Chapter 1
INSTITUTIONAL FOUNDATIONS OF
LOCAL GOVERNANCE
In 1931, a number of
prominent businessmen in Dallas carefully orchestrated a successful campaign to
replace the existing city charter with a new charter establishing a council‑manager
form of government for Dallas. This
group became known as the Citizen's Charter Association, and it remained active
in Dallas civic and political affairs, along with another businessmen's group,
the Dallas Citizen’s Council. Through
the new charter, and through their other efforts, the Dallas "business
elite was instrumental in helping to create and maintain a political system in
which those who held elected and appointed office did not have to be told what
to do,” according to Stephen Elkin.
Instead, the government officials "would be drawn of their own
volition to particular projects and to general ways of looking at the city that
were compatible with the inclinations of business leaders. They were to act in ways that, if the
members of the business elite had time and authority, they might be drawn to
themselves” (Elkin 1987).
Almost
thirty years later, an incorporation petition was circulated in northeastern
Los Angeles County for a community that was to be called Industry. Despite the fact that the boundaries specified
on the petition contained six square miles of land, the areas failed to contain
five hundred inhabitants, the minimum number required by state law for
incorporated communities. The sponsors
then redrew the boundaries to include the 169 patients of a mental
sanitarium. Once the thirty‑one
employees at the sanitarium were added to the total, the area contained a
population of 629 inhabitants. The City
of Industry was soon born, and no adjoining municipality could annex its land,
which included some of the prime industrial properties in the metropolitan
area. In 1961, Industry's per capita
property tax assessment was $41,865, compared to $849 per capita in the
neighboring City of La Puente (Miller 1981).
In
September 1979, General Motors' chairman Thomas Murphy met with Michigan
Governor William Milliken and Detroit's Mayor Coleman Young to discuss the
deterioration of the American automobile industry and to invite these political
leaders to help GM find a new site for any new assembly plants that might be
constructed in the near future. Murphy's invitation may have been half‑hearted,
because it did not seem likely at the time that the state or the city could
find an affordable site, with the appropriate design and location, and then
help GM take title to the property during the time frame that Murphy had in
mind. However, by April of the next year the Michigan legislature had changed
the state law of eminent domain to permit a "quick‑take" of
property whereby a condemning authority could take title before compensation
had been settled upon with property owners.
By July, the residents of an area that was to become a new Cadillac
assembly plant were informed that their homes, businesses, and churches were to
be destroyed (Jones and Bachelor 1986).
What
is common to each of these controversies is the critical role played by the
formal institutions and rules of government.
The form of government authorized by municipal charter, the authority
and ability to incorporate as a municipality, and the power of eminent domain
were each used strategically by political actors to purse their interests. These institutions were central to the
outcomes. In some instances, the
political actors involved are struggling among themselves to establish new and
different institutions to govern their communities. In other instances, political and policy outcomes can be
attributed to the presence of certain institutions that exist in some, but not
all, communities. In either case, the
institutional arrangements present or absent in the different communities are
considered worth the struggle to change or maintain them over the opposition of
other political actors who want to impose or retain their own sets of
institutions. If citizens believe them
to be worth fighting over, we believe they are worthy of study.
One
difficulty with an institutional focus is that the term institution can take on
several meanings. Substantial confusion
exists between scholars who use the term institution to refer to an
organizational entity such as a family, a business firm, political party, or a
university, and scholars who use the term institution to refer to the formal
and informal rules operating within or across organizations (Ostrom 1990). We adopt the latter use of the term. Douglass North has defined institutions as
"the rules of the game in a society or, more formally, the humanly devised
constraints that shape human interaction” (North 1990). Institutions encompass both formal rules such
as the formal powers of office and also informal norms, roles, and operating
practices that are so stable, structured, and accepted that they can be said to
be “institutionalized” (Wolman 1995). While we place greater emphasis on rules
than on roles, both formal rules and informal roles are important to the extent
to which they structure political action.
Institutions
serve several important functions in organizing local politics. First, institutional arrangements shape
individual actions because they offer incentives to engage in certain behaviors
and disincentives to behave in other ways.
