POLICY FEEDBACK AND POLICY CHANGE

Alan M. Jacobs
Department of Political Science
University of British Columbia
C425-1866 Main Mall
Vancouver, B.C. V6T 1Z1, Canada
jacobs@politics.ubc.ca

R. Kent Weaver
Georgetown University and
The Brookings Institution
1775 Massachusetts Ave, NW
Washington, DC 20036
KWEAVER@brookings.edu

PRELIMINARY DRAFT:
DO NOT CITE WITHOUT AUTHORS’ PERMISSION

Paper prepared for presentation at the Annual Meeting of the American Political Science
Association, Washington, D.C., September 2-5, 2010
Abstract

The concept of policy feedback has become central to the study of policymaking. This paper
seeks to advance the analysis of policy feedback in four principal ways. First, we argue that,
despite a strong emphasis in the literature positive feedback, negative feedback effects are likely
to be highly common and to have important implications for policy development. Second, we call
into question the common notion of positive feedback as primarily stability-inducing and negative
feedback as a driver of change. Third, we highlight the important ways in which feedback
mechanisms and their effects are conditional on other features of the political and social context.
Fourth, we argue that explanations that integrate negative with positive feedback effects – and
that understand those effects as conditional – can help to explain both incremental and dramatic
policy change. We contend that both negative and positive feedback effects can -- under
particular political and technical conditions -- explain the transformation of policy regimes.

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 Over the past two decades, the related concepts of policy feedback and path dependence

have become central to the study of policymaking (see, e.g., Skocpol 1992; Pierson 1993; Hacker

2002, 1998; Pierson 1994). The key insight of this approach is that past policy choices shape, and

in particular limit, later policy choices and outputs, and the analysis of feedback effects has

generated a large number of persuasive explanations of current policy arrangements and of policy

development over time. While the analysts acknowledge that policy feedbacks are not universal,

they have shown feedback effects to be common and an important driver of policy choice (and

“non-choice”).

While this paper shares the perspective that policy feedback is an important influence on

public policy, we hope to advance the analysis of policy feedback in four principal ways. First,

we will argue that, while the overwhelming emphasis in the historical-institutionalist literature

has been on positive feedbacks, both the logic of a feedback approach and the available empirical

evidence suggest that we should be paying equally close attention to negative feedback effects.

An emerging literature focused on explaining institutional and policy change (e.g., Streeck and

Thelen 2005; Mahoney and Thelen 2009a; Patashnik 2008; Hacker 2004) as well as a

reexamination of prior studies, suggest that negative feedback effects are common and can have

important political consequences.

We then aim to address substantial theoretical murkiness – of two kinds – in causal claims

associated with policy feedback. We contend, first, that there is little conceptual justification for

associating positive feedback mechanisms with the outcome of policy stability, or negative

feedback mechanisms with policy change. As we will suggest, positive feedback can be a key

driver of change, while negative feedback can be a powerful stabilizing force in public policy. We

further argue that feedback arguments have paid insufficient attention to the conditionality of

feedback effects: to their dependence on interactions with other features of the social and

political environment, such as institutional rules and political actors’ goals. While the conditional
nature of feedback effects is often latent in existing empirical analyses, it has been the object of

little theoretical attention. We see the formulation of conditional arguments about feedback to be

key step in assessing when positive as opposed to negative feedback will dominate policy

development, as well as for understanding how feedback mechanisms ultimately generate policy

stability or change.

Finally, we will argue that explanations that integrate negative with positive feedback

effects – and that understand those effects as conditional – can help to address one of the most

important limitations of a feedback approach focused largely on self-reinforcing dynamics: that it

has difficulty explaining change without ad hoc reliance on exogenous variables. One strand of

recent historical-institutionalist analysis has sought to expand our explanatory repertoire by

examining sources and processes of gradual policy and institutional change (Mahoney and

Thelen 2009b; Streeck and Thelen 2005). In the present paper, in contrast, that an analysis of

conditional feedback effects can offer leverage on both incremental change and major

transformation of policy structures. We argue that both negative and positive feedback effects can

-- under particular political and technical conditions -- explain non-incremental policy change.

The argument unfolds in five steps, illustrated throughout with examples drawn largely

from the fields of pension and health care policy. The next section focuses on clarifying the

concepts of positive and negative feedback and their potential relationships to policy stability and

types of policy change. The second section outlines our arguments about the conditionality of

feedback effects on exogenous conditions. The third section employs a conditional logic for

explaining non-incremental policy change. The fourth section illustrates our claims about

conditionality and policy change via an extended policy example, while the final section reviews

our arguments’ major implications.

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 POLICY FEEDBACK: CONCEPTUAL ISSUES

As we will use the term, policy feedback describes a causal process leading from a policy

choice at t1 to the conditions under which policy is chosen at t2. Drawing largely on Pierson

(2004), we understand positive policy feedback to be processes, deriving from the policy chosen

at t1, that increase the relative benefits (or reduce the relative costs) of present policy

arrangements as compared to the conceivable policy alternatives. Negative policy feedback

would of course constitute the opposite endogenous process: a feedback from the choice at t1 that,

over time, raises the relative costs (or reduces the relative benefits) of the status quo. Consistent

with the existing literature, we also understand these costs and benefits in broad terms: involving

not just fiscal and economic costs and benefits, but also the political risks and rewards faced by

officeholders and the administrative ease or difficulty with which policy options can be

implemented. We note that a cost or benefit cannot simply be a cost or benefit to some segment of

society: it must affect the calculations, incentives, or choice constraints of those with policy

influence at t2 in order to meaningfully shape the conditions of choice and be considered a

feedback effect.

While positive policy feedbacks have become an established part of the political science

literature, there has been limited sustained attention to and theorization of the ways in which

policy regimes produce negative effects that feed back into their politics. In this section, we argue

that negative feedback merits such attention and unpack and outline some of the key conceptual

building blocks for claims about negative feedback, positive feedback, and their effect on policy

development.

The prevalence of negative feedback

There is a clear recognition in the public policy literature that not all feedbacks from policy

choices are positive and self-reinforcing. While Pierson’s (1994) early application of policy-

feedback logic to retrenchment politics focused heavily on self-reinforcing dynamics – especially

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the tendency of social programs to generate their own bases of political support – his study also

pointed to program features that facilitate the efforts who those that seek to undermine the welfare

state, such as the absence of automatic inflation-indexation and service delivery based on state

ownership of a stock of physical assets (e.g., housing). Theda Skocpol (1992) has argued that the

patronage politics associated with Civil War pensions led both to the demise of that program and

to a truncation of options for later programs. Esping-Andersen’s analysis of class development in

the three worlds of welfare capitalism notes negative effects associated with each type of regime:

very high budget costs for the Scandinavian social democratic model, social exclusion and high

unemployment among younger workers in continental welfare states, and high income inequality

in liberal welfare states (Esping-Andersen 1999, 1990). And, although he did not employ the

concept of policy feedback, Kingdon’s (1984) pathbreaking work on agenda-setting demonstrates

that the “problem stream”—the set of issues that policymakers feel pressured to respond to—is

importantly affected by negative outcomes associated with current policies. Despite ample

acknowledgement of negative feedback effects, however, such processes have not received nearly

the same degree of conceptual and theoretical attention as positive feedback effects.

This analytical asymmetry would be unproblematic if it reflected empirical reality: if

negative feedback played a far more limited role in the political world than positive feedback.

Some arguments in the political-science literature on path dependence, moreover, suggest that

this might well be the case. Building upon economic models of increasing returns in market

activities, Pierson (Pierson 2004, 2000, 1993) has argued persuasively that political life displays

features that should make positive feedback especially common in politics. These features

included the institutional density of political life, the prevalence of coordination problems, and

the opacity of outcomes. Among Pierson’s central claims is that political choice and political

interaction often lack mechanisms – such as processes of competitive selection and opportunities

for effective learning – that allow for self-correction or reversal in response to negative outcomes.

Short time horizons and the status quo bias of political institutions, moreover, make reversal

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unlikely even when actors recognize undesirable consequences of past choices. These

observations would seem to suggest that positive feedback effects should be far more common in

public policy than negative ones.

We find in these insights a compelling justification for close analytical attention to path

dependence in politics. At the same time, we also believe that there are strong reasons to expect

negative feedback to be a common feature of policymaking. In fact, we note that some of the very

same features of politics that create room for positive feedback can also generate make policy

development susceptible to negative feedback.

First, and most obviously, the distributional consequences of many public policies mean

that they create “losers.” This means that state programs may not only generate their own support

bases among those who reap their benefits but also provoke their own political opposition among

those who bear their costs – a clear negative-feedback effect.1 In dramatic illustration of this

effect, Patashnik (2008) has demonstrated that even after major policy reforms are adopted, they

are commonly subject both to outright reversal or to erosion by those who bear their costs.

Patashnik argues that “the losers from reform cannot be counted on to vanish without another

fight, and new actors may arrive on the scene who will seek to undo the reform to further their

own agendas”(3).

Over the long term, such a feedback effect will turn on what happens to the losers over

time, and path dependence arguments have emphasized possibilities that will tend to reinforce the

status quo – processes through which opponents adapt, demobilize, or otherwise “disappear.” We

will suggest, however, that under common conditions the losers will have the motive and the

capacity to mobilize and fight, rather than adapt or exit the political stage. Further, if a policy’s

original “losers” sometimes demobilize or exit the political stage, new losers can also enter.

