The credibility thesis is a proposed
heterodox
In religion, heterodoxy (from Ancient Greek: , "other, another, different" + , "popular belief") means "any opinions or doctrines at variance with an official or orthodox position". Under this definition, heterodoxy is similar to unorthodoxy, w ...
theoretical framework for understanding how societal
institution
Institutions are humanly devised structures of rules and norms that shape and constrain individual behavior. All definitions of institutions generally entail that there is a level of persistence and continuity. Laws, rules, social conventions a ...
s 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
Endogenous substances and processes are those that originate from within a living system such as an organism, tissue, or cell.
In contrast, exogenous substances and processes are those that originate from outside of an organism.
For example, es ...
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
In common law systems, land tenure, from the French verb "tenir" means "to hold", is the legal regime in which land owned by an individual is possessed by someone else who is said to "hold" the land, based on an agreement between both individual ...
. 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
Land, also known as dry land, ground, or earth, is the solid terrestrial surface of the planet Earth that is not submerged by the ocean or other bodies of water. It makes up 29% of Earth's surface and includes the continents and various islan ...
,
housing
Housing, or more generally, living spaces, refers to the construction and assigned usage of houses or buildings individually or collectively, for the purpose of shelter. Housing ensures that members of society have a place to live, whether it ...
,
informal housing
Informal housing or informal settlement can include any form of housing, shelter, or settlement (or lack thereof) which is illegal, falls outside of government control or regulation, or is not afforded protection by the state. As such, the inform ...
and
slums
A slum is a highly populated urban residential area consisting of densely packed housing units of weak build quality and often associated with poverty. The infrastructure in slums is often deteriorated or incomplete, and they are primarily in ...
,
natural resources
Natural resources are resources that are drawn from nature and used with few modifications. This includes the sources of valued characteristics such as commercial and industrial use, aesthetic value, scientific interest and cultural value. O ...
,
climate change policy
The politics of climate change results from different perspectives on how to respond to climate change. Global warming is driven largely by the emissions of greenhouse gases due to human economic activity, especially the burning of fossil fuels ...
and
environmental policy
Environmental policy is the commitment of an organization or government to the laws, regulations, and other policy mechanisms concerning environmental issues. These issues generally include air and water pollution, waste management, ecosystem mana ...
.
Postulates of the credibility thesis
According to the credibility thesis, institutional persistence, meaning the survival and change of particular institutions through time is determined by the function of the institution and
actors
An actor or actress is a person who portrays a character in a performance. The actor performs "in the flesh" in the traditional medium of the theatre or in modern media such as film, radio, and television. The analogous Greek term is (), lite ...
' expectations of the institution to play that function. The Credibility Thesis has put forward “that what ultimately determines the performance of institutions is not their form in terms of formality, privatization, or security, but their spatially and temporally defined function. In different wording, institutional function presides over form; the former can be expressed by its credibility, that is, the perceived social support at a given time and space.”
Or, as Pero and Smith phrased “institutional credibility refers to peoples’ acceptance of an institution based on their perceptions of that institutions’ accountability, representation, legitimacy, transparency, fairness and justice.”
In light of the above, the thesis predicts that institutions that persist over time likely are credible, thus functional. If not, they would have changed or gone extinct. This principle holds for whatever form an institution may assume, regardless whether it is formal or informal, public or private, secure or insecure. A typical example is
sharecropping
Sharecropping is a legal arrangement with regard to agricultural land in which a landowner allows a tenant to use the land in return for a share of the crops produced on that land.
Sharecropping has a long history and there are a wide range ...
, which has been regarded as economically inefficient or "second-best".
However, its persistence throughout the ages has challenged this premise,
leading others to conclude that it is efficient, thus credible and functional.
That credibility has been confirmed in other studies.
In this context, Fan et al. noted: “Compared with other institutional theories, the credibility thesis places more emphasis on the function of the institution. (…) The credibility thesis explains successfully why some seemingly imperfect institutions, even without clear property rights, have persisted and been championed, while other seemingly perfect institutions have had poor operation effects.”
