Assignment

Ques: Analyse any theory of policy making

Course : BA(Hons)Political Science

Paper : Public Policy In India

Submitted by Submitted to
Anurag Yadav Nikhil Sir
Roll No. 17/56025
Sec – A (IIIyr)
Introduction

In recent times,there has been a growing awareness of the significance of placing

public policy in the context of institutions.The fact that policymaking takes place
in the context of institutions,the impact of institutional arrangements ,cannot be
ignored in understanding the process of policy formulation.

Institutions are now described as organizations as well as systems in which

individuals interact and achieve political and policy goals through explicit or
implicit rules that evolve over time through cooperative means.(Ostrom,2007)

The institutional approach attempts to study the relationships between public

policy and governmental institutions.Institutionalism,with its focus on the legal
and structural aspects of institutions, can be applied in policy analysis. The
structures and institutions and their arrangements and interactions can have a
significant impact on public policy.

The study of institutions and the people who compose them are important. In a
democratic society,a state is a web of government structures and institutions.The
state performs many functions.It strives to adjudicate between conflicting social
and economic interests.It is regarded as the guardian of all sections of the
community.No organization has ever been able to succeed in its objectives across
the whole range of public policies,and policy issues tend to be resolved in ways
generally compatible with the preferences of thre majority of the public.In a
democratic society,the activities of individuals and groups are generally directed
towards governmental institutions such as the legislature,executive,judiciary and
bureaucracy. Public policy is formulated,implemented and enforced by
governmental institutions.In other words,a policy does not take the shape of
public policy unless it is adopted and implemented by the governmental
institutions.
 Sociological Institutionalism

March and Olsen maintain that problems and solutions happen within political
framework, rather than outside the ‘black box’, because human activity and ideas
are fundamentally bounded by the institutions within which they are set. The
political framework (institutions and rules) provides the parameters of how
conflict takes place, how participants interact and how citizens relate to
governing bodies. Thus an explanation of how and why a given policy emerged in
relation to a ‘problem’ requires that we first analyse the structure, historical
development, personal networks and decisions over time of the institutions
involved in finding a solution to a problem.

According to Selznick, formal structures ‘never succeed in conquering the non-

formal dimensions of organizational behaviour’.The decision-making which takes
place in organizations is, therefore, influenced by its dependence on the
environment in which it is situated, rather than by formal or rational
considerations. Selznick argues,

Every formal organization … attempts to mobilize human and technical resources

as means for the achievements of its ends. However, the individuals within the
system tend to resist being treated as means. They interact as wholes, bringing to
bear their own special problems and purposes….As a result, the organization may
be significantly viewed as an adaptive social structure, facing problems which
arise simply because it exists as an organization in an institutional environment,
independently of the special… goals which called it into being.

As such, people are dependent on the organization to fulfill certain needs,and in

turn the organization is dependent on the environment in which it is located.In
other words,decision making in organizations may be driven by an inner logic,the
interests and values of its members,by its need to adapt or displace goals,rather
than by rational considerations.The policymakinhg process may consequently
subvert formal policy and institutional arrangements.
 Criticism
The institutional theory in terms of structural-functionalist explanation advocated
by Selzenick offered much insight into the organizational context of
decision/policy making. However it has some limitations :

1) It does not take account of power within and around organizations.

2) It is possible that some organizations are more powerful to shape their

environment than others.In this case,more powerful will have an ability to shape
their own agendas,whereas the less powerful will be far more the product of the
external environment.

Perrow contends that ‘the dominant organizations or institutions of our society

have not experienced goal displacement and are able to institutionalize on their
own terms.

3) Selzenick’s model neglects the way in which power operates within

organizations.

Economic Institutionalism

In comparison to sociologists who envisage decision making in institutions

involving environmental impact and interests,economic institutionalists argue
that human beings are driven by self-interests and are self-regarding Economic
institutionalism comprises theories derived from ‘transaction cost economics’ and
‘principle agent’ theories(agency theory).

Transaction Cost Economics

TCE reasons that the markets involve costs in locating buyers and sellers in getting
information,in negotiating over price,terms and conditions and also in monitoring
agreed contracts.In all of this we are involved in trying to reduce uncertainty and
increase control over our transaction.The instutionalist model derived from TCE is
one composed of buyers and sellers in which there is little trust,much
uncertainty,bounded rationality,opportunism,moral hazard,and where contracts
impose on human transactions discipline and control.The issue of costs in
economic transaction was developed into a theory of ‘how firms grow’ by Olliver
Williamson in his work ‘Markets and Hierarchies’.