While a policy’s costs may initially fall on small or politically disadvantaged groups – making

1
We draw here on an analogous point that has been made about institutions (see, e.g.,
Mahoney and Thelen 2009a; Knight 1992; Thelen 2003)

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original enactment possible – the political and social calculus may change over time. Exogenous

social and economic developments can expand the ranks of the losers while electoral shifts can

enhance their leverage. And policy may create its own organized opposition: relatively

unorganized groups that feel that they are ignored or harmed by the existing policy regime may

specifically mobilize in response.2

More broadly – and aside from a policy’s redistributive effects – the economic fact of

scarcity means that state action frequently involves social tradeoffs. Even at the aggregate level,

in other words, many policies will display problematic features alongside the desirable attributes.

In the case of pension policy, for example, the provision of pensions with high replacement rates

– which helps to secure standards of living in retirement and avoid poverty in old age – is widely

believed to also cause reductions in individual savings, with negative effects for households and

the economy as a whole. In some cases, negative social effects will be recognized by policy

designers at the outset but acknowledged as the unavoidable cost of retaining a policy that also

has important advantages. Such tradeoffs may also emerge only over time, as the slow-developing

consequence of a policy regime’s internal logic: a prime example would be the rising costs of a

Pay-As-You-Go public pension system as it is matures (see, e.g., Pierson 2004). To the extent

that (as Pierson argues) political actors tend to choose with foreshortened time horizons, such

long-term policy costs may remain unacknowledged – and, thus, unaddressed – until they

materialize in severe form.

Third, the political processes that give rise to public policies mean that programs will rarely

embody a single, coherent logic bound to generate consequences predicted and desired by their

creators. Because political institutions typically require policymakers to win the assent of multiple

actors representing diverse constituencies, policies usually represent compromise among

competing goals and policy logics (Pierson 2004). The program architectures that result from

2
The rapid political mobilization of U.S. business in response to massive defeats at the
hands of environmental and consumer groups in the early 1970s is a prime example.

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collective political decision-making will frequently contain substantial complexity and

incoherence, creating vast opportunity for friction and unforeseen interactions among policy

mechanisms that yield outcomes unexpected by members of the policy’s enacting coalition.

Compromise-driven complexity, in other words, creates ample scope for a policy to generate

consequences that are unacceptable to the influential actors and groups that fashioned it. Even if a

policy’s initial losers do disappear, today’s policy winners may become, in important respects,

tomorrow’s policy losers.

For a variety of reasons, in sum, public policies will frequently (a.) yield substantial social

costs and (b.) impose those costs not just on “vanishing” losers but on groups with considerable

staying power and capacity to undermine the status quo. We finally note that, unlike most market

actors, successful political actors possess a powerful tool for overcoming challenges that often

inhibit economic change in the presence of increasing returns. As Pierson points out, the

authoritative features of public policies can shape social and economic incentives and behavior in

ways that generate self-reinforcing patterns of activity. But the monopolistic authority in the

hands of governing actors also allows them to coordinate expectations and behavior in ways

conducive to change. In the QWERTY-keyboard example often used to illustrate the “lock-in”

effects of increasing returns (see, e.g., Pierson 1993), path dependence results in large part from

the difficulty economic actors have in coordinating a transition in both equipment and skills to a

more efficient alternative. The winners of political competition, however, inherit legal authority

that can often overcome precisely this kind of problem, by enforcing simultaneous changes across

society and shifting actors’ expectations about one another’s behavior.

Policy regimes that have very strong, immediate negative feedbacks presumably will not

last long; thus programs subject to strong negative feedback are less likely to be the present-day

structures that analysts might seek to explain. But of course the weakness or absence of a program

structure can be an outcome just as demanding of explanation as its strength or presence.

Moreover, even where programs survive over long stretches of time, we would expect negative

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feedback processes to frequently generate pressures for change short of the complete termination,

including both incremental adjustment and more radical transformations. We will argue that

attention to negative feedbacks can help address one of the criticisms most commonly leveled at

path dependence approaches: that it does a good job of explaining the durability of policy regimes

once chosen, but must rely on exogenous factors to explain how major, regime-shifting policy

choices get made in the first place (see Weaver 2010).

Types of feedback mechanisms

Positive and negative feedback mechanisms may be of several types (see Pierson 1994;

Weaver 2010). Drawing in part on existing arguments about feedback, Table 1 displays some of

the most important classes of mechanism for generating policy feedbacks, along with specific

types of feedback process within each class. We group feedback mechanisms into three

categories. Political mechanisms concern how the adoption and operation of a program affects the

strength and preferences of political coalitions struggling over future policy development. Fiscal

mechanisms refer to demands on the government budget, notably how a program affects the

availability of resources for paying the program’s own costs. Administrative mechanisms refer to

the capacity of government to carry out specific tasks. While each of these types of feedback is

more frequently discussed in its positive variant, negative forms of political, fiscal, and

administrative feedback are also possible.

Political feedback mechanisms can be divided into four types: (1) those that shape actors’

policy preferences, (2) those that shape the identity and capacities of the actors themselves, (3)

those that affect the informational environment and relations of electoral accountability within

which politicians choose, and (4) those affecting the menu of alternatives from which

policymakers choose. As suggested above, actors’ preferences are likely to be shaped in obvious

ways by the distribution of benefits. “Winners” from a program are likely not only to favor its

continuation but also to develop expectations of a continued (and perhaps expanded) flow of

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benefits from the program or to come to view those benefits as an “entitlement.” Even when

payouts are a pure transfer from other citizens, recipients are likely to punish politicians who try

to take those benefits away.

A more indirect mechanism of preference formation – but one central to the literature on

path dependence -- results from the hard-to-reverse choices that social actors may make in

expectation of a continuation of the policy status quo. One oft-cited example of adaptation to

current policy is that individuals may consume more and save less in expectation that they will

receive a state pension when they retire. Alternatively, manufacturers may adapt to a regulatory

regime by installing expensive equipment that allows production processes to comply with new

legal standards. Crucially, if such “investments” are policy-specific – if they require program

continuation to pay off or avoid failure – then actors who make them will develop a preference

for maintenance of the status quo (Pierson 2004; see also Pierson and Trowbridge 2002).

While the literature has emphasized self-reinforcing preference effects, we would note that

negative feedback effects on preferences are also possible. As discussed above, the losers from a

policy will have a natural incentive to seek its reform or repeal. Moreover, where the losers

attended little to a policy’s potential costs before a policy’s enactment, they may become more

determined to reverse those losses after the policy is put in place -- especially if the losses are

immediate and severe.

A second political mechanism concerns the building of organizational coalitions around a

program. Beneficiaries of a policy may organize to protect or expand a program from which they

benefit, making it more difficult to cut back or eliminate that program (Pierson 1993); public

programs may also lend a group’s members resources, capacities, and political orientations that

allow and encourage them to become more politically engaged (Campbell 2003; Mettler 2005).

These positive organizational dynamics, however, are likely to unfold and dominate future

interest-group politics only to the extent that the program’s benefits are concentrated on a group

capable of overcoming obstacles to collective action, while its losses are broadly diffused and/or

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losers lack political resources. Where the losses themselves are concentrated, however, absolute

or relative losers from policy may organize to seek redress. The quick reversal of the Medicare

Catastrophic Insurance program in 1988 -- which both imposed its costs (an income-related

premium) before its benefits were received and concentrated its costs on the powerful

constituency of upper-income elders – is a powerful example of a negative feedback effect on

clientele organizational support for a program.

Third, policy choices at t1 can influence the informational conditions, and hence the

relationships of electoral accountability, within which politicians at t2 choose. As Pierson (1993)

argues, public policies shape the informational environment within which constituents perceive

and interpret policy problems and governments’ policy choices. In particular, how existing

programs are structured can facilitate or impede governments’ efforts to impose losses while

avoiding blame, by making it easier or harder for constituents to trace negative policy outcomes

back to policy choices and the politicians responsible for them (Pierson 1994). We note that this

political effect is clearly bi-directional: program structures can increase or decrease the electoral

risks of policy change.

Fourth, political feedback is sometimes conceived of as shaping the policy options or

menus from which actors choose. And, generally speaking, historical menu effects have been

conceptualized as processes that truncate the options available to later decision-makers. As

Pierson (2004, p. 45) puts it, political processes can be “highly influenced by relatively small

perturbations at early stages;” however, “once actors have ventured far down a particular path,

they may find it very difficult to reverse course. Political alternatives that were once quite

plausible become irretrievably lost” (Pierson 2004: pp. 10-11).

Once again, however, there is a negative analogue: if existing policy is perceived to have

negative consequences, then it may trigger a search for new alternatives to address those

problems—in other words, efforts to expand the policy menu. This may involve either efforts to

draw lessons from other existing models -- often importing ideas from other countries -- or to

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invent new alternatives. Both can be seen in the case of pension policy in recent decades. In

Latin America, the perceived unsustainability of current pension regimes along with a perceived

need to raise domestic savings rates led to a search for new alternatives—and ultimately led many

countries to move in whole or in part toward defined-contribution pension regimes (see, e.g.,

Weyland 2005; Madrid 2003). In Europe, negative feedbacks from existing pension policies led

policymakers in Sweden to develop a new policy alternative, “notional defined contribution”

pensions, again expanding the menu of available alternatives (see, e.g., Brooks and Weaver

2006). That model was in turn to diffused to other countries (e.g., Italy, and in part to Germany)

as those countries sought ways to address their own pension-insolvency woes.

