(Cambridge Studies in Comparative) Sven Steinmo, Kathleen Thelen, Frank Longstreth - Structuring Politics - Historical Institutionalism in Comparative Analysis-Cambridge University Press (1992)

Institutions and Rationality in Politics - Three Varieties of Neo-Institutionalists
Author(s): Junko Kato

Source: British Journal of Political Science, Vol. 26, No. 4 (Oct., 1996), pp. 553-582
Published by: Cambridge University Press
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B.J.Pol.S. 26, 553-582 Copyright? 1996 CambridgeUniversityPress
Printed in Great Britain
Review Article: Institutions and Rationality

in Politics - Three Varieties of
Neo-lnstitutio nalists
JUNKO KATO*
The driving force behind the production of new studies in political science is
a focus on political institutions - the new institutionalism. This recent shift in
the dominant approach in political science has brought increasing scholarly
interest in institutions' and ushered in an active debate about certain central
concepts, such as the state.2
Two major controversies revolve around the new institutionalism. The first
is between supporters and sceptics of the utility of this approach in political
science. While the advocates claim that the focus on political institutions will
shed new light on underexplored or even neglected aspects of politics, the
sceptics doubt the novelty of the insights and are thus reluctant to promote this
approach at the expense of existing approaches in political science.3 The second
dispute, which has been less salient, but is becoming more importantas scholarly
interest in institutions increases, is concerned with how the new institutionalism
can analyse the relationship between individuals and institutions. In this
argument, three distinct groups can be identified.
The first group employs primarily traditional methods of political science
research, especially historical investigation and qualitative analysis with a
*
Department of Social Science, University of Tokyo. The author gratefully acknowledges
comments and suggestions from Stephan Haggard, Margaret Levi, Susan Rose-Ackerman, Sven
Steinmo, Albert Weale and two anonymous Journal referees.
'T. Skocpol, 'Bringing the State Back In: Strategies of Analysis in CurrentResearch', in P. B.
Evans, D. Rueschemeyer and T. Skocpol, eds, Bringing The State Back In (Cambridge: Cambridge
University Press, 1985, pp. 3-37); J. G. March and J. P. Olsen, 'The New Institutionalism:Organized
Factors in Political Life', American Political Science Review, 78 (1984), 734-49; J. G. March and
J. P. Olsen, Rediscovering Institutions. The Organizational Basis of Politics (New York: The Free
Press, 1989).
2 T.
Mitchell, 'The Limit of the State: Beyond Statist Approaches and the Critics', American
Political Science Review, 85 (1991), 77-96; T. Mitchell, 'Response: Going Beyond the State',
American Political Science Review, 86 (1992), 1017-21; J. Bendix, 'Controversy: Going Beyond
the State', American Political Science Review, 86 (1992), 1007-10; B. Ollman, 'Controversy:Going
Beyond the State', American Political Science Review, 86 (1992), 1014-17; B. H. Sparrow,
'Controversy: Going Beyond the State', American Political Science Review, 82 (1992), 1010-14.
3 G. A. Almond, 'The Return to the State', American Political Science
Review, 82 (1988),
853-74; O. K. Pederson, 'Nine Questions to a Neo-lnstitutional Theory in Political Science',
Scandinavian Journal of Political Science, 14 (1991), 125-48.

554 KATO
renewed focus on institutional changes and dynamics. The alleged novelty of

this first approach, therefore, lies not in its research methodology, but in its
broadened perspectives of institutions which include factors such as culture,
norms and routines. The second group is composed of rational choice theorists
who attempt to incorporate institutional constraints upon individual behaviour
into their original approach, which is based on an assumption of economic
rationality. Their approach is 'new' in the sense that they add institutional
factors to the analytical framework of micro-economics or public choice theory.
The third group is least well known and often confused with the second group.
They use the concept of bounded rationality, as presented by Simon,4 and
consider institutions to be organizational contexts in which individual rational
behaviour is cultivated and promoted.
The three groups are often confused with each other. One reason for this is
that each makes its own claim for the importance of institutions independently
of the other groups' claims. Skocpol sets the agenda for 'bringing the state back
in' only for the first group of new institutionalists.5 McCubbins makes a
convincing case for incorporating institutional factors into rational choice
perspectives.6 In the third category, North analyses the relationship between
institutional change and economic performance and shows its strength by using
an approach based on bounded rationality.7
Recently, some scholars have been interested in comparing these different
approaches.8 In contrast to existing comparisons of neo-institutionalism, this
article aims to clarify the merits of the various new institutionalist approaches
and narrow their disagreement on the question of the relationship between
political institutions and individual rational behaviour. A central aspect of the
disagreements among the three approaches is closely related to their different
4 H. A.
Simon, 'A Behavioral Model of Rational Choice', Quarterly Journal of Economics, 69
(1955), reprinted in H. A. Simon, Models of Bounded Rationality: Behavioral Economics and
Business Organization (Cambridge, Mass.: MIT Press, 1982); and H. A. Simon, Models of Man:
Social and Rational (New York: GarlandPublishing, 1987); H. A. Simon, 'Rational Choice and the
Structureof Environment', Psychological Review, 63 (1956), reprintedin Simon, Models of Bounded
Rationality and Simon, Models of Man.
5
Skocpol, 'Bringing the State Back In'. She does not use the term 'new institutionalism'.
6 M. D.
McCubbins, 'Introduction', in P. Cowhey and M. D. McCubbins, eds, Structure and
Policy in Japan and the United States (Cambridge: Cambridge University Press, 1995), 1-16.
7
D. C. North, Institutions, Institutional Change and Economic Performance (Cambridge:
Cambridge University Press, 1990).
8 For example, S. Steinmo and K. Thelen, 'Historical Institutionalism in Comparative Politics',
in S. Steinmo, K. Thelen and F. Longstreth, eds, Structuring Politics: Historical Institutionalism in
ComparativeAnalysis (Cambridge:Cambridge University Press, 1992), pp. 1-32; March and Olsen,
Rediscovering Institutions;M. Levi, K. S. Cook, J. A. O'Brien and H. Faye, 'Introduction:The Limits
of Rationality', in K. S. Cook and M. Levi, eds, The Limits of Rationality (Chicago: University of
Chicago Press, 1990, pp. 219-63); W. R. Keech, R. H. Bates and P. Lange, 'Political Economy within
Nations', in W. Crotty, ed., Political Science: Looking to the Future, Vol. 2 (Evanston, NJ:
Northwestern University Press,1991), pp. 1-16; P. A. Hall and R. C. R. Taylor, 'Political Science
and Four New Institutionalisms' (presented to the Annual Meeting of American Political Science
Association in New York, 1994).

Review Article: Institutions and Rationality in Politics 555
perspectives on individual rationality. A deep chasm divides those who consider

the assumption of individual rationality an importantcomponent of institutional
analysis and those who see it as a misperceived postulate diverting our attention
from institutions. Scholars relying on the historical method and qualitative
sociopolitical analysis (those in the first group) regard the assumption of
individual rationality as incompatible with an institutional focus, and, thus, are
sceptical of the other approaches. By contrast, rational choice theorists in the
second group stress that retaining the economic rationality assumption is the
best way to maintain a unified and cohesive analytical scheme of institutional
analysis. The third approach, based upon bounded rationality, seeks a middle
ground between the socio-historical approach and the rational choice approach.
Its assumption of human rationality enables one to regard institutions or
organizations9 as possible environments in which the rational behaviour of
individual actors is promoted.
My ultimate aim is to provide some bridge between those who support and
those who oppose employing the rationality assumption. The first part of this
strategy is to clarify the different emphases in institutional analysis between the
socio-historical approach and the rational choice approach. Although these
approaches have distinct strengths in identifying different aspects of the
interaction between institutions and individuals, I do not propose a synthesis
between the two competing approaches. Rather, I will argue that the coexistence
of the two approaches serves to broaden our understandingof politics, especially
in comparative studies. I make a special effort not to overextend criticisms
presented by one approach to another. More specifically, I intend to qualify, on
the one hand, the socio-historical criticism of institutional analysis using the
rationality assumption; and, on the other, the rational choice criticism of the
limited generality of the socio-historical approach. I will then introduce the third
approach as a middle way between these two approaches and suggest that
discussions about the meaning of political institutions and individual rationality
can be made more productive by using this approach.
DIFFERENT APPROACHES TO INSTITUTIONS
The first group of new institutionalists includes a broad range of political

scientists, as well as some sociologists and historians. With a small number of
exceptions, those using the socio-historical approach regard the assumption of
individual rationality or rational behaviour in politics as incompatible with an
institutional focus. I will argue that criticism of the rational choice approach by
9The terms 'institutions' and 'organizations' are often used synonymously because both can be
applied to some collective bodies, for example, the state, bureaucracy, firm, market and so on. But,
I consider 'organizations' the better term in the more specific context in which one presupposes
certain internal structuresin such entities and regardsthese bodies as unified actors. Knight presents
a similar definition of organizations (see J. Knight, Institutions and Social Conflict (Cambridge:
Cambridge University Press, 1992)).

