department of Political Science, Duke University.
James Raymond Vreeland is Professor, Edmund A. Walsh School of Foreign Service,
Georgetown University.
Joachim Wehner is Associate Professor in Public Policy, Department of Government and
Institute of Public Affairs, London School of Economics and Political Science.


This page intentionally left blank

Jennifer Gandhi and Rubén Ruiz-Rufino

“Institutions matter” has served as a mantra for the social sciences for almost thirty years. In
political science, scholars in the subfield of comparative politics embraced this intellectual agenda
by first “bringing the state back in” (Evans et al. 1985). Since then, comparative politics has
focused much attention on institutions, and at this point, it seems appropriate to ask: What is
our accumulated knowledge about political institutions in the comparative context, and how
have we acquired it? Where have debates in the study of institutions emerged and how have
scholars resolved them? What remains to be done in the comparative study of institutions? In
this volume, we address these questions by having leading scholars in the field discuss their areas
of substantive and methodological expertise.
The volume is organized into three parts. Part I focuses on broad theoretical and empirical
challenges affecting the study of institutions. The six chapters of this part highlight the major issues
that emerge among scholars defining and analyzing institutions. The chapters discuss how these
challenges have been handled since the “institutionalist revolution” in political science and highlight the open questions that still bedevil the study of institutions. Part II of the volume consists of
fifteen chapters, each of which handles a different substantive institution of importance in comparative politics. In this part, we cover institutions, such as electoral rules and federalism, whose
study is well established in the field. But we also expand our focus to include areas that traditionally
either have attracted less attention or have not been aggregated as a separate area within comparative politics. These include authoritarian institutions, the military, and electoral management
bodies. The final part, Part III, encompassing seven chapters, examines the relationship between
Because our contributors discuss the state of our knowledge and what constitutes the research
frontier in their specific areas, each chapter offers its own answers to the questions posed above.
But on the basis of these chapters, we also can offer a more synthetic account of what we broadly
know about institutions, how we know it, and what remains to be studied. We begin by discussing how comparative scholars have developed institutionalist theories: how they have borrowed
from other subfields, confronted the tension between generalist and more time- or place-specific

Jennifer Gandhi and Rubén Ruiz-Rufino

claims, and used a variety of tools to craft their arguments. We then go on to discuss two recurring themes in the volume that highlight how many comparative scholars view institutions: first,
the use of institutions to address strategic dilemmas and, second, how institutions both incentivize behavior and are created by purposive action. Understanding institutions both as rules and as
equilibria opens up a host of theoretical and empirical challenges. We review these challenges
that confront the general study of institutions before discussing the open debates surrounding
some of the specific substantive institutions that have been highlighted by authors in the volume.
These last two sections clearly show that while we have accumulated substantial knowledge
about comparative institutions, there is still much work to be done.

the sources and scope of our institutional theories
In developing theoretical arguments about the emergence and effects of institutions, it is clear
that many areas of comparative institutional analysis have borrowed and built upon the frameworks first developed in the study of American politics. In his chapter on legislative organization
and outcomes (Chapter 11), Eduardo Alemán discusses the rationale for legislative rules as well
as their impact in distributing gatekeeping and agenda-setting powers which, in turn, influence
passage rates and the substantive content of legislation. Many of the theories—explaining both
why a majority of legislators would adopt organizational arrangements that occasionally make
them worse off and how such organizational rules can pull policy outcomes away from the
median legislator’s preferences—have been developed in the context of studying behavior in the
U.S. House of Representatives. As Alemán notes, scholars in comparative politics are using these
theoretical frameworks to make sense of legislative behavior and outcomes in other places
around the world, and in the process they are able to comment on the extent to which these
theories are generalizable beyond the American context.
Similarly, in his chapter on fiscal institutions (Chapter 20), Joachim Wehner points out that
much of the early empirical work on budget institutions focused on the American states. These
works focused on the effects of institutions such as formal budget rules and legislative committee
structures on fiscal adjustment and policy outcomes. Due to the variation in institutions and
outcomes across a large number of comparable units, the American states serve as a good laboratory to investigate the effects of fiscal institutions. In recent years, as comparative scholars have
increasingly accumulated cross-national data on budget institutions, policies, and outcomes, they
have been able to test theories that were developed within the American context as well as
others that take into account comparative institutional differences.
In some contexts, this crossover continues to be influential in the development of comparative studies. In other cases, scholars are questioning to what extent institutional theories or theories of institutions developed within the context of established democracies (e.g. the US, Western
Europe) are helpful in understanding these same types of institutions in other areas of the world.
In his chapter on party politics (Chapter 10), Noam Lupu tackles this issue by noting that the
variation in how parties emerge, how they persist or change over time, and how they differ in
their strategies for appealing to voters in many parts of the world cannot be fully accounted for
by extant theories of parties that were developed in the context of American and Western
European parties. The discrepancy between received theories and empirical realities can be handled in two different ways. Splitters argue that theories derived from the experiences of the
advanced democracies fail to apply to other places, and as a result alternative explanations must
be developed. Lumpers, in contrast, attempt to generate broad theoretical frameworks that incorporate prior theories of party politics but still enable us to make sense of diverging empirical


The challenge, of course, is in building theories that are general but that still account for historically and contextually distinct paths. The difficulty of the endeavor should not be underestimated, as noted by Gabriel Negretto in his chapter on electoral systems (Chapter 9). Most
explanations of the origins and reform of electoral systems draw from the experience of Western
European states at the beginning of the twentieth century that underwent a shift from majoritarian to proportional systems. But, as Negretto argues, it is clear that outside of Western Europe,
proportional representation (PR) was adopted under historical conditions that were quite different: greater uncertainty over which systems would benefit established parties, political elites without full control over the reform process, and other goals of reform besides short-term partisan
interests. As a result, while the adoption of PR in places such as Latin America can be considered
within the general framework of actors behaving strategically to achieve their interests, historical
specificities may render impossible any attempt to generate a general theory of electoral reform.
Of course, there are sometimes very good contextual reasons for limiting the scope of our
research questions and theories. In their chapter on the military (Chapter 18), Aurel Croissant
and David Kuehn observe that the research questions surrounding the study of the military vary
by regime type. In authoritarian regimes, the focus has been on understanding military coups
and military regimes. In new democracies, the most significant issue is how to establish civilian
control over the military, while in established democracies scholars examine how civil–military
relations play out when norms and institutions already have established civilian primacy over the
military. That the research agenda is segmented by regime type is, in part, a reflection of realworld concerns. Establishing civilian control, for example, is a critical question for many new
democracies, but less so for established democracies. But since these research foci are interrelated
and countries sometimes transition across regimes, scholars studying the military under different
regimes still have much to learn from each other. In investigating how contemporary new
democracies might establish civilian control, for example, the historical experience of established
democracies in tackling this issue may be instructive.
Moreover, that contextual differences exist is not a reason to cease thinking and conversing
broadly about institutions. For one, the substantive context studied by scholars in one subfield
may have explicit relevance for phenomena under investigation by scholars in another subfield.
James Raymond Vreeland (Chapter 22) directly addresses this type of symbiosis between comparative politics and international relations scholars. Governments must be incentivized to join
international organizations (IOs). Interstate relations may strongly structure their incentives, but
so do domestic factors. So in order to understand why states join IOs, how IOs are structured
and operate, and what are their effects, it is critical to know something about the domestic politics of these states. Comparative scholars, in turn, will have a better understanding of some features of domestic institutions, policies, and outcomes if they factor in the effects of IOs.
More broadly, as the examples in this chapter and across the chapters in the Handbook illustrate, the structure of the problem confronting actors in one substantive context often resembles
the one that emerges in a very different environment. The challenge for scholars, then, is to
consider how specifics of a place or time require modification of extant institutional theories to
account for the specific phenomena of interest. In order to do so, they must know about those
existing theories which may require knowledge about an institution in another time and place.
For this reason, in their chapter on the study of institutions (Chapter 3), Tom Clark and Jennifer
Gandhi call for more collaboration not only across subfields, but also across substantive areas. To
take one example: if the object of study is the agency problem among parties within a coalition
government, it is useful not only to know how coalition governments operate in many parts of
the world, but also to learn about how the agency problem functions in other substantive contexts (e.g. bureaucrats and legislators, elected officials and voters).