Fiscal mechanisms – ways in which policy choices can affect the financial resources

available for future program operation – are another frequently cited feedback process in the

literature. For instance, programs that have a dedicated revenue source and trust-fund mechanism

(e.g., Social Security in the U.S.) that keep funds from being used for other purposes are likely to

be relatively protected from broader retrenchment initiatives (Pierson 1994; Patashnik 2000). If

that self-financing mechanism generates surpluses within the program account, moreover, then

program expansion may even be facilitated. But fiscal feedback effects can be negative as well as

positive. Programs can exhaust as well as generate fiscal resources, using up budgetary room that

could otherwise finance their operation or expansion. As Aaron Wildavsky noted long ago, rapid,

unanticipated program growth is likely to create an image of “uncontrolled” spending that

exceeds program’s “fair share” of the budget, placing it squarely in the crosshairs of agencies

responsible for protecting a government’s fiscal integrity. Even the fiscal effects of trust-fund

financing have a flip side: just as surpluses may pay for expansion, trust fund shortfalls may

prompt and help justify program retrenchment (Pierson 1994; Patashnik 2000).

Changes in administrative capacity represent a third broad form of policy feedback. Most

obviously, an agency administering a program is likely to gain expertise in performing its

assigned tasks over time as routines are developed and staff are trained. But negative feedback

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with respect to administrative capacity is also possible. As Martha Derthick (1990) noted in her

magisterial book Agency Under Stress, when the Social Security Administration took on

administering the new Supplemental Security Income program -- a task for which it was not

prepared in terms of organizational mission -- training or computer support, it led to a loss of

policymaker and public confidence in the agency that took a long time to repair. More generally,

governments’ propensity to add new tasks for agencies without adequate new resources reduces

the ability of those agencies to perform existing tasks.

Feedback mechanisms vs. feedback effects

Policy feedback describes a mechanism through which early policy choices influence later

ones. Positive policy feedback reduces the relative costs – fiscal, political, or administrative – of

current policy arrangements or increases its relative benefits, while negative feedback does the

opposite. Identifying the operation of these mechanisms, however, does not itself indicate what

effect they will have on policy stability or change over time.

We distinguish among four possible over-time outcomes of policy feedback: four

developments at t2 that may result, via the operation of feedback mechanisms, from policy

choices made at t1. (We focus here on stability and change in policy provisions, bracketing effects

on social consequences.) First is stability: policy provisions at t2 may remain unchanged. Second

is expansion, which we define as a change in provisions at t2 that increases the coverage or

generosity of benefits (in the case of a benefit program) or an increase in the stringency or

coverage of rules (in the case of a regulatory program). Third is contraction: a change in policy

provisions that reduces the coverage or generosity of benefits or the stringency or coverage of

rules – which, in extremus, may include the complete termination of a program. In general,

expansion and contraction involve -- to draw on Peter Hall’s (1993) typology of policy change --

a change in the settings on existing policy instruments – such as an adjustment in the wage

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replacement-rates or duration of unemployment benefits or a change in the age of pension

eligibility.

Finally, we identify a type of change that cannot properly be considered either an

expansion or a contraction of existing policy. What we refer to as transformational change (akin

to what is sometimes termed “regime transition”) involves large and durable changes in the

principles, mechanisms, or policy instruments through which the costs and benefits in a policy

sector are distributed or imposed/delivered. Examples would include a shift in the delivery old-

age pensions away from public defined-benefit arrangements toward private defined-contribution

vehicles (as in Britain in the 1980s); removing the individual-entitlement status from social

assistance (as in the U.S. in the 1990s); or a move from contribution-financed national health

insurance with private service-delivery to a national health service with public service-delivery

(as in Britain in the 1940s).

Employing a logic of feedback to explain policy development requires drawing clear

relationships between mechanisms and outcomes. The historical-institutionalist literature

commonly depicts mechanisms of positive feedback as conducive to the outcome of stability – a

process that, over time, “makes it more difficult to reverse course” (Pierson 2004). As Thelen

(2004) writes, “…[I]ncreasing returns and positive feedback arguments…have been more helpful

in understanding the sources of institutional resiliency than in yielding insights into institutional

change” (27-28). While negative feedback has been rarely considered, the implication would

seem to be that it constitutes an engine of change.

At the same time, we see considerable ambiguity in the literature about the possible

mappings of feedback mechanisms to outcomes. In a treatment of positive and negative feedback

drawing on cybernetic models, Baumgartner and Jones (2002) emphasize precisely the opposite

relations: they point to the tendency of negative feedback processes to return systems to a state of

long-term equilibrium (as disturbances trigger self-correcting dynamics) and of positive feedback

to generate dramatic change (as initial shifts generate a cascade of movement in the same

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direction). The literature on path dependence itself tends to elide the distinction between a self-

reinforcing process that stabilizes the status quo, on the one hand, and a self-reinforcing process

that generates momentum for additional steps in the same direction -- i.e., for programmatic

change in expansive directions. This is more than a trivial distinction. There is a large difference,

for instance, between (1.) an outcome of stability in a state pension system, deriving from self-

reinforcing processes that make it difficult to retrench, and (2.) an outcome of rapidly rising

pension payouts, resulting from self-reinforcing processes that over time amplify incumbents’

political incentives to enrich benefits to seniors.

Nor are stability and expansion the only potential outcomes of positive feedback. In

Hacker’s (1998) comparative-historical analysis of the development of national health-care

systems, positive feedback – including self-reinforcing effects of earlier choices on public

expectations and doctors’ preferences – contributes heavily to Britain’s transformative shift from

national health insurance to a national health service. Similarly, mechanisms of negative feedback

may generate stability as readily as change. Hacker, for instance, demonstrates that many of the

negative consequences of prior developments – including ballooning medical costs – made it far

more difficult for the United States to move to universal coverage in the 1990s. We will also

propose that transformative change will sometimes be a result of a simultaneous combination of

(a.) negative feedback that generates pressure for policy change and (b.) positive feedback or

exogenous constraints that, at the same time, make it politically difficult or economically costly to

change the settings on current instruments. As we explain further below, the adoption of a new

policy logic or policy mechanisms will often be most attractive when policymakers are caught

between pressures on the status quo and towering obstacles to incremental change.

We outline a range of conceivable relationships between feedback effects and policy

trajectories in Table 2. In sum, we see little reason to conceptualize positive feedback as

inherently stability-inducing and negative feedback as intrinsically generative of change. We

believe that much ambiguity about the relationship between feedback mechanisms and policy

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trajectories – about what feedback arguments are good at explaining – derives from discussion of

feedback in a causal vacuum: from a dearth of explicit theorization of feedback processes in

interaction with other, exogenous elements of the social, economic, and political environment.

These include the political-institutional context within which policy is made, the policy goals of

dominant political coalitions, and the economic and social constraints within which policy

operates. We consider the conditional nature of feedback effects in the next section.

THE CONDITIONALITY OF FEEDBACK EFFECTS

Feedback effects never operate in a social, economic, political, or institutional vacuum. If

policy at t1 reshapes, for instance, the policy preferences of social actors, then those new social

demands will not exert an unmediated effect on policy at t2: rather, they will be (like all social

preferences) refracted through political institutions, circumscribed by resource constraints, and

interpreted by boundedly-rational decision-makers -- before those feedback effects come to shape

policy itself.

In other words, feedback effects are conditional on other, often exogenous features of the

political environment. Arguments about policy feedback often take the following form: “A policy

choice of type A at t1 sets in motion a feedback mechanism of type B that generates a choice of

type C at t2.” Prominent examples include claims about the greater (Korpi 1983) – or,

alternatively, the lesser (Pierson 1994) – vulnerability of means-tested programs to retrenchment

as compared to universal programs; about the increasing difficulty over time of cutting back

contributory, as opposed to general-tax-financed, retirement programs (Pierson 1994); and about

the tendency of entire welfare-state regimes to yield particular types of political conflict (Esping-

Andersen 1999, 1990). Comparative differences – across countries, for instance, or policy fields –

in the output at t2 are then explained as a consequence of differences in feedback mechanisms and

their effects between t1 and t2. In many instances, this policy feedback explanation is also

15
juxtaposed against competing explanations based on exogenous factors, such as institutional

structure, economic pressure, or government partisanship.

We are suggesting, instead, that feedback arguments will often need to framed in terms of

interactions between endogenous (feedback) and exogenous factors – and that a good model of

feedback effects needs to be context-sensitive. We point to two stages at which feedback effects

are conditional on other things. First, whether and how a given policy choice at t1 reshapes the

political, fiscal, or administrative conditions of choice at t2 will depend on features of the context.

The same policy choice may generate its own broadened coalition of political support in context

A but not in context B. Second, once political, fiscal, or administrative conditions have been

shaped by earlier policy choices, the ultimate effect on the policy trajectory at t2 is conditional on

a range of exogenous factors.

Taking conditional effects into account yields more than just a more accurate and complete

account of the causal structure of feedback processes. If policies can set in motion both positive

and negative feedback mechanisms – and if the effect of each mechanism on policy development

is itself variable – then conditional propositions will be critical to explaining patterns of policy

stability and change. In particular, they can help us generate systematic explanations of why

stabilizing forces might dominate in one context while destabilizing processes dominate in

another. We also believe that relatively high-level conditional claims about feedback effects are

well within our analytical grasp. In fact, the existing public policy and historical-institutionalist

literatures suggest important conditional effects that are often not explicitly theorized. Drawing

on these literatures, we illustrate the tractability of conditional feedback dynamics by highlighting

a few plausible ways in which positive and negative feedback may be powerfully moderated by

exogenous factors. The following discussion is meant to be merely suggestive of the kinds of

conditional arguments that analysts might consider.