556 KATO
the first group often exaggerates the limitation of the rationality assumption. To
this end, I will first compare and contrast the socio-historical and rational choice
new institutionalisms.
Both the socio-historical institutionalists and the rational choice new
institutionalists are concerned with the question of how institutions shape
political behaviour and outcomes.10These approaches emerged from a reaction
to the indifference to political institutions during the behaviourist era of the
1950s and 1960s. Major proponents of different new institutionalist approaches
criticize the preceding approaches. For example, Skocpol has presented a clear
antithesis to the pluralist, structural-functionalistand Marxist literatures, which
she alleges were dominant during this period, and has proposed a new
institutional interest, focusing particularly on the state." March and Olsen
contrast their institutionalist approach with contextualism, reductionism,
utilitarianism, instrumentalism and functionalism during the same period.'2
Rational choice theorists, such as Ordeshook, also define a new institutionalism
as 'an effort at recombining behaviourist research with more traditional
concerns of political science', namely institutions.13
The second common point between the socio-historical and rational choice
institutionalists is the inclusion in the analysis of both formal rules and
organizations and informal routines and procedures.14Despite this similarity,
however, these two institutionalist positions are distinguishable, especially in
the way they interpretand analyse individual behaviour in institutions. Steinmo
and Thelen make the most clear-cut distinction in this respect.15According to
them, the rational choice approach relies on 'a "universal tool kit" that can be
applied in virtually any political setting', that is, a logical framework based on
the assumption of utility maximization of self-interested individuals; and it
considers an institution as 'a strategic context, imposing constraints on
self-interested behaviour'. By contrast, historical institutionalists find that
10Because most scholars who endorse the socio-historical

approachpay too little attention to the
difference in the rationality assumption between the second and the third groups, I also do not
distinguish them in this section. Their differences will be introduced later.
" Skocpol, 'Bringing the State Back In', pp. 4-6.
12March and Olsen, Rediscovering Institutions, pp. 3-8.
13P. C. Ordeshook, 'The Emerging Discipline of Political Economy', in J. Alt and K. A. Shepsle,
eds, Perspectives on Positive Political Economy (Cambridge: Cambridge University Press, 1990),
pp. 9-30.
14For example, see P. A. Hall, Governing the Economy (New York: Oxford University Press,
1986), and Ordeshook, 'Emerging Discipline of Political Economy'.
15Steinmo and Thelen, 'Historical Institutionalism in
Comparative Politics'. Their edited book
(Steinmo, Thelen and Longstreth, eds, Structuring Politics) is a collection of essays, many of which
have developed into books. For example, C. A. Dunlavy, Political Structureand Institutional Change
(Princeton, NJ: Princeton University Press, 1993); V. C. Hattam, Labor Visions and State Power:
The Origins of Business Unionism in the United States (Princeton, NJ: Princeton University Press,
1993): and S. Steinmo, Taxation and Democracy (New Haven, Conn.: Yale University Press, 1993).
These works are good examples of historical institutionalism, but I will review only Steinmo,
Taxation and Democracy, because of the limited space here.

reliance on such a deductive logic based on individual rationality restricts their

interests in institutions. Thus, 'ratherthan deducing hypotheses on the basis of
global assumptions and priorto the analysis, historical institutionalists generally
develop their hypotheses more inductively, in the course of interpreting the
empirical material itself.'16
Rational choice studies apply the assumption of utility maximization, or some
approximation of it, to the analysis of political actors. But, which political
actor's preference or interest is of primary importance differs from one rational
choice perspective to another. Different assumptions, concerning, for example,
the domination of bureaucratic interests over a popular mandate or the
effectiveness of political control over bureaucracy, can lead to completely
different conclusions about policy outcomes. Using the former assumption,
Niskanen,'7 and Brennan and Buchanan18 maintain that the preferences of
constituents of the state, especially bureaucrats who are free from popular
mandates, dominate decisions on public policy. However, other public choice
literature emphasizes the link between public preference and policy decisions
and presents rational choice perspectives that focus on incentives provided by
politicians' desire for re-election.19 In terms of macro-level concerns, the
rational choice approach permits one to analyse various consequences of
rational behaviour such as collective action problems represented by Olson's
work on interest groups,20 the prisoners' dilemma situation applied both to
international and domestic politics, party competition as formulated by
Downs,21 and so on.
The novelty of rational choice new institutionalism lies in the analysis of the
effects and influences of institutions, especially the analysis of whose interests
or preferences prevail in public policy or social decisions. The literature
explores the relationship between institutional contexts or 'structures' for
decision making and rational individual behaviour defined a priori. For
example, the rational choice literature in American politics is especially
concerned with how politicians who desire re-election represent the interests of
constituencies under the constraints of the institutionalized decision-making
procedures and committee system of Congress.22 It also investigates agenda
16
Steinmo and Thelen, 'Historical Institutionalism in Comparative Politics', p. 12.
17W. A. Niskanen Jr, Bureaucracy and Representative Government
(Chicago: Aldine, 1971).
1xG. Brennan and J. M. Buchanan, The Power to Tax (New York: Cambridge University Press,
1980).
19A.
Downs, An Economic Theory of Democracy (New York: Harper & Row, 1957); J. M.
Buchanan and G. Tullock, The Calculus of Consents (Ann Arbor: University of Michigan Press,
1962); W. H. Riker, Liberalism Against Populism: A Confrontation Between the Theory of Social
Choice and the Theory of Democracy (New York: Freeman, 1982).
2"M. Olson, The Logic of Collective Action (Cambridge, Mass.: HarvardUniversity Press, 1965).
21
Downs, Economic Theory of Democracy.
22
R. Calvert, M. J. Moran and B. R. Weingast, 'Congressional Influence over Policy Making:
The Case of FTC', in M. D. McCubbins and T. Sullivan, eds, Congress: Structure and Policy
(Cambridge: Cambridge University Press, 1987), pp. 493-522; R. Calvert, M. D. McCubbins and

558 KATO
control and compliance with rules within the Congress and explores the reason
why congressmen representing various interests can decide on specific
legislation. Thus Moe surveys this rational choice literature in American politics
as a 'positive theory of institutions'.23
Rather than predetermining a unit of analysis such as a rational individual,
studies using the socio-historical approach are the product of research that takes
organizations or institutions as primary subjects. Among socio-historical
institutional studies, I distinguish those that reflect a state-centred view, those
that examine state-society relations, and those that focus on the more basic
elements that constitute institutions, that is, routines, rules, norms, values and
ideas.24
Because attempts at 'bringing the state back in' belong to studies of the
state-centred view, Skocpol25 reviews many works including those by Evans,
Krasner, Nordlinger, Skocpol, Stepan, Skowronek, Tilly and Trimberger.26
(F'note continued)
B. R. Weingast, 'A Theory of Political Control and Agency Discretion', American Journal of
Political Science, 33 (1989), 588-611; M. P. Fiorina, 'Legislative Choice of Regulatory Forms:Legal
Process or Administrative Process?', Public Choice, 39 (1982), 33-66; M. D. McCubbins, 'The
Legislative Design of Regulatory Structure', American Journal of Political Science, 29 (1985),
721-48; M. D. McCubbins and T. Schwartz, 'Congressional Oversight Overlooked: Policy Patrols
versus Fire Alarms', American Journal of Political Science, 2 (1984), 164-79, reprinted in
McCubbins and Sullivan, eds, Congress: Structure and Policy; K. A. Shepsle, 'Institutional
Arrangements and Equilibrium in Multidimensional Voting Models', American Journal of Political
Science, 23 (1979), 27-59; K. A. Shepsle, 'Institutional Equilibrium and Equilibrium Institutions',
in H. F. Weisberg, eds, Political Science: The Science of Politics (New York: Agathon Press, 1986),
pp. 51-81; K. A. Shepsle and B. Weingast, 'Structure-InducedEquilibriumand Legislative Choice',
Public Choice, 37 (1981), 503-19; B. R. Weingast and W. J. Marshall, 'The IndustrialOrganization
of Congress; or, Why Legislatures, Like Firms, Are Not Organized as Markets', Journal of Political
Economy, 96 (1988), 132-63.
23 T. M.
Moe, 'The Politics of StructuralChoice: Toward a Theory of Public Bureaucracy', in
0. E. Williamson, ed, Organization Theory: From Chester Barnard to the Present and Beyond (New
York: Oxford University Press, 1990), pp. 116-53.
24 Pederson
presents a categorization that includes (1) a state-centred theory, (2) a strategic
relational theory, and (3) an institutional theory (Pederson, 'Nine Questions to a Neo-Institutional
Theory', p. 126). The first and third groups in his categorization may correspond to the first and third
in my grouping, respectively. But I do not give an independent place to a strategic relational theory
of the state, such as Jessop's (see B. Jessop, State Theory (London: Polity Press, 1991)). Instead, I
include it in the first group of works studying the state. This difference derives from Pederson's
concern with methodology and theorization in the socio-historical new institutionalism, especially
the concept of the state. Rather,my categorization is based on differences in basic units of institutional
analysis.
25
Skocpol, 'Bringing the State Back In'.
26
p. R. Evans, Dependent Development: TheAlliance of Multi-national, State, and Local Capital
in Brazil (Princeton, NJ: Princeton University Press, 1979); S. D. Krasner,Defending the National
Interest: Raw Materials Investments and U.S. Foreign Policy (Princeton, NJ: Princeton University
Press, 1978); E. A. Nordlinger, On the Autonomy of the Democratic State (Cambridge, Mass.:
HarvardUniversity Press, 1981); T. Skocpol, States and Social Revolutions: A ComparativeAnalysis
of France, Russia, and China (Cambridge: Cambridge University Press, 1979); A. Stepan, State and
Society: Peru in Comparative Perspective (Princeton, NJ: Princeton University Press, 1978); S.
Skowronek, Building a New American State: The Expansion of National Administrative Capitalism

Studies using this perspective tackle the problems of state autonomy directly
(that is to what extent state action is independent of social pressure), and of state
capacity (that is, to what extent the state contributes independently to
determining policies or political changes).
By contrast with the state-centred view, works that examine state-society
relations aim to elicit a pattern of interaction between the state (in most cases,
bureaucracy) and society (social classes or interest groups whose interests are
represented by politicians), and associate this pattern with resulting policy
outcomes or changes. Many works about interest groups and those about
economic policies adopt this view. For example, Schmitter and Lehmbruch
employ the concept of corporatism to investigate modes of representation of
social interests in the state policies;27 Gourevitch, Haggard, Hall, Hart,
Katzenstein, and Zysman compare and contrast economic performance of
different countries in terms of the state-society relationship focusing on the state
structure.28
Thirdly, some socio-historical institutionalists present much smaller units of
analysis, in the form of norms, rules and ideas comprised in institutions.29 For
example, Elster has shifted from his interest in game theory and has begun to
pay more attention to social norms.30 Hall tries to incorporate elements of policy
ideas into the socio-historical analysis of the policy-making process,31 and
(F'note continued)
(New York: Cambridge University Press, 1982); C. Tilley, ed., The Formation of National States
in Western Europe (Princeton, NJ: Princeton University Press, 1975); E. K. Trimberger,Revolution
from Above:MilitaryBureaucratsand Developmentin Japan, Turkey,Egypt,and Peru (New
Brunswick, Mass.: Transaction Books, 1978).
27 P. C. Schmitter and C. Lehmbruch, eds, Trends toward
Corporatist Intermediation (Beverly
Hills, Calif.: Sage, 1979). Another example of comparative studies on corporatism is S. D. Berger,
OrganizingInterestsin WesternEurope:Pluralism,Corporatism
andtheTransformation
of Politics
(New York: Cambridge University Press, 1981).
28
P. Gourevitch, Politics in Hard Times (Ithaca,NY: Cornell University Press, 1986); S. Haggard,
Pathways from the Periphery (Ithaca, NY: Cornell University Press, 1990); Hall, Governing the
Economy; J. A. Hart, Rival Capitalists (Ithaca, NY: Cornell University Press, 1992); P. Katzenstein,
Corporatism and Change (Ithaca, NY: Cornell University Press, 1984); P. Katzenstein, Small States
in World Markets (Ithaca, NY: Cornell University Press, 1985); J. Zysman, Governments, Markets
andGrowth:FinancialSystemsandthePoliticsof IndustrialChange(Ithaca,NY:CornellUniversity
Press, 1983).
29 The extension of this
perspective in political science may be very close to 'sociological
institutionalism', named by Hall and Taylor in 'Political Science and Four New Institutionalisms',
which defines the institution more loosely and flexibly. For example, see W. W. Powell and P. J.
Dimaggie, eds, The New Institutionalism in Organizational Analysis (Chicago: Chicago University
Press, 1991).
3o For his interest in the rational choice
approach, see J. Elster, Ulysses and Sirens: Studies in
Rationality and Irrationality (Cambridge: Cambridge University Press, 1984). For his interest in
social norms, see J. Elster, The Cements of Society: A Study of Social Order (New York: Cambridge
UniversityPress, 1989);J. Elster,SolomonicJudgements:Studiesin the Limitationsof Rationality
(New York: Cambridge University Press, 1989).
31
Peter A. Hall, ed., The Political Power of Economic Ideas (Princeton, NJ: Princeton University
Press, 1989).

