Rational choice institutionalism (RCI) is a theoretical approach to the study of institutions arguing that actors use institutions to maximize their utility, and that institutions affect rational individual behavior. Rational choice institutionalism arose initially from the study of congressional behaviour in the U.S. in the late 1970s. Influential early RCI scholarship was done by political economists at California Institute of Technology, University of Rochester, and Washington University. It employs analytical tools borrowed from neo-classical economics to explain how institutions are created, the behaviour of political actors within it, and the outcome of strategic interaction.
RCI explains the creation of institutions as an attempt to reduce transaction costs of collective activity which would be significantly higher without such institutions. Institutions persist after their creation because they reduce uncertainty and allow gains from exchange. Rational choice institutionalism assumes that political actors within the institutional setting have a fixed set of preferences. To maximize those preferences actors behave highly instrumental through systematic foresight and strategic cost-benefit calculation. Institutions lay down the 'rules of the game', define the range of available strategies and the sequence of alternatives. The actors' behaviour will be highly influenced by the expectation how other players will bargain. The institutional environment provides information and enforcement mechanism that reduce uncertainty for each actor about the corresponding behaviour of others. This 'calculus approach' explains how the institutional setting influences individual behaviour and stresses how strategic interaction determines policy outcomes.