Adaptation costs

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 As recounted above, a major claim undergirding many arguments about the path

dependence of public policy is that the losers from policy at t1 – initially opposed to it – adapt to

the policy over time and, thus, shift their preferences toward that policy at t2. Particularly for

policies with major distributive consequences, adaptation is a key mechanism through which

policy outputs can reshape the political battlefield in self-reinforcing ways. Yet this positive-

feedback process hinges on adaptation being both technically feasible and relatively cheap – and,

in particular, cheaper than just living with the policy’s current costs. If adaptation is impossible or

very costly, then today’s policy opponents will remain tomorrow’s policy opponents, and the

policy will be just as contested at t2 as it was at t1. In short, negative rather than positive feedback

will emerge.

In some domains, an expectation of cheap adaptation may be reasonable. It was relatively

inexpensive for American employers developing occupational benefit systems during and after

World War II to layer those systems atop Social Security, a decision that would later make them

dependent on the continued payment of program benefits (Hacker 2002). But accounting and

financial arrangements may, in fact, represent a relatively easy case for adaptation. By contrast,

for manufacturers and energy producers facing environmental regulation, adaptation may mean

very costly investment in physical capital – or may in fact be infeasible given existing

technology, short of divestment from the sector. For these firms, it may be cheaper to live with

current policy burdens than to reorganize their activities and physical plants to make the policy

less burdensome. Moreover, even if adaptation may be less costly over the long term, actors’ time

horizons (as path-dependence theorists point out) will not always be sufficiently extended to take

its benefits fully into account: with pressures on public companies to meet quarterly earnings

targets, the up-front transition costs of reorganization may at times loom larger than its

downstream advantages.

To put this point differently, path dependence can cut two ways. The presence of high

startup costs, asset-specificity, adaptive expectations, and coordination problems in social and

17
economic activity can make it costly and politically difficult to change a policy once actors have

adapted to it. But those very same factors – the path dependence of much of social and economic

life – can also make it less likely that actors will adapt to new policies in the first place. To

generate societal adaptation and increasing returns over time, new policies must first overwhelm

any positive-feedback dynamics that currently hold existing patterns of social activity in place.

The implication for the study of policy development is fundamental: the direction of a policy’s

feedback effects – whether they will be positive, negative, or altogether absent – hinges in part on

whether its losers find it less costly to adapt or to maintain existing patterns of activity in the face

of new policy burdens.

The losers’ political opportunity structure

For a policy’s “losers,” living with that policy’s costs is not the only alternative to

adaptation: they can also choose to seek policy change. As a slight simplification, it is fair to say

that the costs of pursuing policy change – the resources that groups must commit to the task – will

generally be low relative to the costs of complying with or adapting to policy. What will vary

greatly, however, is the ease and likelihood of achieving success. We can consider the losers’

probability of achieving successful policy change to be a function of (1.) their capacities for

political action – e.g., how well organized they are and what resources they possess – and (2.) the

political opportunity structure that they confront. We focus here on the latter condition,

particularly on the institutional conditions that make successful opposition more likely. We

hypothesize that the losers’ institutional opportunities to revise the status quo can condition

policy feedback effects in two ways: by moderating the emergence of policy-feedback processes

over time, and by moderating the effect of policy feedback (once it emerges) on policy change.

First, where favorable institutional conditions allow the losers to win substantial changes

quickly after enactment, many long-term processes of positive feedback from the initial policy

choice will simply never have a chance to emerge. Many processes of increasing returns depend

18
on a policy’s remaining in place for a considerable period of time. What makes survival far from

a sure thing is that negative feedback will often emerge first. Mahoney and Thelen (2009a) have

pointed out that the distributional consequences of many policies and institutions means that they

quickly give rise to their own opposition. The creation of losers who are highly motivated to

pursue opportunities for change constitute an immediate negative feedback effect. By contrast,

many path-dependent dynamics involve slow-moving processes of adaptation, coordination, and

accommodation that take considerable stretches of time to gather momentum. Whether positive or

negative feedback will ultimately dominate policy development thus depends greatly on how easy

it is for opponents to achieve their ends quickly.

It is clear, moreover, that some political contexts are more hospitable than others to the

survival of fragile new programs against challenge by losers. To the extent that opponents seek

what Hacker (2004) calls “authoritative policy change” (247) – a formal revision of statute or

regulatory rules – their political opportunities will be heavily shaped by the structure of political

institutions, including the number of institutional veto points (Immergut 1992; see also Tsebelis

1995). The losers’ prospects for achieving authoritative policy change should increase as the

number of veto points falls and as the preferences of actors positioned at those veto points draw

closer to one another and the losers’ preferred outcome (see also Hacker 2004). In particular, to

the extent that political authority is institutionally concentrated, policy choices at t1 will be more

vulnerable to shifts in the balance of political advantage that weaken the enacting coalition

shortly after adoption. Where authority is more widely dispersed, however, the initial policy

choice is likely to be more robust to early fluctuations in electoral outcomes and seat shares.

Hacker’s (1998) comparative analysis of health-policy development in the United States,

Britain, and Canada provides a clear illustration of how institutions can condition feedback

effects by facilitating or hindering policy change early in a self-reinforcing process. While Hacker

identifies feedback effects as the proximate determinants of government’s health-policy choices

at t2, he points out that outputs at t1 were themselves heavily shaped by institutional context. To

19
frame the claim most simply: where power was more centralized, governments were capable of

more dramatic policy action against well-organized interests. Thus, governments wielding

concentrated authority were able to displace private-sector actors and arrangements at earlier

windows of opportunity and, in effect, to head off the path-dependent expansion of private-

insurance markets before it could become a substantial constraint on public-sector action action.

A comparison of Britain’s and the United States’ experiences with contributory public

pensions also illustrates this conditional dynamic. Shortly after the creation of the British

contributory State Earnings-Related Pensions Scheme (SERPS) in 1976, Margaret Thatcher’s

Conservatives achieved power and, within a decade, had enacted deep benefit cuts favored by

business as well as an individualized opt-out provision. With the program so quickly rolled back,

many of the long-run processes of positive feedback that would normally flow from the adoption

of a contributory pension system never had a chance to emerge. Critical to business’s and the

right’s capacity to enact this early rollback was the high concentration of institutional authority in

the hands of a pro-retrenchment Cabinet. Similarly, a few years after the creation of the U.S.

Social Security system in 1935, the political left suffered major electoral setbacks, and

“conservative coalition” of southern Democrats and business-friendly Republicans gained the

upper hand in Congress. U.S. employers at this point, moreover, remained (as they had been in

1935) overwhelming opposed to the old-age insurance program (Hacker and Pierson 2002). But

the multiplicity of veto points within U.S. political institutions – including, among other things,

the president’s authority to block new legislation – made it far more difficult for electorally

ascendant conservative forces to enact their preferences for policy change into law. Given the

need to forge a broad consensus to adopt new statutes, conservatives were successful only in their

efforts to forestall scheduled increases in payroll tax rates – a goal shared in part by labor and the

left and an achievement that likely shored up fragile support for the program by making it more

acceptable to the mass public (Jacobs 2009; Derthick 1979; Leff 1988). And so Social Security

20
survived its early years – a period of relative vulnerability prior to the buildup of strong positive

feedback – and slow-moving path-dependent processes were able to run their course.

To cast our point into sharper relief, we can juxtapose our claim with Pierson’s (1994)

explanation of U.S. and British 1980s retrenchment outcomes. Pierson argues that Thatcher was a

more successful reformer than Reagan in large part because she undertook her reform efforts far

sooner after the initial enactment of the program that she sought to dismantle. We agree with this

point as far as it goes. But we would further note that the U.S. Social Security program also faced

powerful assault from a broad coalition of electorally successful conservative forces shortly after

its enactment. While the Reagan-Thatcher comparison illuminates certain dynamics, an equally

important question is why British conservatives could achieve soon after pension-program

enactment what American conservatives could not. That the U.S. scheme survived early political

challenges to generate long-run processes of positive feedback owed much to an institutional

setting that made policy change difficult and, therefore, difficult to achieve quickly. It is not that

Thatcher and Reagan arrived on the scene at different historical stages of the same process of

policy feedback: institutional conditions in the U.S. dampened the impact of early negative

feedback, making it possible for positive feedback to unfold over time; institutions in Britain, on

the other hand, amplified negative feedback and prevented the emergence of strong self-

reinforcing dynamics.

Turning to our second claim, even once feedback processes have taken hold, political

institutions are likely to moderate their effect on policy development. If policy at t1 shapes actors’

preferences and their political activities at t2, those actors’ capacity to achieve their goals will still

be heavily conditioned by the rules of the game. In particular, those groups that develop a vested

interest in a public program and mobilize in its defense are in a much stronger position to protect

the status quo to the extent that they have access to plentiful institutional veto points.

