Games Real Actors Play: Actor-Centered Institutionalism in Policy Research

By Fritz W. Scharpf | Go to book overview
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6

Negotiated Agreements

Welfare losses that cannot be avoided in the modes of unilateral action can in principle be avoided in cooperative games -- that is, under institutional conditions that not only provide legal or procedural protection for property rights and other interest positions but also assure the binding force of negotiated agreements. When that is the case, the Coase Theorem ( Coase 1960) assures us that -- regardless of whether property rights are assigned to one party or another-negotiations among rational (and fully informed) actors will lead to voluntary agreements that will realize all potential welfare gains among the participants, provided that transaction costs are negligible and that side payments or package deals are possible. What is more, these welfare-efficient outcomes are to be achieved by purely self-interested actors who, by definition, would not agree unless the expected outcome is more attractive, from their subjective perspective, than the outcome that could be expected without the agreement. From a normative point of view this is an extremely important claim that can be made for no other mode of interaction among self-interested actors-neither for unilateral action, nor for majority voting, nor for hierarchical decisions. This normative significance is not reduced by the fact that the Coase Theorem is only concerned with the maximization of aggregate utility or welfare and not with the distributive justice of negotiated outcomes. These are likely to be "fair" with regard to the alternative options available to the negotiating parties, but they will not correct existing inequalities of initial endowments.

By contrast, the normative significance of the Coase Theorem is indeed affected by the assumption of negligible transaction costs. The reason for this is of general significance for political theory: Obviously, the welfare claims of the theorem apply only among the actors who actually participate in a negotiation. Now if transaction costs were zero, negotiations could include all parties who are in one way or another affected by a policy problem. In that case voluntary agreement would be the only mode of interaction that is normatively defensible on welfare-theoretic grounds ( Buchanan/ Tullock 1962).

But if transaction costs cannot be neglected -- and Ronald Coase, the founder of transaction-cost economics, was emphatic in his insistence that they not be

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