Principle Agent Theory

Agency theory or popularly known as principal-agent theory also emerged in the
1970s as an alternative to behavior tradition.Stilglitz and Alchian and Demsetz are
the key contributors to the development and popularizatuion of the principal-
agent theory.It holds that an organization’s principles-owners,CEOs,govt agency
heads-look for achievement of organizational goals.Like the TCEs analysis,the
formulation of the agency theory focuses on the problem of the relationship
between principals contracts and agents.

Advocates of the agency theory argue that costs of monitoring the relationship
will,in conditions of high uncertainty,a small number of agents,poor
information,an opportunistic behavior of agents,be higher in dealing with outside
agents than with intra-organizational agents.The answer to this troublesome
relationships,in which agents seem to have the upper hand,lies in the selection of
institutions-markets or hierarchies-so that contracts can be monitored at lower
cost.

For the proponents of TCE and principal-agent theory as a model of political

life,the answer appears to be to improve the way in which contractual
arrangements can keep tabs on actors who are involved in the policymaking
process.

Criticism
Halachmi raises certain issues in the application of agency theory. As Moe noted,
there are certainly significant problem in translating economic approaches to
organizational analysis to the distinctive operating and task environment of the
public sector. What Moe explains as a great strength of ‘new economics of
organization’-promoting assumptions of neoclassical economics- can also be seen
as less realistic descriptively and so somewhat less useful prescriptively in a world
of multiple principals, ambiguous goals and labile preferences.

Reviewing the use of quasi-markets as social policy, Le Grand and Bartlett offer a
conclusion in terms of TCE that it has pushed up TCEs in the delivery of welfare
services: ‘overall, the issue of appropriate institutional design to minimize
transaction costs is one which will undoubtedly require a long period of
experimentation and disruption in the evolving quasi- market system’. Lane also
comments that basis to the operation of the bureau is a principal-agent
relationship between politicians on the one hand and civil servants on the other
hand.

Political Institutionalism

Political institutionalism is most closely associated with the works of Theda

Skockpol and Peter Hall.Skockpol and Hall’s approaches to political
institutionalism come from theories of state-society relations,and consequently
their definition of institutions goes far beyond that of either of the sociological or
economic institutionalism.

Political institutionalism approach argues that policymaking is the outcome of the

internal agenda of state institutions rather than the result of external pressures
and influences.Contrary to the Marxist idea of state as an instrument of the
dominant class ,Skockpol in her review of the research argues that the state in
both liberal democratic systems and the developing world has the capacity to be
relatively insulated from social and economic forces.

Hall’s model gives a macro view of the relationships of institutions to society and
state,rather than single organizations or mechanisms of individual rational
choice.For Hall focusing on institutions and organizations refers to ‘an analysis of
the formal rules,compliance,procedures,and operating practices that structure
the relationship between individuals in various units if the polity and economy.His
approach is fundamentally opposed to the factionist sociological framework of
Selzenick.

Both Skockpol and Hall argue that the analysis of policymaking must be set within
the context of the capacity which state institutions have for shaping policy.In their
view state institutions have a dominant role in shaping key areas of policymaking
over a long period of time.However,institutions do not exist in isolation from the
wider relationship of the state to society.

Hall’s conclusion of the detailed study of economic policymaking in Britain and

France is that economic policy has been the result of institutional structuring of
state society relations.Hall’s political institutionalism approach provides a
framework for the analysis of decision making in historical and comparative
terms.Hall says that institiutions exist and have an impact on how decisions are
made as they provide the context within which judgements are made but they do
not eliminate ‘the free will of policy makers.’Hall does not accept the central
assumption of the economists,that we are free to choose and reform institutional
structures.On the other hand,policymakers in political institutionalism approach
are free to make choices.The view which runs through TCE and agency theory is
that ,as Chandler argues,strucures follow strategy.However,in the case of political
decision makers,Hall doubts that ,on the strength of historical evidence ,stuctures
follow strategy:It is more usual in politics for the structures to shape strategy.

Conclusion

Arguments of the institutionalists have gained wide recognition.As Almond and

others conceded that such issues were grossly neglected in 1960s and 1970s.The
impact of March and Olsen and of Skockpol and others have done much to
redress the balance in favour of taking more account of the institutional context
within which problems and policies are formulated.Political institutionalism also
offers criticism of the kind of arguments advanced by Sabatier and Jenkins-
Smithin regard to policymaking as the product of ‘advocacy coalitions’.Skockol
and Hall for example argue that the analysis of policymaking must be set within
the context of the capacity of the state institutions.Sabatier that tis idea of state
autonomy is highly dubious and misleading.However,the approaches advocated
by institutionalists cannot be easily discarded.To them,’institutions do make a
difference when explaining public policy outcomes.(B.Dan Wood)