Jennifer Gandhi and Rubén Ruiz-Rufino

Formal theory, as Milan Svolik argues in his chapter (Chapter 6), is well placed to enable
scholars to engage in this type of inquiry across substantive areas. Institutional rules usually delineate the participants, their available actions and information, and the procedures by which their
actions translate into outcomes—all elements required in a game theoretic model. Furthermore,
the participants often have conflicting interests, requiring them to behave strategically to get
what they want. Whether this means making strategic decisions within the constraints established by institutional rules or making them about the choice of institutions, the rationality
assumptions underpinning formal theory are reasonable even if models necessarily require some
abstraction from reality.

Institutions as solutions to strategic dilemmas
Because institutions are explicitly rules, incentives, and constraints on individual actors, scholars
studying institutions have become more attuned to the microfoundations of their explanatory
accounts. As Diermeier and Krehbiel (2003: 126) point out: “The crucial link between institutions (as contextual constraints) and outcomes (as consequences of collective choice) is behavior.”
In order to determine that institutions affect outcomes and how they do so, it is critical that we
draw as sharp a line as possible between institutions and behavior, and specify and show how
these incentives and constraints influence actions. Theoretically, scholars have been thinking
carefully about the strategic dilemmas that confront political actors and how institutions address
(or do not address) them. Throughout the work on a variety of different substantive institutions,
the problems of coordination, commitment, and agency appear, and institutions serve as solutions to these dilemmas.

Actors may be better off coordinating their actions, but individual rationality frequently does
not lead to collective rationality. In such situations, institutions may act as a coordinating device.
It is possible, for example, to organize the structure of government in a variety of ways, but
constant renegotiation over it is detrimental to political life. Institutional instability inhibits the
formation of plans and expectations and prevents actors from solving “lower-order” problems.
Constitutions, as Tom Ginsburg points out in his chapter (Chapter 8), may address this problem
by laying out a structure of government that serves as a focal point for actors. By offering a
blueprint for how government works, a constitution enables individuals to coordinate their
beliefs, expectations, and actions. Besides enabling action, however, constitutions can serve to
constrain government within limits. By generating an intersubjective understanding of what
constitutes appropriate state action, constitutions may help coordinate citizens so that they can
credibly threaten punishment of a government that exceeds its limits.
In his chapter on judicial institutions (Chapter 14), Julio Ríos-Figueroa observes that courts
may serve a similar function. Courts may convey relevant information about government misconduct and signal when rulers have overstepped constitutional bounds. Thus, judicial rulings serve
an important informational role that aids citizens in determining when government has committed a transgression, which is the first step in developing a coordinated response to restrain it.

When actors’ preferences are time inconsistent, institutions may enable them to make credible
commitments. As Ríos-Figueroa points out, judicial institutions play this role as well. Courts can


serve as a commitment device for an executive or legislature interested in signaling its intention
to protect property rights. He points out that courts can serve as such a commitment device,
however, only in so far as their rulings command compliance—not a trivial detail given that
courts lack enforcement power.
The problem of enforcement also plagues institutions as a means for resolving conflict. The
problem is that peace agreements—like constitutions and laws—are just pieces of paper. So any
promises to disarm or refrain from violent actions made now may not appear credible in the
future, especially if the actors involved retain their capacity to use force. In her chapter on the
relationship between institutions and political violence (Chapter 26), Laia Balcells notes that
there are domestic and international institutions that can alleviate this commitment problem
among civil war combatants, influencing the likelihood of war termination and the duration of
peace. But there is no “one size fits all” solution, and as a result, “there are a lot of contextdependent factors that affect their likelihood of success” (p. 381).

When actors delegate authority to an agent, problems of hidden information or hidden
action frequently emerge. Institutional structure often determines the extent of agency loss.
In their chapter on federalism (Chapter 15), Pablo Beramendi and Sandra León point out
that the degree to which the regions are able to shirk or the center “overawes” them depends
on the precise nature of federal institutions, including their fiscal authority as well as the
interdependence between the national and regional electoral arenas. As a result, the variance
in outcomes among federal countries is often as large as what exists between federal and
unitary states.
In some cases, institutions are able to directly minimize the degree of agency loss. Lanny
Martin and Georg Vanberg in their chapter on parliamentary government (Chapter 13), for
example, discuss the agency problem among parties within a coalition government. Parties must
figure out how to insure that their coalition partners will enact policy that is acceptable to the
coalition as a whole for the ministries that they control. Martin and Vanberg highlight the importance of strong legislative institutions in enabling coalition partners to monitor and enforce
policy agreements and thus mitigate the moral hazard problem.

Institutions-as-rules and institutions-as-equilibria
Institutions and their effects
If actors use institutions to address particular strategic dilemmas, it must be true that they believe
that institutions have important effects on behavior and outcomes. Otherwise, there would be
little point in employing such institutions as solutions. So it seems appropriate that much of the
literature on institutions examines how they serve as rules or constraints on behavior and, as a
result, have important effects on a variety of outcomes.
Institutions often shape the opportunities available for political mobilization. In her chapter
(Chapter 25), Erica Chenoweth points out that one of the most noteworthy findings of the literature on mobilization is that significant extra-institutional action takes place in precisely those
countries with many formal, legal, and viable institutional channels through which people can
express their preferences. In support of her point, Chenoweth reviews several hypotheses and the
scholarly work behind them, examining the effects of institutions, such as regimes, electoral rules,
and political parties, on protest activities.

Jennifer Gandhi and Rubén Ruiz-Rufino

Similarly, Ian McAllister (Chapter 23) observes that voting is “not simply a personal choice,
but one that is shaped by the context within which the choice is made” (p. 333). Institutions play
an important role in determining whether individuals vote, whether they vote strategically or
sincerely, whether they develop partisan identification, and for whom they vote. And the range
of institutions that play a role in structuring this choice is large, including voter registration laws,
ballot structure, electoral systems, and legislative structure. The challenge is in uncovering the
interaction between system-level and individual-level characteristics in determining these
Institutions shape the choices not only of individuals, but also of governments. In her chapter
on institutions and economic development (Chapter 29), Luz Marina Arias focuses on the ability
of governments to credibly commit to refrain from opportunistic behavior; to protect private
property rights and enforce contracts; and to provide public goods and infrastructure. She argues
that these three features of state behavior are critical in accounting for the substantial variation
in economic performance across countries and also are heavily influenced by institutions.

Institutions as outcomes
If institutions address strategic dilemmas, however, it also means that they are human constructs,
chosen under constraints and incentives. They cannot exist—at least, not with any stability—
unless critical actors agree to their existence. As such, institutions are endogenous and can constitute equilibria.
International organizations, for example, are composed of member states, and there often are
domestic reasons why states do (or do not) join these organizations and covenants. As Vreeland
discusses (Chapter 22), governments may join international organizations or agreements to solve
domestic problems, marginalize opposition, or deflect blame for unpopular policies. As such, the
focus is on understanding the domestic factors that contribute to making international organizations stable institutional equilibria.
For new democracies and states recovering from domestic conflict, transitional justice institutions offer a way for their societies to deal with their authoritarian and violent legacies. There are
normative reasons for establishing these types of institutions, but, as Monika Nalepa discusses in
her chapter (Chapter 27), the process by which these institutions emerge is purely political.
Consequently, in order to understand why some countries adopt transitional justice institutions
and the different forms they take, it is necessary to focus on the electoral incentives that mold
parties’ preferences for these institutions and the partisan and legislative features that influence
their abilities to establish them. In Nalepa’s account, institutions play an important role in shaping the emergence of other institutions.

