Path?dependence?in?the?welfare?states

王丽铮

Introduction

In the welfare state theories， the new institutional approach has explained incremental changes as institutions adjust at the margin progressively （Jensen， 2009）. In the past several decades， historical institutionalism has generally emerged as a significant approach in political science and a major approach of institutional analysis. There lies an assumption that policymaking systems tend to be conservative and find ways of defending existing patterns of policy， as well as the organizations delivering these policies （Peters et al， 2005）. As Pierson （2000） points out there are self-reinforcing processes in institutions and thus it is difficult to change to another trajectory once a pattern has been established. Historical institutionalism considers policy-making and political change as a discrete process， characterized by periods of stability - denominated as path dependence.

Path dependence has become increasingly widespread in economics and social sciences. To some extent， politics differs from economics. But some features such as increasing return processes could be applied into politics. The general idea of path dependence is that the events occurred in the past have an impact on the later ones. It is indicated that the past shapes the future in varying degrees. There is a common “short hand” （Ebbinghaus， 2005）. In other words， history matters. Path dependence includes elements of both stability and change. It is crucial to understand path dependence in a dynamic system.

This article consists of four sections. After briefly give an example of the Polya Urn， the first section gives a literature review of path dependence， which understands path dependence in general sense and in a more open system. The second part is case study， including health reform in the United States and in Britain. Following the part comes discussion. It gives an analysis and comparison of the cases in the United States and Britain， which represents a strong path dependence and a weak path dependence respectively. The final section is conclusion. Even though the NHS system in Britain has experienced policy changes， it could not be easily concluded that it is not suitable for path dependence. And in the end， this essay also considers the constraints and indications of policy-makers.

Literature Review

Imaging there is a large urn including two balls of equal size （one black， one white）. First， one ball is removed randomly from the urn and its color observed. Then the ball is put back along with an additional ball of the same color. The process is repeated until the urn fills up. What kind of distribution would be eventually in the urn？ Every time one ball is removed and returned， it increases the probability of drawing the same color in the next process. I would say， one color would dominate at last even though it is always a random process. Mathematicians call this a Polya urn model. Polya urn processes exhibit positive feedback and capture essential elements of path dependence （Pierson， 2004）.

The new institutionalism is an approach that for the purpose of ‘illuminating how political struggles are mediated by the institutional setting in which they take place （Thelen and Steinmo， 1992， p.2）. The approach is ‘new because it tries to stress agency， structure and the role of institutions. In particular， historical institutionalism look more closely at the origins and development of the welfare states， which interprets the limited options and behaviors in a ‘logic of path-dependence （Schmidt， 2006）. The historical institutionalists are associated with historical development. As Hall and Taylor （1996， p. 940） puts it， path dependence refers to “the rejection of the traditional postulate that the same operative forces will generate the same results everywhere in favor of the view that the effect of such forces will be mediated by the contextual features of a given situation often inherited from the past”. Thus， historical institutionalists often emphasis the high degree of continuity and unintended consequences that result from historical development. Some historical institutionalists also separate a sequence of events into periods of continuity punctuated by critical moments or junctures that shape the basic contours of life， such as institutional change happens and then creates a “branching point” from which historical development moves away from the old path （Collier and Collier， 1991; Krasner， 1988）.

At the heart of historical institutionalism is an image of social causation that is based upon path dependence. In a general sense， the key mechanisms identified in the path dependence literature include positive feedback （or self-reinforcement） and increasing returns. As David （2000， p. 8） puts it， “the core content of the concept of path dependence as a dynamic property refers to the idea of history as an irreversible branching process”. Also， Hacker （2002， p. 54） argues that “path dependence refers to developmental trajectories that are inherently difficult to reverse.” Path dependence refers to dynamic processes involving positive feedback， which generate a number of possible outcomes （Arthur， 1994; David， 2000）. In the face of positive feedback， the chance of further steps along the same path would increase with each move down （Pierson， 2004）. Every step in one direction makes it a little more difficult to reverse to another. All of them have claimed that positive feedback is a crucial character of a historical process which generates path dependence.