Changes in institutional arrangements, such as changes from informal
land tenure
In common law systems, land tenure, from the French verb "tenir" means "to hold", is the legal regime in which land owned by an individual is possessed by someone else who is said to "hold" the land, based on an agreement between both individual ...
and
informal housing
Informal housing or informal settlement can include any form of housing, shelter, or settlement (or lack thereof) which is illegal, falls outside of government control or regulation, or is not afforded protection by the state. As such, the inform ...
to a formalized real estate market or gradually declining prevalence of formal marriage or
customary rights
A legal custom is the established pattern of behavior that can be objectively verified within a particular social setting. A claim can be carried out in defense of "what has always been done and accepted by law".
Customary law (also, consuetudina ...
, are brought about by rule-making in a multi-actor playing field, where even the strongest actors cannot fully dictate institutional arrangements. In effect, when powerful actors exogenously impose institutions that contradict the evolutionary flow of endogenously emerged functions, the newly designed arrangements will invariably develop into "empty institutions" and "non credible" institutions.
An institution that appears stable and unchanging over time is often alleged to exist in an equilibrium wherein actors' conflicting interests on what form the institution should take are locked in a
frozen conflict
In international relations, a frozen conflict is a situation in which active armed conflict has been brought to an end, but no peace treaty or other political framework resolves the conflict to the satisfaction of the combatants. Therefore, lega ...
. For example, whether land holdings should be registered in a cadastre or if informal exchange of payment for use rights can suffice as confirmation of a land sale, constitute two possible institutional arrangements and either can be beneficial to different actors' interests. That no actor perceives an immediate opportunity to change the arrangement to their advantage is a sign of the credibility of the assignment and the source of the equilibrium of institutional arrangement. However, in actuality disequilibrium characterises institutional arrangements and equilibrium is transitory and rare. What is perceived as persistence of institutions is, in fact, the occurrence of infinitesimally small institutional changes over time under a veneer of apparent stability. In this context, the credibility thesis is predicated upon the notion of dynamic disequilibrium.
It is also why in this respect the credibility theory is juxtaposed to
structural functionalism
Structural functionalism, or simply functionalism, is "a framework for building theory that sees society as a complex system whose parts work together to promote solidarity and stability".
This approach looks at society through a macro-level o ...
, which is based on presupposed equilibrium.
A series of underlying postulates for the credibility thesis has been proposed:
* Institutions are the resultant of unintentional development. Although actors have intentions, there is no agency that can externally or exogenously design institutions, as actors' actions are part of the same endogenous game. Institutions emerge as an unanticipated outcome of actors' multitudinous interactions, in effect, are the result of an autonomous, ''Unintended Intentionality''.
* Institutional change is driven by disequilibrium. Contrary to the notion that institutions settle around equilibrium, actors' interactions are seen as an ever-changing and conflicting process in which stable status is never reached. One could see it as a "Dynamic Disequilibrium" or institutional change as perpetual alteration, yet, with alternating speeds of change; sometimes, imperceptibly slow, sometimes, sudden and with shocks.
* Institutional Form is subordinate to Function. In other words, functional adaptation as evident through the use and disuse of institutions over time and space is what matters for understanding their role in development, not their appearance.
Key concepts
{, class="wikitable sortable"
, -
! Term !! Definition !! Example
, -
, Credibility , , Perceived social support of an institutional arrangement at a given time and space; a measure of individual actors' aggregate perceptions of an institution as a jointly shared arrangement
, , Informal settlements
and extra-legal housing that provide non-state social welfare for low-income residents.
, -
, Institutional function , , The use that a particular institutional arrangement can provide to actors.
, , In the agricultural economy, land is a primary asset from a subsistence point of view: it provides food security, enables utilization of family labour, and reduces vulnerability
The
agricultural lease system in China functions as a social welfare net for the vast surplus of China's rural labour.
, -
, Empty institution , , “
nstitutionalcompromises over sensitive political issues. The interests opposed to them ensure that they are established in such a way that they cannot achieve their aims, whereas the interests supporting them win a pyrrhic victory as their rules, as represented by the new institution, have no practical impact on social actors’ behaviour".
