Paul Pierson, “The limits of design”, Governance 13 (2000), pp. 475-499.

‘Main Argument: The goal of this essay is to explore some of the limitations of functionalist mechanisms of institutional development  and to identify alternative mechanisms of institutional origins and change, and to begin to specify the conditions that make one or another account more probable. (1) Functionalist premises about institutional origins and change should be replaced by functionalist hypotheses; and (2)  functionalist hypotheses should be supplemented and contrasted with hypotheses stressing the possible non-functionalist roots of institutions.
Key Definitions:
Credible Commitments:  actors can often do better if they remove certain alternatives from their future menu of options
== Notes ==
Functionalist Arguments About Institutions:
– The dominant response to institutional origin has been functionalist reasoning
– Functionalists state that institutional functioning in large part explains the presence of particular institutional arrangements
– The assumption is that these institutions exist in the form they do because they are functional for social actors [477]
Limits Of Rational Design:
– A simple vision of institutional design focuses on the intentional and far-sighted choices of purposive, instrumental actors
– Actors may not be instrumental in the sense implied by this framework; they may not be far-sighted; finally, institutional effects may not be intended –> exposes a possible limitation on the effectiveness of institutional design
Limitation 1: Institutional Designers May Not Act Instrumentally: actors may be motivated more by conceptions of what is appropriate than effective [478] “logic of appropriateness”
Limitation 2: The Problem of Short Time Horizons: Long-term institutional consequences may be the by-products of actions taken for short-term political reasons
– “Credible commitment”:  “[T]he ability to commit often (not always) expands one’s opportunity set, whereas the capacity to exercise discretion—which includes the latitude to renege or behave opportunistically—reduces it” (Shepsle 1991)
– “Time Inconsistency”: It may be rational for an actor to make an agreement, but equally rational to subsequently break it [480]
– “Shadow Of The Future”: actors both care about the future and feel capable of influencing it
Limitation 3: Institutional Effects May Be Unanticipated: designers make mistakes; increasing social complexity
– Dominant response to the issue has been avoidance or to treat unintended effects as “noise” and to assume random distribution and therefore leave systematic, effects behind
Institutional “Stickiness”:
– Institutional arrangements in politics are typically hard to change
– Lines of authority are clear, and the relevant decision makers are likely to share the same broad goal of maximizing profit
– Those who design institutions and policies may wish to bind their successors [491]; “political uncertainty\” (Moe 1990)
Consequences of Path Dependence:
– Individual and organizational adaptations to previous arrangements may make reversal both difficult and unattractive
– initial institutional decisions—even suboptimal ones—can become self-reinforcing over time (Krasner 1989; North 1990a)
– Commitments may “lock in” previous decisions
– technological change has revealed some of the circumstances conducive to path dependence (David 1985; Arthur 1994)–> presence of increasing returns or positive feedback
Sources of Increasing Returns:
– Large set-up or fixed costs; increasing returns to further investment in a given technology
Learning effects:  the operation of complex systems
– Coordination effects: (or network externalities) when the individual receives increased benefits from a particular activity if others also adopt the same option
Adaptive expectations: when individuals feel a need to “pick the right horse” because options that fail to win broad acceptance will have drawbacks later on’