Transaction Costs and the Perceived Effectiveness of Complex Institutional Systems

• Author: Jack M. Mewhirter,Mark Lubell,Ramiro Berardo,John T. Scholz
• DOI: http://doi.org/10.1111/puar.12622
• Published date: 01 September 2017
• Date: 01 September 2017

668 Public Administration Review • September | October 2017

Public Administration Review,

Vol. 77, Iss. 5, pp. 668–680. © 2016 by

The American Society for Public Administration.

DOI: 10.1111/puar.12622.

Ramiro Berardo is assistant professor

in the School of Environment and Natural

Resources at The Ohio State University. His

research focuses on the role of institutions

in solving collective action problems in the

use and management of common-pool

resources, with an emphasis on water.

Most of his work is done in complex social-

ecological systems, including large-scale

estuaries and river systems in the United

States and Latin America.

E-mail : berardo.3@osu.edu

Jack M. Mewhirter is assistant

professor in the Department of Political

Science at the University of Cincinnati. His

research focuses on cooperation problems

and policy influence in complex governance

systems. Most of his work is done in the

context of regional water governance

systems.

E-mail : jack.mewhirter@uc.edu

Mark Lubell is professor of

environmental science and policy at the

University of California, Davis. His research

focuses on cooperation and institutions

in the context of environmental policy. He

works on these issues mainly in the context

of water management and agricultural

decision making, using a mix of quantitative

analysis, experiments, computational

models, and qualitative approaches.

E-mail : mnlubell@ucdavis.edu

Public

Administration

and the

Disciplines

Abstract: This article studies factors affecting how policy actors perceive the effectiveness of political institutions involved

in complex water governance systems. The ecology of games framework argues that participants are more likely to

perceive institutions as effective when the benefits of solving collective action problems outweigh the transaction costs

of developing political contracts within these institutions. The authors hypothesize that transaction costs are a function

of conflict, type of participation, political knowledge, scientific knowledge, and actor resources. Survey results suggest

that the importance of these different sources of transaction costs varies across study sites in the Tampa Bay watershed in

Florida, the Sacramento–San Joaquin River delta in California, and the Paraná River delta in Argentina. Based on the

observed differences, some initial ideas are sketched about the evolution of complex governance systems from fairly simple

and informal rules and networks to well-established tapestries of many formal institutions.

Practitioner Points

• Participants with more adequate knowledge of other participants and scientific issues and with broader

and more intensive participation generally give higher forum evaluations, although the importance of each

depends on the nature of the regional political system in which the forum operates.

• Policy forums in any regional political system receive higher evaluations if they are perceived to enhance

value through the resolution of collective action problems rather than to negotiate the division of fixed

resources.

• Forums in relatively new systems should first focus on frequent interactions to develop political knowledge

about the preferences of other participants

• Forums in developed systems with more stable sets of institutions should invest more in developing the

scientific basis for decision making.

• To achieve their policy goals, actors in more developed systems should participate in a wide range of forums.

T his article analyzes perceptions of policy

effectiveness in complex governance systems

that feature multiple institutions and actors

interacting in the context of interconnected collective

action problems. For example, water governance

systems—the empirical focus of this article—feature

multiple problems, such as water supply, water

quality, biodiversity, flooding, land use, and climate

change, in which decisions about one problem may

have implications for the others. Many different

government and nongovernmental actors have an

interest in the solutions to these problems, but there

is no single institutional framework or “policy”

governing these issues. Rather, collective decisions

are made across a range of formal and informal

institutions that constitute the overall governance

system in a particular area. We will use the term

“policy forums” or simply “forums” as the generic

term to describe the multiple policy institutions

that exist in such complex governance systems. Each

forum constitutes a set of formal and informal rules

that provide a social space for actors to collectively

negotiate their policy preferences and decide how

problems are to be addressed (Ostrom 2009b ).

It is our contention that complex governance

systems are the reality not only for environmental

policy but for most policy issues studied by public

administration scholars. For example, Provan and

Milward ( 1995 ) describe how community health

organizations must navigate multiple funding and

decision-making processes and variance across cities in

terms of the structure of interorganizational networks.

The existence of complex governance systems

has been described in diverse domains, including

telecommunications (Dutton 1992 ), education

(Firestone 1989 ), local economic development

(Cornwell, Curry, and Schwirian 2003 ), and even

talent development within Norwegian handball

(Bjørndal, Ronglan, and Andersen 2015). Upon

Rosemary O’Leary, Editor

Mark Lubell

University of California , Davis

Jack M. Mewhirter

University of Cincinnati

Ramiro Berardo

The Ohio State University

John T. Scholz

Florida State University

Transaction Costs and the Perceived Effectiveness

of Complex Institutional Systems

John T. Scholz is the Francis Eppes

Professor Emeritus of Political Science at

Florida State University. He has published

empirical analyses of regulatory and

environmental agencies and laboratory

studies of cooperative decisions to explore

the responsiveness of agencies to changing

political and policy environments and their

ability to effectively enforce and implement

policies.

E-mail : jscholz@fsu.edu