560 KATO
March and Olsen argue the importance of norms and rules in organizational
settings.3
Each of the socio-historical studies of institutions is unique and original, but
many recent studies share several common perspectives about politics and
political behaviour.33 They try to identify the institutional influences that
political actors are likely to follow, such as the organizational interests,
ideologies or value orientations peculiar to certain institutions, rather than to
define them as aggregations of individual interests and preferences. They do not
define individual interests and preferences independently of institutions. Nor do
they relate political behaviour directly to individual interests and preferences.
In order to generalize their findings about different institutions, most studies rely
on a comparative analysis of political processes or the comparison of historical
cases. Thus, these studies reject the use of a deductive method to analyse
individual behaviour that can be applied to different organizations and
institutions. Consequently, they are cautious about employing a concept of
rationality that implies a behavioural pattern based on a means-ends calculus
or even goal-oriented behaviour in general.
The discussion thus far has clarified why proponents of the socio-historical
approach often regard the institutional analysis of the rational choice approach
as limited by a narrowly-defined rational action postulate. How extensively can
this criticism be applied to the rational choice approach?
The rationality concept in economics on which the rational choice approach
is based is utility maximization; it defines a behavioural patternthat links means
to ends.34The concept of economic rationality is purely instrumentaland formal
in the sense that it denotes a choice of the best means for whatever goals
individuals pursue. While socio-historical studies regard institutions as a
primary subject of analysis, the rational choice approach focuses on individual
rational behaviour and analyses its relationship with institutions. This contrast
is often interpreted as a superior or inferior method of institutional analysis
rather than a difference in the way to examine institutional factors. Socio-
historical institutionalists tend to believe that the incorporation of a strong
32 March and
Olsen, Rediscovering Institutions. Some of the works, of course, may involve more
than one perspective and, thus, it is difficult to classify all the works into the above-mentioned
categories. For example, Katzenstein's work can be placed somewhere between the first and second
groups, and Friedman's between the second and third. See P. Katzenstein, ed., Between Power and
Plenty: Foreign Economic Policies of Advanced Industrial States (Madison: Wisconsin University
Press, 1978); D. Friedman, The Misunderstood Miracle: Industrial Development and Political
Change in Japan (Ithaca, NY: Cornell University Press, 1988).
33Pederson, 'Nine Questions to a Neo-Institutional Theory', also presents a characterizationof
common theoretical points of the first group of institutionalists. My presentation here is compatible
with, but still distinctive from, each of his points, because here I am primarily concerned with its
relationship with the rationality assumption, which Pederson includes, but does not make the focus
of his discussion.
34 This definition is
oversimplified, but, at this point, it is sufficient to show that the criticism on
the rationality concept is misdirected. In the final section, I will clarify further the concept of
economic rationality in contrast with the bounded rationality concept.

behavioural assumption, such as in the rational choice approach, deflects one's

attention from the institution as a whole; in contrast, rational choice theorists
contend that the application of a common behavioural assumption, such as a
rational choice, is the best way to distinguish institutional effects which may
lead to strikingly different political outcomes across systems or countries.
There are three reasons to believe thatthe conflict between the two approaches
is exaggerated. First, it is possible to use the factors such as rules, routines and
norms embedded in institutions with the postulate of individual rational
calculation in the explanation on policy outcomes. For example, Ostrom argues
that rules and social norms do not comprehend all forms of behaviour
appropriately accepted in certain social contexts, and they thereby leave a
significant amount of behaviour to independent individual decisions - most
plausibly, rational ones.35
Secondly, on the question of institutional emergence, socio-historical and
rational choice institutionalism may not diverge as much as they appear to. The
socio-historical approachconsiders the emergence of institutions to be the result
of adopting a certain norm or of a historical consequence, while the rational
choice approach is concerned with the rational basis of institutional emergence.
For example, March and Olsen emphasize institutional emergence and
transformationdriven by the logic of appropriateness;36and the joint essays by
Steinmo and Thelen explain how historical contingencies affect the formation
of policies and political organizations.37In contrast, the rationalchoice approach
pays attention to the calculation of self-interest by individuals. Ostrom contends
that rational individuals choose institutions for self-governance using the
information about prospective rules as well as costs and benefits accompanied
by these rules.38More specifically, she shows that such voluntary self-organiza-
tion, instead of coercive state action and market mechanisms, may well solve
the collective action problems of pooled resources.
While the above rational choice explanation of the origin of institutions
appears to contradict the socio-historical approach, the recent approach within
rational choice certainly serves to bridge this gap because it emphasizes the
process of institutional emergence. For example, Knight focuses on the rational
individual's concern with the distributional consequence of institutions, but he
explains the emergence of these institutions as a by-product of distributional
conflicts rather than as a result of individuals' seeking the collective benetits
expected from them.39 Knight shows that the rational choice explanation of
institutional emergence does not necessarily presume intentional individual
' E. Ostrom, 'Rational Choice

Theory and Institutional Analysis: Toward Complementarity'.
AmerticanPolitical Science Reviewv,85 (1991), 237-50.
' March and Olsen. Rediscovering ln.stitution.s.
7 Steinmo and
Thelen, 'Historical Institutionalism in Comparative Politics'.
*XOstrom, 'Rational Choice Theory and Institutional Analysis'.
9
Knight, Institutions Clad1Social Conflict.

562 KATO
behaviour to seek a certain goal.40 Such a new approach shows that rational
choice neo-institutionalism may be more compatible with socio-historical
neo-institutionalism.
Lastly and most importantly, it is possible to maintain that a socio-historical
approach can also involve the assumption of rational behaviour. For example,
the rationality assumption can be an indisputable part of a statist approach,
especially one which focuses on autonomous and self-interested officials who
have secure tenure in the state. Nordlinger41correctly highlights a close parallel
between the statist position and the monopoly bureau model of Niskanen,42
which contends that rational bureaucratsmaximize their budgets at the expense
of the welfare of sponsors (legislatures and, ultimately, voters). Both this statist
view (in socio-historical institutionalism) and the monopoly bureau model (in
the rational choice approach) assume that bureaucratic interests dominate over
the social interests represented by party politicians. Thus, in both approaches,
bureaucratic interests determine most policy outcomes at the expense of an
electoral mandate.
The historical studies that regardthe state as an autonomous organization also
define what interest policy makers or rulers are pursuing and ultimately attribute
the direction of state behaviour to their interest. For example, Skocpol treats the
state as a unitary autonomous actor in her comparative historical study of the
French, Russian and Chinese revolutions,43 and presents the idea that 'one
(hidden or overt) feature of all autonomous state actions will be the
reinforcement of the prerogatives of collectivities of state officials'.44 In other
words, she hypothesizes that state action cannot be 'disinterested' given its
incumbents' intents, though she admits the possible inconsistency of such an
action and refrains from asserting the rationality of constituents of the state.45
In this way, when self-interested behaviour is taken for granted under the
guise of a unitaryor autonomous state organization, state-centred views may be
interpreted as being compatible with the rational choice approach. If this is so,
40 Before
Knight, some empirical and theoretical works showed that social institutions are human
artefacts but that their formations are not entirely explained by relying on rational behaviour. For
an example of empirical work, see 0. Young, Resource Regimes (Berkeley: University of California
Press, 1982).
4' E. A. Nordlinger, 'The Return to the State: Critiques', American Political Science Review, 82
(1988), 875-85, especially pp. 880-1.
42Niskanen, Bureaucracy tandRepresentative Government.
4
Skocpol, States (1andSocial Revolutions.
44
Skocpol, 'Bringing the State Back In'. p. 15.
45 Mitchell has already shown in detail that Skocpol's perspective of state organization in States
and Social Revolutions ultimately relies on the ideology or interest of political leaders or rulers who
are constituents of the slate (see Mitchell, 'Limit of the State', pp. 86-9). Kitschelt also considers
the combination of historical structuralismand the rational choice approach in Skocpol's work as
evidence of the compatibility of the socio-historical and rationalchoice approaches. See H. Kitschelt,
'Political Regime Change: Structureand Process-Driven Explanations?' American Political Science
Review, 86 (1992), 1028-34, n. 1.

the real dispute between the socio-historical and rational choice approaches is
over the issue of methodological individualism rather than the rationality
assumption itself.46 If one rejects an epistemological commitment to methodo-
logical individualism, one tends to understand the state only in its relationship
with social processes or social organizations. Mitchell, who regards the state as
a set of disciplinary effects, exemplifies this anti-deductionist nature of the
socio-historical approach; he argues that the state should be analysed as a
structural effect that works in a distinct dimension of society.47 However,
Mitchell's approach, which refuses to regard the state as a separate entity, is
controversial even among socio-historical institutionalists.48
The above discussion shows that socio-historical institutionalism often
includes the individual rationality assumption as an element of institutional
analysis though it refuses to develop the deductive logic starting from such a
simple assumption. This point will be confirmed in the next section with
reference to the comparative literature.
SOCIO-HISTORICAL AND RATIONAL CHOICE APPROACHES:

