HOW TO IMPROVE THE OUTCOME OF STATE

WELFARE SERVICES. GOVERNANCE IN A

SYSTEMS-THEORETICAL PERSPECTIVE

SIMON CALMAR ANDERSEN

Much governance literature deals with the limited capacity of the state and the mar-
ket to govern core state welfare services such as education, scientific research and
healthcare. Rather less attention has been focused on how the outcome of these serv-
ices can be improved politically. An analysis of Niklas Luhmann’s systems theory
(Luhmann 1997a, 2000) leads to the hypothesis that self-governance, that is, a combi-
nation of professional autonomy and public peer-evaluation, is a superior strategy.
Though this may seem counterintuitive at first glance, this paper shows that it corre-
sponds to well-rooted principles of public administration and, in the sphere of edu-
cation, to empirical findings on school choice and school effectiveness. This raises
new perspectives for future comparative governance studies.

INTRODUCTION
For obvious reasons, much public administration and public-policy research
explores the politico-administrative potential for improvement of state
welfare services such as education, scientific research and healthcare. How-
ever, despite substantial efforts in these fields, clear-cut answers are still
lacking. The traditional question is whether public or private provision
yields the best outcome for these services, but criticism of both forms has
surfaced in recent governance literature. The common basis of criticism is
the experience of both state and market failures and the notion that the
boundary itself between the public and the private is blurred (Stoker 1998,
p. 17; Peters and Pierre 1998, p. 226; Rhodes 2000, p. 54). But if the two most
prevalent political means, marketization and direct state governing, are
under increasing strain, how can policy-makers enhance the outcome of
such state welfare services?
Much of the governance literature has focused on mere description of
networks as alternatives to the state and the market (for an excellent new
introduction, see Kjær 2004), but only recently the conditions of success and
failure of governance has been raised for the agenda of the ‘second genera-
tion’ of governance research (Sørensen and Torfing 2004, p. 15). The study of
this kind of issues necessarily requires a theory capable of guiding compara-
tive empirical research (cf. Flinders 2002, p. 54). Jessop has done some pio-
neer work in theorizing on the general question of how coordination and

Simon Calmar Andersen is a doctoral candidate in the Department of Political Science, University of
Aarhus.

Public Administration Vol. 83, No. 4, 2005 (891–907)

© Blackwell Publishing Ltd. 2005, 9600 Garsington Road, Oxford OX4 2DQ, UK and 350 Main Street,
Malden, MA 02148, USA.
892 SIMON CALMAR ANDERSEN

integration of specialized social systems can succeed (2003; see also Dunsire
1996). This paper directs a more specific aspect of this question by develop-
ing a theoretical hypothesis about how the outcome of single domains of the
welfare state can be improved politically.
Answers to this question depends heavily on the diagnosis of the problem
of governing modern society (cf. Mayntz 1993b, p. 10). In this regard, Jessop
as well as other works on governance are inspired by Niklas Luhmann’s sys-
tems theory (Jessop 1995; 2002, 2003; Rhodes 1997, p. 3; 2000, pp. 58–9). The
first part of this paper will show how this theory explains why the public/
private distinction is too simplistic in the study of politico-administrative
efforts to improve education, healthcare or scientific research: Because of
modern society’s functional differentiation, these fields are subject to their
own different logics and they are driven by their own coding. They conse-
quently cannot be controlled by either economic exchange or political com-
mand (Luhmann 1997b, 2000; cf. Teubner 1998).
However, this explanation does not show how to improve the outcome
of state welfare services, and Luhmann’s own writings offer little advice in
this respect (see Luhmann 1997b; cf. Mayntz 1993a, p. 13; Brans and
Rossbach 1997, pp. 432–5; Jessop 2002, pp. 239–40). In order to find a posit-
ive solution to the governability problem, the second part of the paper will
analyse what prescriptive implications can be derived from Luhmann’s
descriptive theory. The analysis reveals that the best political strategy may be
to leave control to the steered systems themselves. Though this hypothesis
may seem counterintuitive at first glance, it is, in the third part of the paper,
shown to correspond to well-rooted principles of public administration. In
order to illustrate the rather abstract theory and to provide empirical sup-
port (the fourth part of the paper), the case of education is used throughout
the paper, even if the argument goes for other areas of the welfare state
as well.
In policy research in general the clear-cut division between normative and
descriptive evaluations of success and failure, improvements and declines,
cannot be maintained (Scharpf 1997, pp. 13–16). In what follows I will use
fulfilment of the functions of the social systems as criteria to judge improve-
ments upon. In the case of the economy, for example, the function is defined
as the future supply of scarce resources (Luhmann 1997a, p. 758; cf. Jessop
2003). I take these criteria to be rather uncontroversial and generally shared,
but by no means intend to suggest that they are objective or apolitical. In a
recent self-criticism on the limits of the Cologne school, Renata Mayntz
argues that steering theory has taken for granted that political steering aims
at societal problem-solving and that the theory hereby implies a crypto-
normativity (2001). The selective theoretical perspective of this paper surely
implies a normativity, but this is a precondition of all theories. Hence, the
paper does not attempt to say more than given this theoretical description
and the criteria it involves, what form of governance will improve the out-
come of core state welfare services?