Second, by reducing uncertainty, institutions can provide premises for
decision-making and supply particular channels for information to travel
through and among organizations. Third,
institutions can provide stability in collective choices which otherwise would
be chaotic. In short, they induce
patterns within social phenomena that otherwise would appear meaningless.
The New-Institutionalism
Increased
attention to institutions has arisen in history, sociology, economics, and
political science over the last few years (Goodin 1996). This
“new-institutionalism” is more than a resurrection of older institutionalist
traditions. In political science, this
approach has addressed questions regarding both legislative decision making and
bureaucratic action. The first of these
has focused on institutions as constraints that limit choices, predispose
certain outcomes, and allow decision makers to overcome the intransitivity of majority
voting. Institutional arrangements such
as committee structures in legislative bodies or constitutional constraints on
the actions of officials often produce a “structure-induced equilibrium”
(Shepsle and Weingast 1987).
The
second contribution of the new-institutionalism has modeled bureaucratic
institutions based on the economic theory of the firm and principal-agent
analysis. Ensuring the wishes of
principals are carried out by their agents depends upon complex calculations of
the comparative costs of internal monitoring of subordinate behavior and
external monitoring of the quality of goods supplied by external
providers. It is sometimes advantageous
to reduce uncertainty and minimize transaction costs through institutional
arrangements which “internalize” certain activities within an organization
rather than contracting with external suppliers (Moe 1984; Weingast 1988).
THE ROLE OF INSTITUTIONS IN
URBAN POLITICS THEORY
We
believe that formal institutions are at the core of local governance and that
any understanding of how and why local governments do what they do must include
some appreciation of the constraints and incentives derived from
institutions. Though few scholars today
would question the general proposition that institutions matter, much of the
contemporary research in urban politics and policymaking has little role for
institutional arrangements. Research
explaining local government action often attributes particular outcomes to
changing demographics, shortages in revenue, corporate power, hegemonic
ideology, and a number of other factors.
We are not arguing research in this tradition is wrong, merely that it
is incomplete by its omission of the role of institutions in structuring
behavior. The internal political
forces that are the focus of this work are certainly important for
understanding the dynamics of local politics.
Nevertheless, the path of these trends and internal forces, as well as
their impacts on policy choices, may in large part be a product of the institutional
constraints on local governments. These constraints characteristically have
historical roots, as artifacts of past action and policy choices.
Somewhat
ironically, thirty years ago the study of institutions held a prominent place
in the study of urban politics. In the
1960s scholars such as Gordon Black, Robert H. Salisbury, and Edmund Fowler and
Robert Lineberry devoted a great deal of effort to examining the electoral and
policy implications of the institutions of the municipal reform movement. While the study of institutions has continued,
the institutional perspective has played only a minor role in the behavioral
and class‑conflict scholarship that dominates contemporary study of urban
politics. This is not to say that
analysis of local institutions came to a halt.
Over
the last two decades, several authors have added greatly to our knowledge.
Susan Welch and Timothy Bledsoe have continued to investigate the implications
of the institutions of the municipal reformers (Welch and Bledsoe 1988). In addition considerable attention has been
given to the organization and fragmentation of jurisdictions in metropolitan
areas (Miller 1981; Oakerson and Parks 1988; Parks and Oakerson 1989; Schneider
1989), and the various institutional arrangements employed in delivering city
services (Stein 1990). But this work,
first of all, is far out‑numbered by urban research which downplays local
government institutions, and, secondly, this work has tended to focus upon a
far-from-comprehensive set of local institutions and a fairly select set of
public issues.
Even
in the field of intergovernmental relations, where the formal legal
relationship of one level of government to another is central,
intergovernmental institutions have not played a prominent role in the
literature. One notable exception is
the recent work of Nancy Burns which examines the effects state level
constraints have on municipal incorporations and jurisdictional change (Burns
1994). In this book, we will show how
institutionally‑focused analysis, informed by principal‑agent theory,
transaction costs economics, and rational‑choice approaches to politics
can provide a richer understanding of local politics and policymaking.
WHY DO INSTITUTIONS MATTER?