Consider, again, the path-dependent dynamics that Hacker (1998) uncovers in his comparative

analysis of health-care policy. Among the principal feedback effects in Hacker’s account are the

21
ways in which past policy choices shape (a.) the preferences of key actors in the sector (especially

doctors) and (b.) the emergence and strength of private-sector actors (especially the insurance

industry) with a vested interest in limiting state involvement. In settings in which governments

failed to establish a major state presence in the field of medical insurance early on, this “non-

choice” generated stronger doctor opposition to national-health insurance and the emergence of a

larger and better-resourced private-insurance industry over time. At later stages of policy

development, such feedback effects do most of the causal “work” in Hacker’s argument. For

instance, against institutionalist and other explanations of the failure of Bill Clinton’s 1993-4

push for universal coverage (e.g., Steinmo and Watts 1995), Hacker focuses on the ways in which

prior policy choices structured the policy dilemmas and configuration of political forces that

Clinton faced. By this stage in the developmental trajectory, the explanation rests largely on the

(historically shaped) inputs into the policymaking process – who the main stakeholders are, what

they want, and what resources are at their disposal. While institutions in this account are a key

interactive variable in Hacker’s account of early choices, they play a modest role in his

explanation of the U.S. policy outcome of 1994. As he summarizes the comparative logic at this

later developmental stage:

[T]he point to be made is that neither Britain nor Canada enacted national health
insurance under the stark conditions Clinton confronted. If leaders in those countries
had been faced with a medical system as costly and complex as that of the United
States, if they had been forced to seamlessly move two-thirds of the public from
private and public insurance plans into a common public framework, and if they had
faced the challenges that all welfare states faced after the mid-1970s, then perhaps the
United States would not be the only country without national health insurance (126).

Hacker’s argument is a powerful corrective to strategies of explanation that ahistorical

accounts centered on static causal relationships. An explanation of health-policy outcomes

focused only on exogenously given institutions cannot withstand scrutiny because it cannot

explain the makeup and strength of the political forces that fought against reform or the resource

pressures and administrative challenges that U.S. reformers faced. As Hacker suggests, British

22
and Canadian governments would likely have faced far dimmer prospects of success if they had

faced the same constellation of political forces and policy challenges that Clinton confronted.

At the same time, given what we know about the operation of political institutions, the

converse counterfactual is equally compelling: a Prime Minster Clinton in a Westminster

parliamentary system would have had far better prospects of building a winning legislative

coalition for major reform in the face of organized opposition and fiscal constraints. Likewise,

British and Canadian leaders would – at a minimum – have had to substantially scale back their

ambitions if existing private insurers and medical associations in the 1940s and 1960s,

respectively, had been able to exploit the plentiful veto opportunities afforded by a Madisonian

system of government with weak party discipline.3 Put simply, even if vested interests in each

case were a product of choices at t1, their influence at t2 still had to operate through the logic of

political institutions prevailing at that later moment in time.

We do not seek here to adjudicate between an institutionalist and an historically oriented

explanation of this – or any other – comparative policy puzzle. As should be clear, our point is

that we should not choose between the two causal logics: rather, we should more explicitly

recognize and theorize the degree to which the effects of feedback processes on policy choice are

conditioned by institutional context. In particular, we are suggesting that many positive political

feedback effects will be amplified by an institutional dispersion of authority: feedback processes

that generate actor preferences and political mobilization in favor of the status quo are likely to

have a much stronger stabilizing effect in institutional settings that fragment policymaking

authority than in those that concentrate it.

3
Indeed, recent research by Boychuk and Banting indicates that Canadian reformers –
especially in the pivotal province of Ontario – overcame the opposition of strong private-
sector interests hostile to universal public coverage, including not only doctors
associations but also a well-established insurance industry that already covered a large
majority of the population for both hospital and medical services (Boychuk and Banting
2008). We strongly suspect that the relative concentration of authority within Canada’s
provincial and federal Westminster institutions contributed considerably to the capacity
of heads of government to overcome this opposition.

23
 Feedback effects on policy tools: Socio-economic conditions and politicians’ goals

The above discussion has emphasized feedback effects deriving from the ways in which

public programs reconfigure the field of political conflict over long periods of time by reshaping

actor preferences or by mobilizing and demobilizing social groups. Yet some political, fiscal, and

administrative feedback mechanisms operate on what we might call the tools – including the

resources and informational advantages – at politicians’ disposal as they pursue policy goals. The

design of a program created at t1 shapes the informational conditions under which politicians will

choose at t2, making it easier or more difficult for politicians at t2 to minimizing the visibility and

traceability of the losses associated with policy change (Pierson 1994). Similarly, policy choices

at t1 can shape the fiscal possibilities and administrative tools available to politicians at t2, either

generating fiscal slack or administrative capacities for politicians to exploit at t2, or drain

budgetary resources and implementation capabalities.

Yet, feedback logics that run through the “tools” at politicians’ disposal do not imply any

linear relationship – any one-to-one mapping – between policy choices at t1 and policy stability or

change at t2. Rather, feedback effects on politicians’ informational, fiscal, and administrative

resources will be conditioned by at least two additional features of the choice environment. First,

the effect of program structures on downstream informational signals and state resources and

capacities will depend critically on how those structures interact with socio-economic forces.

Because they tax economic activity, protect against economic and social risk, and often

redistribute between demographic groups, program finances – the availability of fiscal slack and

signals of financial trouble – will turn heavily on developments throughout the economy and

society, including levels of employment, wage growth, and the age structure of the population.

Who benefits from a public program and how much that program costs will hinge on how

demographic and economic forces move individuals, households, and firms into and out of the

classes of payors and beneficiaries. And how easy program costs are for society to bear will

24
depend on how quickly the economic pie expands and how easy it is for today’s cost-bearers –

especially, firms and investors – to exit the system tomorrow.

Second, fiscal and informational feedback effects will be conditional on politicians’ goals. We

construe politicians’ goals in a broad sense as encompassing both those policy endeavors to

which they are personally committed (i.e., their sincere policy preferences) and those policy

options that they have an electoral incentive to pursue.4 We note four senses in which politicians’

goals matter. First, programs adopted at t1 may bequeath fiscal and administrative capacities to

governments at t2, but enhanced capacity is typically fungible. How future incumbents will

mobilize those resources and capacities – and, hence, the direction of any feedback effect – will

depend on what tomorrow’s officeholders want to achieve and what broader incentive structures

they confront.5 Second, the effect of any feedback process that exhausts fiscal and administrative

resources depends critically on a political counterfactual: on what politicians would have done if

they had had more options. Third, resource constraints do not inherently limit options and the

scope for choice: where politicians want to scale back state activity, fiscal pressures can provide a

legitimating motive for doing so.

Fourth, the “information” provided by public policy does not always speak for itself. Like

fiscal resources, information is usually fungible; it can be framed in alternative ways and can

mobilized in the service of a wide range of political purposes. Programs’ operating principles

often have a double-edged logic – potentially countervailing effects that turn on politicians’

motives (and ingenuity). Rules that link a program’s outlays to a dedicated tax rate, for instance,

may limit expansion by making the costs more visible; but, at the same time, it may also lend

credibility to claims for expanded resources by tying costs to popular benefits. While a program’s

4
Of course, the feedback effects that we are discussing also shape the electoral
consequences associated with the enactment of alternative policy options. In referring to
the electoral incentives that shape politicians’ goals, however, we mean those electoral
incentives that are prior (or exogenous) to the policy-feedback effect in question.
5
This point draws in part on arguments about “conversion” in the literature on policy and
institutional change (e.g., Thelen 2004; Hacker 2004; Mahoney and Thelen 2009a)

25
informational logic is not infinitely plastic, the principles undergirding a program’s operation and

the social outcomes that it signals will nonetheless be strategically interpreted by political actors

as they seek to legitimize and justify their policy projects.

EXPLAINING TRANSFORMATIONAL CHANGE

We have argued that policy feedback may take several forms, and that whether the effects

of particular mechanisms are, for example, stabilizing or expansionist, are conditioned by a range

of other variables. Here we turn to the role of feedback effects – again, in combination with other

conditions – in explaining the most dramatic type of policy revision: transformational change,

which involves a major shift in policy instruments or reconfiguration of policy logic. Recent

efforts to study the endogenous (i.e., feedback-based) effects of policy and institutional change

have focused mostly on explaining gradual and incremental change (e.g., Mahoney and Thelen

2009a; Hacker 2004). We want to suggest that understanding policy feedback in conditional

terms can also yield explanations of non-incremental policy change.

The prospects for regime-transforming change can be thought of as reflecting the three

factors shown in the left-hand column of Table 2: the prevalence of positive and negative

feedback effects, the availability of incremental reform options to “patch” the status quo, and the

availability of alternative policy regimes. The political salience of each of these factors is in turn

affected by the factors shown on the right-hand side of the table.

We first note that incremental policy change – expansionary or contractionary changes in

the settings on current instruments – will often be policymakers’ first choice in response to

problems and pressures. As advocates of incrementalism noted long ago (e.g., Lindblom 1959),

limited change that holds most parameters constant usually involves far less uncertainty than

radical transformation – a considerable benefit to risk-averse actors with high stakes in the status

quo. Incrementalism also has political advantages. For politicians interested in adopting

potentially unpopular changes by stealth, a dramatic transformation of the policy regime is likely

26
to be far more conspicuous to the mass public, raising the salience of any losses that must be

imposed. Many classic strategies of obfuscation – such as amending complex tax and benefit

formulae in ways calculated to draw little notice – rely on tinkering with existing instruments.