As Mahoney （2000， p. 507） puts it， “path dependence characterizes specifically those historical sequences in which contingent events set into motion institutional patterns or event chains that have deterministic properties.” The understanding of path dependence can be dated back to Arthur. Arthur （1994， p. 112） has argued that there are four features of a technology and its social context generate increasing returns： large set-up costs， learning effects， coordination effects and adaptive expectations. And North （1990） claims that all the four features that Arthur identified in increasing returns of technology can be applied to institutions. In Norths words， “There are large initial setup costs when the institutions are created…. There are significant learning effects for organizations that arise in consequence of the opportunity set provided by the institutional framework…. There will be coordination effects directly via contracts with other organizations and indirectly by induced investments through the polity in complementary activities…. Adaptive expectations occur because increased prevalence of contracting based on a specific institution will reduce uncertainties about the permanence of that rule” （North， 1990， p. 95）. A path with increasing return effects will lead to a deterministic framework （Pierson， 2000）. That is to say， contingent beginnings create a path with deterministic effects. Here path dependence implies that equilibrium is stable and highly deterministic， but also temporary. Under some circumstances， a series of critical junctures will come up and result in an unexpected new path （Djelic and Quack， 2007）.

It probably comes as no surprise that path dependence theory has been subject to powerful critiques in politics （see Schwartz， 2002; Peters et al， 2005）. The most common and well-documented charge levelled against the theory concerns its weak ability to account for endogenously generated change （Ross， 2007）. Ross （2007） argues that it is path dependent theorys fundamental weakness at explaining change.

However， the strong version of path dependence also acknowledges the possibility of change. According to Djelic and Quack （2007）， “the image or model of change is one of punctuated equilibrium”. And the particular sequence of events could be critical moments or junctures for contingent developments， though sometimes they are rare （Mahoney， 2000）. Those events for change are in the logic of each path being entrenchment， stability and reproduction， which are considered as “external shocks” to the system （Djelic and Quack， 2007）. Ebbinghaus （2005） puts forward two clearly different explanations of path dependence that could be summarized in two metaphors. The first one is “trodden trail that emerges through the subsequent repeated use by others of a path spontaneously chosen by an individual”. The other interpretation is the “road juncture， the branching point at which a person needs to choose one of the available pathways in order to continue the journey”. Thus， this kind of path dependence involves two different ways to make clear historical events. The “trodden trail” and “road juncture” resemble a consistent diffusion path and a branching pathway respectively. The branching pathway concentrates on the particular historical origins of institutions. Historical institutionalists regard institutions as conscious choices by policy actors at critical junctures. But this does not mean institutionalists are well-planned.

A path-dependent sequence of events and political changes are associated with previous decisions and existing institutions （Wilsford， 1994）. Different sources of stability will be sensitive to different pressures for change （Djelic and Quack， 2007）. The view of Ebbinghaus （2005） allows for more openness to change. The first way is path stabilization. Due to self-reinforcing process and successful gradual adaptation， it shows a long-term stability， and people often call this ‘lock-in; The second is path departure. It occurs under optimistic environment， and the self-reinforcing mechanisms provide sufficient resources for gradual adaptation. Earlier decisions narrow the choice set but do not determine the next adaptive step. Path departure locates between path stability and radical system change; The last one is path switch，which takes step to end the self-reinforcement of an exsiting institution and establish another trajectory. Therefore， in this perspective， ‘branching pathways can explain the different forms of institution stability and change （Ebbinghaus， 2005）.

Case Study

Policy continuity and change are displayed by a ‘punctuated equilibrium， with a long period of relative stability followed by sudden and dramatic change （Jensen， 2009）. In the path dependent model， established pattern serves as a device for policy reforms， connecting future policy movement along a certain path （Wildford， 1994）. Since equilibrium is stable， conclusive and temporary， there is still a possibility of policy changes. As David （1989， p. 4） puts it， “changes in fundamental scientific or engineering knowledge can occasion radical innovation”. Thus in this section， I will give the case of health reform in the United States and Britain in turn.

