78 4: Public Institutional Th eory
structures of public administration. As we point out later, in Chapter 9, and as
Hill and Lynn point out, hierarchy is quite necessary owing to how appropria-
tions, constitutional authority, and jurisdiction work in the American political
system. It is no surprise, then, that William West (1997) cautions us about ra-
tional choice theories concerning bureaucratic structure and political control.
West points out that, among other fl aws, a key limitation of such theories is that
agencies have discretion over choosing courses of action in program implemen-
tation. For example, agencies may choose adjudication over rulemaking in order
to avoid the infl uence of citizen or industry groups. In other words, agencies
have options that insulate them from other participants in a network.
Alternatives to Hierarchy
Although it may be acknowledged that formal structure and hierarchy, defi ned
broadly, are central to any understanding of institutions and are here to stay
(March and Olsen 1989), the theoretical and methodological fashions of the day
have tended toward transaction cost analysis, information asymmetry, principal-
agent theory, and models of rational choice. Indeed, a leading symposium on the
new institutionalism in public administration approached the subject primar-
ily from the vantage of rational choice theory (Ferris and Tang 1993). In that
symposium, Elinor Ostrom, Larry Schroeder, and Susan Wayne (1993) evaluated
the successes of polycentric institutional arrangements for sustaining rural in-
frastructure in developing countries. Robert Stein (1993), using data from the
International City/County Management Association (ICMA), analyzed alterna-
tive structural arrangements for city services in the United States and concluded
that the real theoretical issue is not whether alternative services are provided
by government or by private companies, but whether governments have eff ec-
tively matched their service responsibilities and appropriate methods of service
delivery. Jack Knott (1993) grouped public and private organizations according
to how standardized their work was, the level of information asymmetry, the
level of contextual political consensus and stability, and the level of internal co-
hesion, categories not unlike Mintzberg’s, and concluded that management in
private fi rms and management in public institutions have essentially the same
basic problem: trust between principals and agents. Finally, as an illustration of
the institutional perspective’s broad methodological appeal, Th omas Hammond
(1993) compared the processes and institutional arrangements of national states,
baseball tournaments, bureaucratic hierarchies, and the organization of books in
libraries to build a formal model of hierarchy. Having set out his formal model,
Hammond concluded:
Every institution processes information so as to perceive and defi ne problems,
and every institution’s decisionmakers choose among the available options to
address these problems. Th e act of comparison lies at the heart of these two