Some institutional inefficiencies exist because they serve the interests of the people who maintain them, not despite them.
The Feature, Not the Bug
Institutional reform efforts frequently identify inefficiencies — processes that are slower, more expensive, and more burdensome than they need to be — and treat them as unintentional failures awaiting correction. This diagnosis is often wrong. Many institutional inefficiencies are not failures; they are features. They persist not because no one has noticed them or because the institution lacks the capacity to change them, but because the inefficiency serves the interests of the actors who have the power to eliminate it — and who therefore have no intention of doing so.
The slow regulatory approval process that incumbents navigate easily and new entrants find prohibitive is an inefficiency for new entrants and a competitive advantage for incumbents. The complex compliance requirement that large firms absorb as overhead and small firms cannot afford is an inefficiency for small firms and a barrier to entry for large ones. The opaque procurement process that rewards long-term relationships over competitive bids is an inefficiency for bidders without relationships and a preference for those who have them. Each of these inefficiencies is maintained by the actors who benefit from it, using the same institutional mechanisms that maintain any institutional arrangement: control over the decision processes, influence over the actors who would need to change it, and the ability to frame the inefficiency as a necessary feature rather than a removable bug.
The Reform Barrier
Recognising that an inefficiency is a feature rather than a bug changes the analysis of how to address it. The reform approach designed for an unintentional inefficiency is process improvement: identify the bottleneck, redesign the process, implement the change. The reform approach required for an intentional inefficiency is political: identify the actors who benefit from the inefficiency, understand why the inefficiency serves their interests, and build the coalition that can change it against their resistance. The first approach applied to the second type of inefficiency fails — the process is redesigned and the actors who benefit from the old process reintroduce the inefficiency in a new form that achieves the same protective effect.
The institutional inefficiency that has persisted despite repeated reform attempts is probably not a failure of reform design. It is a feature someone has chosen to protect. The question for the reformer is not how to design a better process but who benefits from the current one — and what it will take to change the political balance that maintains it.
Discussion