Resilient blunderers: why is the authority of rating agencies so persistent?

Andreas Kruck (Ludwig-Maximilians-University Munich)
Andreas Kruck (Ludwig-Maximilians-University Munich)

By Andreas Kruck

More recent accounts of credit rating agencies (CRAs) have largely been stories of failure. Nonetheless, CRAs continue to co-determine access to capital markets and costs of borrowing. Investors still follow CRAs’ standard of creditworthiness, and even powerful states zealously seek to preserve their top ratings. How can that be? Why is the authority of CRAs so resilient even in the face of recurrent, costly and widely recognized rating fiascos? In “Resilient Blunderers: Credit Rating Fiascos and Rating Agencies’ Institutionalized Status as Private Authorities”, I make a historical institutionalist argument to resolve this puzzle: Flawed public policy choices in the past and non-intended institutional dynamics have spawned later regulatory dilemmas culminating in the paradoxical outcome that CRAs’ mistakes have fostered a progressive institutionalization rather than a down-grade of their role as private governors. Read my contribution to the JEPP Special Issue on “Fiascos in Public Policy and Foreign Policy” to learn more about a particularly perplexing instance of path-dependent post-crisis reform and its broader lessons for (non-)learning from failures committed by private governors.

What is in a policy failure?

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Mark Bovens (Utrecht University School of Governance) & Paul ‘t Hart (Utrecht University School of Governance)

Cynical political pundits might contend that policy failures are the default outcome of politics – some tend to be surprised if policy actually works. But what feeds into our evaluation of policy as either successful or potentially disastrous? Mark Bovens and Paul ‘t Hart argue that the analysis of policy failures “is, by definition, not a neutral endeavour, since policy fiascos are not neutral events”. Read their article “Revisiting the study of policy failures” published in the Journal of European Public Policy to learn more about what makes us label policy as a ‘success’ or ‘failure’.

When states over- and under-react

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Christoph Meyer (King’s College London)

Disproportionate responses to ill-conceived threats can be just as costly as underestimating a particular risk, especially when it comes to foreign policy-making. When “states and international organizations over- and under-react to perceived transboundary threats and hazards that emanate from or easily spread beyond a given state’s territory, their mistakes can have equally harmful consequences for the citizens they mean to protect”. Read Christoph Meyer’s article “Over- and under-reaction to transboundary threats: two sides of a misprinted coin?” published in the Journal of European Public Policy to find out what conditions states’ misapprehension of external threats.

Personality traits and fiasco prime ministers: Is there a connection?

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Klaus Brummer (Catholic University of Eichstätt-Ingolstadt)

Following the aphorism that those who will not risk cannot win seems not to bode well for British prime ministers. Klaus Brummer argues that British leaders with particularly high self-confidence and in pursuit of conflictual political strategies are more likely to be attached the label ‘fiasco-prime ministers’ than their cannier colleagues. Read his article “‘Fiasco prime ministers’: leaders’ beliefs and personality traits as possible causes for policy fiascos” published in the Journal of European Public Policy to learn how personality traits of individual decision-makers can contribute to the evolution of policy fiascos.