In short, radical change usually requires a big “push” – material or political pressures that

make the status quo untenable. To the extent that feedback processes play a role in generating this

push, it seems almost a truism that regime transitions should become more likely when negative

feedback flowing from existing policy is much stronger than positive feedback. Crucially, this is

not the same as saying that a dominance of negative over positive policy consequences makes

regime transition more likely. For negative social consequences to become politically salient,

those effects must be visible and have substantial (though not exclusive) impact on actors that are

politically resourceful, rather than being concentrated among the politically powerless. As we

suggested in the last section, destabilizing negative feedback effects will also be stronger to the

extent that the losers face high adaptation costs and enjoy institutional opportunities to influence

policy. Where they are strong enough, negative feedback mechanisms can make radical change an

attractive option to both social actors and politicians.

If negative feedback is the most intuitive source of pressure for a regime shift, however,

transformational change can also derive from positive feedback, particularly in its political forms.

Policies that encourage public expectations of an expanded state role in a given policy sector and

that contribute to the mobilization and empowerment of beneficiary groups may yield strong

pressures on governments to do more of what they are currently doing – especially where a

policy’s outcomes do not completely fulfill the heightened expectations that it generates. In some

cases, a complete reconfiguration of policy instruments – such as a shift from national health

insurance to a national health service – can provide an effective way of delivering greatly

expanded benefits or spreading them more widely across society.

Yet strong pressures for change generated by either negative or positive feedback do not

push policy in any linear way toward transformational change. Rather, we want to suggest that

27
change pressures are refracted through a logic of “availability.” In ways that have not been widely

integrated into feedback arguments, the effect of policy demands on policy change depend on the

structure of the menu of available policy alternatives (Weaver 2010). The “availability” of a

policy alternative has both technical and political dimensions. For a policy option to be

technically available, policymakers must be aware of the alternative, and it must be technically

feasible to enact, given existing resources, technology, administrative capacities, and “know-

how.” For a policy to be politically available, its enactment must be consistent with politicians’

career goals (e.g., reelection) and must plausible given the institutional context and the

preferences of actors wielding veto power. We note that both the technical and political

availability of options may themselves be a function of feedback from past choices – that, for

instance, expand or exhaust fiscal and administrative resources or shape the preferences and

political capacities of stakeholder groups.

There are, in turn, two principal ways in which availability matters. First, restructuring

reform depends on the availability of other regime options. The availability of transformational

alternatives depends in part on whether those who would lose from a transition are well placed

politically to block it. Yet given that transformational change depends on a change of policy

instruments or reconfiguration of policy logic, the menu of available options can also be limited

in technical terms. In some cases, a particular set of policy mechanisms may simply not have

been invented yet, or may not be widely known outside of early adopters. Some alternative policy

regimes may be too costly in budgetary terms; others may be perceived as having unacceptable

social costs, or require an administrative or market infrastructure that is inadequate in a particular

country. Thus a policy regime transition may be blocked despite strong feedback pressures for

change, because no alternative policy regime is politically or technically unavailable.

Second, transition to a new regime is less likely to the extent that incremental change

options are available that make a policy’s negative effects more bearable. Rising programmatic

costs, for example, may be addressable by finding new sources of funding or expanding existing

28
sources that can be earmarked to support the policy regime. Giving some additional benefits to

groups who are disadvantaged by the current policy regime may sufficiently weaken political

opposition to stave off demands for far-reaching change.

By the same token, having limited incremental fixes available will make transformational

change in response to strong feedback pressures more likely. In some cases, policymakers may

have already exhausted technically feasible adjustments to existing instruments. Alternatively,

they may have arrived at a point at which any change in settings will provoke sharp opposition

from powerful losers. Moreover, transformational change will in some cases be technically and

politically feasible where incremental adjustments are not. Changing the settings on existing

instruments – raising or lowering benefit or tax rates, for instance – tends to involve zero-sum

redistribution: one group’s gains is another group’s losses. Many transformational changes,

however, hold out the prospect of easing the policy or political tradeoffs that governments face.

The introduction market mechanisms, such as choice and competition, into health-care systems

may increase the efficiency of service delivery, thus easing distributive tradeoffs by allowing the

provision of greater benefits at any given level of spending. A shift from public to private

pensions is often viewed, similarly, as a way to provide more generous retirement payouts at a

given contribution burden by leveraging the market returns to private equities. Other

transformational changes dampen the political dilemmas governments face. A notional-defined

contribution pension scheme, for instance, helps politicians avoid blame for future pension cuts

by automating and delaying them -- indexing them to future economic developments, such as

wage growth (Brooks and Weaver 2006). Britain’s shift from national health insurance to a

national health service allowed ministers to vastly expand provision while controlling costs and

sidelining the private insurance interests that had opposed incremental expansion (Hacker 1998).

Transformational change can thus help governments to blunt the tradeoffs built into

existing policy regimes, and may therefore be a plausible and appealing option when incremental

expansion or contraction is not. Given the typically greater risks of transformational change,

29
however, the likelihood that governments will pursue it depends heavily on the availability of

more modest changes to instrument settings. Thus, the central points we wish to emphasize are

twofold. First, strong pressure for change – as a result of either powerful negative or positive

feedback – does not automatically make radical policy change more likely: whether it does so

depends on the range of available options. Second, dramatic policy change may result from a

winnowing of options, as much as from their expansion. The very processes that create, mobilize,

and empower vested interests in program benefits – making losses harder to impose – may also

motivate a search for innovative alternatives. Given compelling pressures for policy change, it is

precisely when incremental distributive adjustments are least available that governments will

have the greatest incentives to pursue more radical restructuring that eases or obfuscates harsh

tradeoffs.

AN ILLUSTRATION:

THE FEEDBACK EFFECTS OF THE PAYROLL TAX

We now illustrate our arguments about the conditionality of feedback effects and the

politics of transformational change by working through an extended example. To throw the

interactive character of feedback effects into sharp relief, we draw out here the multiple,

conditional effects of a single policy-design feature: the contributory payroll tax that finances

many public pension programs. Looking across OECD countries and over time, we observe that

the single decision to finance pensions out of payroll contributions has generated a diverse set of

feedback effects, depending heavily on background conditions. The key conditioning variables on

which we focus are (a.) whether socio-economic forces, in combination with contributory

financing, tend to generate fiscal slack or fiscal austerity within the program and (b.) whether an

influential group of officeholders (e.g., a governing party or president) seeks an expansion or a

contraction of state pension benefits. Most of the relationships described below involve three-way

interactions between these two conditioning variables and program design. Moreover, we stress

30
that more than one feedback process may operate simultaneously: that is to say, the same policy

structure and configuration of exogenous conditions may have multiple – even countervailing –

effects on governments’ policymaking resources and capacities. We organize the example by

outcome – the type of policy trajectory generated by feedback – and summarize the causal

dynamics in Table 4.

Expansionary effects

Under the right socio-economic and political conditions, contributory financing can

generate an expansionary dynamic: if demographic and economic processes generate fiscal slack

and politicians seek, for electoral or ideological reasons, to pursue the policy goal of enhanced

benefits. First, because contributory pension programs enact a redistribution of resources from

workers to retirees, their fiscal operation depends heavily on demographic development.

Specifically, they will tend to generate resource slack to the extent that they are operating in a

context of high fertility – the demographic backdrop against which many OECD pension

programs were initially created. High fertility rates yield a relatively young age structure,

implying a high ratio of workers to potential beneficiaries and allowing a relatively modest

financial burden to be spread across a large number of contributors. Similarly, rapid growth in

wages – the tax base on which payroll-tax financing rests – will lead to an automatic increase in

revenues while also making any increases in the contribution rate relatively less painful.

Moreover, if payroll tax financing is combined with a long maturation period6 -- in which retiree

benefits are tied closely to the length of contribution records – then programs will be extremely

cheap to operate and to expand in the short run. If full benefits will not be paid for years or

decades, then low payroll tax rates can even more easily finance generous benefit formulae

6
The maturation period refers to the relationship between contribution records and
benefit entitlements for workers who retire in the scheme’s early years, without having
paid into the scheme for their full working lives.

31
(Pierson 2001). Governments can thus make magnanimous benefit promises without imposing

onerous contribution burdens on current workers (Derthick 1979).

Exclusive reliance on payroll contributions can also have two political feedback effects on

the prospects for expansion by lending expansion enhanced legitimacy. First, a strict insulation of

pension financing from the rest of the public budget – as in the case, again, of the U.S. Social

Security scheme – can help create expansionary coalitions by reassuring fiscal conservatives that

higher retirements benefits will not lead to deficit spending or higher general taxes. Second,

contributory financing – featuring a revenue source dedicated to a specific spending purpose –

can make it politically easier for politicians to raise this particular form of tax by creating a clear

and credible link for contributors between the sacrifice imposed today and benefits to be enjoyed

tomorrow (Zelizer 1998; Jacobs 2009; Patashnik 2000; Derthick 1979; Jacobs in press).

Importantly, none of these feedback effects are by themselves sufficient for driving

program expansion; none forces politicians to increase pension benefits. They each require a

political motive for expansion, deriving from either electoral demands for more generous pensions

or politicians’ preferences for enriched benefits. Where officeholders seek to expand a pension

program, contributory financing -- under favorable socio-economic conditions – will make it

easier for them to forge a winning legislative coalition for this purpose.

Contractionary effects

Under altered background conditions, however, contributory financing – especially in its

purest form – can generate pressures for a reduction in benefit generosity. We note three potential

rollback effects, each generated under distinct configurations of socio-economic and political

conditions.

