Mechanism Choice

Abstract

Mechanism choice can generally be described as the selection of some way to structure rules for social behavior. Nobel Laureate Eric Maskin recently described a mechanism as “an institution, procedure, or game for determining outcomes” (Maskin 2008: 568). In the realm of public law, mechanism choice is synonymous with “instrument choice” or policy design. The selection of the policy instrument can be as important to success or failure as the intended policy outcome. Good intentions or objectives are not enough: the choice of tools matters. A large and growing literature in instrument choice and mechanism design examines both the normative criteria for correcting market failures, matching optimal instruments to different types of problems, minimizing costs, and overcoming incomplete information; and also the positive political factors that may influence the actual selection of instruments, and the pattern of such choices across issue areas, governance systems, and time. Public policy instruments are selected and designed by public bodies –legislatures, executive agencies, and courts – that are comprised of individuals with their own policy preferences, and that are subject to pressures from private interests through lobbying, campaign contributions, and elections. Thus, it is no surprise to the student of public law that the mechanisms actually selected to implement public policy are not necessarily the ones that best pursue the public interest. This chapter begins with a brief summary of normative mechanism choice, including the legal literature on instrument choice and the economics literature on mechanism design. It then moves to a more detailed discussion of positive mechanism choice, also called public choice, political economy, or positive politics. This positive literature explores how political institutions and pressures shape the selection of mechanisms to implement policy, notably when the selected instrument departs from the normative ideal. The positive study of mechanism choice not only informs how political processes shape policy outcomes, but also sheds useful insights into those processes themselves.