© Blackwell Publishing Ltd. 2005

 GOVERNANCE IN A SYSTEMS-THEORETICAL PERSPECTIVE 893

STEERING IN FUNCTIONALLY DIFFERENTIATED SOCIETIES

According to Luhmann’s systems theory, social systems are based not on
actors or actions but on communication. (For general English introductions
to aspects of Luhmann’s theory relevant for politics and public administra-
tion see Brans and Rossbach 1997; King and Thornhill 2004.) The same
person can, consequently, be an object of communication in different sys-
tems. In modern societies, the primary form of differentiation is functional.
This means, for example, that the economic system functions according to its
own logic: You pay the same price, whatever your status in the system.
Communication using the economic code of payment/no-payment is what
draws the line between the economic system and its environment. What is
true or false is the operational code of the scientific system, and this is
decided independently of what political support there is for a given state-
ment. Similar descriptions can be made of other function systems such as
politics, law, education, art and others. Luhmann leaves it an open empirical
question how many function systems exist (1997a, p. 622, 2000, p. 232).
The famous term ‘autopoiesis’ means that systems are reproducing their
own elements – in short their communication – in a circular continuation
according to their own codes. No matter what is decided politically, these
decisions themselves cannot educate children. This is the function of the
educational system. In this way systems are operating autonomously.
But autopoiesis does not mean causal independence from the environ-
ment (Teubner 1993, p. 35). Each system depends on contributions from
other systems and is therefore influenced by them. At least two general
forms of influence or ‘irritation’ relevant for the governability problem can
be identified. One is the structural coupling made by organizations. Schools
and hospitals are examples of organizational systems that create structural
couplings because they form decisions using the codes of several different
function systems (Luhmann 2000, pp. 396ff.; cf. Andersen 2002). Besides
making professional decisions in, respectively, the educational and the
healthcare system, they make economic decisions concerning payments and
political decisions about how to react to other political decisions. This does
not solve the governability problem, because what is politics and what is, for
example, education will still be determined by reference to the recursive
network of political and educational communications, respectively. In the
political system, there will be a theme segment called school policy, which
will react on its own history and new problems, but this does not imply that
these political activities educate (Luhmann 2000, p. 401). But organizations
represent a possibility for politics to influence the conditions of the opera-
tion of other function systems.
The other form of influence is ‘steering at the programme level’. Luhmann
distinguishes between codes and programmes. Programmes are decision
rules stating under what conditions the one or the other side of the code is
rightly or falsely applied (1997a, p. 750). While codes are invariant for the

© Blackwell Publishing Ltd. 2005

894 SIMON CALMAR ANDERSEN

system, programmes can be changed, and this can be used for external
irritations of the system. Politics can influence the programmes according to
which other systems act (1997b, pp. 52–3). In relation to education, the use of
the cane as a teaching method can be prohibited, or certain aims for the
students can be stated. Thus politics can create conditions that influence the
way in which education is using the code better/worse towards the devel-
opment of the children. What cannot be controlled politically is how the
educational system reacts to such programs. It may be decided politically
that students in a certain school or country should reach a certain level of
reading skills, but if they do not, then what can the politicians do about it?
They may grant more (or less) money or raise the number of hours spent on
reading. But these instruments do not themselves teach students to read.
What teaching methods are most efficient is a pedagogical question handled
by the educational system (cf. Luhmann 1997b, pp. 47–8; Teubner 1993,
pp. 69–71).
Renata Mayntz (1993b, p. 13; 2003, p. 29) has argued that common to
most contemporary ideas about steering is that they locate the root of the
problem not in the actors trying to steer, but in the systems that are to be
steered. If it is, prima facie, impossible to control the educational or the sci-
entific system, then more knowledge or better incentives would not help
the politicians or administrators trying to steer teachers or doctors. How-
ever, she contends, nobody claims omnipotence. In order to govern, one
‘only’ needs to intervene when a desired societal function is endangered or
has problematic consequences. As an example of this, payments can be
used politically to influence, through the researcher who has received the
payment, whether certain scientific statements can or will be made or not
(1993b, pp. 16–17).
However, this is only partially true. It is true that payments are a neces-
sary condition for scientific work. Putting a full stop on payments to the uni-
versities might prevent statements from being made. But payments cannot
assure that a certain statement will be made. At least that would be an
example of corruption or faking data. Politically it can be decided that a
country should be among the top ten research nations of the world. This can
be facilitated by increased payments, but scientific breakthroughs cannot be
assured. The occurrence of such statements depends on whether data con-
firm theories, whether they are true or not, and this is, according to systems
theory, the basic code of the scientific system. A statement cannot be made
true either by economic payments or by political decisions (cf. Luhmann
1997a, p. 753).
In this way the distinction between public and private, state and market is
too simplistic, when it comes to the question of improving the quality of
state welfare services. Systems such as science, education and health care are
driven by their own logics, which cannot be directly controlled from out-
side. But clearly, some indirect ways of influencing other systems exists, and
the next section elaborates on these.

© Blackwell Publishing Ltd. 2005

 GOVERNANCE IN A SYSTEMS-THEORETICAL PERSPECTIVE 895

PRESCRIPTIVE IMPLICATIONS OF SYSTEMS THEORY

According to Luhmann, the task for a sociological theory is not to substanti-
ate societal norms or values. On the contrary, he finds that sociology must
see itself as a contribution to a recognition which is free of moral judgements
(1978, p. 8, 1984, p. 444). Nevertheless, the following section will attempt to
demonstrate that some prescriptive implications can be drawn from his sys-
tems theory concerning how to provide a kind of political steering of other
societal systems. The idea is that in so far as society is considered function-
ally differentiated by operationally closed systems, it does matter how polit-
ical steering of education, research, and health care is attempted.
The argument starts from the assertion that in practise it is impossible to
withhold the value-relativistic division between what ‘is’ and what ‘ought
to be’. Not because the theoretical description is coloured by the scientist’s
personal values (which it may or may not be), but because a relatively pre-
cise description of reality implies a relatively narrow space of problem solu-
tions, alternatives of action, etc. Accordingly, there is no accidental relation
between problem descriptions and suggestions for solutions (Taylor 1967;
Loftager 1989, 1994; cf. Scharpf 1997, pp. 13–14).
The approach thus builds on a constructivist epistemology (Luhmann
1997a, pp. 34, 155–6; cf. Bang 2003, pp. 8–9) stating that reality is not idealis-
tically constructed, but any notion, any description, any story of reality are
forming what it is possible to observe – including problem solutions. On the
other hand, such problem solutions, such implications about what ought to
be done, cannot be claimed to form an absolute normative evaluation
regardless of the theoretical description. The implications will always be rela-
tive to the description, which is why I apply the term ‘prescriptive implica-
tions’ instead of ‘normative implications’.

