Credibility thesis

The credibility thesis is a proposed heterodox theoretical framework for understanding how societal institutions or social rules come about and evolve. It posits that institutions emerge from intentional institution-building but never in the originally intended form. Instead, institutional development is endogenous and spontaneously ordered and institutional persistence can be explained by their credibility, which is provided by the function that particular institutions serve rather than their theoretical or ideological form. The credibility thesis can be applied to explain, for example, why purported institutional improvements do not take hold as part of structural adjustment programs, while other economies in the developing world deliver growth despite absence of clear and strong market mechanisms such as indisputable private property rights or clearly delineated and registered land tenure. The thesis has been applied to explain the failure and success of institutional reforms for various sectors and property rights, including but not limited to, land, housing, informal housing and slums, natural resources, climate change policy and environmental policy.

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