Toward a New Theory of Institutional Change

Going beyond historical and rational choice institutionalism, this article elaborates the core of a new theory that can account for the discontinuous, disproportionate, and frequently wavelike nature of institutional change. Cognitive-psychological findings on shifts in actors' propensity for assuming risk help explain why periods of institutional stasis can be followed by dramatic breakthroughs as actors eventually respond to a growing problem load with efforts at bold transformation. And insights on boundedly rational learning explain why solutions to these problems often occur as emulation of other countries' innovations and experiences. The new approach, which elucidates both the demand and the supply side of institutional change, is illustrated through an analysis of the transformation of developmental states, welfare states, and political regimes.