Evolution, complexity and rationality

As stated earlier, Luhmann describes an evolution from segmentation and
stratification to function as the primary form of differentiation in societies.
In socio-cultural theories, such as systems theories, ‘the units of evolution
are not human individuals and their aggregates – groups, nations, races [as
in social Darwinism] – but socio-cultural phenomena – ideas, customs, and
forms of organization’ (Teubner 1993, p. 52). One could ask what basically
makes a difference between different types of evolutionarily developed soci-
eties – equivalent to Charles Darwin’s identification of ‘survival of the fit-
test’ as the basic principle in biological evolution. The answer would be ‘the
ability to handle complexity’. Without going into the distinctions between
internal/external, and structured/unstructured complexity, it here suffices
to cite a quite concise summarization by Luhmann: ‘To give a general descrip-
tion of the outcome of evolution, it is sufficient to use formulations such as:
facilitation of higher complexity’ (1997a, p. 505, my translation; see also
1984, pp. 45–51). Now, the point is that from this specific systems-theoretical

© Blackwell Publishing Ltd. 2005

896 SIMON CALMAR ANDERSEN

description of evolution follows the prescriptive implication that problem

solutions that facilitate higher complexity will be superior to solutions facili-
tating lower complexity. To assert the opposite would be meaningless. This
does not imply that societal development will necessarily follow this path,
or that higher complexity regardless of theoretical perspective will be pref-
erable. Actually, Luhmann stresses that such evaluation does not presup-
pose any absolute values – in this way evolution theories differ from
progress theories (1997a, p. 506; cf. Blankenburg and Teubner’s discussion
Teubner 1993, p. 48). But provided that the evolution perspective is chosen,
the ability to handle higher complexity leaves a measure of ‘success’. The
movement from one form of differentiation to another, from segmented or
stratified to functionally differentiated societies creates possibilities of
komplexitätsgünstigere Strukturen (Luhmann 1997a, p. 490).
These considerations can be further applied to modern functionally differ-
entiated societies. In these societies each subsystem has a universal compe-
tence to handle its own specific function. For example, the political function
system is able to deal with any problem or theme – in this way it is universal
– and turn it into a political case. On the other hand, it can only deal with the
political aspects of the case; it cannot decide whether the case is scientifically
true or whether it is aesthetically beautiful. The point is, namely, that by
assuming this universal competence, the function system is renouncing the
ability to observe other aspects of a certain theme. In this way it is operation-
ally closed. It can only operate in its own system-specific codes, and there-
fore it must rely on other systems fulfilling their functions. In this way,
higher complexity is facilitated, because each system can specialize in its
own function (p. 131).
So far, the descriptive theory of modern societies clearly demonstrates
that by refraining from letting a single system fulfil several functions, a
number of ‘Komplexitätsgewinne’ can be achieved (p. 761). From this state-
ment one can directly infer the prescriptive implication that problem solu-
tions that facilitate the functional differentiation of modern societies are
better than their opposites. This is also what is implied in the concept of
‘function’ itself, since the function of function systems is not to maintain
themselves but rather to solve a societal problem which must be handled, ‘if
society is to maintain a certain level of evolution and also be able to fulfil
other functions’ (p. 747, my translation). The theoretical description of
evolution, complexity and function systems, therefore, implies that more
societal problems can be handled if each system maintains its own function.
The best way of achieving this is further specified by Luhmann’s concept
of rationality. Luhmann takes a stance against what he terms ‘the old-
European concept of rationality’, which was connected with human nature
(pp. 171ff.; cf. King and Thornhill 2004, pp. 130–6) . For systems theory the
problem is that in modern societies there is no privileged point of observa-
tion, no general reference, which can substantiate a certain kind of rational-
ity per se; it is impossible to define a general rationality with implications

© Blackwell Publishing Ltd. 2005

 GOVERNANCE IN A SYSTEMS-THEORETICAL PERSPECTIVE 897

for all systems (Luhmann 1997a, p. 184). In this conception, rationality is

impossible within a systems-theoretical framework.
On the level of the specific function systems, though, it is actually possible to
define a kind of rationality. This definition states that it is rational when a sys-
tem re-enters the difference between system and environment in the system and
reflects on the unity of this difference. The definition is elaborated by Luhmann
as follows: ‘This means that systems determine themselves through their differ-
ence from the environment, and this difference must in itself bestow operative
significance, information value, and connective value’ (1984, pp. 640–1, cf.
p. 617; translation from p. 474 in Social Systems, Stanford University Press,
Stanford, California 1995). A similar view can be found in Teubner’s concept of
reflexive law (1993, p. 68, cf. p. 97; cf. Bang 2003, p. 10): ‘We can thus talk of
reflexive law if, and only if, the legal system identifies itself as an autopoietic
system in a world of autopoietic systems and faces up to the consequences’.
In relation to the present question of political steering, Luhmann’s quite
abstract designation can be interpreted as follows: The political system is
operating rationally, when the difference between politics and the environ-
ment is observed and given operative meaning, i.e. decisions are made
accordingly. In other words, the political system can be said to be operating
rationally when political decisions are made in a way that maintains the
difference to other function systems and takes advantage of the fact that
other systems fulfil functions, which it cannot fulfil itself:
The same problem reappear within society at the level of each societal
function system. Also here the chances of rationality lie in the maintainance
and utilization of differences, not in their elimination. (1997a, p. 185, my
translation; my italics)
In summary, if the evolutionary gains from the complexity of functionally
differentiated societies are to be maintained, political steering must be con-
ducted in a way that benefits from, not eliminates, the difference to the func-
tions of other systems. Rational political steering reflects its own limited
capacity by taking the operational autonomy of other systems as a starting
point and gives this recognition an operational meaning in its collectively
binding decisions. Therefore, the outcome of state welfare services will be
improved if politics commits to a self-limitation by deciding not to attempt
direct steering of certain social fields.
This idea has some affinities with Teubner’s work on the legal system and
Claus Offe’s on the economic system. Discussing the consequences of
privatization, Teubner argues that the role of ‘private law would be to con-
stitutionalize spaces of professional autonomy within those organizations
[non-economic associations], ring-fencing them against direct intrusions of
the market’ (1998, p. 422). And further:
Systems sociology recommends that economic action needs to keep out
of the specific Eigenlogics of diverse social systems and must resist the