CONTRIBUTIONS TO COMPARATIVE STUDIES
While the critics of the rational choice approach tend to reject its utility
altogether, some rational choice theorists are also uncompromising in their view
of other approaches. Proponents of the approach contend that the individual
rationality assumption is useful for making generalizations about intentions
observed in specific cases, especially for finding an equilibrium in political
interactions as a consequence of decisions.49 This defence of the rational choice
approach often leads to a dismissal of other approaches. For example, Riker
labelled as 'hermeneutics' the approachthatemphasizes concrete circumstances
or cultures in which decisions are made, and he argued that, within such an
approach, one interprets intentions of political actors specific to the circum-
stances around them and 'confines social studies entirely to the interpretation
of specific events'.50 Here, the disagreement between critics and advocates of
rational choice widens into a chasm which it is impossible to bridge.
My position differs from the two extremes of full-blown critics and advocates
of the rational choice approach. Instead, I will argue that the socio-historical
approach and the rational choice approach have different merits. More
specifically, I will demonstrate that each approach is suitable for a different
purpose. This point is especially clear if one examines the utilities of the two
approaches in comparative studies, where scholars are required to make
46I thank Stephan Haggard for his suggestion that I should include this point here.
47
Mitchell, 'Limit of the State'.
8 Bendix, 'Controversy'; Sparrow, 'Controversy'; Oilman, 'Controversy'.
49
Riker, 'Political Science and Rational Choice', p. 175.
5" Riker, 'Political Science and Rational Choice', p. 175.

564 KATO
certain generalizations about political phenomena or to find rules across

different countries and political systems.
The Rational Choice Approach in Comparative Studies
Let me start with reviewing the rational choice comparative literature.

Comparative studies using the rational choice approach are still at their early
stages, but the rational choice theorists' position in such comparative inquiries
is clear: individual behaviour can be regarded as rational in so far as one is
concerned to examine major social and political consequences;51 and thus, the
fundamental principles of political behaviour are the same across different
political systems despite seemingly different configurations of institutions and
political phenomena.52I will illustrate this position by using a famous Downsian
formulation which explains two-party and multi-party dynamics.53 In this
formulation, the political parties in a two-party system behave quite differently
from those in a multi-party system. But, this divergence is not considered to be
the result of different behavioural principles at the party level. There is a
common assumption about party behaviour that parties make policies to
maximize the votes obtained in elections. The divergence between different
party systems is the result of an adaptation, based on a common behavioural
principle, to different circumstances.
Adopting such a behavioural assumption is quite useful when one attempts
to illuminate the effects of institutions on individuals, because individuals are
assumed to respond to the same influences from their environments in the same
way, that is, rationally. This point is clear if we observe the application of the
rational choice approach to a comparative study of traditional and moder
societies, especially the pre-industrial and industrial ones. Through the eyes of
observers in industrialized democracies, African agrariansocieties appear quite
distinct given their resistance to market economies and their difficulties in
transition to democratic polities. Bates began his career as an African specialist
devoted to a cultural explanation that emphasized the indigenous characteristics
of Africa, but he now argues for the utility of the rational choice approach -
especially the collective-choice approach- to a developing society.54One of the
5' This adjectival clause is important to defend the rationality assumption against the finding in
psychology that human behaviours in experimental situations diverge from what a theory of rational
choice predicts. See A. Tversky and D. Kahneman, 'Rational Choice and the Framing of Decision',
in Hogarth and Reder, eds, Rational Choice. Becker turns this qualification into the strength of the
rationality assumption by showing that economic behaviours at the marketlevel can be rational even
though irrationaldecisions dominate individual behaviour in that market.See G. S. Becker, 'Irrational
Behavior and Economic Theory', Journal of Political Economy, 70 (1962), 1-13.
52 For
example, see M. McCubbins, 'Introduction', in Cowhey and McCubbins, eds, Structure
and Policy in Japan and the United States.
53 Downs, Economic TheolT of Democracy.
54R. H. Bates, 'Macropolitical Economy in the Field of Development', in Alt and Shepsle, eds.
Perspectives on Positive Political Economy, pp. 31-54.

most crucial differences between the cultural and rational choice approaches lies
in whether to regard individual members of a society as having psychological
characteristics distinct from those found in industrialized societies. Cultural
explanations characterize members of a society by their special social
psychological traits, and relate a society's low level of economic and political
development to individual characteristics particular to its culture and social
values.55 The choice-theoretic approach, according to Bates, considers the
fundamental patternof individual behaviour as basically the same, i.e., rational,
and explains divergent political and economic consequences by influences over
individuals of political institutions that are particularto the society.56The picture
that emerges from the choice-theoretic approach is just the opposite of the one
from the cultural explanation. That is, 'behavior that has been interpretedto be
the result of tradition, passed on by socialization and learning, can instead be
interpretedto be the result of choice'.57 More specifically, individuals in agrarian
societies in Africa, if they resist modernization, 'choose to do so' instead of
suffering from misinformation or ignorance. Application of the assumption of
individual rationality, though it is not very strict in Bates's framework, leads to
a successful demonstration of the similarities in the pattern of individual
behaviour across different societies and to a refutation of the uniqueness of the
case studied.58
As Bates argues, however, a choice-theoretic approach such as the rational
choice approach is not necessarily incompatible with the explanation that
focuses on specific cultural values and distinctive institutions. While refusing
to explain every phenomenon in agrarianAfrica by characteristics of its native
society, Bates appreciates the importance of 'the particularities of specific
culture' or 'significance of values and institutions'. What is to be examined 'is
the manner in which these factors systematically shape collective outcomes'.59
In his view, the rational choice approach provides a powerful tool to connect
individual behaviour to political and economic phenomena at the level of a
society or country, and to explain how rational individuals adjust to distinct
institutional settings and specific cultural entities.
Bates's approach is one of rational choice; but he also contends that
maintaining the behavioural assumption of individual rationality and appreciat-
ing the distinct influences of specific circumstance over individuals are equally
55
R. H. Bates, 'Some ContemporaryOrthodoxies in the Study of AgrarianChange', in A. Kohli,
ed., The State and Development in the Third World(Princeton, NJ: Princeton University Press, 1986).
56
For example, Bates applies this framework to several aspects of agrarian societies in Africa
from pre-colonial and post-colonial periods (see R. H. Bates, Essays on the Political Economy of
Rural Africa (Cambridge: Cambridge University Press, 1983).
57
Bates, 'Macropolitical Economy in the Field of Development', p. 34.
58 Another example of the application of the choice-theoretic approach to rural development
emphasizes the more specific utility of the approach,that is, increasing the understandingof collective
decision problems in ruraldevelopment (see C. S. Russell and N. K. Nicholson, eds, Public Choice
and Rural Development (Washington, DC: Resources for the Future Inc., 1981)).
59 Bates, 'Macropolitical Economy in the Field of
Development', p. 54.

566 KATO
important. This point is also demonstrated by Little.60 He stipulates that the

rational choice approach 'provides a basis for social explanation in a wide
variety of cultural contexts and may support significant cross-cultural
generalizations'.61 At the same time however, he is conscious of the limitations
of the rational choice framework, with its oversimplified and abstract
characterization of rational agents and structure, and indifference to the roles
of norms and values. He suggests that it is necessary 'to pay more attention to
the institutional framework within which choice takes place' and to the roles of
values and norms in individual decision making.62 From this position, the
distance between an approach based on the rationality assumption and one not
so based, for example, socio-historical new institutionalism, may not be very
great. Between the two approaches, there is a shift in scholarly interest: from
one eliciting the general pattern of individual behaviour to one characterizing
institutions that constitute environments for individuals.
Interestingly, Williamson observes this kind of shift in scholarly interests
between neoclassical economics based on a rigorous rationality assumption and
institutional economics based on a weak assumption of rationality, that is,
bounded rationality. He emphasizes that 'comparative institutional analysis
commonly involves an examination of discrete structuralalternatives for which
marginal analysis is not required'.63 I would like to clarify this point by
following Simon's discussion of the modification of the rationality assump-
tion.64 According to Simon, in 'analyses aimed at explaining institutional
structure, maximizing assumptions play a much less significant role than they
typically do in the analysis of market equilibria'.65This is because 'they are not
focused on, or even much concerned with ... how equilibrium is altered by
marginal shifts in conditions'; rather they are 'focused on qualitative and
structuralquestions, typically on the choice among a small number of discrete
institutional alternatives'.66
Closely paralleling this reasoning, one can speculate as to why some employ
the socio-historical analysis of institutions without using the rationality
assumption and why others apply the rationality postulate to the empirical
analysis, though not in a very strict way. To investigate this point, consider two
scholars who study different areas from a comparative institutional perspective.
6) D. Little, 'Rational-Choice Models and Asian Studies', Journal of Asian Studies, 50 (1991),
35-52.
61 Little, 'Rational Choice Models and Asian Studies', p. 35.
62
Little, 'Rational Choice Models and Asian Studies', p. 43.
63
O. E. Williamson, 'The Modem Corporation: Origins, Evolution, Attributes', Journal of
Economic Literature, 19 (1981), 1537-68, especially p. 1544.
64 H. A.
Simon, 'Rationality as Process and as Product of Thought', American Economic Review,
68 (1978), 1-16, reprinted in Simon, Models of Bounded Rationality. This article is also cited by
Williamson, 'Modem Corporation', p. 1544.
65
Simon, 'Rationality as Process and as Product of Thought', p. 6.
66
Simon, 'Rationality as Process and as Product of Thought'.