First, by making the program dependent on a finite source of revenues, exclusive

contributory financing can produce objective fiscal imperatives to scale back pension promises as

demographic or economic circumstances deteriorate. In most OECD countries, some combination

32
of an aging population, slowed employment and wage growth, the full maturation of the program,

and a rapid expansion of benefits (itself a consequence of earlier extension-promoting feedback

effects) tended to place fiscal strain on pension programs beginning in the 1970s or 1980s. For

those schemes financed strictly out of payroll contributions – specifically, those in the United

States and Canada – fiscal strain meant the possibility of “insolvency”: without an infusion of

general revenues, these programs’ trust funds were in danger of running out of money if

contribution income and accumulated assets became insufficient to cover benefit outlays. An

expected – and, even more so, an imminent – trust-fund crisis, in turn, is an action-forcing

mechanisms that compels governments to make some painful adjustment on either the revenue or

the expenditure side of a program. While politicians can in principle resolve such crises solely

through payroll-tax increases, they will often face electoral incentives to “spread the pain” more

fairly and diffusely by imposing some of the required losses in the form of benefit reductions

rather than forcing current workers to absorb the full impact of reform.

That these rollback pressures can result in different degrees of benefit reduction versus

payroll tax increase, and that those impacts are conditional, is evident in looking at the examples

of the United States in the period from 1977 to 1983 and Canada in the late 1990s. The United

States relied more heavily on benefit cuts (plus some taxation of benefits) than on tax increases;

Canada and Quebec struck the opposite balance. Among the factors that played a role in affecting

these choices is the starting level of payroll taxes, which in the United States were already at a

level twice as high as in Canada when choices were being made. Even more important was the

institutional position of those opposed to alternative forms of loss-imposition: while

congressional Republicans hostile to payroll tax increases wielded a veto in the United States,

provincial governments adamantly opposed to benefit cuts were institutionally empowered to

block policy change in Canada (Weaver 2003; Jacobs 2008).

Second, contributory financing – which has everywhere taken the form of a tax on wages –

can yield pressure to rein in spending because of the incidence of the financing burden:

33
specifically, its tendency to increase the cost of labor. This second objective pressure is likely to

be conditioned by the degree of exposure of domestic producers to international competition. In a

world of relatively closed national economies, employers may be relatively insensitive to non-

wage labor costs imposed on all domestic producers. Under conditions of product and capital

mobility, however, employers facing stiff international competition have a much greater stake in

containing the size of their own “social burden” relative to that faced by producers in other

national settings. Moreover, to the extent that firms have plausible exit options, their demands for

cost-reducing reform are likely to be all the more compelling to governments concerned about

maintaining levels of employment. Perhaps the most striking instance of this effect can be

observed in the debates leading to German pension cutbacks over the last decade-and-a-half

(Jacobs in press; Jochem 2001; Hering 2004) In sum, in a globalized world, pressures for rollback

will depend on the source of program financing: a given amount of expenditure will generate

stronger demands for cutbacks, the greater the share of costs borne by mobile factors. And,

crucially, this feedback effect is conditional on exogenous economic pressures: payroll-tax

financing will generate more powerful pressures for rollback when economies are open than when

they are closed.

These two contractionary feedback dynamics – deriving from an interaction of contributory

financing and socio-economic “hard times” – will unfold to some extent regardless of the goals of

officeholders. Even center-left governments have found themselves forced to trim benefits by

these fiscal and economic pressures. Yet the effects are likely to be amplified when influential

officeholders prefer to see social programs scaled back. Trust-fund crises, arguments about the

job-killing effects of the payroll tax, and employers’ exit threats can all lend a powerful

legitimating rationale to ideologically driven efforts to reduce the state’s role in retirement

provision (Patashnik 2000; Pierson 1994).

Third, contributory financing can generate a quite different, longer-term contractionary

effect when retrenchment-oriented incumbents govern under circumstances of fiscal plenty. As

34
argued above, when program surpluses emerge, politicians enjoy an easy path to expansion if

expansion is their goal. Yet financial resources do not dictate a particular use: rather, their

primary effect is to create fiscal slack that policymakers can mobilize toward a variety of

potential purposes. When conservatives – ideologically committed to a small state, allied to

business organizations with similar goals, or beholden to an affluent electoral base – hold a

working legislative majority, surpluses built up within a contributory pension program will

become a tool not for expanding the welfare state but for scaling it back. Conservatives will see

excess program funds as an opportunity to painlessly pursue their own ideological and

distributive goals of reducing or containing payroll tax rates. Beyond delivering immediate

benefits to important organized and voting constituencies, cutting payroll taxes serves the long-

run conservative goal of limiting the state’s capacities to pay future benefits.7 Indeed, this is

precisely how a newly ascendant conservative coalition in the U.S. Congress chose to mobilize

Social Security’s first substantial surpluses as they emerged in the 1940s (Leff 1988).

Stabilizing effects

Contributory financing can also help hold the status quo in place against efforts either to

extend or to roll back the program. Stabilizing effects are likeliest to emerge once demographic

and economic forces have pushed the program to its fiscal limits—and may, in fact, operate

alongside the contractionary effects discussed above. Consider two countervailing effects that

may, together, anchor current arrangements in place.

First, when socio-economic conditions make painless expansion impossible, reliance on

contributions – a finite source of revenue – to finance benefits raises the political costs of

program expansion. If incumbents wish to pursue the goal of enriched benefits, pure contributory

7
Some analysts – most prominently Paul Krugman – have seen an analogous “starve the
beast” logic at work in George Bush’s expenditure of projected federal budget surpluses
on tax cuts.

35
financing forces them to increase a specific tax on a large swathe of voters whenever boosting

benefits. But, second, when conservatives hold the reins of power, the contributory principle

creates unique political risks of rolling back benefits. Without the availability of program

surpluses, conservatives cannot constrain a pension scheme’s growth via the politically painless

and indirect path of reducing payroll taxes: rather, they must undertake a more direct assault on

expenditures. But contributory financing generates a reciprocal moral equation that makes benefit

cutbacks perilous: the electorate will more readily punish politicians who attempt to take away

benefits that have the status of an “earned” entitlement than those that rely merely on taxpayer

largesse. Withdrawing long-promised benefits is all the more difficult because most beneficiaries

will have spent decades making contributions to the public scheme at the expense of investing in

alternative, private retirement arrangements. This second effect is the logic most commonly

identified as a source of path dependence in the politics of contributory public pensions. But we

wish to underline that this much-cited effect is not a universal consequence of payroll-tax

financing: rather, it depends on a specific alignment of political forces and resource pressures.

Transformational effects

Having a payroll tax in place is likely to have important effects in limiting the menu of

policy options considered by policymakers, especially if a fairly tight linkage of contributions to

benefits is also in place: certain regime transitions are thus less likely. Moving to a system that

awards benefits on the basis of a means test, or to a system that provides universal flat-rate

benefits regardless of earnings history, are unlikely to be considered because those who have

made contributions are likely to perceive themselves as entitled to contribution-related benefits

and will resist changes to a system that makes them relatively or absolutely worse off.

A payroll tax may also facilitate a pension regime transition in several ways, however.

First, it may facilitate a transition from a Bismarckian-style contributory social insurance program

to a notional defined contribution (NDC) system in which payroll tax rates are fixed and benefit

36
reductions are made automatically (i.e., without intervention by politicians) when projected

shortfalls arise in the pension system. This is likely to occur under some similar conditions to

those facilitating incremental program contractions, notably an over-extended pension system and

strong resistance by one or more veto players to increases in payroll taxes. But a shift to NDC is

likely to occur where a distinctive set of conditions, notably both the technical and political

availability of NDC ideas, are present. A shift to NDC is also likely to be facilitated by a cartel-

like arrangement between parties of the left and right in which both sides accept the inevitability

of cutbacks and the political necessity of making them more obscure and keeping pension policy

off the electioneering agenda in the near future.

Payroll taxes also have administrative advantage in facilitating regime transitions to NDC

and/or to the addition of an individual account, defined contribution pension tier. Where an

effective payroll tax collection mechanism is in place, in combination with good record-keeping

capacity, it will be much easier to calculate the lifetime earnings on which NDC pensions are

based. It can also facilitate addition of a defined-contribution (DC) tier (or replacement of an

existing pension system with a DC tier) by simplifying the collection of contributions to such a

tier, thus both lowering administrative costs and potentially dampening employer opposition to

the burden of administering a DC system. But existence of a payroll tax is by no means a

sufficient condition for the emergence of NDC or DC tiers: this will occur only where political

elites seek to facilitate benefit reductions (NDC) and/or expansion of DC tier as potential

compensation for falling benefits in the public scheme or as a mechanism for shifting-the fiscal

risk of poor economic growth to workers and retirees from the state.

CONCLUSION

In this paper, we have sought to address three common features of arguments about policy

feedback. The first of these is a tendency – when studying the endogenous influences on policy

development over time – to pay much more attention to positive than negative feedback. There

37
are good reasons to expect self-reinforcing dynamics to emerge with some frequency in political

life. But we have also suggested that are also strong reasons to expect public policies to

frequently generate negative feedback – including their tendencies to create distributive losers, to

embody unavoidable tradeoffs, and to produce undesirable effects unforeseen by their creators.

Alongside the prevalence of positive feedback, commoon processes of negative feedback are thus

an additional and equally important sense in which choices at t1 can shape the conditions for

choice at t2. And, as with path dependence and positive feedback, taking negative feedback into

account requires historically oriented research: it means “going back to look” at how earlier

outcomes generated causal processes that, over time, raised the relative costs of current

arrangements.