© Blackwell Publishing Ltd. 2005

898 SIMON CALMAR ANDERSEN

temptation offered to its decentralized decision structure to reap advant-

ages via special deals […] These ethics of boundaries coincide with the
typical design of private law institutions – to create Chinese walls
between different spaces of action, as in property law; to prohibit incom-
patibilities of roles, as in contract law; to establish spaces of autonomous
decision-making, as in the law of associations. (p. 410, cf. pp. 421–2)
Offe (1984, p. 39) distinguishes between negative and positive subordina-
tion. By positive subordination, political-administrative systems positively
contribute to the economic system. Negative subordination is referred to as
‘protection of the sphere regulated by exchange against overlaps and
interferences, which are a possible consequence of the development of the
normative and political subsystems’, and thereby bear a resemblance to the
idea mentioned. But it might be objected that if everything is left to the self-
steering of systems, there is no steering at all. Or the other way around: how
could a ‘positive subordination’ be achieved? Taking the inexpediency of
attempts at direct political steering as a precondition, the question is how
the external conditions of the operation of other systems can be influenced
politically. This is a question of context-steering (Teubner and Willke 1984)
or meta-governance (Jessop 2002, 2003).

Accountability
Even if a rational political steering should not attempt direct steering of cer-
tain social fields, this does not mean, of course, that it should abstain from
making decisions at all. Other function systems depend on political deci-
sions stating overall goals as well as the distribution of economic resources.
In this way systems are influenced at the programme level – cf. the discus-
sion above.
But if it is taken as a precondition that politics should not make detailed
rules for the fulfilment of certain tasks, accountability cannot be measured
as the difference between performance and rule. Accountability instead
requires reason giving, as Charles F. Sabel has argued (2004, p. 12). Since the
political system, according to systems theory, cannot communicate directly
with other function systems, organizational systems must be used to
address this kind of requirements. In other words, to enhance accountability
it can be decided politically that schools, hospital and universities must
explain their use of their autonomy. This could take different forms, but in
what follows I will focus on the use of professional self-evaluations open to pub-
lic scrutiny. Taking education as an example, I will give some reasons for
why this could work out.
From the perspective of the political system it is impossible to observe
whether teachers in a school are using the most efficient methods of teach-
ing. The political system can potentially cope with any theme, but only in a
political manner. It can be decided politically whether the use of new teach-
ing methods is acceptable or not, but the political system cannot observe

© Blackwell Publishing Ltd. 2005

 GOVERNANCE IN A SYSTEMS-THEORETICAL PERSPECTIVE 899

whether students actually learn more by these methods. In other theoretical

traditions, this problem is usually referred to as ‘information asymmetry’ in
terms of technical expertise (cf. for example Waterman and Meier 1998,
pp. 183–4). But among teachers internally, this asymmetry does not exist.
Generally speaking, their education enables them to evaluate each other’s
work; or, in other words, the educational system is specialized in communi-
cating about what students learn from different pedagogical methods. So in
systems-theoretical terms, rational political steering could take advantage of
this fact by demanding that schools evaluate themselves and require their
teachers to substantiate their choice of methods and their results.
But how could we be sure that teachers do not misuse this latitude and
make judgements as employees within the economic system or participants
in the religious system rather than as professional teachers? Well, there
might be no guarantee against this, but public scrutiny seems to be a good
approximation. Dirk Baecker suggests that ‘publicity’ should be defined as
the marking and reflection of the borders of social systems (Baecker 1996; cf.
Luhmann 2000, pp. 284–5). This generalized concept of publicity first of all
indicates that all social systems must count on the public; the concept is not
reserved for the political system. Secondly, by observing from outside what
happens inside a system, publicity at the same time makes it possible to
observe from the inside how what happens here is observed from outside.
Publicity thus creates a reflection of the border itself by showing its contin-
gency (Baecker 1996, p. 95).
Thus, if professional self-evaluations are made open to public scrutiny,
everybody else has got the opportunity to object to the choices made by
teachers. This will create the conditions for a professional reflection on how
the educational activities are observed from outside and how these activities
can be substantiated pedagogically. Using publicity as an indirect way of
governing also implies that the effect does not depend on how many outside
observers use the opportunity. As long as the system itself reacts to the pos-
sibility that it is observed from outside, the effect will be there (cf. Foucault
on ‘Panopticism’, 1977 [1975], pp. 195–230).
In this way publicity promotes a kind of self-governance. Furthermore, it
would presumably be very few teachers who publicly would adduce the argu-
ment that their choice of teaching methods is based on extra-pedagogical con-
cerns, such as their own pecuniary interests. Whether this is the ‘true’ motive is
less important as long as they can give professional reasons for their decisions.
Actually, professional self-evaluation might in itself assure a high degree
of accountability. Christopher Hood argues that a system of ‘mutuality’,
where each individual is continually subjected to mutual surveillance and
veto from the rest of the group,
requires group members to accept the entitlement of the collective to hold
them to account at any time and to accept the priority of group decisions
over individual wishes […] Mutuality hardly fits into the common

© Blackwell Publishing Ltd. 2005

900 SIMON CALMAR ANDERSEN

‘economic’ notion of control over public administration as essentially a

two-person game played between a ‘principal’ and an ‘agent’, but for all
that, peer-group accountability is a recurring theme in the literature on
public administration control and accountability. Indeed, control of this
type is often identified as viable alternative to the intractable information-
asymmetry problems which otherwise beset any principal-agent model
of public management. (Hood 1998, pp. 126–7)
A general solution to the governability problem may consequently be for-
mulated in terms of the following hypothesis: ‘The outcome of state welfare
services will be improved if politics commits to a self-limitation allowing for
greater professional autonomy, and at the same time demands that profes-
sional organizations are subjected to self-evaluations open to public scru-
tiny’. Though this hypothesis may seem counterintuitive at first glance, it is
nevertheless, as shall be seen in the next section, possible to find empirical
examples of well-rooted principles of public administration that actually
fulfil the prescription.

