Microfoundations of Policy Implementation

Towards European Best Practices

Phedon Nicolaides

• Publisher: Routledge
• Year: 2013
• ISBN:
  9781135017774
• Edition: 1
• Topic: Politics & International Relations
• Subtopic: Public Affairs & Administration
• Index: Politics & International Relations

The European Union (EU) has a compliance problem: there are persistent failures in the implementation of EU rules and policies by the member states. This book examines how policy implementation may be improved. It explains the nature of policy mistakes, proceeds to consider how individual public authorities and organizations can avoid making policy mistakes and then, in the light of its findings, derives how the EU may induce its member states and their public authorities to improve their compliance with EU rules and policies.

Basically, this is a book about how the right incentives at national level can improve institutional performance and contribute towards more effective application of EU rules across member states without having to confer new competences to the EU. Its premise is that strengthening the capacity of organizations to learn should not only lead to better performance, but should also stimulate useful policy experimentation across the EU.

Although this volume focuses on the obligations of EU membership and how to strengthen compliance, the proposed solutions have broader applicability. Improved organizational capacity for policy implementation will also be beneficial in those areas where the EU has no formal competence. Just as member states can learn from each other, so can policy officials in different policy fields. Good practices can spread.

1
Introduction

The main issues

Effective implementation of Union law by the Member States, which is essential for the proper functioning of the Union, shall be regarded as a matter of common interest … the EU supports the efforts of Member States to improve their administrative capacity to implement Union law.

(Article 197 of the Treaty on the Functioning of the European Union)

Picture this. You try to enter a building. You push at the door, but nothing happens. In an instant you realize your mistake and correct it by pulling the door. It opens and you gain access to the building.

Events like this happen to all of us. In fact, they happen every day. We don’t give them a second thought because they are not only common, they are natural. It is normal that we make some mistakes, despite our best efforts to avoid them. It is also normal that we learn from our mistakes and adjust our behaviour. Instinctively and instantaneously, we take in thousands of pieces of information, process them and change our behaviour to remedy any mistakes.

We set short-term and long-term objectives and we do what we think is necessary to achieve those objectives. In the process, we make errors, but we are also capable of being self-critical and assessing the results of our decisions. When we detect an error we take corrective action. We may not reach our objectives in the most efficient manner or fastest way, but we get there eventually.

This is because we can learn. We are not like computers that try to complete a task and regardless of whether it is the first or the thousandth time they attempt it, they follow the same approach again and again. Sometimes we fail repeatedly, but we eventually learn and try a different approach. Sometimes we give up. Irrespective of whether we persist or desist, we surely don’t get stuck in an endless loop of futile attempt and failure.

However, recent research in behavioural sciences has shown that individuals do make persistent mistakes. We seem to be fooled by the way problems are framed. We also seem to have an ingrained aversion to certain forms of risk even though different possible outcomes may have the same probability of occurrence or the same payoff.

The underlying theme of this book is how public policy can benefit from the ability of humans to learn from their mistakes while avoiding their tendency to commit certain persistent errors. There is a common element in individual decisions and public policy, apart from the trivial fact that it is only humans that make and apply policy. Formulating and implementing public policy involves a large element of informed guessing and personal initiative. So the question is, how can policies be improved by assuming some of the flexibility of individuals to correct their mistakes while at the same time avoiding their blind spots?

There is a serious complication. Public policy is designed and applied by public authorities. All authorities, irrespective of their special missions, are organizations with particular structures and procedures. These structures and procedures have to be adapted to function in the same uniform and seamless fashion in which individuals act. Therefore, to improve the quality of public policy we need first to understand how policy organizations function and how they can both utilize the problem-solving capacity of individuals and avoid their innate weaknesses and biases. The behaviour of individuals within policy organizations and the structures and procedures of these organizations are the microfoundations of public policy.

The formulation of public policy always involves the setting of aims, objectives or targets. An organization is always given responsibility to use appropriate instruments to achieve those aims, objectives or targets. Organizations that pursue public policy need to ask how well they carry out their tasks. Are they like computers, which perform the same tasks day-in, day-out without any further thought on whether their actions are effective? Or are they like humans, who are able to learn from mistakes and change their behaviour?

Of course, we know that organizations are not human beings. There are huge differences between them. The pertinent question is not so much whether they are different but whether they are similar enough that they can learn like humans.