First
and foremost, institutions matter because they affect the behaviors of policy‑makers. One objective of this book is to examine how
the constraints and incentives derived from institutions influence the choices
and performance of local governments.
Because institutions provide incentives for political exchange, they
affect political and policy outcomes, often in very predictable ways. For example, we will demonstrate how
institutions such as electoral rules, constituency and jurisdictional
boundaries, and the formal powers of local officers shape and constrain the
choices of elected officials who wish to remain in office or rise to higher
office.
This
is not to say that the general impact of institutions is straightforward or
easily predictable, nor do we mean to imply that there is great consensus as to
what those impacts really are. For
example, much of the social scientific research views institutions,
particularly economic arrangements, as efficiency enhancing (Posner 1972;
Williamson 1985). Others see them as
primarily exploitative and coercive (Marglin 1974). We will argue that, under various circumstances and contexts,
institutions may induce each of these outcomes.
What
is generally true of all institutions that pertain to local governance is that
they affect participation in public decisions.
Some arrangements expand the set of participants, others determine which
sets of participants will be taken seriously, while still others affect the
scope of issues about which citizens may participate. E.E. Schattschneider viewed institutions as critical to the
determination of political outcomes because they expand or limit the scope of
conflict. For these reasons,
institutional rules help determine who the winners and losers will be in local
controversies over policy choices (Schattschneider 1975).
The
impact of institutions does not stop with policy adoption; their influence also
reaches to the administration and implementation of policies that have already
been chosen. Differing institutional
arrangements can affect the risk and uncertainty of bureaucratic actions as well
as creating incentives that reward or punish administrators for acting in
particular ways. The implications of
differing sets of institutions on policy choices, their implementation and
their performance are central to our analysis.
Institutions as Outcomes
Before
embarking on our analysis of the impacts of various local government
institutions it is useful to introduce some ideas regarding the origins of
different institutions to inform this analysis. We do not accept particular sets of institutions as given, as did
institutional economists of the early twentieth century, but instead see them
as humanly derived constructs.
Individuals and groups have preferences for particular institutions. These preferences may be shaped by a belief
that those institutions will increase the probability of reaching their favored
policy ends. Therefore, the politics of
institutional choice may be a continuation of the politics of particular policy
choices. At any given point in time,
institutions may represent the "congealed tastes" for the specific
policies that they encourage (Riker 1980). We can therefore explain, to some
extent, variation in institutions across different jurisdictions by identifying
differences in the preferences and clout of the individuals and groups in these
different jurisdictions.
Accounting
for institutional change over time, however, is somewhat more difficult. Some change can be attributed to changes in
the relative prices of the goods, services, and objects of desire of the people
governed by particular institutions. In
those cases, specific policy preferences will change as the cost of reaching
different goals changes.
Therefore,
the choice of ideal institutions will also be modified to improve the chances
of reaching new policy ends. Frequently
local government institutions will change because of the impetus of outside
forces, such as when federal courts dictate that at‑large elections will
no longer be permitted. But on other
occasions preferences for institutions change as more general preferences and
world views change. How and why this
occurs is not well-understood, but many scholars suggest that such views are
socially constructed as a function of the kind of social interactions and contexts
into which individuals are imbedded (Durkheim 1952; Huckfeldt and Sprague 1995;
North 1990). Therefore we should expect
institutional change over time to occur most when the social environments of
communities are undergoing the most upheaval.
For example, when demographic change is most rapid, or when the
occupational base of a community is suddenly transformed by economic
circumstances.
OVERVIEW OF THE BOOK
In
the next chapter, we elaborate how institutional features of city governments
affect some different kinds of important policy choices. We then apply this framework to an analysis
of the adoption of comprehensive zoning ordinances and the choices of different
kinds of economic development policies.
We find that institutional arrangements such as ward representation and
mayoral veto power affect these policy choices, and in some instances, even
determine the kind of effect that socioeconomic variables have upon these
outcomes.
