Institutions and organizations: differences and linkages from organization theory.
| Autor | March, James |
| Cargo | Texto en ingles - Entrevista |
David Arellano: Following this wave of new public management that has been so influential in Mexico and Latin America there is a superficial discussion regarding the difference between institutions and organizations. In particular, under the idea that institutions are basically the rules of the game and that, if you design correctly the right incentives, people will follow them and we can change their behavior through those incentives. Therefore, you can build up, you can design and you can create institutions in a rational manner, through these incentive structures. In sum, do you consider that institutions and organizations are different? That you can rationally design them? That by creating the correct incentives you can change the behavior of people in public organizations?
James March: I think that is the kind of question that Erhard should respond to first because he is the expert on local orders and how the same kind of theory works for public and private and multiple networks of various sizes.
Erhard Friedberg: My impression is that I do not think we are going to have a big controversy around this. My take on this is that this is the language of economists, and that very often this language is over simplifying complicated processes that over estimate the clarity of what is going on. It forgets that you do not command an active system as if it were a machine and you pushed a button and it aligns. So, incentive structures are of course one of the few instruments a policy maker has; so he/she may use them as an instrument but he/she should also be aware of the fact that incentive structures are nothing but incentive structures, and actual behavior will not necessarily fall in line because you create an incentive structure. So the question then becomes: how does the incentive structure relate to what is already going on? And, can the new incentives be readily integrated in the games that are going on, they are totally contradictory with them? If this is so, there is going to be a big problem. If they are too easy to integrate then they do not do too much good, and if they are too different they will not be probably very well implemented. Thus, I do not really know what to do with that language because of its importance; I mean (if I use/adopt this language) I am not going to attend the limits of our power and intentions. I am always aware of the hundred thousand unanticipated consequences that any kind of voluntary design will have. In sum, I will say (that you can) design an incentive structure but the problem starts then.
March: I think there are two related questions. One is the question of complexity; you are talking about relatively complex systems that are unlikely to respond to relatively simple minded manipulations, in relatively simple ways so there is the problem of complexity. The other problem is the question of the extent to which human action is based on incentives; whether behavior is interpretable in that way, if it can be either or not categorical, and if you can define incentives in such a way that any behavior is interpretable within that framework. I think, however, that we know rather well that a lot of human behavior is driven by expectation of consequences, and consequences are what you manipulate through incentives but a lot of human behavior does not fit that model very well. A lot of human behavior is much more following the rules of identity, of what I call the logic of appropriateness, and that kind of behavior does not fit incentive manipulation very well. Therefore, you have the problem of the extent to which you can manipulate incentives, the extent to which incentives control action precisely, and the extent to which incentives are not even relevant to a lot of the behavior we observe in organizations.
Friedberg: I agree, I would add that even people who are responding to the incentive structure do not necessarily respond to the sense and direction that the structure provides; in other words, there are many ways in which you can use rules, directives, incentives to do things that are not quite in line with the intentions of the incentive structure's design.
March: Another issue to be considered is the extent to which the incentive is approached and how it tends to drive people to behave in response. In some sense, if you design an organization with the idea that people are responsive to capable incentives, over time they would probably become so. That poses some problems for people who are concerned in things like justice and equality, which tend to not be responsive to incentive structures and they can be responsive more to identity structures.
Arellano: Accepting the issue of unexpected consequences or that people's behavior is not necessarily affected by incentives, the problem is that, in several countries including Mexico, several important public administration reformers are adopting this strategy as their foundation. And it is not only in government, for example we can see that universities create incentives for academics to publish in good journals, and that becomes the cornerstone to evaluate academic performance. Imagine the same in other sectors, for instance in education, where you have a proposal for a vouchers' scheme in order to create quasi-market structures. The problem is, as pointed by James March, that we have now these reforms in action and people believe that their behavior should be following incentive structures. I mean, they may be convinced that incentives are the only way through, the only manner in what an organization may obtain co-operation or make them behave in the way...
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