Credible change exploring the bases of state reform in new democracies

Abstract

The essay starts from the assumption that institutions can be conceived of as patterns of expectation and thus that changing institutions requires changing expectations. According to its central hypothesis, the key to such expectational changes reads credibility: People correct their predictions about the ways others behave only when they have good reasons to do so. It suggests that three conditions must be fulfilled to render institutional reforms credible and thus effective: First, institutional reformers have to devise sound incentives compatible with the assumption that actors are self-concerned utility maximizers. Second, institutional reformers need sound moral credentials. They have to build solid images of moral integrity. Third, new institutions have to be built upon sound material bases. They demand skills, money, and technology. Yet, as the paper lines out in its conclusion, the ultimate proof of any institutional cake is eating it. Inconsistent performance devalues ex post any investment of trust eventually granted ex ante.