Challenges and opportunities in studying institutions
Numerous chapters in the volume make clear that the study of particular substantive institutions
has included both lines of inquiry—to varying degrees. What is less clear is how to think about
the joint implications of the fact that institutions influence outcomes and that they are endogenous. Thinking about institutions-as-rules and institutions-as-equilibria generates significant
theoretical and empirical challenges for the study of institutions. The fundamental problem lies
in establishing that institutions exhibit a true causal effect in the face of critical issues such as
epiphenomality, selection effects, and reverse or simultaneous effects.
Institutions may be epiphenomenal, or, at the very least, have a more modest role to play in
influencing behavior and determining outcomes. In their chapter on authoritarian institutions


(Chapter 19), Clara Boulianne Lagacé and Jennifer Gandhi discuss the many reasons why autocrats govern with institutions that are familiar to students of democracy: legislatures, parties,
elections, courts. One claim in the literature is that these institutions can constrain autocrats so
that they can credibly commit to share power with elites or desist from predatory behavior. It is
unclear, however, to what extent the institutions—or the balance of power behind them—act as
the real constraint on autocratic behavior since such institutions appear to be malleable. The difficulty in sorting out the issue exists also at the empirical level due to the difficulty of measuring
the balance of power between leaders and their supporting coalitions in autocracies.
Selection effects also may render the relationship between an institution and an outcome
spurious. Susan Hyde and Kevin Pallister (Chapter 17) discuss two institutions that potentially
have a significant influence on election quality: electoral management bodies (EMBs) and election observation missions (EOMs). EMBs are the institutions that run elections: they carry out
essential tasks such as registering voters, regulating campaigns, conducting the polling and counting of votes, and resolving electoral disputes. By performing these tasks in ways that do not
advantage one side over the other, EMBs can increase the quality of elections. But in describing
the effect of these institutions on election quality, the use of the word “potentially” is intentional.
As Hyde and Pallister point out, scholars have not yet uncovered why some countries adopt
“better” EMB models than others. As a result, it may be the case that countries that are more
likely to adopt “good” (e.g. non-partisan) EMB structures are the same ones that are likely to
hold high-quality elections. Because EMBs are a choice, the factors driving that choice may be
more determinative of electoral outcomes than the EMBs themselves.
Finally, reverse or simultaneous causation may characterize the relationship between an institution and an outcome. In his chapter (Chapter 16), Victor Lapuente reviews the factors that
contribute to the rise of a merit-based bureaucracy. In doing so, he tackles the difficult relationship between economic development and a well-functioning state apparatus. Does development
lead to the rise of a meritocratic bureaucracy? Or does such a bureaucracy encourage the flourishing of the economy? The answer to both questions is most likely “yes,” complicating efforts to
determine the independent impact of bureaucracy on important economic outcomes.
But the fact that institutions are, at the same time, the product of choices and act as incentives
for other choices opens up other large promising areas for research: institutional change and
institutional bundles. We discuss each topic in turn.
First, institutions may have effects which sometimes provide incentives for actors to maintain
or change these very same institutions. In his chapter (Chapter 4), Adam Przeworski examines
this type of endogenous institutional change in a notoriously difficult context—that of economic development. In some situations, endogenous change may occur through a decentralized
process. Przeworski claims that Marx was one of the first to provide such a theory in explaining
how the actions of individual capitalists would result in the downfall of their economic system.
In other cases, elites who control resources and political power make conscious choices—in
response to economic conditions—that result in a more centralized process of change. But complications may emerge because new institutions do not always “take.” As Przeworski notes: “often
reforms are futile: institutions change and life goes on as before” (p. 52). This may occur because,
as Przeworski observes, institutions may not map onto outcomes one to one. But it raises the
question of why some institutional arrangements are respected while others are not.
One answer may lie in acknowledging that formal institutions exist beside informal ones. In
his chapter (Chapter 5), Hans-Joachim Lauth discusses the nature of informal institutions and
points out that the relationship between formal and informal institutions is particularly thorny
when political change is involved. When change occurs—for example, in the case of regime
transitions—it may consist of changes in the formal rules of the game, but also in informal

Jennifer Gandhi and Rubén Ruiz-Rufino

institutions. When informal institutions undermine new democracies, Lauth argues, it is relatively
straightforward to observe. But it is much more difficult to assess their influence when they support formal democratic institutions. In this case, scholars may end up attributing greater causal
impact to formal institutions than they deserve.
Second, while scholars often examine individual institutions, it is important to keep in mind
that institutions exist in bundles. Depending upon the procedures governing institutional choice,
existing institutions may play an important role in determining the origins of other institutions.
In her chapter on transitional justice (Chapter 27), Nalepa explores this route, discussing how
legislative and partisan institutions in new democracies influence the choice of transitional justice institutions.
Indeed, it may be the case that we cannot understand how any one institution functions
without considering its place within the larger institutional setting. Beramendi and León
(Chapter 15) argue that this is the case with federalism. The degree to which central and regional
governments cooperate, for example, may depend on the degree to which their electoral fates
are tied, making the interaction between federalism and party systems critical for determining
the types of outcomes that are produced. Similarly, Ginsburg (Chapter 8) observes that in order
to understand the endurance and change of constitutions, it is important to consider not only its
content (e.g. amendment procedures), but also institutions of constitutional review. To the extent
that courts and other institutions can interpret a constitution’s meaning and application, they
play a decisive role in determining that institution’s effect on behavior and outcomes.
Not only do institutions influence the choice and operation of other institutions, but there is
clearly more room to understand how institutions work together as substitutes or complements
in addressing various strategic dilemmas facing political actors. Martin and Vanberg (Chapter 13),
for example, suggest that there are many institutional ways in which parties within a government
coalition can police their policy bargains. Similarly, in their chapter on authoritarian institutions
(Chapter 19), Boulianne Lagacé and Gandhi discuss how autocrats use legislatures, parties, and
courts to solve problems of commitment while they use some of these same institutions along
with elections and decentralization to improve their efforts at information-gathering. These
cases (along with others) raise several questions: Why do some countries use one type of institutional solution while others use different ones? Why do some governments address a problem
with multiple institutional solutions while others use one? Are various institutions—that may
work together or at cross-purposes in addressing a problem—chosen together intentionally?
Most scholars study a particular substantive institution, imparting a rudimentary understanding
of how bundles of institutions operate.
The challenges and opportunities of institutional analysis lie not only in our theories and
explanations, but also in our empirical strategies. As is evident from several of the chapters in the
Handbook, the bulk of scholars’ empirical efforts have centered on assessing the effects of institutions. The focus on institutions-as-rules is due, in part, to the difficulty of explaining institutional
origins and change, but perhaps in equal measure to the scarcity of comparative historical data.
Recent efforts to improve contemporary cross-national data have enabled scholars to focus
more closely on the effects of institutions on a variety of outcomes. Wehner (Chapter 20), for
example, notes that for many years the major impediment to comparative work on fiscal institutions was the paucity of cross-national data. But in the early twenty-first century, scholars have
compiled detailed and consistent information on budget institutions in fifteen European Union
countries as well as increasingly better data on these institutions in Latin America. Similarly, the
study of institutions and voting behavior received a significant boost from the Comparative
Study of Electoral Systems (CSES) project, which coordinates the operation of more than fifty
national election studies across the world. McAllister (Chapter 23) notes that this data collection


effort insures that information about citizens’ behavior and attitudes gathered in each country is
comparable and can be matched with information about institutional arrangements.
With observational data, there also has been a move towards examining variation within
countries, relying upon sub-national data. In their chapter on institutions and political corruption (Chapter 28), Miriam Golden and Paasha Mahdavi discuss many of the reasons for this
trend. At the sub-national level, scholars may be able to collect fine-grained measures to more
precisely test theoretical arguments. In addition, within a single country there may be more
variation in the relevant variables (e.g. institutional structure) while still enabling scholars to
better “control” for important contextual factors. In the study of political corruption, the fact
that studies based on cross-national and sub-national data produce conflicting results is impetus
enough for demanding more within-country analysis.
Observational data—whether at the national or sub-national level—carries its own challenges in assessing the effects of institutions. Because we know that actors purposively choose or
change institutions due to the outcomes they generate, disentangling the effects of institutions
and the conditions under which they exist is difficult (Przeworski 2004). It is also then likely that
the universe of institutions that we observe does not contain all of the counterfactuals that we
need to adequately assess causality (King and Zeng 2007). The end result is that the use of observational data creates a variety of inferential problems.
In response—following the trend more generally in political science—there is a small but
growing literature that uses experimental methods to understand the effect of institutions. In
their chapter on the use of field experiments to study institutions (Chapter 7), Guy Grossman
and Laura Paler discuss the introduction of participatory institutions or the provision of information to improve the functioning of existing electoral mechanisms at the local level. The
experiments enable scholars to empirically assess whether institutions influence individual-level
behavior. The experimental design avoids the messiness of observational data, and the zeroingin on microfoundations allows for close testing of particular theoretical linkages. But Grossman
and Paler observe that, as with all things, there are trade-offs: field experiments may not allow
us to get at questions associated with “big” institutions, such as regimes or executive–legislative