PRINCIPLES OF INDIRECT POLITICAL STEERING

The discussion below will focus on examples of indirect political steering,
i.e. political attempts to reach certain goals by limiting political steering
itself. The example most fundamental to modern societies could be the con-
stitutional division of powers. However, what is questioned here is the rela-
tionship between the political system and other function systems. Therefore,
examples will instead be taken from principles concerning indirect political
steering of other function systems, namely the economy and the arts.
Methodologically, Luhmann applies what he calls functional analysis.
This means that he is searching for different solutions to the same kind of
problems, i.e. ‘functional equivalences’ (1984, pp. 83–4). The principles men-
tioned exemplify how the problem of indirect political steering of other
function systems finds different solutions in the case of different systems –
solutions that at the same time are functionally equivalent, in that they all
attempt to provide greater publicity about decisions made.
The focus on these principles also indicates that the difficulties of steering
are not necessarily new. The differentiation of society has developed
through centuries, and, accordingly, examples of steering strategies dealing
with this situation need not be new. Whether such strategies are multiplying
or whether counter-tendencies – such as ever more rigid ways of measuring
citizens’ needs for state welfare services – are dominant is an important
empirical question, which, however, will not be dealt with here.

Examples from economics and the arts

Both principles could be made the subject of separate comprehensive
analyses, but this is not the purpose here. Therefore I will only provide a
schematic outline based on table 1. Perhaps the most familiar example of

© Blackwell Publishing Ltd. 2005

 GOVERNANCE IN A SYSTEMS-THEORETICAL PERSPECTIVE 901

TABLE 1 Principles of indirect political steering

Steering related to the function systems of:

Economy Art

Principle Central Bank independence The arm’s-length principle

Accountability Transparency of monetary policy Peer evaluation

indirect political steering is related to the economic system, namely the

principle of ‘Central Bank Independence’. According to this principle, it is
politically decided to shift the control of monetary policies out of the hands
of politicians and into the hands of an independent central bank. Leaving
the vivid debate pro and con this principle aside, the interesting aspect in
the present context is that this widespread and spreading principle is in
clear accordance with the systems-theoretical hypothesis of indirect political
steering. Here politicians deliberately limit their control of an important pol-
icy area, the monetary policy, and leave it to one of the prime organizations
in the economic system, the Central Bank. The rationale is that direct polit-
ical steering of the inflation through monetary policy will be impossible,
because the economic system will anticipate changes in the policy and
hereby undermine its effectiveness. Empirical evidence suggest that if the
political goal is a reduced and stable inflation without negative impact on
real economic activity, countries applying the principle are the most suc-
cessful (Alesina and Summers 1993; but see Down 2004).
The ‘arm’s length principle’ could be interpreted as the key principle of
the constitutional division of powers. But usually it is more specifically asso-
ciated with the political steering of the arts. The principle was developed in
Great Britain during World War II and consolidated by the creation of the
Arts Council after the war. The basic notion is that decisions about subsidiz-
ing artists should be made by persons knowledgeable in the arts, but inde-
pendent of politicians, in order to avoid the use of the arts for political
purposes, as it was seen in Nazi Germany and Stalinist Russia. Today the
principle is used as one among others in most Western countries (Hillman-
Chartrand and McCaughey 1989). By this principle politics deliberately lim-
its its own control of the distribution of economic grants, arguing that in the
long run this kind of indirect steering will simply provide better art. Of
course it still has to be decided repeatedly how much money should be
spent on the arts, but leaving the concrete allocation of the money to an
independent organization, there is less risk that artists will have their devel-
opment influenced by shifts in politics.
But even if the arm’s-length principle will reduce the influence of (partisan)
politics, opponents might still argue that a whole bunch of extra-artistic con-
cerns – for example personal sympathies – will influence the decision process.
Both principles, however, seek to oppose this problem of accountability.

© Blackwell Publishing Ltd. 2005

902 SIMON CALMAR ANDERSEN

Accountability
If discretionary decisions on a range of central domains of modern welfare
states are left out of political reach, then how can the new decision-makers
be held accountable? Well, also in this respect there is a great deal of similar-
ity between the principles and the prescriptive implications of Luhmann’s
theory, as they have been derived above.
In constituting the independent European Central Bank (ECB), the
question of accountability has been of central concern. This has resulted in
different provisions to promote the transparency of monetary policy. Thus,
the President of the ECB is to publish different reports on the activities of the
bank, and he and other members of the Executive Board can be asked by the
European Parliament to give evidence to the Committee on Economic and
Monetary Affairs (Treaty on European Union, revised version, Article 113
(3)). Now, very interestingly, this ‘principle of transparency’ does not only
promote democratic accountability. It is also expected to enhance the func-
tioning of the bank, because it creates credibility about its decisions and
thereby supports the effectiveness of the monetary policy (cf. Randzio-Plath
and Padoa-Schioppa 2000).
Also in the case of arts, the use of the arm’s-length principle is strongly
bound up with the concept of ‘peer evaluation’, described by Hillman-
Chartrand and McCaughey (1989) as follows:
The peer evaluation system lies at the heart of the arm’s length arts coun-
cil. This system has its origins in English law. It rests on the premise that
justice imposed by the lords on commoners is unjust because the circum-
stances of lords and commoners are radically different. Therefore, an artist
ought to be judged by his or her peers, and, accordingly, other artists are
involved in grant-making decisions.
Thus, the arm’s-length principle can be interpreted systems-theoretically
as a political recognition of the fact that the arts system is better capable of
differentiating between good and bad art, for which reason the grant-making
decisions are left to artists. Crucial for this principle is that decisions and rea-
sons for decisions are made public. This does not prevent the ‘real’ reasons
from being based on non-professional criteria, but it forces the decision mak-
ers to provide professional arguments, which can then be criticized by others.
These principles from the areas of arts and the economy could be supple-
mented by the principles of ‘freedom of research’ and ‘clinical autonomy’.
Both principles are fundamental for the political relationship to the function
systems of science and health care respectively. The next section, however,
will take a closer look on reviews of empirical research on the governance of
the educational system.