Bridging the Gap between the Socio-Historical and Rational Choice Compar-
ative Studies
Peter Hall, in his comparative study of Britain and France67 presents a
comprehensive concept of 'institutions', which refers to 'the formal rules,
compliance procedures, and standard operating practices that structure the
relationship between individuals in various units of the policy and economy'.
In his analysis of the empirical cases of Britain and France, Hall focuses on 'the
relational characters of institutions', especially, the influences of the organiza-
tions68 of capital, labour and state on the economic policy choices of the two
countries, while also paying close attention to external economic factors. He
examines the rational choice approach69as an alternative to his own institutional
approach.70 He includes in the rational choice approach one branch of
organization theory, which employs a conception of bounded rationality.7' He
pays special attention to this organization theory as a promising alternative to
his approach. However, he rejects the use of this approach in the close
examination of institutions. He argues 'a great deal of organization theory has
been devoted to the discovery of laws applicable to the operation of
organizations' and 'more must be done to associate particular patterns of
rationality with specific organizational attributes'.72Here, Hall decides not to
use the rationality assumption because he intends to analyse different
organizations, that is, capital, labour and state, by different kinds of logic. He
maintains that organization theory applies the same logic to the analysis of these
organizations. And such standardizedtreatmentis obviously not suitable for his
purpose, which is to specify the relationships between these organizations in the
two countries in question and to distinguish the countries in terms of their
relationships.
Stephan Haggard's comparative study of newly industrializing countries
(mainly in East Asia, but also in Brazil and Mexico)73 is a good example of
starting with the rationality assumption applied to individuals and developing
the study into a socio-historical analysis. His approach is characterized as
67
Hall, Governing the Economy, p. 19.
h6 Hall uses 'organizations' to mean the same as 'institutions' (see Hall, Governing tlie Economy,
p. 19).
69 He
actually uses the term 'public choice theory' in his discussion, and broadly includes the
approaches that apply economic methods to political analysis. But, we can replace this term with
the 'rational choice approach' without changing what he means.
7(1Hall, Governing the Economy, pp. 10-13.
71 He treats organization theory based on the
concept of bounded rationality (the third group)
separately from the conventional public (rational) choice theory based on economic rationality (the
second group) but he includes both in the discussion of public choice theory (see Hall, Goiverning
the Economy, pp. 10)-13). I will show in the last section that this version of organization theory
belongs to the third category of new institutionalists if the two different concepts of rationality are
clearly distinguished.
72Hall, Governing the Economty,pp. 12-13.
73
s. friom the Pcrilpherv.
Haggard. Pathln'av

568 KATO
state-centred, although he also includes for consideration factors that represent

international shocks and pressures as well as configurations of social groups.
Instead of focusing on the relationship of different institutions as Hall does,
Haggard pays close attention to the interests of political elites as constituents
of the state. He examines how, and to what extent, internationalcrisis or change
as well as social groups' demands are interpreted by elites and then translated
into specific policies. Thus, his state-centred view is one that is very close to
the rational choice approach centred on the monopoly power of bureaucracy
which I have already discussed relying on Nordlinger.74 Haggard himself
acknowledges this: 'The emphasis I give to politically motivated choice by state
actors falls broadly within the realm of rational-choice theorizing, and I have
learned from this strand of work'.75
Haggard startsfrom the assumption thatpolicy-makers rationally seek power,
but at the same time he puts 'great emphasis on the institutional context within
which political choice takes place'. He stresses the fact that 'political elites differ
in their organizational capabilities and the instruments they have at their
disposal for pursuing their goals'.76 He is especially interested in situations in
which the distinctiveness of institutional settings across countries leads equally
rational policy-makers to different policy choices. A subtle balance between the
socio-historical emphasis and the attention to the individual policy-makers is the
reason why Haggard's approach clarifies the distinct policy responses among
the East Asian Newly Industrialized Countries (NICs) which have been
commonly characterized as successful examples of industrialization. In this
respect, Haggard succeeds in bridging the gap between the first and second
groups of new institutionalists.
This compatibility between the rationality postulate and the socio-historical
analysis demonstrated by Haggard casts doubt on an easy distinction between
the socio-historical and rational choice new institutionalism in comparative
studies. The assumption of individual rationality often seems the focal point of
the dispute between the two groups, but as Haggard's work implies,
socio-historical analysis is not necessarily incompatible with the employment
of the rationality assumption. This finding parallels the theoretical argument at
the end of the previous section: the real difference between socio-historical and
rational choice institutionalism arises from their epistemological attitude to the
deductive logic which derives from a strict application of the rationality
assumption. Some socio-historical new institutionalists clarify the behavioural
postulate prior to analysis, but do not extend the application of such an
assumption all the way in the analysis.
A typical example of such an approach is Rogowski's cautious but persuasive
presentation of the influence of trade on domestic political cleavages in cases
74
E. A. Nordlinger, 'The Return to the State: Critiques', Americfan Political Science Review, 82
(1988), 875-85.
75
Haggard, Pathways'tsjom the Peripher', p. 4.
71lHaggard, Pathway'sfrtomthe Peripher'v,p. 5.

varying from the ancient period to the nineteenth and twentieth centuries.77
Rogowski presents a set of three simple assumptions about political behaviour.
First, those who gain from trade try to maintain the status quo while those who
are harmed by exposure to the same situation try to change it; secondly,
economic gainers increase their political power; thirdly, the economic
beneficiaries of trade attempt to institutionalize the mechanism in order to
continue the current favourable conditions.78 The close parallel between
economic capability and political power and the primacy of self-interested
behaviour79supports an examination of the historical development of political
cleavages. What he demonstrates is the link between conflicting domestic
interests in the trade issue and political cleavages, a link which has otherwise
been obscured by other factors such as political culture, religion, tradition, social
heritage and custom, and political contingencies. He avoids overplaying the
impact of trade on domestic politics and does not assert that trade determined
most of the configurations of domestic social alliances of the countries which
he studied. Despite this modesty, Rogowski's work convincingly shows that a
rationalresponse to tradecontributes to a specific institutionalization of political
alliance in countries that had previously been examined primarily by
socio-historical studies such as Gerschenkron80 and Moore.81 He critically
examines these alternative explanations of the emergence of domestic political
alliances while showing empirically the persuasiveness of his argument.
In this respect, Rogowski's approach contrasts well with the rational choice
analysis of Przeworski.82 Przeworski uses a game theoretical formulation to
explain the institutional consolidation of democracy. He specifically focuses on
conflicting social forces which try to capture the transition to democracy to
advance their political advantages. He regards the transition as a process in
which their conflicts over a basic institutional design continue. At the same time,
he relates democratic transition with reform to a market-oriented economy.
What is to be noted here is that Przeworski uses the recent transitions to
democracy and market economy in Eastern Europe and Latin America to
support his theory rather than using the framework to explain these cases.
Though both Rogowski and Przeworski starttheir socio-historical analysis from
the rationality assumption, they differ in how they draw their conclusions and
justify their arguments. Rogowski's work is based firmly on the assumption of
77R. Rogowski, Commerce and Coalitions: How Trade Affects Domestic Political Alignments
(Princeton, NJ: Princeton University Press, 1989).
78
Rogowski, Commerce and Coalitions, pp. 3-5.
79 He
categorizes different interests in tradeas those representedby labour,capital and land, which
correspond to a three-factor model of trade.
80A. Gerschenkron, Economic Backwardness in Historical Perspective: A Book of Essays
(Cambridge, Mass.: Belknap Press of HarvardUniversity Press, 1962).
81 B. Moore Jr, Social Origins of
Dictatorship and Democracy: Lord and Peasant in the Making
of the Modem World (Boston, Mass.: Beacon Press, 1967).
82
A. Przeworski, Democracy and the Market (Cambridge: Cambridge University Press, 1991).

570 KATO
rational behaviour, but his argument is closely supportedby inductive reasoning

and empirical observation.83
An approach such as Rogowski's opens'the possibility that the rationality
assumption will be abandoned if it does not approximate a real situation. Such
an example is found in Steinmo's (1993) comparative study of the development
of contemporary taxation in Sweden, Britain and the United States.84Steinmo
attempts both an analysis of individual rational behaviour and a socio-historical
analysis. In contrast with Rogowski, however, Steinmo finds little point in using
the rationality assumption and shifts the emphasis to institutional analysis.
Steinmo does not deny that citizens, party politicians and bureaucrats are
rational in the sense that they try to pursue their own interests. But, at the same
time, he emphasizes that they are not necessarily well-informed because of the
limitations of their capacity and affordable time (especially in the case of
citizens); and that 'people do not have a single definable and stable hierarchy
of preferences that can or should be used to decide between competing policy
choices'.85 The recognition of the ambiguities of the preferences and the
decisions of political actors shifts the focus of analysis to political institutions
which constitute the context in which policy decisions and behaviour take place.
Steinmo does not deny the existence of a common behavioural pattern across
countries and contends that 'both citizens and elites in Sweden, Britain and the
United States would make highly similar decisions if offered similar choices'.86
However, 'the real choices in one country are not likely to be offered in the same
way that they are in another country ... because the institutions through which
they are offered differ' .87Thus, political institutions which were founded on the
basis of historic compromise in these countries from 1918 to 1945 still have
sweeping influences over tax policy outcomes, though they have been changing
and are expected to change in the future.88
Rogowski's and Steinmo's attitudes towards the rationality assumption
differ: Rogowski finds that tradehas a persistent impact on the domestic politics
of interest-seeking behaviour, while Steinmo detects no major impact from
rational political behaviour over tax policy outcomes.89 Like Rogowski,
83 The recent work

by Putnam is also a good example of the works which combine historical
observation and empirical data with an analysis of collective action problems by rational individuals.
By comparing communities in northern and southern Italy using detailed empirical data over two
decades, Putnam's work has discovered the importance of the environment of individual behaviour
in determining the consequences of collective action (see R. D. Putnam, Making Democracy Work:
Civic Traditions in Modem Italy (Princeton, NJ: Princeton University Press, 1993).
84Steinmo, Taxation and Democracy.
85Steinmo, Taxation and Democracy, p. 198.
86
Steinmo, Taxation and Democracy, p. 199.
87
Steinmo, Taxation and Democracy, p. 200.
88
Steinmo, Taxation and Democracy, chaps. 4-6.
89
It is possible to speculate that the selection of the policies to be studied is a result of the
differences between the works by Rogowski and Steinmo. In a tradeissue, those with vested interests
are more attentive to policy problems and sensitive to gains and losses, because trade affects their

