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Rational choice institutionalism
Rational Choice Institutionalism (RCI) is a theoretical approach to the study of institutions arguing that actors use institutions to maximize their utility. However, actors face rule-based constraints provided by the institutional environment which influence their behaviour. Rational Choice Institutionalism arose initially from the study of congressional behaviour in the U.S. in the late 1970s.〔Hall, P. A., & Taylor, R. (1996). Political Science and the Three Institutionalisms. Political Studies, 44, 936-957〕 It employs analytical tools borrowed from neo-classical economics to explain how institutions are created, the behaviour of political actors within it, and the outcome of strategic interaction.
RCI explains the creation of institutions as an attempt to reduce transaction costs of collective activity which would be significantly higher without such institutions.〔Williamson, Oliver (1985) The Economic Institutions of Capitalism, New York, Free Press〕 Institutions persist after their creation because they reduce uncertainty and allow gains from exchange. Rational Choice Institutionalism assumes that political actors within the institutional setting have a fixed set of preferences. To maximize those preferences actors behave highly instrumental through systematic foresight and strategic cost-benefit calculation.〔Shepsle, K. (2005). Rational Choice Instituionalism. Havard University Press.〕 Institutions lay down the 'rules of the game', define the range of available strategies and the sequence of alternatives. The actors' behaviour will be highly influenced by the expectation how other players will bargain. The institutional environment provides information and enforcement mechanism that reduce uncertainty for each actor about the corresponding behaviour of others.〔Hall, P. A., & Taylor, R. (1996). Political Science and the Three Institutionalisms. Political Studies, 44, 936-957〕 This 'calculus approach' explains how the institutional setting influences individual behaviour and stresses how strategic interaction determines policy outcomes.
==The Principal-Agent Model==
A key concept of Rational Choice Institutionalism is the principal-agent model borrowed from Neo-classical economics. The concept assumes that the principal enters into a contractual relation with a second party, the agent, and delegates responsibility to the latter to fulfil certain responsibilities or a set of tasks on behalf of the principal.〔http://www.iim.uni-flensburg.de/vwl/upload/lehre/wise0607/eus/institutions_and_culture/Kassim_on_P-A_in_EU.pdf〕 Problems occur due to an asymmetric distribution of information which favours the agent. The latter enables the agent to pursue its own interest and engage in opportunistic behaviour – shirking - at the cost of the principal’s interest.〔Kiewiet, D.R. and McCubbins, M.D. (1991) The Logic of Delegation: Congressional Parties and the Appropriations Process, Chicago: University of Chicago Press.〕 The principal’s problem is how to control and limit shirking by the agent.
There can also be principal drift, or as Sokolowski has called it, 'the opportunistic principal.'
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