Do institutions matter?
Careful theoretical and empirical work has furthered our understanding of institutions, but it
also has led to continued debate on many substantive questions. What may have stood as conventional wisdom is often revisited, with more precise theorizing to account for more empirical
patterns. This volume highlights a number of these debates, ranging from the sources of instability in presidential democracies to the class origins of economic and social policies. Some of these
substantive debates also highlight that “institutions matter” may still be considered a question
rather than a statement.
In his chapter on executive–legislative relations (Chapter 12), Sebastian Saiegh revisits the
Linzian argument about presidentialism and democratic stability. Saiegh argues that there are
good theoretical reasons to think that presidential regimes are no more dysfunctional than parliamentary ones, and he shows empirically that presidents form government coalitions and, more
significantly, are successful at passing their policy agendas through the legislature at a frequency
approaching that of parliamentary governments. His findings demonstrate that presidential
regimes are not inherently prone to deadlock and instability. But the fact that presidential democracies die at a higher frequency than parliamentary ones still remains, leaving scholars with an
open puzzle.

Jennifer Gandhi and Rubén Ruiz-Rufino

Similarly, Rubén Ruiz-Rufino (Chapter 24) discusses the complex relationship between ethnicity and elections. There is a large, still unsettled, debate over whether elections serve as a
peaceful mechanism through which groups can process their conflicts or whether they serve to
incite mobilization and/or conflict along ethnic lines. The answer depends, in part, on the way
the election is structured. Certain types of electoral rules may encourage party formation or
post-electoral behavior that reflects ethnic peace or conflict. And as scholars are learning more
about how candidates and parties use fraud and manipulation, Ruiz-Rufino argues that we
should expect these aspects of electoral behavior to affect whether elections quell or foment
ethnic conflict.
Finally, in their chapter on labor market institutions (Chapter 21), Irene Menendez and David
Rueda trace the evolution of institutionalist arguments designed to account for variation in
macroeconomic outcomes such as unemployment and inflation. Scholars emphasized the role of
corporatist and partisan institutions as a corrective to an earlier consensus on the role of labor
market rigidities in influencing such outcomes. Yet concertation bargaining along class lines and
left partisan control of government go only so far in accounting for historical patterns because
the emphasis on these institutions assumes that workers and employers engage in zero-sum conflict while the interests of labor and Social Democratic parties are static and homogenous.
Because cross-class alliances do sometimes emerge and workers are often divided between
“insiders” and “outsiders,” Menendez and Rueda call for a focus on these dynamics as well as
different institutions to explain labor market policies and outcomes.
The above examples are just some of the substantive areas, highlighted in the Handbook’s
chapters, where scholarly debate continues and research frontiers remain wide open. More broad
is the debate over whether institutions are even as important as we think they should be in
accounting for various outcomes. There are some areas in which it is clear that the “institutional
revolution” has made a measurable impact on our understanding of some political outcomes.
Martin and Vanberg (Chapter 13), for example, observe that the study of coalition government
used to be “institution-free” in that scholars focused on how non-institutional factors such as
party ideology influenced coalition formation. Due to the turn towards institutions, we have
learned that institutions, such as investiture requirements and the continuation rule, influence the
government formation process, and we are just now beginning to understand how institutions
affect governance under coalitions.
Similarly, Balcells (Chapter 26) argues that institutions are critical in understanding political
violence for a number of reasons. Institutions themselves are often the target of political violence;
they also shape the opportunities and capacities for using violence. The institutional means by
which actors can advance their goals, for example, may influence the decision to use violence.
Institutions also may be critical for the resolution of commitment problems among combatants,
influencing the extent of inefficient conflict.
In reviewing institutionalist approaches, Margaret Levi and Victor Menaldo (Chapter 2) generally observe that “we have established that institutional variation explains a big share of the
observed variation in economic growth, regime types, and public policies” (p. 16). This understanding of institutions has been hard won. As Levi and Menaldo explain, it has required not only
the careful development of theoretical mechanisms and empirical strategies to assess them, but
also the creativity and imagination to consider rare or non-existent institutional forms. Given the
importance of institutions for explaining such big, important outcomes, it becomes all the more
imperative to understand why most of the world still lives under “bad” institutions.
But there are other areas in which the importance of institutions is still unclear—both in theoretically disentangling their effects from non-institutional factors and in empirically uncovering
substantively important effects. In examining party systems, for example, Negretto (Chapter 9)


makes clear that electoral rules matter, but he also points out that so does social heterogeneity.
While much of the literature on electoral and party systems treats cleavages as a priori fixed
within a society, we know that social cleavages must become political cleavages in order to be
relevant. But this happens only if political parties take action, and, being strategic actors, when
parties try to activate cleavages they probably also consider electoral rules. As a result, the interaction between electoral rules and social heterogeneity in determining party systems is probably
more complicated than currently acknowledged.
In examining political corruption, Golden and Mahdavi (Chapter 28) adopt a significantly
more pessimistic view. They review the recent scholarship that has examined the effect of
regimes, electoral rules, executive–legislative relations, the judiciary, and federalism on corruption, and conclude that “[I]nstitutionalist approaches are surprisingly ineffective in understanding corruption” (p. 416). One problem is that cross-national empirical studies have produced a
tangle of conflicting results. The other issue is that any institutional effects are dwarfed by those
generated by economic development. Poor countries—whatever their institutional makeup—
tend to be more corrupt than wealthy ones. If institutions matter, they do so only at the margins.
For other chapters in which the authors are more reticent in stating an opinion on whether
institutions truly matter, readers will have to be the judge. But it should be clear from the work
in this volume that there is still ample room for further research.

Diermeier, Daniel and Keith Krehbiel. 2003. “Institutionalism as a Methodology.” Journal of Theoretical
Politics 15 (2): 123–144.
Evans, Peter, Dietrich Rueschemeyer, and Theda Skocpol (eds.). 1985. Bringing the State Back In.
Cambridge: Cambridge University Press.
King, Gary and Langche Zeng. 2007. “When Can History Be Our Guide? The Pitfalls of Counterfactual
Inference.” International Studies Quarterly 51: 183–210.
Przeworski, Adam. 2004. “Institutions Matter?” Government and Opposition 39: 527–540.


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Part I

approaches to studying

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tHe new eConomiC
institutionalism in
HistoRiCal peRspeCtive
Margaret Levi and Victor Menaldo1

The new institutionalism arose in the 1980s, more than thirty years ago, in reaction to narrowly
individualistic approaches in economics, political science, and sociology. Behavioralists and
conventional neo-classical economics “interpreted collective political and economic behavior as
the aggregate consequence of individual choice…[and] viewed institutions as epiphenomenal,
merely the sum of individual level properties” (Powell and Dimaggio 1991: 2). The new institutionalists, building on a long tradition, claim that rules, norms, and customs—often arbitrary
and artificial—structure human interaction, and they use institutionalist approaches to explain
major macro-outcomes and long-term secular change.
The new economic institutionalists are methodological individualists who recognize the constraints and incentives encapsulated in institutional arrangements. They are both micro and
macro. By combining the analytic tools of rational choice with serious consideration of institutional arrangements, both formal and informal, the new economic institutionalists build on
microfoundations to reveal how institutions intervene between preferred choices and actions to
meaningfully affect outcomes of interest to economists, political scientists, and sociologists. In
contrast, the historical institutionalists, who came to prominence in the mid-1980s (Evans et al.
1985), have a determined emphasis on structural features, i.e. the type of economy or regime. At
least until the 1990s, the historical institutionalists paid little attention to microfoundations
(Thelen 1999). On the other hand, they did emphasize how institutions shape preferences and
behavior (Steinmo et al. 1992), an insight embodied in the work of older economic institutionalists but initially lost (if subsequently found) by their successors.
Here we focus on the new economic institutionalism, but hasten to note that all variants of
contemporary institutionalists have their roots in the older versions of institutionalism that date
back to at least the seventeenth century. Consideration of how institutions influence individual
behavior and collective action has a distinguished history. Major thinkers have long sought to
address big questions with important policy implications; and each subsequent generation built
(and builds) on the questions, tools, and insights bequeathed by the prior ones. While earlier institutionalists, comprising the authors of classical works in political economy, flirted with the origins
of order, secularism, and markets, the new economic institutionalists fashioned a rigorous analytic
approach to explain real world variation in the quality of institutions, state capacity, democracy,
economic development, and the welfare state. The most recent economic institutionalists use stateof-the art models and methods to explain why underdevelopment remains pervasive—despite the

