Maimone Christina PS311 Week 3 Response Knight's Bargaining Theory of Institutional Change Many of the theories of institutional change lack descriptions of the mechanisms by which change occurs. The forces that contribute to change are developed, but the processes by which these forces act upon society to produce changes in institutions are noticeably absent. In addition, many theories focus on the collective benefits of institutions as the reason why such institutions are established. Rational actors are portrayed as contributing to the development of collective benefits because it is in their interest to do so. This approach ignores the distributional properties of institutions and differences in resources and power possessed by actors in society by assuming incorrectly that the collective benefits of institutions would be preferred over individual gains in distributional advantage possible through institutions. Jack Knight, in Institutions and Social Conflict, provides an important contribution to the literature on institutional creation and change by developing a micro-level account of how rules, and then institutions, are created that is based in asymmetries of power and resources. His analysis of how institutions change, however, lacks the emphasis on the roles actors adopt during interactions that would more accurately account for changes in institutions over time. Knight defines social institutions as "a set of rules that structure social interactions in particular ways" and of which knowledge is shared by members of the community (p. 2). The focus of his analysis is on self-enforcing informal institutions, although he does discuss the role of the state or another third-party as an enforcer of sanctions. He begins his argument by criticizing existing classic and contemporary theories of institutional change, highlighting their misplaced focus on development of collective benefits and lack of micro-level mechanisms by which change occurs. In doing this, Knight firmly establishes the point at which he is entering the discussion about institutional change and provides a clear picture of the motivations for his work and the theories against which he is arguing. He then attempts to address the failings he finds in existing theories by looking at the distributional effects of institutions and the conflict resulting from those effects. He develops how asymmetries of power, resulting from
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asymmetries of resources, influence change. To do this, he adopts a rational choice model because of its appropriateness for situations in which competing interests are present. The bargaining theory of institutional emergence and change that Knight builds starts with the interactions between actors in society. Interactions often offer the potential for mutual benefits for the participants, as emphasized by theories attributing institutional development to collective benefits; however, these benefits may be distributed to the actors at different rates. By using the power that they bring to interactions, actors attempt to influence the outcome of interactions to benefit them. Actors exert power by attempting to restrict the choices of others through the use of their resources. They want to use credibility, risk aversion, and time preferences in their favor. For example, consider a situation where players A and B would both benefit by choosing to go the same direction (Fig. 1). Both A and B will benefit if either (L, L) or (R, R) is the outcome, but A will benefit more from (L, L) and B from (R, R). Which of these two potential outcomes is chosen will depend on the resources the players can bring to bear in bargaining over this conflict. If player A is in a resource situation that enables him to bargain longer or risk losing the benefits of the interaction, he is in a position to constrain his own choice to L in a way that B will find credible. If B finds A's assertion of choosing L no matter what credible, he will chose R in the attempt to maximize his benefit given the constraint A has placed upon him. Given the resource situation of the two players, the outcome, or rule, that results Player B A er ay Pl R L L 0, 0 5, 3 R 3, 5 0, 0
Figure 1 Potential Interaction
when any actors face a similar interaction and occupy similar roles to players A and B is expected to be the same. Since the outcomes of particular interactions are repeated, rules about how actors in particular roles facing particular interactions should behave develop. These rules provide information about the probable future actions of others and the resulting sanctions (loss of benefits) for those who do not follow the rules.
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A rule becomes institutionalized as knowledge about the expected actions of those occupying the roles involved in a given interaction is shared. This sharing is accomplished though a combination of observation of interactions in society and consistent experiences of multiple actors placed in similar situations. Rules can be established as institutions largely because the distribution of resources such is that people can be divided into roles based on similarities in resources that they possess. Rules can be established between roles instead of between unique individuals, which allows for rules that emerge from interactions to be widely applicable to many members of the community. Knight addresses the issue of institutional change by arguing that when the distribution of resources or the relative bargaining power of actors changes, possibly as a result of the current institutional arrangement, renegotiation and bargaining will be undertaken as it was originally. This leads to the possible formation of new rules that can again be institutionalized in the same manner as before. While Knight provides a good account of institutional development, his argument about institutional change neglects what is actually occurring when distributions of resources are altered. It is the roles that actors occupy within society that change significantly, not the rules that emerge from interactions between actors in these roles. Using the rational choice model that Knight does, the rule that will emerge from actors with given resources interacting within a benefit structure can be predicted. Consequently, current institutions are aptly conceptualized as a subset of the infinite set of rules that are predictable by applying rational choice to any given combination of actors, resources, and benefit structure. Institutional change then becomes the shifts that occur in the composition of the subset of rules currently in place. The rules that comprise any given subset are determined by the roles that actors within society occupy. Changes in distributions of resources thus affect institutional change by changing the roles that people occupy in the community, since roles are defined in terms of the resources actors possess.1 The key to understanding institutional change is thus the change in roles that actors inhabit as a result of changing resource distributions, not the rules currently in play in the community. The roles are interesting because, unlike rules, they
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Changes in distributions could also affect benefit structures by altering the resources available for gain in any given interaction. However, since distributional changes are likely to have wide-ranging effects, it is unlikely that benefit structures will be altered without changes occurring in the roles actors inhabit. The focus on roles is not misplaced. Situations where both roles and benefits change add more complexity to the process without negating roles as the unit of change. The benefit structures are simply the arena in which roles interact. We should be more concerned with the actors than the scenery.
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are not a given once a rational choice model is assumed. There is substance to roles that actors adopt, such as conflict between roles an actor plays, degrees of identification by actors with roles, and opportunity for ideological influences, that is absent from rules dictating expected behaviors. Emphasizing roles provides a place out...