EMPIRICAL FINDINGS
The theoretical as well as ideological controversy between proponents of
public versus private service-provision has generated a vast amount of

© Blackwell Publishing Ltd. 2005

 GOVERNANCE IN A SYSTEMS-THEORETICAL PERSPECTIVE 903

research. In the case of school policy, this was initiated by the seminal work
of John E. Chubb and Terry Moe, stating that private schools are doing
better than public schools (1988, 1990). However, as recent reviews of the
research on public versus private schools shows, empirical evidence is
inconclusive (Levin 1998; McEwan 2000; Teske and Schneider 2001; Ladd
2002; Neal 2002; Christensen 2002, 2003). A great deal of variation is found
between schools in terms of student achievement, but it appears to be uncor-
related with form of organization. Private schools seem to aggravate the
already serious patterns of social segregation, but there is no significant dif-
ference in terms of outcome, that is, student achievement, when students’
socio-economic background is controlled for.
The discrepancy between Chubb and Moe’s reasoning and the subsequent
findings may be due to the fact that Chubb and Moe mix two arguments. On
the one hand, they refer to a positive correlation between professional
autonomy and the achievements of students that is identified by school
effectiveness research. On the other hand, they advance the public-choice
argument that private schools have greater flexibility to respond to
demands of their ‘consumers’, the parents. But while this might create
greater consumer satisfaction, it does not necessarily create greater educa-
tional quality. In other words, the (economic) autonomy of private schools
may induce teachers to make economic rather than educational judgements
(cf. Smith and Meier 1994). From a systems-theoretical point of view, the
root of the problem is the simple distinction between public and private. As
noted above, this distinction misses the notion of other systems operating
according to other logics. The decisive factor is not whether schools have
economic autonomy to make economic decisions, as do private schools, but
whether teachers have professional autonomy to make judgements accord-
ing to pedagogical criteria. Therefore, it might be true that schools with
greater professional autonomy are doing better, but these are not necessarily
and always private schools.
These considerations make it relevant to look more closely at the school
effectiveness research. It takes a more empirical approach to the study of
school differences by asking what characterizes the best schools. Although
strengthened recently, the theoretical basis of this research is still relatively
weak (Scheerens 1992; Mortimore 1997, p. 480; Sammons et al. 1997, pp. 159–
62; Sammons 1999, pp. 227–8). The results, though, seem to fit quite well
with the systems-theoretical hypothesis developed above.
Pam Sammons, Josh Hillman and Peter Mortimore have conducted a
review of school effectiveness research, summarizing current knowledge
about the ‘Key Characteristics of Effective Schools’ (see Sammons 1999,
pp. 183–226). These sums up to the following 11 (p. 195):
1. Professional leadership
2. Shared vision and goals
3. A learning environment

© Blackwell Publishing Ltd. 2005

904 SIMON CALMAR ANDERSEN

4. Concentration on teaching and learning

5. Purposeful teaching
6. High expectations
7. Positive reinforcement
8. Monitoring progress
9. Pupil rights and responsibilities
10. Home-school partnership
11. A learning organization
There is no space here for a detailed account of all of them, but I will briefly
go into those most obviously corresponding to the hypothesis above. This
also indicates that no rigorous empirical test is asserted.
To be a leading professional implies involvement in and knowledge about
what goes on in the classroom, including the curriculum, teaching strategies
and the monitoring of pupil progress (p. 198). Thus, the principal should not
just be a senior administrator forming decisions in the politico-administra-
tive codes, but in addition primarily participate in educational activities.
The second item involves a sense of community, that is, collegiality and
collaboration, deriving from staff ‘observing each other and giving feedback,
learning from each other, and working together to improve the teaching
programme’ (p. 200). This corresponds to the kind of accountability that
stems from ‘mutuality’ (cf. Hood above).
Items 4, 5, and 6, above, which ‘have the most significant role to play in
fostering pupils’ learning progress and, therefore, in influencing their edu-
cational outcomes’ (p. 215), all support the idea that political steering aimed
at improving quality should first of all prevent that focus is displaced from
education to administrative or other extra-educational concerns. The more
active part of political steering, the demand for professional self-evaluation,
is found in items 7 and 8, which concern feedback and the monitoring
of pupil performance as well as the evaluation of school performance
(pp. 209–10).
It is also worth noting what is not mentioned among the characteristics.
Resources are said to be no major determinant of effectiveness (p. 217; cf.
Hanushek 2003). Of course it is immediately pointed out that this does not
mean that resources are of no importance at all; schools cannot do without
resources. But this is also quite in line with the systems-theoretical point that
one system, such as economics, can destruct another by removing resources,
but it cannot instruct it (Luhmann 1997a, p. 753).
Furthermore, there is no talk of economic incentives – either directed
against schools or individual teachers. According to another recent review,
New Public Management reforms, though widespread in most Western
countries, do not seem to contribute positively to the performance of
schools. And where positive developments are actually found, it is highly
uncertain whether they can be ascribed to the reforms (Boyne et al. 2003,
pp. 11, 151).

© Blackwell Publishing Ltd. 2005

 GOVERNANCE IN A SYSTEMS-THEORETICAL PERSPECTIVE 905

To sum up, immediate political means like allocating resources or decid-

ing to organize schools publicly or privately are of less importance. What
seems to be important is to focus on what happens in schools in terms of
educational communication. To promote this politically, one should first of
all not make detailed hierarchical regulation, that could shift focus from
teaching to administration and create ‘irritating bureaucratization’ (Luhmann
1990 [1981], p. 76). Secondly, it should be demanded that teachers evaluate
each other and their students according to criteria they agree upon and
make these evaluations open to public scrutiny.