Steinmo pays close attention to individual rational behaviour and carefully

examines its meaning. But, based on the findings in his comparative study of
tax politics in three countries, Steinmo explicitly denies any epistemological and
methodological commitments that aim to establish a universal law of human
behaviour.90
What I have argued in this section is quite simple. Researchers choose a
certain approach from several alternatives, based on their interest in their
subjects and the purpose of their investigation. This attitude is also observed in
their choice between two different new institutionalist approaches - the
socio-historical approach and the rational choice approach. The rational choice
approach explains individual behaviour relating to institutions, but it distin-
guishes the logic of individual behaviour from that of institutional characteris-
tics. This distinction avoids tying individual behaviour to specific institutions
and serves to emphasize the fundamental patternof individual behaviour across
different institutional settings. However, this is exactly the reason why some
socio-historical institutionalists such as Hall and Steinmo refrain from using the
rationality assumption and employ a more qualitative analysis of institutions.
In other words, researchers who are overtly concerned with connecting political
choices with the distinct institutional settings of each country, consider the
common patterns of behaviour which may link individual decisions to
institutional settings across countries a secondary interest. Thus, in terms of
scholarly emphasis, both the socio-historical approach and the rational choice
approach are equally justified with no need to dismiss the other.
The Issue of Epistemological Commitment to Methodological Individualism
Despite the compatibility described above between these new institutional

approaches, commitments to methodological individualism may still remain an
issue on which socio-historical new institutionalism and rational choice new
institutionalism disagree. While deduction based on methodological individual-
ism is a theoretical foundation of rational choice comparative studies, the
socio-historical new institutionalists may argue that this theoretical core of the
rational choice itself is incompatible with robust empirical analysis. The key
(F'note continued)
major economic activities. However, a tax issue influences the members of a society widely but not
very explicitly, and thus they are less likely to seek reliable information and are not always as eager
to pursue their interests. In other words, if the political actors put a higher priority on tax issues in
their political and/or economic activities, they can be expected to seek their interests more rationally.
My work on the recent Japanese tax reform explores this possibility by focusing on a bureaucratic
organization in which the policy problems and goals are explicitly defined and shared among
members (see J. Kato, The Problem of Bureaucratic Rationality (Princeton, NJ: PrincetonUniversity
Press, 1994).
90Steinmo, Taxation and Democracy, pp. 201-2.

572 KATO
issue here is to what extent and in what way the rational choice comparative
studies can leave room for empiricism. To answer this, one needs to find
comparative literature that apparently employs methodological individualism
and to examine to what extent and in what way it can go hand in hand with
empiricism.
A good example of such literature is Margaret Levi's analysis of the state's
power to produce revenue.91She explains revenue production by the presence
of predatory rulers who aim to satisfy their personal objectives by maximizing
revenue. Levi's analysis is clearly based on methodological individualism and
deduction. She focuses on the self-interested behaviour of rulers and explains
how institutions are arrangedto maintain a half-voluntary compliance with state
power to maximize revenue. The rulers' bargaining power, their ability to avoid
transaction costs and the durability of their rule are the factors that constitute
the constraint on their choice of a revenue system through which they try to
capture as much revenue as possible. Alternatively, the rulers attemptto increase
their bargaining power with the governed or their constituencies, lower the
transaction costs that they incur when collecting revenue (that is, costs of
bargaining, agency costs, and so on), and keep lower discount rates of the present
value of revenue in the future. This perspective shows the dynamic interaction
between micro-level factors (which define the rulers' rational behaviour) and
macro-level factors (which characterize the resulting revenue policies) and is
consistent with the process analysis that uses historical material. Thus Levi can
apply her theory to such diverse cases as Republican Rome, medieval and
Renaissance France and England, eighteenth-century Britain, and twentieth-
century Australia, and support her argument with ample empirical evidence.
Another example of a rational choice comparative study is Geddes's work
which seeks to explain why some Latin American countries have engaged in
administrative reforms to create competent bureaucracies and others have not.92
She considers that reform involves the supply of collective goods to people in
developing countries who desire economic development and essential govern-
ment services through well-organized bureaucratic systems. According to her
argument, politicians face a dilemma when they attempt to implement reforms
that are beneficial for the long-term development of countries and are desired
by their constituencies. This is because they need to give up political resources
(that is, clientelism, established personal connection with officials, and so on)
which they currently get from the existing systems. Politicians become political
entrepreneurs who institute reform only when the benefits outweigh the costs
of implementing them. This means that a substantial number of politicians must
be continuously encouraged with incentives to boost their latent interests to
provide a public good. What is to be noted in Geddes's framework is that the
91M.
Levi, Of Rule and Revenue (Berkeley: University of California Press, 1988).
92
B. Geddes, Politician's Dilemma: Building State Capacity in Latin America (Berkeley:
University of California Press, 1994).

politicians' incentives to provide a public good (that is, competent administrat-

ive capacity expected from the reforms) are primarily shaped by political
institutions such as election systems, party systems, organizations of executive
branches and so on. In her framework, the institutional setting of the country
is not just a constraint on politicians' rational behaviour, rather it provides the
incentives for politicians as well as the solution for collective action problem.
This is the reason why she can point out institutional conditions which serve to
introduce and extend administrative reforms based on historical and empirical
observation. For example, when access to patronage resources is evenly divided
among major parties (such as in stable two-party systems), reforms are more
likely to be introduced and 'presidents are more likely to help build
administrative competence in stable, well-institutionalized, less fragmented,
and more disciplined party systems'.93
Levi's and Geddes's works suggest that methodological individualism and
deduction do not necessarily preclude the production of high quality empirical
works. In both studies, the assumed behaviour of a rational individual is deeply
embedded in institutional circumstance. This reminds us of the importance of
knowing under what conditions and in what context rational behaviour takes
place. A ramification of this point provides a key to understandingwhy the third
group of new institutionalists employs a concept of bounded rationality distinct
from economic rationality conventionally conceived in the rational choice
framework. To explore this issue, the next section will first introduce a
distinction between the concepts of economic and bounded rationality. Then,
I will consider the utility the bounded rationality concept has in comparative
politics.
ECONOMIC RATIONALITY AND BOUNDED RATIONALITY: THE

SECOND AND THIRD GROUPS OF NEW INSTITUTIONALISTS
The most popular criticism of the rational choice approach is that the rationality
assumption is too strict and unrealistic to apply to real situations. A criticism
of rational choice perspectives involves two related but still distinct points: (1)
the realism of the rationality assumption, that is, the fit between the rationality
assumption and real situations in general; and (2) the possibility that such a
simple account of individual rationality may ignore the complexities of
incentives in specific real situations.
There are two possible ways to defend the rationality assumption in the face
of such criticisms. One is to defend its general applicability, that is, to support
the utility of the assumption in all aspects of political life. This position ignores
the criticism of the 'un-realism' of the rationality assumption in order to
emphasize its utility as the foundation for coherent theory. Another defence is
more modest and claims that the rationality assumption is a good approximation
93
Geddes, Politician's Dilemma, p. 187.

574 KATO
of certain forms of political behaviour, and thus the rational choice approach
is a true theory in a significant number of important cases though it may not
explain all cases. The second position is obviously concerned with the question
of whether the rationality assumption is realistic or not, that is, the assumption's
fit with specific real situations.
The first position - ascribing rationality to actors prior to an empirical
investigation - is well illustrated by the work of Gary S. Becker. He contrasts
sceptics and advocates of the rational choice approach and explains his position
as follows:
I start with the assumptionthat behaviour is rational, and ask, 'As I apply this to
a particularproblem, is there behaviour that I cannot explain with the rationality
model?'... Others [who] are more agnostic about the scope of rationality ... will
approacha problemby asking, 'Does this look like rationalbehaviouror is it better
interpretedin a different way?' Part of the difference, therefore, is the degree of
commitmentor confidenceone has of findingrationalbehaviourwhen investigating
a particularset of phenomena.94
Becker's statement above well illustrates the point that a pattern of rational
behaviour is assumed as a postulate rather than is examined as an empirical
question.
Becker is also clear about the potential and scope of the economic analysis
of human behaviour. He argues that the economic approach provides a
comprehensive framework for all human behaviour, but he does not suppose that
its application will exhaust useful explanations for all human behaviour. He
applies the economic approach because 'all human behaviour can be viewed as
involving participants who maximize their utility from a stable set of
preferences and accumulate an optimal amount of information and other inputs
in a variety of markets'.
Simon, by contrast, is more circumspect about using the rationality
assumption. He describes it as 'a methodological principle', so that 'if the
conditions of the real world approximate sufficiently well the assumption of an
ideal type, the derivations from these assumptions will be approximatelycor-
rect'.96 Differing from that of Becker, this attitude is concerned with the fit
between the rationality assumption and real-life situations, as well as with the
94Swedberg, Economics and Sociology (Princeton, NJ: Princeton University Press, 1990), p. 41.
Becker may go to an extreme here because, in another instance, he himself attempts to defend the
approach instead of regarding its use only as a commitment (G. S. Becker, Economic Approach to
Human Behavior (Chicago: University of Chicago Press, 1976)).
95Becker, Economic Approach to Human Behavior, p. 14 (emphasis added). Of course, other
rational choice theorists may prefer to defend the rationality assumption for other reasons. For
example, G. Tsebelis, Nested Games: Rational Choice in Comparative Politics (Berkeley: University
of California Press, 1990), pp. 39-43, defends the rational choice theory as a more coherent theory
than alternative approaches because of its theoretical clarity, equilibrium analysis, deductive
reasoning, and the interchangeability of individuals in an analysis.
96
Simon, Models of Bounded Rationality, Vol. 2, p. 370.