This book is not about organizations in general. It is about policy organizations in the European Union (EU). More specifically, the book concentrates on those organizations that are responsible for applying EU rules, whether they are laws, policies, practices or procedures. The EU has developed rules that affect, shape or constrain many different national policies. When asking how policy organizations should learn it is impossible to ignore the influence of the EU. Non-compliance and non-implementation are not an option for member states. For this reason it is imperative for their organizations to learn, adjust and improve. EU rules require them to do so. However, the problems that are examined in this book are not confined to the EU, nor are they caused specifically by EU membership. A recent Organisation for Economic Co-operation and Development (OECD) report found that similar problems occur across the ‘OECD community’. For example, one of the critical issues that are analysed here is the setting of verifiable policy objectives and the assessment of whether those objectives are actually achieved. The OECD report found that ‘ex post evaluation is observed to be the weakest current link in the governance cycle across OECD member countries … For evaluation to be well grounded, performance measures will also be required. This is still at an early stage of development in the OECD community’.¹

As the quote at the beginning of this chapter shows, not only does the EU regard the effective implementation of Union law to be a matter of common concern, but it also expects that member states will do what is necessary to improve their administrative capacity to implement Union law. At the same time, the EU offers numerous opportunities for learning. National administrations and public authorities in general are in close contact with their counterparts in other member states. They get to know their experiences, their successes and their failures. In theory, they should be able to draw appropriate lessons. (Annexes 3 and 4 describe co-operation procedures that link different national authorities and administrative networks operating across member states, respectively.)

Yet, in considering whether European public administrations learn from each other, a paradox emerges. The same member states, and consequently the same national administrations, seem to be making the same mistakes. Those that do well, do consistently well; those that do badly, do consistently badly. An imperfect but useful proxy for ‘good’ or ‘bad’ performance is how frequently a member state is taken by the Commission to the Court of Justice for failing to comply with EU rules, or, in EU terminology, for infringing EU law. Court statistics indicate that just a handful of countries account for over 50% of all judgments that find infringement.² In fact, it is mostly the same countries that commit the highest number of infringements every year. By contrast, another handful of member states account for the lowest number of infringements. Their performance is also consistent. They are ‘good’ in any given year.

Court statistics also show that the Commission ‘wins’ an amazingly large proportion of infringement cases. The Commission’s success rate is stable over the years, varying slightly around 90%. With this very high success rate, it is puzzling that member states refuse to amend their laws before the Court delivers its judgments.

Many attempts have been made in the literature to explain the striking difference in the performance of member states. Various authors suggest differences in national administrative systems, national policy preferences, national character, propensity to comply with rules, etc. None of these explanations is satisfactory. None of them fits all countries in either group. None of them can account for political, social and administrative variation across all member states.

One may say that there is no single explanation.³ Perhaps there are indeed multiple explanations, but the purpose of testing a hypothesis across distinct subjects, irrespective of whether they are persons or countries, is to minimize the significance of their differences. As a result, what emerges are their commonalities. The only similarity within the group of the ‘bad’ member states and within the group of the ‘good’ member states is counterintuitive. The bad ones are largely in favour of further integration while the good ones are largely eurosceptic!

These substantial differences among member states remain puzzling. In fact, the mystery is compounded by another statistic. To ease cross-border transactions, member states, at the behest of the European Commission, have set up the so-called ‘SOLVIT’ network. All member states have local SOLVIT centres, the purpose of which is to take up complaints brought by businesses and citizens concerning restrictions and unjustified requirements that they encounter when they try to sell, invest, find jobs or settle down in another member state. Then the centre that receives the complaint contacts its counterpart in the other member state and tries to resolve the issue. The Commission proudly reports that more than 80% of reported problems are solved.⁴

When we look at the issues that routinely cause problems, we find that 20% concern professional qualifications, 15% market access, 15% social security, 10% taxation and 10% car registration. Together these cases account for 70% of reported problems. If we exclude cases brought by businesses, then a more striking picture emerges. Almost 90% of cases deal with issues of concern to citizens. From that 90%, the large majority of problems is linked to residence and social security.

However, social security issues don’t change from day to day. There aren’t many different ways to register a car. Professional qualifications are well known. The point is that public administrations seem to be dealing largely with routine issues and yet appear unable to find a general solution or provide sufficiently clear information to companies and individuals so that they can be aware of what to expect when they enter another member state.

These statistics suggest that public administrations do not learn as readily as they should. If this is true then the EU has a major problem on its hands. The EU can legislate as much as it wants, but if national organizations do not learn and improve, the obstacles to free movement, free trade, free investment or free establishment will never be eliminated. As old ones are removed, new ones will be created.

Most explanations of systematic failure to comply with EU rules or failure to apply EU rules correctly examine factors external to public administrations. In this book I want to consider internal factors such as organizational structure and procedures. I will not attempt an empirical study. Such a study is far beyond the scope of the book. Rather I examine the role that organizational structure and procedures play in determining an organization’s capacity to implement policies and adjust its policy instruments in response to indications of failure to reach its policy objectives or in response to changes in the market, in society and in the broader European policy environment.

The EU is a ‘policy experiment’ on avast scale. When varied policy approaches are tried by different member states, some are likely to be more successful, others less so. If something is tried many times, however, a workable version is bound to emerge. It is the inevitable result of the law of large numbers.