Margaret Levi and Victor Menaldo

now widespread knowledge that institutions account for a large share of the variation in the outcomes that constitute development.
Earlier generations of institutionalists, including such luminaries as Thomas Hobbes, Adam
Smith, and Karl Marx were not necessarily aware that they were making inroads into the study
of institutions. They did not often use the language of rules and beliefs to describe and explain
social life. What they did was stretch the limits of their imagination to conjure worlds that were
not their own but could be. In the process, they came up with the first justifications and organizational blueprints for centralized order, liberalism, and capitalism. Because many of these institutions had not previously existed, or were vehemently opposed by reactionary thinkers and
forces, their contributions were groundbreaking.
A later generation, which includes Douglass North, Barry Weingast, and Robert Bates, were
self-consciously institutionalist. They imported the logic and implications of neo-classical economics while taking up the torch from the classical political economists, who had put politics at
the center of their analyses of social life. In their models rules and beliefs, but also power, trust,
and distributive politics, play a central role.
More recently, institutionalists try to make sense of the fact that government predation,
repression, politicized legal systems, corruption, citizen-on-citizen predation, and inveterate mistrust persist (e.g. Besley and Persson 2011; Acemoglu and Robinson 2012); this despite the fact
that their forbearers, the first economic institutionalists, adduced that strong and competent
states, the rule of law, and democracy are the key to promoting welfare-enhancing policies and
Indeed, thanks to robust empirical evaluations of the theories exposited by the new economic
institutionalists, we have established that institutional variation explains a big share of the
observed variation in economic growth, regime types, and public policies. We now have compelling evidence concerning how the rule of law and concomitant institutions contribute to development: by reducing the transaction costs of impersonal exchange (Wallis and North 1986;
Knack and Keefer 1995; Hall and Jones 1999), facilitating the generation of greater revenues
(Levi 1988; North and Weingast 1989; Olson 1993; Kiser 1994; Barzel and Kiser 2002), and
enabling democratization and pluralism (Clague et al. 1996; Weingast 1997; Acemoglu
and Robinson 2006). And we can document how democracy endows states with greater fiscal
and administrative capacity, if not legitimacy (Levi 1997; Schultz and Weingast 2003; Stasavage
2011), fosters the provision of public goods (Lake and Baum 2001; Bueno de Mesquita et al.
2003; Albertus and Menaldo forthcoming-b), and promotes greater global integration
(Eichengreen and Leblang 2008).
Meanwhile, institutional variation among democracies matters for the scope and quality of
governance. Proportional representation is associated with the provision of social insurance and
greater economic equality, better environmental stewardship, and lower incarceration rates
(Fredriksson and Millimet 2004; Iversen and Soskice 2006; Lijphart 2012). Majoritarianism
deters corruption and excessive government debt (Persson and Tabellini 2005). Federalism and
political decentralization may improve the provision of public services at the local level and promote more responsible spending (Weingast 1995; Rodden and Wibbels 2002; Wibbels 2005;
Diaz-Cayeros 2006; Treisman 2007).
In arguing that institutions have a profound impact on the organizations, policies, and even
the identities that constitute people’s everyday reality, the new economic institutionalism forces
us to grapple with an uncomfortable conclusion, however: Although “bad” institutions are
potentially subject to change, they nonetheless continue to condemn a huge swath of the world’s
population to lives that are short, nasty, and brutish—through no fault of their own (Fukuyama
2011; Acemoglu and Robinson 2012). These institutions include unchecked autocratic authority

The new economic institutionalism

and weak bureaucracies that promote predatory behavior, corruption, and civil strife. They
therefore breed insecurity and underdevelopment, if not the serial violation of human rights and
tragedies such as famines (Sen 1981). Paradoxically, it is Hobbesian absolutism that has often
replicated the state of nature depicted in the Leviathan across today’s developing world, not
transcended it.
This realization ushers in the critical puzzle that contemporary institutionalists are grappling
with. If “good” institutions are the key to promoting the means by which humans achieve
greater welfare and societies flourish, such as economic growth or egalitarianism, if not ends
with intrinsic value, such as civil liberties, then why don’t all societies simply adopt these institutions? A fledgling theoretical literature stands on the shoulders of giants in economics, economic
history, political sociology, and comparative political science and confronts this paradox. Scholars
have arrived at four explanations for why there is often a paucity of reforms that might bring
about more optimal equilibria despite the now common knowledge that certain institutions
should engender outcomes preferred by a greater swath of society: commitment problems; information asymmetries; collective action difficulties; and scope conditions.
This chapter continues as follows. We will first examine how earlier generations of institutionalists, the classical political economists, provided the scaffolding necessary to address the
puzzle of underdevelopment. We will explore how the ancestors of the new economic institutionalism imagined new worlds where none had existed before, and outlined foundations for
secular authority, liberalism, and capitalism, despite the fact that religiously justified rule, disorder,
absolutism, and illiberalism were the only game in town. We will argue that they fashioned a
more primitive, yet visionary, articulation of the question of where development comes from; in
doing so, they bestowed on the next generation of institutionalists a fruitful research agenda. We
then turn to the new economic institutionalists and explore how they marry the study of economics to the study of politics to generate clear, falsifiable predictions about where order, liberalism, and development come from, and how this equilibrium is sustained. We conclude with a
question: How do we make sense of a world in which many of the practical problems first
diagnosed by the classical political economists endure, even though knowledge of what institutions contribute to development has become widely available?

From Hobbes to North
Some of the earliest theorists of the state, Bodin (1530–1596) and Hobbes (1588–1679), deserve
the label of the first institutionalists. Having lived through horrific periods of civil strife, they
argued for the establishment of government institutions capable of creating constraints on
human action through laws and the arrangements devised to uphold law-abidingness. Their
primary goals were order and stability. However, the autocratic institutions they promoted, while
certainly enabling economic growth by ensuring relative peace, had the conjoined effect of
blocking innovation by stabilizing power in some hands and thus reducing competition, enhancing the repressive capacity of rulers, and denying voice to the vast majority of the population.
Given these normatively suspect outcomes, we can only speculate about why these “protoinstitutionalists” proffered such a stark and draconian solution to the problem of anarchy and
disorder. One hypothesis that comes to mind is that it was the only response to the stranglehold
that religious apologists continued to have on the legitimation of monarchy in Western Europe
well after Westphalia. The product of consummately secular assumptions that fed directly into
deductions inspired by geometry instead of the Bible, the Hobbesian social contract and its
attendant political system did not require a metaphysical justification. Such a heterodox approach
to the study of political institutions did require, however, some respect for convention: arriving