, ,
Vilhelm Aubert
Johan Vilhelm Aubert (7 June 1922 – 19 July 1988) was an influential Norwegian sociologist. He was a professor at the Faculty of Law, University of Oslo from 1963 to 1971 and at the Department of Sociology from 1971 to 1988. He co-founded ...
observed that the Housemaid Law in Norway regulating the working conditions of
domestic worker
A domestic worker or domestic servant is a person who works within the scope of a residence. The term "domestic service" applies to the equivalent occupational category. In traditional English contexts, such a person was said to be "in service ...
s in Norway was on the books and technically being implemented but had not any effect.
, -
, Non-credible institution, , An institution that is being enforced by a powerful actor, complied by but not accepted by others. , , Expropriation of customary Native Title for dam-building and privatization of common property of indigenous peoples in Malaysia.
Evictions of peasants and urban citizens in China.
, -
, Dynamic disequilibrium, , Contrary to the concept that institutions settle around equilibrium, actors’ interactions are defined as an ever-changing and conflicting process in which a stable status is never achieved. It will be proposed … as a Theorem on “Dynamic Disequilibrium”: institutional change as a process of perpetual alteration, however, by which the pace of change varies; at times imperceptibly slow, and at other times, sudden and with shocks.
, , "
going subtle shifts beneath the surface of apparently stable formal institutions."
, -
, Institutional form , , The categorical description of institutional arrangements. , , Secure, private, formal as opposed to
fuzzy
Fuzzy or Fuzzies may refer to:
Music
* Fuzzy (band), a 1990s Boston indie pop band
* Fuzzy (composer) (born 1939), Danish composer Jens Vilhelm Pedersen
* ''Fuzzy'' (album), 1993 debut album by the Los Angeles rock group Grant Lee Buffalo
* "Fuz ...
,
common
Common may refer to:
Places
* Common, a townland in County Tyrone, Northern Ireland
* Boston Common, a central public park in Boston, Massachusetts
* Cambridge Common, common land area in Cambridge, Massachusetts
* Clapham Common, originally com ...
, and customary
property rights
The right to property, or the right to own property (cf. ownership) is often classified as a human right for natural persons regarding their possessions. A general recognition of a right to private property is found more rarely and is typically ...
.
Methodological approaches
"Given that all involved actors are constantly interested in changing institutional design, credibility cannot be measured by directly asking respondents whether they find an institution credible.
Instead it has to be operationalized through
proxies, such as the level of conflict that an institution generates, the extent of 'institutional robustness' expressed as a function of institutional lifespan and flexibility, the degree to which an institution facilitates or frustrates overall
socio-economic
Socioeconomics (also known as social economics) is the social science that studies how economic activity affects and is shaped by social processes. In general it analyzes how modern societies progress, stagnate, or regress because of their local ...
, political and
cultural change Culture change is a term used in public policy making that emphasizes the influence of cultural capital on individual and community behavior. It has been sometimes called repositioning of culture, which means the reconstruction of the cultural conce ...
, and the extent to which an institution fulfils the functions it ought to perform in the eyes of social actors."
Such ''opening of the black box'' of institutions is possible using
mixed methods to describe institutions in detail over time and space, which serves as an ''archaeology of institutions''. The archaeology of institutions can be understood as "an approach by which the change of institutions is meticulously recorded, interpreted and studied through the collection of data from every possible source, regardless of whether that is socio-economic, historical, ethno-anthropological, geographical, psychological or legal-political."
An example of this, is the history of China's titling
and housing ownership.
While predominantly applied to land-related institutions, this approach could be applied to analysis of other
means of production
The means of production is a term which describes land, labor and capital that can be used to produce products (such as goods or services); however, the term can also refer to anything that is used to produce products. It can also be used as an ...
, such as capital (e.g. banks and industries),
labor (trade unions)
or beyond
(water management and notaries).