The core of the United State welfare state was established during the New Deal， and since then， its history has been the history of the many political intentions. In November 1992， George Bush was defeated and Bill Clinton was elected as the new president. Clinton would like to force American health policy onto a new path and put forward an activist health policy agenda， while Bush has always considered to continue American health policy as its own trajectory. Therefore， the Clintons put forward two new bases of the health care system radically. First， it would set up geographically-based regional health alliances， which were supported by government tax revenues and the contributions of employers and employees. They act as purchasing agents of health care for their members. And these members are ensured a basic package of health care services. Thus， it was actually an insurance-based system. Secondly， the plan would stimulate the competition of provider networks. In order to get packages of health care services at different prices， it requires the cooperation of physicians， hospitals， laboratories and pharmaceutical suppliers in local networks. Therefore， the competition among networks would notionally result in a better and better package and a lower and lower price while every network would provide the basic and comprehensive services to patients. Here lies the key of "managed competition” （Wilsford， 1994）. Also， as Enthoven （1993， p. 24） points out， “Managed competition is defined as a purchasing strategy to obtain maximum value for consumers and employers， using rules for competition derived from microeconomic principles. And it is a blending of the competitive and regulatory strategies that have coexisted uneasily for years in the US health care system”. There are three purposes of Clinton plan. The first is to extend basic comprehensive coverage to all the Americans who have no health insurance at all. The second is to reduce the rate of growth in health care expenditure. And last but not least， it aims to save money in order to pay off the federal budget deficit.

Ikenberry （1994） captures the nature of path dependence in a historical institutional approach including “critical junctures and developmental pathways”. Wilsford （1985， 1994， 1995） tries to interpret policy change with the notion of “conjuncture”， including elements of time， space and a window of opportunity. Thus， the possibility of change requires contingent circumstance. Therefore， as Greener （2002， p. 164） puts it， “policy-makers may have to wait for the alignment of a number of factors to create the opportunity to introduce significant change”. However， the Clinton proposal was defeated at the end of the 1993-94 Congress. Wilsford （1994） also argues that the path-dependent model ‘forecast all along the failure of such a non-incremental reform （a new path away from the old trajectory） initiative in the American system. The philosophical foundation of American health care system has regarded health care as a private not a public good traditionally. In effect， in the United States， private insurance plays a role of public programme， and it is hard to remove as the public foundations of mature welfare states （Hacker， 2004）.

Given a strong path dependence in the United States， it is crucial for a conjuncture to overturn the structural impediments to big change. Even under the most favorable conjunctural circumstances， the fragmented institutions in the United States still uphold the status quo， pushing health care policy to the trodden path （Wilsford， 1994）. Therefore， once a system becomes widespread and deeply rooted， it is extremely difficult to move away from the historical path to a new trajectory.

However， the health reform in Britain is not that case. It can not be ignored to understand the economic and political context first in which the National Health Service （NHS） has developed in order to review the evolution of health reform in Britain in the 1980s and the 1990s. The public services and public spending which had featured in the post-war period came to a stop because of the oil crises in the 1970s. The Labor government at that time was pushed to adopt austerity economic policies， which brought conflict with its traditional support foundation in the trade union. It signs the end of the corporatist style of politics that had dominated the British government in the 1960s and 1970s. The Conservative government elected in the 1979 speeded up those changes which challenged the legitimacy of Keynesian and sought a framework including the privatization of state-owned enterprises， reductions in taxation and controls over public expenditure （Ham， 2009）. In the 1980s， the government mainly paid attention to how to make the NHS more businesslike and efficient. Also， health policy gives a symbol of new public management （Hood， 1991）.

As Webster （1998， p. 143-4） puts it， “The Thatcher reforms represent a long-drawn-out sequence of changes， amounting to a process of continuous revolution， in which the end result was not predictable at the beginning， and indeed the whole process of policy-making was akin to a journey through a minefield， advances being made in an erratic manner， as dictated by the exigencies of political opportunism”. After the adoption of a White Paper - Working for Patients - in 1989， the Britain government put forward an ambitious agenda to reform the NHS. This agenda was passed a resolution in 1990 and was set out to implement on April 1， 1991. At the heart of the NHS reform in 1991 was that purchasers of health care were to be apart from providers of care. This was achieved by the establishment of fund-holding general practitioners （GPs）， a system of district health authority （DHA） contracts with hospitals， hospitals set up in autonomous trusts， and consultants working on negotiated contracts with the hospital trusts. These were designed to induce competition among providers for the the business of purchasers in order to greater efficiencies， regarded as ‘more health-care services for money spent （Wilsford， 1994）. Also， Ham （2009， p. 32） argues that “one of the purposes of separating responsibility for purchasing and provision was to stimulate competition between providers in what was often referred to as an internal market”.