We
next examine how institutions shape the relationships between legislators and
their constituents. Here we show how
institutions make a difference in how citizens relate to individual council
members, and how interactions between citizens and council members are shaped
by constituency characteristics, the nature of electoral coalitions, and career
characteristics of council members. We
examine how these factors affect the extent to which citizens contact members
of city council over economic development issues and policies. We find that contacting of ward, as opposed
to at‑large, representatives is affected by somewhat different
conditions. We also find similar forces
affecting levels of council member constituent service regarding development
policy. Our analysis also reveals that
ward representation interacts with partisan affiliation to affect attitudes
toward the targeting of development policy to disadvantaged areas of the city.
The
next two chapters examine the implication of leadership turnover for policy
choices. Chapter 4 examines decisions
about how to deliver city services. In
particular, the chapter identifies whether services are delivered directly or
through some form of contracting with private firms, non‑profit
organizations, or other units of government.
We argue that turnover in leadership positions in city government should
increase transaction costs involved in contractual agreements, thus encouraging
cities to deliver services directly.
Our findings indicate that many cities do deliver services directly when
top administrator turnover is high, but they are likely to contract out
services when mayoral turnover is high.
This finding is consistent with patterns of delegation of authority to
bureaucracies reported by legislative scholars.
Chapter
5 examines how mayoral, manager, and council turnover affects time horizons,
transaction costs, and the credibility of city government commitments as
revealed in long‑term obligations such as debt financing, pension
funding, and long‑run leasing.
Electoral threats may encourage politicians to provide government
benefits to important interests and constituencies in the present, while
postponing the payment of the resulting costs until the future. This could be done through borrowing rather
than pay‑as‑you‑go financing of a project, through under‑funding
of a pension system, or through long‑term leasing of facilities and
equipment. At the same time, cities
experiencing great leadership turnover may have difficulties making credible
commitments that would satisfy credit‑rating firms, banks, or other
private interests with which cities would do business.
City
governments are nested within an intergovernmental framework where they are
subject to external rules and constraints imposed by higher levels of
government. In Chapter 6 we examine how
state or federal regulations, mandates, judicial requirements, and other
external limitations operate as intergovernmental institutions. We apply this intergovernmental institutions
framework to analyze the implications of state annexation laws, requirements for
quasi-judicial processes in zoning, and the Federal Tax Reform Act of 1986 for
local government annexations, exclusionary zoning, and borrowing decisions.
Chapter 7 summarizes our major findings and renews the
call for an institutionally-focused perspective of how local governments are
managed and how and why city elected officials act as they do. In this concluding chapter we focus on the
role of institutions in local governance.
Contemporary empirical research that treats institutions as directly
influencing local decisions and tests only for the additive effects of
institutions is based upon a misunderstanding of the role of institutions as
mechanisms to aggregate preferences. We
argue in favor of an interactive approach that treats the institutions of local
government as mechanisms for mediating conflict and aggregating and
articulating individual and group preferences.
We then review the analyses from this book that reveal preferences
interact with institutional arrangements to predict the use of legislative case
work decisions, as well as development and debt financing choices. Our focus next turns to the implications of
institutions for uncertainty. The
consequences of uncertainty for
political choice are examined based upon our exploration of local government
borrowing and contracting decisions. We
then briefly discuss the importance of intergovernmental institutions, rules
and constraints, and conclude by explaining how the concept of path‑dependent
development helps explain the long-enduring impacts of the institutions of
local governance.
In these seven chapters we
hope to advance institutional analysis of local governments and local
governance. We seek to demonstrate the
promise of such an approach by taking on a wider array of theoretical and substantive
problem than has been attempted before and viewing them from the perspective of
the institutions that shape and influence them.
CONCLUSION
We want to make the case that institutional analysis
should be at the center, not the periphery, of the study of local
politics. This chapter began with some
illustrations of political battles over institutions. Sometimes the battles concern city charters or electoral systems,
sometimes they deal with the nature of service contracts, at other times they
may involve civil service requirements or the extent of authority delegated to
city administrators. These
arrangements are all what are commonly called "institutions." These features of local government are
humanly devised constraints that shape human interaction and consequently
provide incentives for political exchange (North 1990). Institutions affect political and policy
outcomes, often in predictable ways.
It is because they often have predictable effects that political actors
struggle to change or retain existing arrangements. We hope that our illustrations presented here and the analysis