The paper has also queried common understandings of the relationship between feedback

processes and outcomes – in particular, the notion of positive feedback as a generator of stability

and negative feedback as a generator of change. In the case of positive feedback, self-reinforcing

dynamics may make past decisions less reversible, on the one hand, or they may yield expansion

of those arrangements; and there is a world of difference between the two. Negative feedback,

moreover, can be a force for stability as well as change. And the most dramatic form of change –

policy transformation – can be generated by complex combinations of self-reinforcing dynamics,

self-undermining dynamics, and exogenous constraints on choice that make incremental tinkering

untenable and make a reconfiguration of policy logics both politically and technically more

attractive. Indeed, our argument implies that transformational change may derive to a substantial

degree from positive feedback in at least two ways. As in the case of British medical care,

positive feedback may generate expansionary demands that, given constraints on incremental

change, can only be satisfied through a wholesale change in policy instruments. Further, self-

reinforcing dynamics can – by mobilizing and empowering groups who will oppose

straightforward cutbacks in program benefits – enhance the relative political benefits of “outside

the box” solutions that soften, postpone, or automate painful distributive tradeoffs. Put

38
differently, by taking incremental change at the expense of vested interests off the menu, some

forms of positive feedback can make radical change more likely.

Finally, we have called for better specified – particularly, more conditional – arguments

linking policy choices at t1 to policy choices at t2. While the dependence of feedback effects on

other things is implicit in many accounts, it is rarely theorized explicitly. Yet both the emergence

of feedback processes – of increasing or diminishing returns – and the effect of those processes on

policy stability or change often hinge on the social, economic, political, and institutional

conditions under which they occur – and in ways that we can often quite readily theorize. Indeed,

even the direction of feedback effects can turn on such interactions. We are suggesting that a

welcome focus on endogenous and historically generated influences should not come at the

expense of attention to the exogenous conditions that structure so much of political life. One

analytical advantage of conditional arguments is that they do not force us to choose between the

two – between an endogenous or exogenous mode of explanation – but allow for a well-structured

integration of both sets of influences. In a world of both positive and negative feedback effects,

conditional arguments can also provide crucial analytical leverage in explaining the balance

between the two and, thus, accounting for major change.

Political scientists have generally become increasingly sensitive to the conditionality of

social processes: to the fact that causal forces do not operate uniformly across contexts. For those

interested in policy feedback, we see an explicit formulation and testing of conditional

relationships to be a productive next step. Conditional arguments should be of most obvious

appeal to scholars engaged in analysis that is at once historical and comparative. Where we seek

to explain outcomes in multiple settings in terms of differing initial choices and feedback

processes, there will be high costs to ignoring conditionality. Comparative cases will typically

differ from one another in ways other than the policy choice at t1. And if feedback from that

choice interacts with political, economic, social, or institutional conditions – conditions that also

vary across the cases – then unconditional arguments will get the causal importance of feedback

39
effects wrong. An equivalent if less obvious danger also lurks beneath the surface in single-

country historical analyses: precisely because many background conditions will be held constant,

their causal role in conditioning feedback effects may go unnoticed, and broad but invalid

generalizations may be drawn about the universal feedback effects of policy structures. Our

analysis implies that analysts of single-country historical trajectories should routinely seek to

identify and make explicit those elements of the context that were necessary to generate any

feedback processes observed.

40
 TABLE 1. TYPES OF FEEDBACK MECHANISMS

Specific Mechanism Potential Positive and Negative Feedback

Effects
Political
Preference Formation + “Winners” from program develop expectations of
continued (and perhaps expanded) flow of benefits
from program, view benefits as “entitlement”
+ Program participants make “investments” that
require program continuation to pay off
- “Losers” from policy after t1 become determined
to reverse losses
Organizational + Beneficiaries of policy organize to protect or
support coalition expand program
- Absolute or relative losers from policy organize to
seek redress
Menu Effects + Stabilizing: Policy options truncated to status
quo or modest expansions to it
- Perceived policy failures of policy status quo
lead to search for new alternatives
Informational Effects + Program structure makes loss-imposition more
visible to constituents
- Program structure facilitates blame-avoidance in
imposing losses
Fiscal
Short- and long-term + Self-financing mechanism provides short-tem
impact on program surpluses that facilitate
financing - Trust fund shortfall prompts program
retrenchment
Short- and long-term - Rapid, unanticipated program growth creates
impact on overall image of “uncontrolled” spending that exceeds
budget program’s “fair share” of budget
Administrative
Administering agency + Administering agency gains expertise in
develops routines and performing assigned tasks over time
expertise in - Taking on a task for which it is not prepared
performing specific leads to loss of policymaker and public confidence
tasks in agency
- Addition of new tasks without adequate new
resources reduces ability of agency to perform
existing tasks

41
 TABLE 2. FEEDBACK MECHANISMS AND POLICY TRAJECTORIES
Policy Trajectory defined
trajectory over time
Stability No change from policy at t1
Expansion More resources devoted to policy at
time t2 or policy provisions
strengthened (e.g., greater percent
of situations covered; more
stringent regulations)
Contraction Fewer resources devoted to policy
at time t2, weakening of policy
provisions (e.g., smaller percent of
situations covered; less stringent
regulations)
Transformation Major change in policy instruments,
policy logic, or principles of
distributing costs and benefits
42
Possible causal dynamics generating
trajectory
• Negative feedback + exogenous
pressure for expansion
• Positive feedback + exogenous
pressure for contraction
• Positive feedback + negative
feedback
•
• Positive feedback
• Negative feedback
• No feedback + exogenous
pressure for contraction
• Positive feedback + negative
feedback (+ availability of regime-
transition option)
• Negative OR positive feedback +
exogenous constraints on incremental
contraction/expansion (+ availability
of regime-transition option)
TABLE 3: CONDITIONS FACILITATING AND LIMITING REGIME TRANSITIONS

Transformational change is more Related facilitating (+) and limiting (-) conditions
likely if…
1. Policy feedback – negative or + Current or potential losses or benefit-
positive -- generates pressure for inadequacies are visible and are imposed on
major expansion or contraction politically resourceful groups
2. Incremental reform - Multiple incremental reform options may allow
opportunities to address regime policymakers to try several reforms before
challenges are non-existent or limited considering regime change
and declining:
3. Regime transition + Few institutional veto points make it difficult
opportunities are available and for losers from regime transition to block change
affordable + Potential negative impacts of new policy
regime are obscure and/or concentrated on the
politically powerless
- Multiple regime transition options with
different distributional impacts may prevent
opponents of he status quo from uniting around a
single alternative

43
 TABLE 4: FEEDBACK EFFECTS OF PRIMARY OR EXCLUSIVE RELIANCE ON
PAYROLL TAX FINANCING OF PENSIONS
Effect Mechanism
Expansionary Fiscal: dedicated program
revenue in immature program
(1) outpaces spending
requirements in short and
medium term, and (2) allows
expansion with small tax rate
increases
Political: Credible link between
benefits and taxes increases
legitimacy of benefit
expansion
Contractionary Fiscal: Need to scale back
overextended pension
commitments and avoid
further competitive
disadvantage from high payroll
taxes; Imminent trust fund
crisis increases pressures for
cutbacks
Political: Rising business
opposition to further payroll
tax increases
Political: Program surpluses
allow choice between benefit
increases or payroll tax cuts
Stabilizing Political: Program’s financial
reliance on payroll taxes raises
electoral costs of expansion by
making cost increases visible
Political: Tight link between
contribution record and benefit
eligibility makes cutbacks
morally illegitimate
+
Political: “Earned” entitlement
plus long-term promise leads
insured to depend on benefits,
investing less in alternative
arrangements
Transformative Political: Payroll tax broadens
acceptance of contribution-
44
Conditions facilitating (+) or limiting
(-) specific effects of mechanism
+ High fertility and rapid wage
growth
+ Slow maturation of program—no
immediate “vesting” of benefits
+ Politicians see electoral gains in
benefit expansion
+ Politicians have political
incentives and/or policy goals of
increasing pensions
+ Declining ratio of workers to
retirees
+ Payroll taxes are already at a high
level
+ One or more veto players will not
accept payroll tax increases
+ Agenda-setting politicians prefer
retrenchment to tax increases
+ No legal option to use other
revenues to avoid benefit cuts
+ High degree of business exposure
to international competitive pressures
+ Agenda-setting politicians prefer
retrenchment to tax increases
+ Elites controlling policy
machinery seek to limit program size
+ Elites seek expansion
+ Socio-economic conditions have
exhausted fiscal slack, no room for
painless expansion
+ Elites seek contraction
+ Socio-economic conditions have
exhausted fiscal slack, no room for
painless payroll-tax cuts/freezes
+ Declining ratio of workers to
retirees
based solutions
Administrative: Strong payroll
tax system facilitates transition
to NDC tier and addition of
DC tier
45
+ One or more veto players will not
accept payroll tax increases; veto
players also oppose benefit cuts
+ Agenda-setting politicians prefer
retrenchment to tax increases but
seek to obfuscate scale of future
cutbacks.
+ Menu of available alternatives
includes regime transition options
(e.g., NDC)
+ Strong administrative record
system in place
+ Political elites seek to facilitate
benefit reductions (NDC) and
expansion of DC tier as potential
compensation and/or as mechanism
for shifting-risk
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