Beyond Institutional Design

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Lall, R. (2017). Beyond Institutional Design: Explaining the Performance

Citation of International Organizations. International Organization, 71(2),
pp.245–280. doi:10.1017/s0020818317000066.

Status In progress

Subject Politics

Paper International Relations

Created @February 3, 2023 4:23 PM

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edited @February 3, 2023 5:16 PM
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Notes International Cooperation

Existing Theoretical Approaches

The Argument
National Interests, Time Inconsistency, and the Principal’s Moral Hazard
De Jure and De Facto Policy Autonomy
Conclusion

Abstract: International organisations (IOs) have long been a

central focus of scholarship in international relations, yet we
know remarkably little about their performance. This article offers
an explanation for differences in the performance of IOs and

Beyond Institutional Design 1

 tests it using the first quantitative data set on the topic. I argue
that the primary obstacle to effective institutional performance is
not deviant behaviour by IO officials—as conventional “rogue-
agency” analyses suggest—but the propensity of states to use
IOs to promote narrow national interests rather than broader
organisational objectives. IOs that enjoy policy autonomy vis-à-
vis states will thus exhibit higher levels of performance. However,
in the international context policy autonomy cannot be
guaranteed by institutional design. Instead, it is a function of (1)
the existence of (certain types of) institutionalised alliances
between IOs and actors above and below the state; and (2) the
technical complexity of IO activities. I provide empirical evidence
for the argument by construct- ing and analysing a cross-
sectional data set on IO performance—based in part on a new
wave of official government evaluations of IOs and in part on an
original survey of IO staff—and conducting a comparative case
study in the realm of global food security. [p. 245]

Functionalist understanding of IIs - IIs provide efficient solutions to collective

action problems among states stemming from asymmetric information,
transaction costs, moral hazard, or other sources

This implies that the institutions will be successful, because otherwise there
would be no reason to establish them

However, empirical evidence suggests there is variation in performance

Even IOs with similar mandates, membership, and structures can perform at
very different levels

3 main metrics of performance

1. Achievement of stated objectives

2. Responsiveness to diverse stakeholders

3. Cost-effectiveness

Beyond Institutional Design 2

 The primary obstacle to IO effectiveness is not deviant behaviour by bureaucrats
(rogue-agency analysis), but is instead the propensity of states to use IOs to
advance narrow national interests rather than broad oganisational objectives

States are subject to the time-inconsistency problem - incentives for collective

interests before the creation of the IO are replaced by incentives for national
interests afterwards

The implication is that IOs that enjoy policy autonomy vis-à-vis

states will exhibit higher levels of performance. Critically,
however, in the international context policy autonomy cannot be
guaranteed by institutional design. Thus, only de facto—and not
merely de jure—policy autonomy will result in effective
performance. I highlight two previously overlooked sources of de
facto policy autonomy: (1) the existence of (certain types of)
institutionalised alliances between IOs and actors above and
below the state; and (2) a high degree of technical complexity in
IO activities. [p. 248-9]

Existing Theoretical Approaches

Realism

IOs are epiphenomenal and reflect the interests of the powerful nations

They do not independently shape state behaviour

They are ‘effective’ if they advance the interests of the powerful nations

Neoliberal institutionalism

Highlights IO’s role in solving collective action problems

This functionalist analysis holds an implicit commitment to the notion that the
IOs do provide the benefits desired by their creators

Constructivist criticism of IOs

Institutions use their rational-legal authority and control of information to

carve out autonomy from their creators

This results in behaviour that undermines their stated objectives

Beyond Institutional Design 3

 IOs develop tendencies such as mission creep, treating rules as ends, and
bureaucratic cultures

This ‘rogue-agency’ approach implies that IOs that have a high degree of
autonomy perform worse than those that are controlled by states

The Argument
National Interests, Time Inconsistency, and the
Principal’s Moral Hazard
Paper accepts that IOs are a product of a rational and strategic effort by states
to further their common interests by delegating authority to another actor, which
has its own interests and goals

Paper argues that the primary obstacle to effective institutional performance is

opportunistic behaviour by states, rather than by IO officials

This means that it is the principal, not the agent, who suffers from the moral
hazard problem

IO officials possess their own incentives, but acting on these incentives need not
come at the expense of realising organisational objectives

E.g. - officials who want to maximise their budget will be more successful if
their institution is seen as effective and legimitate

States often possess incentives to behave in ways that compromise the

achievement of organisational objectives

De Jure and De Facto Policy Autonomy

How can ineffective institutional performance be avoided? A
central finding of the economics literature on time inconsistency
in monetary policy is that actors can bind themselves to policies
that they favour in period t but not period t + 1 by delegating
policy-making authority to an independent agent whose
preferences are aligned with the desired policy outcome in both
periods.20 This suggests that states can solve the time-

Beyond Institutional Design 4

 inconsistency problem in international delegation by designing
IOs to possess a high level of policy autonomy. [p. 252-3]

H1: An IO’s de facto policy autonomy—which is higher when

officials set the policy agenda, governing body decisions are
made by majority voting, and states do not monopolize funding—
is positively and strongly related to its performance.
H2: An IO’s de jure policy autonomy—which is higher when its
formal rules stipulate that officials set the policy agenda,
governing body decisions are made by majority voting, and
states do not monopolize funding—is positively but weakly
related to its de facto policy autonomy.
H3: An IO’s de jure policy autonomy is positively but weakly
related to its performance. [p. 254]

H4: An IO’s ability to forge institutionalized alliances

characterized by deep coop- eration, aligned policy preferences,
and complementary capabilities is positively and strongly related
to its de facto policy autonomy.
H5: The technical complexity of an IO’s activities is positively and
strongly related to its de facto policy autonomy. [p. 257]

Conclusion
States possess incentives to pursue collective interests before creating IOs

They possess individual incentives afterwards

Hence, the degree of policy autonomy is a critical determinant of their

performance

Institutional design does not guarantee autonomy

Enforcing formal rules at the international level is difficult, and so de juro

autonomy does not always translate into de facto

De facto autonomy arises when:

Beyond Institutional Design 5

 IOs forge institutionalised alliances with actors above and below the state -
these alliances are characterised by deep cooperation, aligned policy
preferences, and complementary capabilities

IOs engage in technically complex activities

This research shows the need to move beyond the functionalist assumption that
design features produce efficient outcomes by addressing cooperation problems

Beyond Institutional Design 6