Margaret Levi and Victor Menaldo

at the modal normative conclusion, the superiority of absolute monarchy, albeit through different means. It was almost impossible to imagine any other prescription.
What were the limits of these theorists’ imagination? Not only was it perhaps difficult to
predict how the consequences of absolutism might ultimately play out in the real world, but
Bodin and Hobbes were constrained by their historical and cultural context. In the face of a
paucity of successful experiments in self-rule that could operate over large territories and prove
sufficiently flexible and enduring, it might have been a step too far to hypostasize a social contract that put rulers and ruled on a more equal playing field. For example, the direct democracy
practiced in Ancient Athens was an idiosyncratic reflection of its relatively small size and a relatively equal distribution of property, knowledge, and sophistication among its (male) citizens, a
social structure that would only be recreated again, millennia later, among white colonists in the
thirteen American colonies.
This suggests that one way to think about the progress that has been made by subsequent
generations of institutionalists since Hobbes is succeeding theorists’ ability to stretch beyond
their predecessors’ creative limitations. It fell upon them to imagine widespread liberty when
none existed, to imagine a vibrant civic life when most of the population was still composed of
illiterate peasants, to imagine how political institutions might be specifically crafted to produce
such outcomes even though institutions had, hitherto, not been engineered to produce improvements in social welfare.
It is almost a century later when a new set of theorists prepared to do just that emerged.
Locke (1632–1704), Montesquieu (1689–1755), and Rousseau (1712–1778) all emphasize an
interaction between the governors and the governed. They, too, want to promote law and order,
but they also seek means to ensure institutional change in order to break up ossified power relationships that fail to advance the interests of the general population. They did not put it in these
modern terms, but these Enlightenment thinkers inferred that the absolutist solution to disorder
only served to “raise the stakes” of politics and promote further disorder down the road. Its ultimate empirical implication, which would soon be attested to during both the American and
French revolutions, is that there may be strong, perverse incentives for the marginalized to illegally contest power, lest a despot with few constraints on his authority and paranoid about
threats to his rule act first and deprive the former of their “life, liberty, and property.”
Of course, although thinkers such as Locke and Montesquieu attempt to be scientific in their
claims, their work on government and governance is largely normative. Nonetheless, their introduction of a new, more egalitarian basis for the social contract stretched the limits of imagination
beyond the political status quo of their age: they sought to provide a way to think about how to
impose systematic limits on executive authority to align the incentives of the rulers and the
ruled. In doing so, these institutionalists introduced a way to reduce the stakes of politics while
continuing to undertake a largely “scientific” and secular approach to the study of institutions.
The idea of a more reciprocal social contract had arrived.
These ideas were far from academic. They were soon instantiated in the limited, secular, and
deliberately engineered government of the first modern republic, the United States. This political experiment would ultimately prove that previously contentious and seemingly irreconcilable
conflicts over political authority, property, and religion could be defused and contained; and over
a huge territorial expanse, no less. This was achieved through the practice of constitutionalism,
federalism, and individual rights.
As institutions evolved to support a more democratic polity, they did so in harness to the
concurrent growth of capitalism. The result was theoretical emphasis on individual actors working in their own self-interest, but under the right institutional conditions able to produce a collective good. Bernard Mandeville (1670–1733) is among the first to both trumpet and raise

The new economic institutionalism

concerns about a highly individualized society. Best known for his Fable of the Bees (Mandeville
and Kaye 1924 (1714)),2 that pioneering text was an elaboration of his earlier popular poem,
“The Grumbling Hive” (Mandeville 1705). Mandeville’s private vices became transformed into
public virtues only if selfishness reigned and corruption was tolerated; virtuous individuals, from
his perspective, created a far smaller economy and duller society.3
But it is also noteworthy that during the long seventeenth century, fairly sophisticated notions
of self-interest were promulgated; notions that accord well with the institutionalist approach to
political economy that now predominates. When their life is on the line, it is hard for individuals
to exercise moral restraints that allow them to behave as the better angels of their nature. Thinkers
both then and now understand that this does not imply that individuals are, by nature, ruthlessly
egotistical. Rather, in some contexts, the price of morality, the ability to give others the benefit
of the doubt, and to trust them fully, is prohibitive. People can be individualistic and selfish, yes;
and under some circumstances narrowly focused on economic well-being. But, even those most
closely associated with the concept never fully believed it. Hobbes argued that people prefer to
act according to the golden rule, although most of the time their circumstances prevent it. Absent
the centralized provision of the rule of law, in a world of theft and predation, people must resort
to defensive selfishness.
It is during the Scottish Enlightenment that David Hume and Adam Smith well and truly
establish the basis for contemporary institutional theorizing in which the combination of selfinterest within rules is linked to producing economic well-being. Indeed, they went farther than
that, arguing that appropriate institutions actually bring the best out of people living in a society.
For Mandeville, the key is the transformation of private vice into public virtue. For Smith, it is
private interest embodied in good husbandry governed by protection of property rights that
produces public virtue. The combination of the division of labor, the invisible hand, and—lest it
be forgot—appropriate laws enables individuals with wide-ranging capacities to generate economic growth for the country in which they reside. Recall that Smith authored not only The
Wealth of Nations (1993 [1776]) but also The Theory of Moral Sentiments (1982 [1759]). In his
second opus the emphasis is on human behavior and norms; his complex theory goes beyond
the narrow characterization of self-interest for which he is currently caricatured.
Smith did have an implicit theory of politics, of course; one that is taken up by the classical
liberals and more contemporary conservatives who perceive government regulation as a threat
to efficient markets and to various forms of personal freedom. Smith’s contemporary David
Hume brought political institutions even more directly into his theorizing. He harked back to
the pre-Hobbesian concern with historically informed classical statecraft, and he shared with
Locke some skepticism about the nature of the capacity of the poor and humble to withdraw
their consent (Ryan 2012: 418, 486). Hume, however, unlike Smith, recognized and assumed
economic scarcity and the conflicts of interest it creates (Commons 1934: 6, 71, 74). Equally
important, he had a developed set of arguments concerning the incentives and psychology of the
individuals whose choices, when aggregated, produced macrobehavior. He brought to bear his
variant of empiricism, which incorporates passions, ideas, and imagination, as well as interests,
into a model that allows us to better understand the complexities of our world. That allowed
Hume to almost envision modern democracy and the tensions it would face in the increasingly
complex economy that accompanied the Industrial Revolution.
Neo-classical economics built on homo economicus, the division of labor, and the mechanisms
for aggregation of interests, ideas inherited from Smith, Hume, and their successors. More
recently, some new economic institutionalists and all behavioral economists have come to recognize the importance of passions and beliefs, long neglected in conventional economics,4 albeit
present in their bloodlines. What these late eighteenth and early nineteenth century political

Margaret Levi and Victor Menaldo

economists neglected or under-theorized were the vast variations among what states do and
how well they serve their publics. Making sense of this requires models of power, legitimacy, and
institutional change.5
Weber more directly considers power, legitimacy, and sources of change. He takes seriously
the rights and treatment of the governed, the constraints on the governed by means of law and
popular support, and, if not institutional change per se, at least the comparative statics that help
account for why change might (or might not) occur. Perhaps Weber was the first to alert us to
the importance of institutional complementarities, an issue taken up today in the “Varieties of
Capitalism” literature (see, e.g., Hall and Soskice 2001; Hall and Gingerich 2009), as well as in
other approaches (e.g. Acemoglu et al. 2001, 2002; Fukuyama 2011; Acemoglu and Robinson
2012). Ancient Rome and feudal China had large bureaucratic structures, but not the economic
institutions to support a modern state. Weber was sensitive to the nexus between political and
economic institutions.
Huntington (1968) took Weber’s analysis of political authority to its logical conclusion. He
speculated about disparaged bases of legitimate and stable political authority in countries experiencing the growing pains of modernization. He zoomed in on the transition from traditional
sources of legitimate political authority to legal-rational authority rooted in impersonal rules.
Whereas Weber largely neglected to foresee and therefore address how turbulent and discomfiting the social and political changes unleashed by economic development would be, Huntington
deftly identified the blind spots that characterized modernization theories such as Weber’s, and
later Lipset’s and Rustow’s.
Huntington did not believe that the diffusion of new organizational, communications, and
transportation technologies, alongside the steady march of industrialization, presaged a smooth,
let alone teleological, progression of social and political liberalization. Instead, these changes
might very well lead to chaos and disorder; that is, if they were not interdicted with new, deliberately constructed, ways of imposing social order and organizing politics that could mimic the
basis of traditional authority forsaken by Weber: cooptation and patronage. Huntington’s preferred solution to the rampant authority vacuums, anomie, and resistance unleashed by modernization was the cultivation of inclusive political parties that could fulfill the neglected functions
of social control on the bumpy road to legal-rational legitimacy. In this way, Huntington brought
institutions back in to the study of modernization and social change.6
Huntington’s 1968 book is located near the end of a long chain of scholars identified now
with the “old institutionalism.” In the United States,7 Thorsten Veblen (1912 [1953], 1914) and
others initiated a variant of institutional theory in the early part of the twentieth century.
Drawing on the “instinct habit” psychology of William James, the evolutionary theory of Darwin,
and his own concern with social position, Veblen rejected fully rational decision-making and
brought to bear a nuanced view of uneven influence and power (Hodgson 2007). John Commons
(1924, 1934) soon identified himself with this group, and it is Commons—far more than
Veblen—to whom several leaders in the new economic institutionalism, including both Douglass
North and Oliver Williamson, claim a lineage.
Commons, however, has thus far proved more important for his emphasis on institutions than
for his actual theories and models. His books are mostly out of print, and his name is all but
forgotten by today’s students, unless they have an interest in labor economics (Commons 1926),
where his work still breathes. Even so, he belongs in this list of those who exercised a major
influence on contemporary economic institutionalism—albeit less for his writings than his
example and preoccupations. He brought to institutionalism a life rich in practical economic
experiences combined with a deep knowledge of political economic theory.8 In his perspective,
institutions shape individual preferences and beliefs, but their ultimate source is in transactions,