The EU, though, has not exploited to the extent it could or should the possibilities afforded by this implicit policy experiment. On the contrary, it is more concerned about ‘uneven’ enforcement and ‘defective’ implementation. This concern is well justified. Member states continue to fail to apply EU rules correctly. Hence, the Commission proposes additional common legislation and promotes instruments for further harmonization.

If, by contrast, member states would empower, require or induce their policy organizations to learn from the experience of other member states and adopt best practices, then steadily there should be a convergence to better policies across the EU. There would then be less need for harmonization through legally enforceable instruments. Policy convergence through learning rather than law would also be less time consuming. Resolution of legal disputes is always slow because it has to follow the correct process, ensure that the rights of all parties are respected and allow all possibilities for appeal to be exhausted.

As the EU deepens and enlarges, legal harmonization is likely to become a less effective means of preventing defective implementation of EU rules across the member states. The EU needs policy organizations that can learn and have strong incentives to continuously improve their performance. In this book I propose a bottom-up approach instead of top-down solutions.

There are many ideas and supporters of top-down solutions. In fact, they are regarded by many as the natural remedy to the problem of non-compliance by member states. Take, for example, the views expressed recently by Jean-Claude Trichet, the President of the European Central Bank, on the governance faults in the eurozone.⁵ He believes it is necessary to ‘change drastically the present governance [of the eurozone, which is] based upon the dialectics of surveillance, recommendations and sanctions. In the present concept, all the decisions remain in the hands of the country concerned, even if the recommendations are not applied, and even if this attitude triggers difficulties for other member countries’. He wants EU leaders to consider whether it would be ‘too bold, in the economic field, with a single market, a single currency and a single central bank, to envisage a ministry of finance of the Union?’

I do not wish to dispute the wisdom of Mr Trichet’s proposals, nor the efficacy of more centralized rules and top-down solutions. My argument here is that we should not ignore other solutions and approaches that involve changes of institutional structures within member states rather than above member states.

Bureaucracies conjure an image of red tape, heaps of paper and cumbersome procedures, but why do organizations, which normally employ intelligent people, persist with unnecessary, superfluous or ineffective procedures and requirements? It cannot be that their staff are unaware of the results of their actions. The answer must be that organizations do not want to change their ways or are unable to change. I will argue in this book that a bureaucracy is an organization composed of intelligent persons who suffer from a collective learning deficiency. A bureaucracy is the organizational equivalent of a malfunctioning computer. It does what it does because it has always been doing it that way.

The outline of the book is as follows: It starts by identifying the prevalence of policy errors and then examines the meaning of errors in a broad sense and how we explain them. I treat errors and mistakes as synonymous. I propose a methodology on how to understand the occurrence of errors. Then I consider how we can avoid errors and what we normally do to learn from our mistakes.

The next issue is how organizations may be thought to make mistakes. This is not so much a conceptual problem in the case of human beings because we all have personal experience of such mistakes, but can we apply the same methodology to organizations? I argue that it is possible. The big difference is that the staff of an organization may have interests that are in conflict with those of the organization itself. This cannot be ignored. I explain how such a potential conflict of interest affects the way policy errors can be understood and then consider how an organization can learn and reduce the incidence of policy mistakes.

The book then turns its attention to the EU. The way the EU functions and the obligations imposed on its members make it more imperative for policy organizations to learn. At the same time, the numerous co-operation procedures within the EU make it easier for that learning to occur. The most recent proposal from the Commission advocates an extension of the ‘mutual assessment’ process, which is a form of peer review. This kind of assessment will most likely facilitate the flow of information across member states, but it will not achieve much if national policy organizations do not have strong incentives to capitalize on that information to reform their own structures and practices.

The main messages of the book are as follows: First, we are interested in explaining errors because we want to avoid repeating them. In order to prevent repetition we need to be able to identify an outcome as being an error. Ability to recognize the causes of e...

Table of contents

• Cover
• Title
• Copyright
• Dedication
• Contents
• List of illustrations
• Foreword
• Acknowledgements
• 1 Introduction: The main issues
• 2 Problem defined: Policy errors
• 3 A bit of a theory
• 4 Anatomy of errors
• 5 Avoidable errors
• 6 Can organizations make mistakes?
• 7 Developing organizational capacity for error avoidance
• 8 Rules and norms in policy implementation
• 9 Incentives for error avoidance
• 10 Capacity for policy implementation
• 11 Obligations of EU membership
• 12 Synthesis and recommendations: Policy experimentation and ‘nudging’ public administrations
• 13 Concluding remarks
• Annex 1: Attributes of effective implementation
• Annex 2: Rules that bind the member states—the internal market
• Annex 3: Measures for better management and co-ordination of internal market issues in EU member states
• Annex 4: Administrative networks in the EU
• Annex 5: The ‘reality check’ performed by the European Court of Auditors
• Annex 6: OECD work on better regulation
• Index