Inaction Costs: Understanding Metropolitan Governmental System Reform Dynamics in Toronto

Abstract

‘Transaction costs’ are widely used to explain why rational governments often do not implement their preferred policy options. According to this idea, governments weigh the benefits of new policies against the costs associated with defending these changes to legislative opponents, political supporters, agents and voters. Flipping the transaction costs framework, this article uses ‘inaction costs’ to explain why governments sometimes, and seemingly irrationally, implement non-preferred policy options. It suggests senior governments implement non-preferred policies only when inaction costs surpass the benefits of their preferred policy coupled with avoided transaction costs. This hypothesis is tested by using content analysis to examine metropolitan governmental system change dynamics in the Toronto Census Metropolitan Area.