The new economic institutionalism

which generate conflict of interests. Institutions, that is, laws, rules, and regulations, are the means
by which to solve social order problems by embodying collective action. He was fundamentally
concerned with the non-contractual basis of contracts:
I make conflict of interests predominant in transactions. But I conclude that this cannot
be allowed to be the only principle, because there are also mutual dependence and the
maintenance of order by collective action. I start, like economists, with scarcity, as universal for all economic theory. Then I proceed, as did Hume and Malthus, to show that
out of scarcity derives not only conflict, but also the collective action that sets up order
on account of mutual dependence.
(Commons 1934: 6)
While predicting a revival of interest in Commons (a revival yet, if ever, to come), Kenneth
Boulding summarized nicely the problem with this body of work: “Commons’ theoretical structure remains today exactly where he left it: a tangled jungle of profound insights, culled by an
essentially nontheoretical mind from a life rich with experience of economic realities” (Boulding 1957: 8). Commons’ insights on transaction costs were refined and made more theoretical
only a few years later by Ronald Coase (1937). One of his most notable insights was that institutions provide the basis of legitimacy for competition and for innovations that threaten the existing order. But it lay with Joseph Schumpeter (1942) to develop this critical insight into the
full-blown theory of “creative destruction.”
Even so, rereading Commons today—despite the literal dustiness of the pages and the denseness of the prose—alerts us to questions and issues that still require research and thinking if we
are to understand the prevalence and persistence of so many “bad” institutions: how institutions
provide legitimacy to various practices, how institutions shape preferences and beliefs, the steps
needed to build the rule of law, the role of custom, and the fragility of social order.
More sociological authors, such as Philip Selznick (1957, 1966), Seymour Martin Lipset
(Lipset 1950; Lipset et al. 1956), Reinhard Bendix (1978), and Edward Banfield (1958), shared
with Commons a focus on how institutional arrangements solve certain problems of public
goods and social order, while creating others. But their way of approaching these questions, also
critical to the “new” institutionalists, was distinctly different than the methods used by the first
generation of rational choice and sociological/organizational institutionalists, as Stinchcombe
nicely summarizes:
Institutions…shaped the creation and functions of units in markets and the relations
between them. But unlike the institutions of modern institutionalism, people ran these
institutions by organizing activities on their behalf. Institutions were, in the first
instance, created by purposive people in legislatures and international unions, and in
pamphlets of business ideologists in Northern England. Modern institutionalism, to
create a caricature, is Durkheimian in the sense that collective representations manufacture themselves by opaque processes, are implemented by diffusion, are exterior and
constraining without exterior people doing the creation or the constraining.
(Stinchcombe 1997: 2)
Government, especially laws, regulations, and organizations, played an important role in these
accounts, but what was lacking was both a theory of the state and an explicit account of how
institutions create preferences and shape behavior. Historical institutionalism9 arose as a corrective to the “old institutionalists,” the behavioralists who ignored institutions altogether, and to the

Margaret Levi and Victor Menaldo

economic and rational choice institutionalism which had arisen in the early 1980s with the
publication of Douglass North’s Structure and Change in Economic History (1981).
Building not only on Smith (and Coase), but also on Marx, in his effort to understand longterm secular change, North looks for the underlying matrix of incentives, constraints, and risks
that structure individual choice. His emphasis on transaction costs, property rights, and commitment problems was pioneering in the sense that he was able to meld insights from neo-classical
economics with the primary concern of political scientists and sociologists: how power, at least
bargaining power,10 matters for the construction, governance, and legitimacy of both political
and economic markets. North argues that the self-interest of rational rulers bent on holding on
to power and maximizing their own stream of revenues could usher in, under the right conditions, more optimal and stable equilibria. This could be accomplished through the self-enforcing
provision of private property rights and public goods with similar transaction cost reducing
properties: the standardization of weights and measures, time, and, most importantly, civil law and
contracts. However, such rules and the institutions they created to sustain their wealth and power
could also, over time, undermine the general welfare and prove destabilizing. As North noted
(1981: 20), “The existence of the state is essential for economic growth; the state, however, is the
source of man-made economic decline.”
In this sense, institutions mattered and mattered absolutely. While the rules of the game and
the attendant expectations about the future were themselves the byproduct of political strategies
adopted by rulers who aimed to consolidate authority and maximize rents, their independent
effects were pronounced and far reaching. If rulers were constrained to provide property rights
to a relatively large number of citizens and similar transaction cost reducing public goods to
remain in power, the result was usually representative government. Only this could adequately
guarantee a self-enforcing commitment to these Pareto improving policies. The ultimate economic upshot would be economic development, because citizens would be incentivized to
work, save, and invest in productivity enhancing endeavors instead of theft or rent-seeking. The
ultimate political upshot would be a strong state flush with tax receipts and access to cheap and
consistent credit. If rulers could somehow fulfill these objectives without the support of a broad
coalition that included the merchant class, and without the consent of the taxed, then they would
fail to provide property rights or other transaction reducing public goods. The logical result
would be underdevelopment—due to predation of the ruler against the ruled and the ruled
against each other, or at least the fear of predation—and weak states bereft of consent and revenues (see also Levi 1981, 1988, 2006).
While his emphasis on transaction costs, property rights, and rents is consistent with neoclassical arguments, his concern with how to acquire and process information and norms aligns
him with those pushing the boundaries of what standard models can achieve. Institutions create
the rules of the game for North and organizations facilitate collective action, but equally important are the cognitive limitations that configure the choices and beliefs of individuals and their
reference groups. In his later work North attempted to better theorize about the role of ideology
through the conception of “mental models” (Denzau and North 1994) and the incorporation of
how cognitive limits impinge upon and shape rational decision-making (North 2005).
The new economic institutionalism that North spawned encouraged a generation of scholars
to develop new theories of and empirical approaches for studying democracy, state building,
economic growth, and solutions to a whole range of collective action and commitment problems. Barry Weingast and Kenneth Shepsle, initially influenced more by William Riker than
North, brought to institutionalism the insights of game theory, deriving important and testable
propositions about institutional equilibria and disequilibria in Congress and other voting bodies
(Shepsle and Weingast 1981, 1987). Weingast, on his own, and in collaboration with North and

