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Provides an overview of the political economy approach as it relates to the political economy of institutions and the political economy of public policy. The field has developed and the literature has exploded on the basis of analyses of the transaction costs in the incentives, strategies, and choices of maximizing and strategic behaviour, within interconnected political and economic institutions. These themes are examined as they relate to cooperation, efficiency, game theoretic models and institutional choice in legislatures, bureaucracies, and government formation. Models are elaborated and evidence assessed in the political economy of public policy, specifically in the areas of political business cycles and budget deficits.

The two papers in Ch. 5 examine how lawyers and law professors, operating in private arenas, successfully revived a pre-modern legal system, the Lex Mercatoria – the international body of trade law derived from merchant practice. Stone Sweet’s paper traces the development of a transnational legal system, comprised of a national contract law and a network of arbitration houses that compete to supply third-party dispute resolution to the international commercial world. The paper is divided into two parts. The first discusses, in a theoretical manner, obstacles to the emergence of a stable network of traders engaged in relatively long-range, impersonal exchange, focusing on three generic problems of human community: cooperation and commitment, transaction costs, and institutional choice and governance. The second part examines three quite different regimes that have governed transnational commercial activity: from the mediaeval law merchant, to the Westphalian state system and its institutional failings (including discussion of conflict of laws practices), and – the principal focus of the chapter – the new Lex Mercatoria and its institutionalization.

This concluding chapter elaborates on the theoretical implications of the study for institutional theory as well as on its practical implications for the likelihood of successful federal reform. In a final step, it applies the theoretical arguments of the book to the European Union and explores whether the mechanisms through which policies are coordinated within this supranational setting can be accounted for by the proposed 'federalism framework'. Being composed of power-concentrating governments and governments with voluntary power-sharing on the level of the member states and characterized by compulsory power-sharing on the European level, the European Union mixes incentive structure within and across governmental levels. Contrasted with the three federal systems, the framework's application reveals parallels and peculiarities of the European polity in how the governments embedded in it handle demands for intergovernmental cooperation. While only a rough sketch, it indicates the fruitfulness of applying federalism frameworks beyond the national sphere and highlights the importance of avoiding the perception of the European Union as 'sui generic' from the outset.

When do actors USE available institutions, SELECT among alternative forums, CHANGE existing rules, or CREATE new arrangements? In this chapter the authors present their theory of boundedly rational institutional choice (USCC) which connects a wide range of institutional theories in arguing that institutional choice is driven by the interaction of cooperation problems and the institutional status quo. USCC theory accounts for the dynamics of institutional choices by combining agent and structural explanations, capturing the push–pull of boundedly rational action within a set of historically inherited rules. The authors conclude by discussing the implications of USCC theory for understanding international institutions in time.

This chapter establishes the theoretical foundation and offers a coherent framework to guide subsequent empirical analyses. After reviewing contemporary literature on the origins of and changes in institutions and local governance, this chapter raises the key research questions. Subsequently, both macro- and micro-views of the origins of indigenously developed institutions and externally imposed institutions in local communities are presented. This chapter also shows how indigenous relation-based institutions solve the problems of collective action and accountability in close-knit communities, with the help of powerful social sanctions. Juxtaposing externally imposed rule-based institutions and indigenous relation-based ones, this chapter further demonstrates the advantage of the former in sustaining governance in loosely coupled communities. This chapter then presents a contextualized understanding of institutional choices in local communities confronted with the coexistence of different institutions and unevenly transformed social environments. This chapter concludes with major hypotheses for subsequent empirical examination.

This chapter moves beyond the induced changes in social environments and focuses on villagers' choices among institutional solutions for handling issues as well as on their assessment of institutions for monitoring village cadres and holding them accountable. Villagers' evaluations of imposed rule-based institutions for conflict resolution, disaster/crisis relief, modest credit and small loans, and regulating village cadres' behaviors are systematically examined using discrete choice models that combine the 2008 Asian Barometer Survey Mainland China Survey and the 2008 National Village Survey. As expected, in loosely coupled villages characterized by a medium level of outward migration, imposed rule-based institutions are more likely to attract villagers' attention and become their choice for addressing local governance issues. Imposed rule-based institutions are also more likely to be used for supervising village cadres and holding them accountable. These findings highlight the influence of structural features on villagers' choice to use imposed rule-based institutions.