The Major government was described as more consensual and also focus on consultation and building effective working relationships with outside organizations （Baggott， 1995; Baggort and McGregor-Riley， 1999）. On the one hand， some previous political commitments were abandoned or weakened. For example， the terms that let trusts set up the service and payment became nonsense. In fact， medical profession successfully defended the valuable consultation contract. On the other hand， The Major government was not afraid to confront organized interests， although with less overt hostility than its predecessor. Because the Major government lacked the resources of Thatcher — notably a smaller parliamentary majority coupled with an increasingly hostile media and a resurgent Labour opposition — it was forced to compromise on policy issues， in particular at the implementation stage （Baggott， 2007）. That is the early institutions of NHS limits the behavior and choice of policy-maker， and they have to rely on the medical profession.

Yet， there are a number of windows of opportunity for reform， which empowered the Thatcher government to overcome the obstacles and introduce big reforms of the NHS. Also， Wilsford （1994， 1995） points out the conjunctures of a sequence of events that allowed the reforms to happen， including the increased political authority of the Thatcher government after the 1987 general election， the increased heterogeneity of the medical experts， the emergence of the early  reform management， the advice provided by Enthoven for an alternative organizational structure， and its deficiency of threat to the patients and community （see also Greener， 2002; Enthoven， 1985， 1990）.

The election of a Labor government under Tony Blair in 1997 brought an end of Conservative government to offer the prospect of a quiet time for the NHS. During this time， there are indeed some factors which bring challenges to the status of medical profession， such as the increased participation of patients and the introduction of some new regulatory mechanisms. But the role of medical profession is still very important. Just as Klein （2010， p. 293） puts it vividly， “History has come full circle， as it were. In the early days of the NHS， empowering doctors were seen as the solution to the challenge of successfully delivering health care. Subsequently， they came to be perceived as the problem; the challenge was how to manage them and their activities. Now it appears that doctors are once again seen as the solution”.

Discussion

Why are the path dependent theories important to the analysis of policy reform in welfare states？ According to Wilsford （1994， 1995）， the notion of path dependence is to find out why so many apparently sub-optimal policy outcomes characterize any policy process dominated by the decentralized interaction of policy actors within existing institutional frameworks. On the one hand， history matters， and it matters a great deal. On the other hand， however， history does not determine the outcomes. The path only narrows. Under some circumstances， it is possible for policy changes that move away from the old trajectory.

Deeming （2004， p. 60） defines decentralization as ‘significant decision-making discretion is available at lower hierarchical levels， with the managers and staff who are closer to the people receiving services. In contrast， he defines centralization as ‘significant decisions are taken upstream at the center of government within a tighter system of control and accountability. In comparison to health care system in the United States and Britain， it shows that the former resembles a decentralized， non-hierarchical network of autonomous decision-agents. It is quite difficult and unlikely to establish a new trajectory. The British， however， resembles a more centralized， hierarchical order of less autonomous decision-agents （Hacker， 2004）.