The proxies that can be used to measure credibility include the following:
* Actors' aggregate perceptions of institutions, which can be operationalized according to the FAT Institutional Framework (in other words, an assessment of Formal, Actual and Targeted institutions);
*Actors' aggregate perceptions of conflict generated by institutions in terms of "incidence, frequency, intensity (e.g., measured in terms of economic costs), the length (in time), and the nature (e.g., violent/non-violent)";
*Speed of institutional change through an institutional archaeology of temporal changes in the formal property rights structure.
When credibility is assessed through these proxies, a better sense can be obtained of the current function that institutions fulfil for a group of actors. In result, one is likely better positioned to predict institutional interventions that might rally social support. Depending on the level of credibility, these can be envisioned as positioned on a gradient from condoning or non-intervention to co-opting, facilitating, prohibiting and ordaining.
The CSI Checklist (Credibility Scales and Intervention)
was developed for this purpose.
{, class="wikitable"
! Credibility level / trend
! Institutional intervention
! Desired effect
, -
, High
, Condoning
, Accepting praxis by non-intervention
, -
, Medium high
, Co-opting
, Formalizing what is done
, -
, Neutral
, Facilitating
, Supporting what needs to be done
, -
, Medium low
, Prohibiting
, Dictating what shall not be done
, -
, Low
, Ordaining
, Commanding what must be done
Apart from studying credibility in real-life situations, the particular premises of the theory – endogeneity, dis-equilibrium, and functional adaptation – make it also suitable for simulation in
agent-based models.
Emergence and reception of the theory
The question of credibility first emerged along with concern about certain institutional interventions failing. In the mid-20th century
Vilhelm Aubert
Johan Vilhelm Aubert (7 June 1922 – 19 July 1988) was an influential Norwegian sociologist. He was a professor at the Faculty of Law, University of Oslo from 1963 to 1971 and at the Department of Sociology from 1971 to 1988. He co-founded ...
noted that the Housemaid Law in Norway had been implemented but flaunted by all involved actors.
The concept of credibility was initially coined as an ''explanandum'' for the success and failure of Western monetary, anti-inflationary policies in the 1970s.
A concern for the credibility of policy emerged in the latter half of the 20th century in response to frequently observed failures of
neoliberal structural adjustments in the developing world associated with the
Washington Consensus. Institutional reform, such as privatization, failed to deliver the predicted economic growth, not because of lacking credible commitment on part of actors but due to the absence of endogenous credibility.
For this reason, Grabel noted that “credibility is always secured endogenously (. . .) rather than exogenously by virtue of the epistemological status of the theory that promotes it.”
In contrast, the growth of the Chinese economy despite lack of many institutions considered to be essential for economic growth indicated that institutional arrangements do not necessarily determine economic outcomes, and also at the same time economic development does not automatically lead to
teleologically predetermined institutional forms. This has been particularly striking in the case of
real estate sector in China.
In this context, there is a growing body of research suggesting one should focus on the
circular cumulative causation
Circular cumulative causation is a theory developed by Swedish economist Gunnar Myrdal who applied it systematically for the first time in 1944 (Myrdal, G. (1944), ''An American Dilemma: The Negro Problem and Modern Democracy'', New York: Harper). ...
aspects of function or quality of institutional performance rather than their form.
As noted by Ha-Joon Chang: “a big problem that dogs the current orthodox literature on development is its inability to clearly distinguish between the forms and functions of institutions.”
The term ''credibility thesis'' was put forth by Peter Ho in 2014.
In a review of the credibility thesis, Delilah Griswold contended that "credibility is a powerful metric by which to understand and evaluate tenure systems. Importantly, understanding the credibility of a given institution requires analysis outside of theory and politics, analysis that is locally and temporally specific and multilayered."
Benjamin Davy described it as a “rallying call of function presides over form” which “takes a fresh approach to credibility, land policy, and property theory. Initially developed with regard to land policy in main-land China, the credibility of property rights is also interesting from the perspective of Western property theory.”
George Lin deemed the thesis “inspirational, innovative, and provocative with great potentials to advance theoretical inquiry into the intriguing nature of China's developmental model in a rapidly changing world.”