How do ideas impact political change? Chapter 2 considers the challenges to demonstrating the causal significance of ideas. It then offers a framework to determine the relative importance of particular ideas to political developments, focusing on institutional choice and institutional durability over time. First, is a particular idea responsible for the choice of a set of institutional arrangements? The framework suggests focusing on (1) the pervasiveness of the idea, (2) whether the idea is cited as a rationale for reform, (3) whether a reform associated with the idea is chosen over other alternatives, and (4) what preexisting ideas and institutional arrangements are being challenged. Second, to what extent does the durability of an institution or policy depend on the continued belief that the ideas underlying it are legitimate? The framework suggests focusing on (1) whether the perceived validity of the idea comes into serious question, (2) whether actors who are in a position to influence reform cite doubts in the idea, and (3) the extent to which other ideas gain leverage over reform. The chapter concludes by outlining the evidence that will be used to demonstrate the influence of the idea of presidential representation on congressional laws affecting presidential power.

This chapter presents the “Analysis of Determinants of Policy Impact” (ADEPT) model, an approach to policy analysis in health promotion that is easy-to-use, parsimonious, and empirically tested. The ADEPT model is based on a theory of action that has been adapted to the organizational and policy level. This chapter discusses the ADEPT model with regards to theories that have been developed specifically to explain the policy process and to the structure/agency debate that is going on in health promotion. It concludes with a discussion of the potential of ADEPT for those engaged in policy development and in policy analysis, emphasizing its versatility and its embedded conception of the process underlying policy development.

This chapter details how the U.S. intervention in Iraq completed a full cycle through the information practice framework between 2003 and 2008. During the invasion and its aftermath, managed practice turned into insulated practice, which prompted both internal and external actors to adapt. During the subsequent occupation, adaptive practice turned into problematic practice, which in turn encouraged the U.S. military to institutionalize doctrinal reforms. The chapter explores the ways in which insulated practice still persisted at the end of this process, curiously enough, even in a tactical unit close to the fight that had ample opportunity to make sense of facts on the ground. It also surveys the Special Operations Task Force's (SOTF) information system and then compares the SOTF to other units that conducted a similar mission (Joint Special Operations Command, JSOC) or operated in the same environment (U.S. Marines) to demonstrate how different institutional choices can generate different qualities of information practice.

This chapter provides a conceptual analysis of judicial deference in free movement law. It argues that the reason for the growing relevance of deference in free movement cases is rooted in a shift in focus away from the scope of rights towards justification and proportionality. The European Court of Justice has created two deference doctrines: the margin of appreciation and decentralized judicial review. While the margin of appreciation doctrine is employed to pass certain regulatory decisions over to national legislatures and executives, decentralized judicial review is used to delegate responsibilities connected with free movement review to national courts. Both deference techniques represent a departure from the Cassis de Dijon approach, which has, for a long time, defined large parts of free movement adjudication, and have significant institutional consequences.

The concluding chapter discusses how the book’s findings contribute to wider debates in global governance, and which lesson they yield for the reformers of international organizations (IOs). The chapter first reconsiders the cultures of change that are part of IO reform. Reform technologies are an important but neglected aspect of bureaucratic culture in IOs, which legitimize themselves as reforming organizations despite all obstacles to organizational change. The chapter next discusses how the fragmentation of global governance at large reinforces the fragmentation of individual IOs. It thereby connects the fragmentation trap model to the literatures on trans-organizational networks, regime complexity and institutional choice. Finally, the chapter points out problems that reformers encounter in contemporary IOs. They are faced with the temptation of goal displacement, that is, of making reform an end in itself, and they have to deal with trade-offs between IO-specific and UN-wide reform outcomes.

The concluding chapter brings together the threads of the preceding discussion. It argues that, instead of classifying conduct as public or private, the real question for both the free movement and competition rules is how their interpretation should adapt to cases of private regulation. This adaptation is tracked through both free movement and competition law, and the proposed approach to the overlap of the two sets of rules is outlined. Finally, the concluding chapter looks at the broader implications of EU law for private regulators and their measures. It argues that EU internal market law functions as a legal accountability mechanism for private regulators. It also describes how the prevalence of private regulation in certain sectors has enabled the use of free movement and competition law as tools for reform, serving as a launchpad for the development of EU policies.