The Choice-Within-Constraints New Institutionalism and Implications for Sociology

The variant of new institutionalism that is our focus is a pan-disciplinary theory that asserts that actors pursue their interests by making choices within institutional constraints. We organize our review of the theory around its behavioral assumptions, the operation of institutional forms, and processes of institutional change. At each stage, we give particular attention to the potential contributions of sociology to the theory. The behavioral assumptions of the theory amount to bounded rationality and imply transaction costs, which, in the absence of institutions, may frustrate collective ends. The principle weakness of these behavioral assumptions is a failure to treat preferences as endogenous. We categorize the institutions that arise in response to transaction costs as to whether they are public or private in their source and centralized or decentralized in their making. In detailing the resulting categories of institutional forms, we identify key interdependencies across the public/private and centralized/decentralized dimensions. The new institutionalism is in particular need of better theory about private decentralized institutions, and theorists could turn to embeddedness theory and cognitive new-institutional theory as a source of help on this topic. The dominant view of institutional change is that it is evolutionary, driven by organizational competition, and framed by individual beliefs and shared understandings. Sociology can refine the change theory by adding better explanations of the behavior of organizations, and of the processes by which institutional alternatives come to be viewed as acceptable or unacceptable.