theoretical coherence of the approach based on the assumption. It is consistent

with Simon's proposal of bounded rationality as a more realistic assumption
than conventional economic rationality. Based on this concept of bounded
rationality, there is a third category of new institutionalism, which is too rarely
distinguished from rational choice approaches based on economic rationality.
Yet the differences between the concepts of economic rationality and bounded
rationality are significant.
Let me compare and contrast the two different concepts of rationality. Utility
maximization according to economic rationality assumes that actors have
consistent orderings of preferences, constituting their utility functions. The
utility functions may be flexibly defined, but once defined, the actors are
assumed to maximize their utility based on it.97Behaviour is chosen from the
alternatives and serves as a means to lead to particularspecified outcomes. The
second premise of the economic approach is thus the consistent link between
means and ends. The critical point here is that this model presumes the existence
of a 'real situation.' Here I mean a 'real situation' in the context of behaviour.
The economic approach presupposes that such a context is specified and
constitutes 'one world' in which the behaviour of all individuals is commonly
observed and analysed. And thus 'rational' behaviour is objectively defined in
relation to the context.
The rival concept is bounded or procedural rationality, which tries to explain
the process of choosing objectives, selecting means and employing strategies
to achieve objectives. The concept of bounded rationality98rests upon more
realistic assumptions than that of substantive rationality. The concept focuses
on the subjectivity of goal-oriented behaviour. It distinguishes 'between the
rationality of perceptions themselves (i.e., whether or not the situation as
perceived is the "real" situation) and the rationality of choice, given the
perceptions'.99 This concept highlights the subjective nature of human
self-interested behaviour, that is, 'behaviour that is rational given the perceptual
97
The minimax rule in a game theoretical situation has the same premise, but applies a different
rule of choosing alternative means from a maximization rule and chooses an alternative so as to
minimize the worst possible loss.
98 Simon uses the terms 'procedural
rationality' or 'bounded rationality' to mean the same concept
which he presents. Both terms - 'bounded rationality' and 'proceduralrationality' - mean basically
the same concept, though Simon usually uses the former in more formal and the latter in more
descriptive analysis. For a formal presentation of this concept, see Simon, 'Behavioral Model of
Rational Choice', and Simon, 'Rational Choice and Structure of Environment'. For an interesting
contrast between the rationality concept in game theory and that'inlearning theory, see H. A. Simon,
'A Comparison of Game Theory and LearningTheory', Psychometrika, 21 (1956), 267-72, reprinted
in Simon, Models of Bounded Rationality, and Simon, Models of Man. For furtherunderstandingof
this concept, see Simon, Models of Bounded Rationality, pp. 203-495; Simon, Models of Man,
pp. 196-206 and pp. 241-79. For application to political science, see H. A. Simon, 'Human Nature
in Politics', American Political Science Review, 79 (1985), 293-304.
99
Simon, 'A Comparison of Game Theory and Learning Theory', p. 271.

576 KATO
and evaluational premises of subjects.'"00Alternatively, a set of such premises

constitutes the environment for human behaviour, and the definition of
rationality is inseparable from it. To highlight its difference from substantive
rationality, two major points in the bounded rationality approach should be
distinguished. The first is the limited capabilities of human beings with respect
to information - including misperceptions, misevaluations, limited processing
of accumulated information and a limited attention span. Sirton writes:
The capacity of the humanmind for formulatingand solving complex problems is
very small compared with the size of the problems whose solution is requiredfor
objectively rational behavior in the real world - or even for a reasonable
approximationto such objective rationality.?10
An emphasis on the limitations of human information capability, however, does
not necessarily imply an incomplete and degraded form of rational behaviour.
Rather, the bounded rationality approach suggests a notion of rational behaviour
that is more reasonable and realistic once the limitations of human capability
are taken seriously. With a limited information capability, an individual only
'intends' to be rational, and 'the intended rationality of an actor requires him
to construct a simplified model of the real situation in order to deal with it.' 02
One ramification of this approach involves the second point, which distin-
guishes the concept of bounded rationality from the concept of economic
rationality. That is, a simplified model of the real situation is actually nurtured
by the environment in which the behaviour takes place. The following passage
makes clear the importance of the environment of behaviour in the conceptual-
ization of bounded rationality.
It is impossible for the behavior of a single, isolated individual to reach any high
degree of rationality... Individualchoice takes place in an environmentof 'givens'
- premises that are accepted by the subject as bases for his choice: and behavior
is adaptive only within the limits set by these 'givens'.103
Subsequently, Simon suggests that organizations often provide an environment

that makes their members recognize premises of behaviour and encourages
'rational' behaviour within the context of the organization. Although organiza-
tional environment may lead to a more integrated patternof behaviour, one can
easily extend the concern with the environment of rational behaviour to a
renewed interest in institutions as a less integrated but more frequently observed
environment of behaviour.
100
Simon, 'A Comparison of Game Theory and Learning Theory'. The application of bounded
rationalityis also different from an expected utility theory in economics. The expected utility theory
presumes the existence of a 'real situation' and then defines the utility function with probabilities.
101
Simon, Models of Man, p. 198.
102
Simon, Models of Man, p. 199.
103
H. A. Simon, Administrative Behavior, 3rd edn (New York: The Free Press, 1976), p. 79.

In economics and also in some interdisciplinary fields such as organization

theory, the two concepts of rationality are clearly distinguished. The concept of
bounded rationality is considered a major challenge to the foundation of
conventional economic theory, based on the concept of substantive ration-
ality.'04 In mainstream political science, however, there is no clear distinction
between these concepts.105 Some critics of the rational choice approach cite
Simon's critical comparison of economic rationality with bounded (or
procedural) rationality'16and emphasize the limitation of economic rationality.
At the same time, however, they often criticize works that are based on the
concept of bounded rationality because they regard the works.as attempts to
modify conventional rational choice perspectives by postulating incomplete
information or subjective utility maximization.'07 Like their critics, rational
choice theorists in political science rarely pay attention to the distinctions
between the concepts of bounded rationality and economic rationality that
Simon makes.108
A distinction between the two concepts, however, has less impact in political
science than in economics. The reason for this is quite simple. As Simon
emphasizes, many rational choice works in political science, game theoretical
models, spatial competition models, and so on, draw heavily on assumptions
other than the simple assumption of economic rationality.'09Such assumptions
include the limited rationality of certain actors - that is, some assumptions of
bounded rationality - as well as the shape and nature of the utility function.
Differing from the simple and rigorous assumption of economic rationality,
these assumptions have to be identified ultimately by empirical research."0 The
104Simon himself makes this
point very clear in his recent writing. See H. A. Simon, 'The State
of American Political Science: Professor Lowi's View of Our Discipline', Political Science and
Politics, 36 (1993), 49-50, especially p. 50.
105
In decision theories and organization theories, the concept of bounded rationality has long
attractedthe attentionof scholars. Allison's work on the CubanMissile Crisis is a prominentexample
of such studies (Graham Allison, Essence of Decision (Boston, Mass.: Little, Brown, 1971)).
However, the employment of the bounded rationality concept in these fields aims to illuminate the
limitations of the perception and information capabilities of human beings without paying much
attention to the environment of rational behaviour. This is one of the important reasons why the
distinction between the two different concepts of rationality has been neglected in political science.
106For
example, see Simon, 'Human Nature in Politics'.
107
Such examples are: North, Institutions, Institutional Change, and Economic Performance;
0. E. Williamson, Marketsand Hierarchies: Analysis andAntitrustImplication (New York: The Free
Press, 1975); Williamson, Economic Institutions of Capitalism. This misunderstanding may derive
from the fact that both North and Williamson utilize the concept of bounded rationality to emphasize
the incompleteness of information and information burdens on rational individual.
108
Simon, 'Behavioral Model of Rational Choice'; Simon, 'Rational Choice and Structure of
Environment'; Simon, 'Comparison of Game Theory and Learning Theory'.
109H. A.
Simon, 'Rationality as Process and as Product of Thought', American Economic Review,
68 (1978), 1-16, reprinted in Simon, Models of Bounded Rationality; Simon, 'Human Nature in
Politics'.
110Curiously enough, Becker, as I have shown above, agrees with Simon that the economic
approach is supported by auxiliary assumptions. They differ in whether to give up the economic
approach when faced with the necessity of assumptions other than economic rationality. Becker

578 KATO
review of various rational choice approaches in the second section of this article
confirms this point. All the literature departs from the simple rationality
assumption and incorporates abundantempirical material which constitutes the
auxiliary assumptions of the rational choice comparative literature. There are
also attempts by rational choice theorists to narrow the distance between
inductive and empirical research and rigorous theory of rational action. For
example, Laver and Schofield try to bridge the gap between the game theoretic
approach to analysing party coalitions and the inductive and empirical approach
to examining the real behaviour of party coalitions.11'
Although the incorporation of yet another rivalry among the advocates of the
different concepts of rationality might not seem useful, emphasizing the
distinctiveness of the concept of bounded rationality has its own merits. First,
more emphasis on the bounded rationality concept will also appeal to many
sceptics by showing both the flexibility and realism of an approach focused on
rational behaviour. When political scientists replace the concept of economic
rationality with one of bounded rationality without changing what they mean,
their presentation of analytical results will be in plain language, avoiding strictly
defined concepts in economics (equilibrium, Pareto-optimal, and so on). This
restriction of the use of economic concepts to formal analysis will not only
reduce the doubts of the sceptics, but also serve to maintain the accurate
meanings of the concepts themselves.
More importantly, the introduction of the concept of bounded rationality
opens the possibility of understandingpolitical phenomena and outcomes which
the rational choice approach falls short of comprehending. 12First, the concept
of bounded rationality is useful in explaining seemingly irrationalbehaviour that
reveals a consistent pattern. For example, people's behaviour under a fascist
regime and the behaviour of members of terroristand racist groups are difficult
to understand for those outside such regimes or groups, but are organized by
consistent rules or patterns. Behaviour in unusual organizational and institu-
tional circumstances is often considered far from rational, but employment of
the concept of bounded rationality can help analyse the patternof that behaviour
without marginalizing it as abnormal. Goals, which may seem extravagant for
outsiders, can-be considered inevitable under a certain perception of the
environment. The concept of bounded rationality is especially useful in
investigating the perceptional limitation and bias of human beings and
connecting them with goal-oriented behaviour.
(F'note continued)
maintains the assumption of economic rationality because he believes it serves to bind together
various human behaviour within a unified framework. Simon replaces it with the assumption of
bounded rationalitybecause he is more concerned with specifying auxiliary assumptions that support
his framework for analysing rational behaviour.
1 ' Michael Laver and Norman Schofield, Multiparty Government: The Politics of Coalition in
Europe (New York: Oxford University Press, 1990).
112 A theoretical
example of a behaviour that is truly counter to the assumption of economic
rationality is a 'commitment' that 'involves choosing an action that yields a lower expected welfare
than an alternative available action' (A. K. Sen, 'Rational Fools: A Critique of the Behavioral

