Some institutional reforms endure. Most do not. What distinguishes the reforms that change institutions permanently from the reforms that are reversed when the reformers leave.
The Durability Conditions
The institutional reforms that endure share a set of conditions that the reforms that do not endure typically lack. They create constituencies for their own continuation: the Social Security programme created a constituency of beneficiaries who would resist its elimination more effectively than any reformer could advocate for its creation. They change the incentive structure for the actors who implement them: the Volcker Rule's restriction on proprietary trading by deposit-taking banks changed what bank traders could do, not just what they were supposed to do. They embed in institutional design rather than administrative practice: the constitutional amendments that entrenched civil rights protections were harder to reverse than the administrative guidance that preceded them. And they are implemented long enough to become the default: the institutional change that has been operating for a decade is harder to reverse than the institutional change that was implemented last year.
The reforms that do not endure typically lack at least one of these conditions. The reform that creates no constituency for its continuation is vulnerable when its initial political champion leaves. The reform that changes rules without changing incentives generates the workarounds that hollow out the rule's effect. The reform that is implemented through administrative guidance rather than statutory change can be reversed by the next administration that disagrees with it. And the reform that is reversed before it has time to become the default never has the opportunity to demonstrate its value.
The reform that sticks is the reform that changes who benefits from the current arrangement, not just what the current arrangement requires. The reform that only changes requirements while leaving the underlying benefit structure intact has not changed the institutional equilibrium — it has imposed a cost on the actors who benefit from the equilibrium while leaving them the incentive and the capacity to erode the cost over time.
Discussion