SOME CAUTIOUS CONCLUSIONS

During the last 15 years a tremendous amount of studies have compared
public and private provision of state welfare services, without reaching any
firm conclusions. Drawing on Luhmann’s systems theory, it has been argued
that the simple public/private distinction disregards that modern societies
are differentiated into several function systems. This theoretical perspective
does not only explain the absent differences between public and private pro-
vision, but also implies the hypothesis that political steering should address
the self-steering of these systems if the outcome is to be improved.
Needles to say, the examples of indirect steering principles and findings
from school policy and school effectiveness research do not provide a rigor-
ous empirical test of the systems-theoretical hypothesis. But, hopefully, they
do illustrate that the hypothesis is not just a matter of abstract theoretical
reasoning without any connection to political realities.
After all, the study of conditions of success and failure of alternatives to
marketization and direct state governing requires a theoretical framework
like the one presented here to guide the choice of governance forms to be
compared. Especially, the absence of governance, or the self-steering through
public self-evaluation, could be worth comparing to more conventional
forms of governing both within and between national contexts.

ACKNOWLEDGEMENT
A previous version of this paper was presented at the conference ‘Demo-
cratic Network Governance’, Copenhagen, October 2004. I would like to
thank participants at the conference as well as Jørgen Grønnegaard Chris-
tensen, Jørn Loftager, Nils Mortensen, Peter B. Mortensen, Thomas Pallesen
and two anonymous referees for helpful comments.

REFERENCES
Alesina, A. and L.H. Summers. 1993. ‘Central Bank Independence and Macroeconomic Performance – Some
Comparative Evidence’, Journal of Money Credit and Banking, 25, 151–62.
Andersen, N.Å. 2002. ‘Polyfone organisationer’, Nordiske Organisasjonsstudier, 2, 27–53.
Baecker, D. 1996. ‘Oszillierende Öffentlichkeit’, in R. Maresch (ed.), Medien und Öffentlichkeit, Munich: Klaus
Boer Verlag, pp. 89–107.

© Blackwell Publishing Ltd. 2005

906 SIMON CALMAR ANDERSEN

Bang, H.P. 2003. ‘Governance as Political Communication’, in H.P Bang (ed.), Governance as Political Commu-
nication. Manchester: Manchester University Press, pp. 7–25.
Boyne, G., C. Farrell, R. Walker, et al. 2003. Evaluating Public Management Reforms. Buckingham: Open Univer-
sity Press.
Brans, M. and S. Rossbach. 1997. ‘The Autopoiesis of Administrative Systems: Niklas Luhmann on Public
Administration and Public Policy’, Public Administration, 75, 417–39.
Christensen, J.G. 2002. ‘Responsive, Efficient, and Fair: Competing Models for the Provision of Welfare
Services’, Paper prepared for ECPR Joint Sessions of Workshops, Turin.
Christensen, J.G. 2003. Velfærdsstatens institutioner. Aarhus: Aarhus University Press.
Chubb, J.E. and T.M. Moe. 1988. ‘Politics, Markets, and the Organization of Schools’, American Political Science
Review, 82, 1065–87.
Chubb, J.E. and T.M. Moe. 1990. Politics, Markets, and America’s Schools. Washington, DC: The Brookings
Institution.
Down, I. 2004. ‘Central Bank Independence, Disinflations, and the Sacrifice Ratio’, Comparative Political
Studies, 37, 399–434.
Dunsire, A. 1996. ‘Tipping the Balance: Autopoiesis and Governance’, Administration & Society, 28, 299–334.
Flinders, M. 2002. ‘Governance in Whitehall’, Public Administration, 80, 1, 51–75.
Foucault, M. 1977. Discipline and Punish. The Birth of the Prison. London: Penguin.
Hanushek, E.A. 2003. ‘The Failure of Input-based Schooling Policies’, The Economic Journal, 113, F64–F98.
Hillman-Chartrand, H. and C. McCaughey. 1989. ‘The Arm’s Length Principle and the Arts: An International
Perspective – Past, Present and Future’, in M.C. Cummings Jr and M.D. Schuster (eds), Who’s to Pay for the
Arts?: The International Search for Models of Support. New York: American Council for the Arts.
Hood, C. 1998. The Art of the State. Culture, Rhetoric, and Public Management. Oxford: The Clarendon Press.
Jessop, B. 1995. ‘The Regulation Approach, Governance and Post-Fordism: Alternative Perspectives on Eco-
nomic and Political Change?’, Economy and Society, 24, 307–33.
Jessop, B. 2002. The Future of the Capitalist State. Cambridge: Polity.
Jessop, B. 2003. ‘Governance and Metagovernance: On Reflexivity, Requisite Variety, and Requisite Irony’, in
H.P Bang (ed.), Governance as Social and Political Communication. Manchester: Manchester University Press,
pp. 101–16.
King, M. and C. Thornhill. 2004. ‘Luhmann’s Social Theory’, Niklas Luhmann’s Theory of Politics and Law.
Basingstoke: Palgrave Macmillan, pp. 1–34.
Kjær, M. 2004. Governance. Cambridge: Polity Press.
Ladd, H.F. 2002. ‘School Vouchers: A Critical View’, Journal of Economic Perspectives, 16, 3–24.
Levin, H.M. 1998. ‘Educational Vouchers: Effectiveness, Choice, and Costs’, Journal of Policy Analysis and
Management, 17, 373–92.
Loftager, J. 1989. ‘Saglig politisk argumentation? Kritiske bemærkninger til den videnskabelige værdirelativ-
isme i politologien’, in B. Steen and P. Pedersen (eds), Dømmekraft. Objektivitet, subjektivitet og videnskab.
Aarhus: Aarhus University, pp. 95–120.
Loftager, J. 1994. ‘Den politiske offentlighed i teori og praksis’, in E.O. Eriksen (ed.), Den politiske orden. Otta:
Tano, pp. 150–78.
Luhmann, N. 1978. ‘Soziologie der Moral’, in N. Luhmann and S.H. Pfürtner (eds), Theorietechnik und Moral.
Frankfurt: Suhrkamp, pp. 8–116.
Luhmann, N. 1984. Soziale Systeme. Grundriß einer allgemeinen Theorie. Frankfurt: Suhrkamp.
Luhmann, N. 1990. Political Theory in the Welfare State. New York: Walter de Gruyter.
Luhmann, N. 1997a. Die Gesellschaft der Gesellschaft. Frankfurt: Suhrkamp.
Luhmann, N. 1997b. ‘Limits of Steering’, Theory Culture & Society, 14, 41–57.
Luhmann, N. 2000. Die Politik der Gesellschaft. Frankfurt: Suhrkamp.
Mayntz, R. 1993a. ‘Governing Failures and the Problem of Governability: Some Comments on a Theoretical
Paradigm’, in J. Kooiman (ed.), Modern Governance. New Government-Society Interactions. London: Sage,
pp. 9–20.
Mayntz, R. 1993b. ‘Governing Failures and the Problem of Governability: Some Comments on a Theoretical
Paradigm’, in J. Kooiman (ed.), Modern Governance. New Government-Society Interactions. London: Sage,
pp. 9–20.