The new economic institutionalism

others, also used game theory to consider the relationship between rule of law and democracy
(Weingast 1997), the establishment of credible commitments that make cooperative relationships
possible (North and Weingast 1989; Milgrom et al. 1990; Greif et al. 1994), and most recently how
beliefs are established and affect collective behavior (Rakove et al. 2000; Weingast 2005).
Robert Bates (1981, 1983) was one of the first researchers to bring the modern study of
institutions to the developing world and to try to make sense of why seemingly irrational and
pathological policies were so ubiquitous there. Taking North’s assumptions about rational and
self-interested rulers to heart, Bates speculated that in the post-colonial nation states of SubSaharan Africa, in particular, rulers responded to perverse incentives inherited from their colonial
masters to retain power by pandering to nascent urban constituencies that could provide them
with political support and rents. This called on adopting industrialization policies that ran against
these countries’ comparative advantage and were subsidized by indirect taxes on the countryside
imposed via marketing boards that allowed the state to monopolize the pricing and distribution
of cash crops. This allowed weak states such as Kenya and Ghana to simultaneously erect protectionist barriers for infant industries rooted in overvalued exchange rates, raise revenues, and
ration credit and agricultural inputs via rural clientelism.
Besides the consolidation of power by rulers among a narrow, urban proletariat and a mass of
unorganized farmers, the upshot was the distortion of behavior in the marketplace. Farmers
eventually stopped producing enough food, nascent manufacturers allocated dear capital to
wasteful investments and supplied low quality goods at exorbitant prices, and urban labor grew
reliant on subsidized food. This pathological equilibrium was built on an erstwhile Russian and
Prussian trick: squeezing the peasantry. Like those examples before it, it ultimately proved unsustainable: balance of payment problems and attendant macroeconomic and political crises undermined the revenues and political coalitions at the core of this strategy. Haber et al. (2003) would
later identify a similar vein of crony capitalism in Mexico and illustrate how mechanisms of
credible commitment to property rights first identified by North worked to offer selective protection to a few oligarchs at the expense of entrepreneurs and the majority of the population,
with similar results to those exposed by Bates.
Bates helps bring the new economic institutionalism into political science and in the process
takes up a preoccupation of political science that economics largely neglects: a conceptualization
of power and the recognition of its importance for the analysis of institutional arrangements. In
her work on revenue production and on conscription, Levi (1988, 1990, 1997) not only makes
key to the analysis the influence of those with resources on which rulers and government actors
are dependent, she broadens the notion of resources to include the withdrawal of compliance and
consent. Even the seemingly powerless may indeed possess “weapons of the weak” (Scott 1985).
It is Jack Knight (1992), however, who brings issues of conflict, distribution, and ultimately
power onto center stage. Knight applies his model to the transformation of norms of bridewealth, common property, and clan exogamy (Ensminger and Knight 1997). As the forms of
power change, so do the norms.11
Meanwhile, it is Elinor Ostrom who develops and applies models of institutions that solve a
variety of common pool resource problems. Her work determinedly emphasizes the cognitive
limits of individuals and the influence of norms and contexts on their decision-making, monitoring, and collective actions (Ostrom 1990, 1998, 1999, 2005).
Other scholars also theorize the sources and sustenance of norms. Less concerned about the
role of power than are Bates, Levi, or Knight, what they emphasize are the informal institutionalization of relationships that solve difficult problems, such as in trade (Greif 1994, 2006), and
interethnic cooperation (Fearon and Laitin 1996). Relying on game theory, Greif offers an alternative to North’s definition of institutions. For Greif, “An institution is a system of rules, beliefs,

Margaret Levi and Victor Menaldo

norms, and organizations that together generate a regularity of (social) behavior” (2006: 30). The
inclusion of both organizations and beliefs has significant implications for how to model institutional change (Greif and Laitin 2004).
Where North and Greif converge, however, is on the importance of beliefs in understanding
not only why institutions arise but also why problematic institutions are retained. Marx,
Schumpeter, and most political economists who followed recognize how powerful actors keep
in place institutions in their own interest that are not necessarily in the general interest. But it is
not solely a story of power, at least not power in the form of observable material interest. It is
also a story of what the population believes is in their interest or what they believe it is possible
to do. A snowballing of protest can be one precipitant of the recognition that others share one’s
perspective or that it safe to act (Granovetter 1978; Kuran 1989, 1995). Often it requires information and leadership to change what people think the world is like and what they can do about
it (Ahlquist and Levi 2013).
Acemoglu and Robinson are, in many ways, the culmination of the different ideas introduced
by the old economic institutionalists and formalized and honed by the new ones. They situate
their work at the intersection of the primacy of power and how formal institutions shape individual behavior through the provision of economic policies that incentivize either consistent
productivity and egalitarianism or inefficiency and oligarchy. Across very influential articles and
books (e.g. Acemoglu et al. 2001, 2002; Acemoglu and Robinson 2006, 2012), they have outlined
dynamic theories of institutions in which democratization or the rule of law institutions that
sustain property rights are introduced or undermined by changes in the balance of power in
society. In their view, all institutions are next-best solutions to commitment problems. They
reflect the preferences over economic policy of those who wield power; but they would not exist
if those with de facto power could somehow perpetuate their threat of coercion into the indefinite future. Indeed, de jure institutions are selected because de facto political power is transitory.
Different groups in society have a fundamental conflict of interest over the distribution of social
gains and those with a temporary edge impose the rules of the game upon society to guarantee
a favorable distribution of resources into the future, even after their raw power fades.
Not all commitment problems have institutional solutions, however. The “best” institutions
theoretically presage increases in absolute wealth across social classes. Unfortunately, these
cannot always be crafted to simultaneously guarantee a favorable economic distribution for
those who wield power and the most Pareto Optimal equilibrium that grows the biggest possible pie. This is a difficult hat trick and historically rare. This is why, and, perhaps in an effort to
chastise economists who believe examples of systematic inefficiency bespeak irrationality,
Acemoglu and Robinson are wont to remind us that it is foolhardy to think about politics
through the prism of the Coase Theorem. Relative gains matter, and gains from trade may
therefore be forsaken. Increased welfare can be used to bolster de facto power of those who are
shut out of formal office. Development threatens the institutional equilibrium that benefits
whoever controls economic policy. The losers from institutional reform may cling to suboptimal
institutions if they fear that a transition to an ostensibly Pareto superior outcome will only serve
to threaten their political power and economic rents (Sutter 1995; Acemoglu et al. 2005; Albertus
and Menaldo forthcoming-b).
The problem is about time-inconsistency. New winners from institutional change have
incentives to renege on any agreement to compensate the losers after the reforms have come to
pass. If these potential losers hold power today, they will block said reforms because guarantees
of side payments or other inducements are not credible tomorrow. “Rather, the natural tendency
is for the gainers to husband their winnings and to stop their ears to the cries of the afflicted”
(Rogowski 1989: 17). This insight helps explain the puzzle that free trade is relatively rare

The new economic institutionalism

historically, and an arena of pitched battles between social classes and sectors, despite the fact that
it is Pareto improving in the textbook sense: gains from trade at the macro-level are axiomatic if
nations specialize along the lines of comparative advantage (Rogowski 1989). This can also
explain why many long-lived dictators run their economy into the ground and otherwise forgo
policies that may strengthen their opponents. It may even explain why they choose to fight to
the death rather than relinquish political power (Albertus and Menaldo forthcoming-a).
Enduring underdevelopment is therefore explained by the fact that powerful actors often opt,
strategically, for the largest possible slice of pie from a smaller overall pie instead of a smaller slice
from a larger pie. Yet, under moderate levels of inequality, a temporary burst in de facto power by
a coalition of the middle classes and the poor can introduce democracy. To avoid revolution, the
rich will step down and allow democracy to become a credible commitment to redistribution;
and, yet, this should not pose an existential threat to capitalists after transition. The result is liberal
democracy coupled with secure property rights and public investments that usher in enduring
economic growth.
However, North, Wallis, and Weingast (2009) have pointed out that, even if credible commitments to protect the privileges and rents earned by elites who block democracy and progress can
be extended, this is not sufficient for ensuring that a transition to a more liberal order will occur.
The fabric of developing societies—what the authors call “natural states”—is supremely delicate,
and liberalizing reforms that aim to shrink hard-earned privileges and rents cannot merely be
compensated for, on an ad hoc basis, with side payments or other compensatory schemes.
Institutions in much of the developing world have been molded and fine-tuned over long periods of time to deter powerful actors from deploying violence to upset the political order or
enlarge their piece of the pie. Indeed, the state or other political actors are wont to dispense rents
in proportion to the de facto power that each group possesses. Therefore, rents are often “the glue
that holds society together” in underdeveloped countries in which power and concomitantly the
potential for violence are widely distributed, and threatening to withdraw them through neoliberal reforms may unleash a violent backlash.
North, Wallis, and Weingast remind us that the groups’ potential for violence interact in
complex and nonlinear ways, and the uncertainty about how each group might respond to
reforms that threaten their rents often cows states into the most rational strategy; that is, a risk
averse conformity to the status quo based on the realization that the opportunity costs of reform
in developing societies are steep. Every reform that is attempted is a forgone opportunity to
deploy rents to foster peace, itself a still quite scarce and highly valued commodity throughout
the world.

Next steps
There are other sources of underdevelopment still. Even if the losers from reform can actually
believe promises that their welfare will not be reduced in the wake of changes to the rules of the
game, the competence or integrity of the policymakers in charge of institutional reform may be
questioned. In turn, imperfect information of this sort may create perverse incentives by policymakers to signal reliability through suboptimal behaviors (Besley 2006; Acemoglu et al. 2010;
Albertus and Menaldo 2012). These may weaken the foundation of the rule of law or de