According to Ebbinghaus （2005）， the branching pathways allow for more openness to change. The health policy reform in United States could be seen as path stabilization， which represents a strong path dependence. In the recent few decades， the NHS policy landscape in Britain has indeed undergone many changes， that is path departure from the old path. But it can not be concluded that Britain's NHS system has experienced the big institutional change， not least because some core features still remain： patients maintain the basic right to get free medical care， the government provides funds for medical services mainly through fiscal revenue， and the collective professional autonomy of doctors also has a good maintenance. From the above， medical experts still play a crucial role in the implementation of health policy and they become more influential than consumers and managers. In the process of policy making， the government may use autocratic power bypass medical experts， as the Thatcher government did in the implementation of ‘Everything for Patients. However， this strategy is very costly， almost giving rise to the step down of Thatcher government. Moreover， followed by successive governments， doctors are once again involved in policy making. As Klein （2010， p. 293） puts it， “in the tense politics of double bed - with the State and the profession locked into an embrace of mutual dependence - the balance appears to be swinging towards the profession”. The government has realized that it would be better to let the doctor and their representatives participate in the policy formulation in order to achieve policy reform and a better efficiency. For example， the Cameron coalition government discussed the primary health care contract together with medical experts to make sure the efficiency and effectiveness of the health service resources and also promoted the medical service of autonomy as a strategy of the health services reform. The second element of branching pathway the subsequent process of institutionalization through self-reinforcing processes， similar to those described by Arthur and David （Ebbinghaus， 2005）. The contingent events at critical junctures results in the formation of the NHS policy community. Once formed， it exerts unique influence on the development of the British NHS system， which has institutionalized the relations between government and medical experts.

In general， though the NHS system in Britain that formed at critical junctures has experienced the changes of environment and the shocks of reform， it still remains intact through the analysis of comparative history. It does not mean the actors are completely powerless， they can also actively utilize resources to policy change. But it should be noted that the choices of actors are limited. Policy legacies of the NHS system have an impact on the formation of their preferences， the resources they could use， and the cost of reform. Of course， the development of the NHS system is inseparable from reforms， but the reforms are limited， mainly by adding new actors （consumers and managers） and function transformation （from providing services directly to the purchasing service）. That is， the NHS reform in British is limited reform of path dependence， which also presents the punctuated equilibrium. Also， the approach of path dependence notices the considerable constraints that exist on policy-makers （Greener， 2002）. Policy-makers may have to be patient and wait for the combination of a great deal of factors to create the window of significant policy change. Path departure and path switch in a broader perspective of path dependence show a better understanding of the circumstances for change in established patterns and for the emergence of new paths （Djelic and Quack， 2007）.

Conclusion

The most originally and consistently of the new institutionalist welfare state literature is the path dependent argument. As Nielson et al （1995， p. 6） puts it， “path dependence suggests that the institutional legacies of the past limit the range of current possibilities and options in institutional innovation”. Hacker （2004） argues the American welfare state shifts step by step towards a privatization of risks as new social risks are being ignored by the political system. Lessenich （2005） shows that Central European welfare states implement reforms on the margin and result in the appearance of the new pathways. Thelen （2004） introduces how institutions evolve into something completely different from the original framework with new policies adding to the old ones in vocational systems. Also， as Esping-Anderson （1996， p. 6） points out， “a major reason has to do with institutional legacies， inherited system characteristics， and the vested interests that these cultivate”. That is， welfare regimes evolve in a path-dependent way.

Path dependence includes elements of both continuity and change. When it comes to the case of Britain， this essay focuses more on the process of change in systems that are assumed to be open. The general argument of path dependence refers to the idea that events occurring at an earlier point in time will affect events occurring at a later point in time. In a strong version of path dependence， it also recognizes the possibility of policy change. As the United States case has shown， once a system becomes widespread and deeply rooted， it is really difficult to move away from the historical path to a new trajectory. Without denying that such critical junctures are possible， it represents a strong history and strong path dependence. However， the case of Britain also provides insights into process of institutional development and policy change. As events in the 1990s， the behavior of political actors is limited. Even though the NHS in Britain has undergone some policy changes， it could not be easily concluded that they are big institutional changes， not least because its core features still remain as mentioned above. In other words， these reforms are also path dependent reforms.

The analysis of path dependence can not only just identify path stability and change， but also indicate policy-makers which aspects of the system are getting stable over time and which are subject to ‘renegotiation （Thelen， 2004）. As Thelen （2004， p. 296） puts it， “periodic renegotiation was the governance structure through which this system would be administered”. Also Pierson and Skocpol （2002） recommend that institutions have assumed only by viewing the form and functions in the context of a larger temporal framework that includes the sequence of events and processed that shaped their development over time. The choice sets of policy-makers are narrowed. They may have to be patient and wait for the combination of a great deal of factors or conjunctures to create the window of significant policy change.

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