© Blackwell Publishing Ltd. 2005

 GOVERNANCE IN A SYSTEMS-THEORETICAL PERSPECTIVE 907

Mayntz, R. 2001. ‘Zur Selektivität der steuerungstheoretischen Perspektive’, in H.-P. Burth and A. Görlitz
(eds), Politische Steuerung in Theorie und Praxis. Baden–Baden: Nomos, pp. 17–27.
Mayntz, R. 2003. ‘New Challenges to Governance Theory’, in H.P. Bang (ed.), Governance as Political Commu-
nication. Manchester: Manchester University Press, pp. 27–40.
McEwan, P.J. 2000. ‘The Potential Impact of Large-scale Voucher Programs’, Review of Educational Research, 70,
103–49.
Mortimore, P. 1997. ‘Can Effective Schools Compensate for Society?’, in A.H. Halsey, H. Lauder, P. Brown
and A.S. Wells (eds), Education. Culture, Economy, and Society, Oxford: Oxford University Press, pp. 476–87.
Neal, D. 2002. ‘How Vouchers Could Change the Market for Education’, Journal of Economic Perspectives, 16,
25–44.
Offe, C. 1984. Contradictions of the Welfare State. London: Hutchinson.
Peters, B. Guy and J. Pierre. 1998. ‘Governance without Government? Rethinking Public Administration’,
Journal of Public Administration Research and Theory, 8, 223–43.
Randzio–Plath, C. and T. Padoa–Schioppa. 2000. ‘The European Central Bank: Independence and Accounta-
bility’, Zentrumfür Europäische Integrationsforschung, Policy Paper (available at http://www.zei.de/
download/zei_wp/B00-16.pdf).
Rhodes, R. A. W. 1997. Understanding Governance. Policy Networks, Governance, Reflexivity and Accountability.
Buckingham: Open University Press.
Rhodes, R. A. W. 2000. ‘Governance and Public Administration’, in J. Pierre (ed.), Debating Governance.
Authority, Steering, and Democracy. Oxford: Oxford University Press.
Sabel, C.F. 2004. ‘Beyond Principal-Agent Governance: Experimentalist Organizations, Learning and
Accountability’, Draft discussion paper prepared for WRR meeting, Amsterdam, May 10–14, 2004 (avail-
able at http://www2.law.columbia.edu/sabel/papers/Sabel.definitief.doc).
Sammons, P. 1999. School Effectiveness. Coming of Age in the Twenty–first Century. Lisse: Swets and Zeitlinger.
Sammons, P., S. Thomas and P. Mortimore. 1997. Forging Links: Effective Schools and Effective Departments.
London: Paul Chapman.
Scharpf, F.W. 1997. Games Real Actors Play. Actor–Centered Institutionalism in Policy Research. Boulder, CO:
Westview Press.
Scheerens, J. 1992. Effective Schooling. Research, Theory, and Practice. London: Cassell.
Smith, K.B. and K.J. Meier. 1994. ‘Politics, Bureaucrats, and Schools’, Public Administration Review, 54, 551–58.
Sørensen, E. and J. Torfing. 2004. ‘Network Governance and Post–liberal Democracy’, Paper presented at the
conference on Democratic Network Governance, October 21–22, 2004, Copenhagen, Denmark.
Stoker, G. 1998. ‘Governance as Theory: Five Propositions’, International Social Science Journal, 50, 17–28.
Taylor, C. 1967. ‘Neutrality in Political Science’, in P. Laslett and W.G. Runciman (eds), Philosophy, Politics,
and Society. Oxford: Blackwell, pp. 25–57.
Teske, P. and M. Schneider. 2001. ‘What Research can tell Policymakers about School Choice’, Journal of Policy
Analysis and Management, 20, 609–31.
Teubner, G. 1993. Law as an Autopoietic System. Oxford: Blackwell.
Teubner, G. 1998. ‘After Privatization? The Many Autonomies of Private Law’, Current Legal Problems, 51,
393–424.
Teubner, G. and H. Willke. 1984. ‘Kontext und Autonomie: Gesellschaftliche Selbststeuerung durch reflexives
Recht’, Zeitschrift für Rechtssoziologie, 6, 4–35.
Waterman, R.W. and K.J. Meier. 1998. ‘Principal–agent models: An expansion?’, Journal of Public Administra-
tion Research and Theory, 8, 173–202.

Date received 17 December 2003. Date accepted 25 January 2005.

© Blackwell Publishing Ltd. 2005