The utility of the concept of bounded rationality, however, is not limited to

specific fields of comparative studies. Rather it may be more appropriatethan
the economic rationality concept is in explaining real political behaviour when
considering circumstantial conditions that influence individual behaviour. For
example, Taylor identifies the conditions under which a strictly defined rational
choice theory is more likely to provide strong explanations about real political
changes."3 According to him, they are; '(1) the options of courses of action
available to the agent are limited'; '(2) at least some of the thin incentives facing
the agent or the costs and benefits attached to the alternative courses of actions,
are to the agent in question well defined'; '(3) ... it matters (or will turn out to
matter) a great deal to the individual which action is chosen'; 'and (4) prior to
the choice situation there have previously been many similar or analogous
occasions.' 14 These conditions actually mean that behaviour is more consist-
ently explained by the strict rationality assumption when individuals are in a
situation in which the cost and benefit of their choice is simple and clear, and
anyhow they understand the meaning of their choice - that is, in what context
their choice will be made and how much gain or damage a specific choice will
or is likely to bring. Taylor's discussion implies that the applicability of the
rational choice framework to real situations may depend on factors which are
not directly concerned with the core of the rational choice framework -
circumstantial conditions in which the behaviour is taken and the perceptions
of the actors about these conditions. If such conditions are not satisfied,
individuals are more likely to take different courses of action from the ones
based on the strict rationality assumption, and these actions tend to lead to
outcomes or consequences that are different from those predicted by the rational
(F'note continued)
Foundations of Economic Theory', in Mansbridge, ed., Beyond Self-Interest (Chicago: University
of Chicago Press, 1990), pp. 32-3). When a person's consistent ordering of choosing behaviour is
not necessarily related to the person's individual welfare, 'the existence of a "variety of motives"
makes a difference' (see A. K. Sen, 'Beneconfusion', in J. G. T. Meeks, ed., ThoughtfulEconomic
Man: Essays On Rationality, Moral Rules and Benevolence (Cambridge: Cambridge University
Press, 1991), 12-16, at p. 15). In other words, the rationalchoice framework is silent about the human
psychology that shapes the actor's motivation to make choices. A rational choice theorist's quick
response to Sen's point about limitations of the economic rationality assumption may be: as long
as social scientists are concerned with social outcomes and not with individual psychology, the
economic assumption is useful (see W. Riker, 'Political Science and Rational Choice', in Alt and
Shepsle, Perspectives on Positive Political Economy, at p. 173). But, some economists are
increasingly interested in that field. For example, see R. M. Hogarth and M. W. Reder, eds, Rational
Choice: The Contrast Between Economies and Psychology (Chicago: University of Chicago Press,
1987).
113 Michael
Taylor, 'Structure,Culture, and Action in the Explanation of Social Change', Politics
and Society, 17 (1989), 115-57. He defines a strict theory of rational choice as a thin rational choice
theory as follows: '(1) rational action is action that is instrumental in achieving or advancing given
aims in the light of given belief; (2) the agent is assumed to be egoistic; and (3) the range of incentives
assumed to affect the agent is limited.'
114
Taylor, 'Structure, Culture, and Action', p. 150.

580 KATO
choice explanation. And, in that case, it is more useful to employ the bounded
rationality concept which stresses the limitation of the actor's perception
capability and delineates real situations by auxiliary assumptions to explain
behaviour. Although there are only a small number of works that use the
bounded rationality concept while recognizing its merits as defined above, I can
introduce at least two examples in comparative studies.
In his comparative study of the development of bureaucraticorganizations in
France, Japan, the United States and Great Britain, Silberman employs the
concept of bounded rationality. He focuses on the 'uncertainty' of situations
which political elites faced with the succession of leadership in these countries
in the late nineteenth and early twentieth centuries, when bureaucratic
organizations were developed.115 He explains the different patterns of
bureaucratic development across these countries by the greater or lesser
uncertainty for political elites who wanted to establish rules of leadership
succession and strategically chose specific forms of bureaucracy in order to
ensure their possession of power. In the United States and Great Britain in the
nineteenth century, individual equality was established in principle, and
political leaders established rules for determining possession and succession of
power based on social networks or competitive party systems. Because of the
low level of uncertainty related to the leadership organizations in these
countries, highly professional and politically controlled bureaucracies evolved
which were accountable to their constituencies. By contrast, France and Japan
experienced revolutionary political changes, and political leaders in these
countries faced crises of possession and succession of power in the nineteenth
century. Under conditions of great uncertainty, the emerging bureaucratic
organization in Japan and France was utilized as a basis of power for political
elites, and a classic type of a highly rationalized bureaucracy was developed to
decrease the uncertainty of political situations.
Silberman's conceptualization of 'uncertainty' does not fit well with the
rational choice framework in which uncertainty is regarded as a factor that is
a mere constraint on rational behaviour. The problem of uncertainty is solved
in the framework of economic rationality by assigning a probability to each
course of action and a specific consequence of that action. In his framework,
however, the level of uncertainty actually changes the course of action for
rational individuals. Silberman convincingly shows, by using historical
evidence, that the uncertainty of a political situation itself is a primary factor
in determining political elites' strategic responses to an emerging bureaucratic
organization. A high or low uncertainty of environment for the power struggle
of political elites, together with other institutional arrangements such as social
networks or political parties, led to a specific form of bureaucraticorganization.
115Silberman defines
uncertainty as 'the inability to predict the kind of decisions that will arise
and/or the degree of acceptance of decisions' (Bernard Silberman, Cages of Reason: The Rise of the
Rational State in France, Japan, the United States, and Great Britain (Chicago: University of
Chicago Press, 1993)), p. 21.

Only by using the concept of bounded rationality does Silberman construct a

framework for comparing rational behaviour.
Another example of the use of the concept of bounded rationality is Budge's
work on party competition. 16 Budge's analysis is especially interesting because
it offers a spatial theory of party competition distinct from the rational choice
approach and is likely to provide a new theory of party competition based on
bounded rationality. In his article, the spatial theory of party competition is first
called into question by pointing out that politicians can obtain little reliable
information about how a party's policy decision influences the next election. To
analyse behaviour subject to such uncertainty, Budge employs the bounded
rationality concept. Then, based on Schelling,117 he suggests that, with
uncertainty, policy equilibria may emerge from cognitive factors such as
ideology rather than from motivational factors such as re-election incentives.
The merit of his work is that it goes beyond pointing up the uncertainty to
incorporate ideology into the analysis. By doing so he extends his model of
electoral competition to a model of government formation and narrows the gap
between the spatial theory of electoral competition and the spatial theory of
government formation.
Budge's work implies that the rational choice theory may not be able to
present an adequate and unified model for rational behaviour at different levels.
The spatial election model justifies its assumption that politicians seek
re-election because votes and office are the most plausible motivations for
politicians, while the spatial theory of party coalition regards policy implemen-
tation as one of the important goals pursued by parties. The chasm between the
two spatial models exists because the goals for electoral competition and for
coalition formation, both of which concern party politicians, may not be
commensurable. Party politicians want to be re-elected, but, at the same time,
once they are re-elected they want to pursue policies that they favour. Thus,
Budge raises the possibility that in real situations, the party politicians are likely
to rely on ideology that permits them to decide on their behaviour at both the
level of electoral competition and party competition in government formation.
He confirms his argument with data on party behaviour in twenty democracies.
As with Silberman's work, Budge demonstrates that an analysis based on
bounded rationality can offer a useful explanation that may not be possible when
relying on the rational choice approach.
CONCLUSION
In this article, I have distinguished three groups of new institutionalists - the

socio-historical new institutionalists, the rational choice new institutionalists,
116
Ian Budge, 'A New Spatial Theory of Party Competition: Uncertainty, Ideology, and Policy
Equilibria Viewed Comparatively and Temporally', British Journal of Political Science, 24 (1994),
443-67.
117 Thomas
Schelling, The Strategy of Conflict (Boston, Mass.: HarvardUniversity Press, 1960),
chap. 3.

582 KATO
and the new institutionalists who use a more flexible concept of rationality - in
terms of their attitudes to rational behaviour and its relationship to institutions.
Then, I showed that neither the socio-historical new institutionalism nor the
rational choice approachis superiorto the other in terms of institutional analysis.
Each approach has different strengths in undertaking comparative studies: the
socio-historical approach is suitable for explaining directly the distinctiveness
and differences between the cases compared; the rational choice approach
employs a different strategy to apply the assumption of rational behaviour and
illuminates institutional differences that produce distinct policy and political
outcomes. I argue that the most critical dispute between the socio-historical new
institutionalism and the rational choice approach involves epistemological
commitments to methodological individualism, not the issue of whether to
employ the rationality assumption. In the final section, I introduced a distinction
between the concepts of economic rationality and bounded rationality and
proposed the utility of the bounded rationality concept in an analysis of real
behaviour.


(Cambridge Studies in Comparative) Sven Steinmo, Kathleen Thelen, Frank Longstreth - Structuring Politics - Historical Institutionalism in Comparative Analysis-Cambridge University Press (1992)

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Institutions and Rationality in Politics - Three Varieties of Neo-Institutionalists

Author(s): Junko Kato

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Review Article: Institutions and Rationality

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renewed focus on institutional changes and dynamics. The alleged novelty of

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perspectives on individual rationality. A deep chasm divides those who consider

DIFFERENT APPROACHES TO INSTITUTIONS

The first group of new institutionalists includes a broad range of political

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10Because most scholars who endorse the socio-historical

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reliance on such a deductive logic based on individual rationality restricts their

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behavioural assumption, such as in the rational choice approach, deflects one's

' E. Ostrom, 'Rational Choice

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SOCIO-HISTORICAL AND RATIONAL CHOICE APPROACHES:

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certain generalizations about political phenomena or to find rules across

The Rational Choice Approach in Comparative Studies

Let me start with reviewing the rational choice comparative literature.

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important. This point is also demonstrated by Little.60 He stipulates that the

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state-centred, although he also includes for consideration factors that represent

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rational behaviour, but his argument is closely supportedby inductive reasoning

83 The recent work

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Steinmo pays close attention to individual rational behaviour and carefully

The Issue of Epistemological Commitment to Methodological Individualism

Despite the compatibility described above between these new institutional

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politicians' incentives to provide a public good (that is, competent administrat-

ECONOMIC RATIONALITY AND BOUNDED RATIONALITY: THE

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theoretical coherence of the approach based on the assumption. It is consistent

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and evaluational premises of subjects.'"00Alternatively, a set of such premises

Subsequently, Simon suggests that organizations often provide an environment

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In economics and also in some interdisciplinary fields such as organization

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The utility of the concept of bounded rationality, however, is not limited to

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Only by using the concept of bounded rationality does Silberman construct a

In this article, I have distinguished three groups of new institutionalists - the

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