State reform and the theory of institutional policy

Abstract

A theory of institutional reforms must recognize what policy instruments are
available, how politics restrains the choice sets of reformers, and whether spontaneous counter-
policy by ordinary actors is likely to undermine reforms. A discussion of the so-called
Determinacy Paradox concludes that it is not a practical issue. Insights suggested by the new
institutionalism include measures to reduce political risks, increase the durability of reforms,
and reduce transaction. The main weakness of NIE as a guide to policy is its limited understanding
of the role of norms in undermining reforms and of long-term internal dynamics of
social systems.

JEL Classification: B25; H11; D72.