The theoretical and methodological groundwork on the credibility thesis was awarded with the William Kapp Prize by the European Association for Evolutionary Political Economy.
Application
The credibility thesis was developed to explain the apparent contradiction between China’s insecure land tenure and the support it rallied by farmers. Since the
Household Contract Responsibility System replaced collective farming of the People’s Communes in the mid-1980s, farm households are allowed to lease agricultural land up to 30 years. Although the security of the lease is protected by law, the contracted land has been subjected to frequent reallocations by the village collective in response to demographic changes. Markedly, studies have found a high support for the land reallocations – and thus, an insecure tenure – by the majority of the farmers. This finding has been confirmed in consecutive research over three decades since the early 1990s.
In the years after it was mooted, the credibility thesis has been applied to various sectors and resources, including land,
slums and informal settlements,
affordable and commercial housing,
grasslands,
forests,
mineral resources,
water management,
apartment and strata rights,
customary land rights,
climate and environmental policy,
and issues of urbanization and planning.
In addition, the thesis has also been used to explain property rights changes of labor markets,
intellectual property rights and technology, and financial institutions.
The contributions of these studies to the understanding of institutions relate to:
1) Falsifying the relation between form and performance. Research has demonstrated that private, formal, and secure institutions may fail to deliver on their predicted positive performance.
Contrarily, other research has ascertained that public, informal, and insecure property rights are not economically inefficient, but functional and credible.
2) Advancing the methodology and measurement of credibility, such as through refinement of the FAT Institutional Framework in relation to
socio-ecological system
A social-ecological system consists of 'a bio-geo-physical' unit and its associated social actors and institutions. Social-ecological systems are complex and adaptive and delimited by spatial or functional boundaries surrounding particular ecosy ...
s;
development of the Conflict Analysis Model;
and calculation of endogenous transaction costs as a measure of credibility;
3) Assessing the functions of institutions, such as for political influence,
social welfare,
sustainability,
the catering for traditional markets,
and social cohesion.
4) Examining conditions for diminishing credibility
due to the imposition of institutional arrangements on hitherto credible property rights.
See also
*
Emergence
In philosophy, systems theory, science, and art, emergence occurs when an entity is observed to have properties its parts do not have on their own, properties or behaviors that emerge only when the parts interact in a wider whole.
Emergence ...
*
Endogeneity
*
Spontaneous order
Spontaneous order, also named self-organization in the hard sciences, is the spontaneous emergence of order out of seeming chaos. The term "self-organization" is more often used for physical changes and biological processes, while "spontaneous o ...
*
Lamarckism
Lamarckism, also known as Lamarckian inheritance or neo-Lamarckism, is the notion that an organism can pass on to its offspring physical characteristics that the parent organism acquired through use or disuse during its lifetime. It is also calle ...
(the use and disuse of function determines the persistence, change or disappearance of institutions)
*
Circular cumulative causation
Circular cumulative causation is a theory developed by Swedish economist Gunnar Myrdal who applied it systematically for the first time in 1944 (Myrdal, G. (1944), ''An American Dilemma: The Negro Problem and Modern Democracy'', New York: Harper). ...
*
Form follows function
Form follows function is a principle of design associated with late 19th and early 20th century architecture and industrial design in general, which states that the shape of a building or object should primarily relate to its intended function ...
(Architecture)
Related theories and theoretical bodies
*
General disequilibrium
In macroeconomic theory, general disequilibrium is a situation in which some or all of the aggregated markets, such as the money market, the goods market, and the labor market, fail to clear because of price rigidities.Mankiw (1990), 1655. In th ...
*
Heterodox economics
Heterodox economics is any economic thought or theory that contrasts with orthodox schools of economic thought, or that may be beyond neoclassical economics.Frederic S. Lee, 2008. "heterodox economics," ''The New Palgrave Dictionary of Economics' ...
,
Neo-Marxism
Neo-Marxism is a Marxism, Marxist school of thought encompassing 20th-century approaches that amend or extend Marxism and Marxist philosophy, Marxist theory, typically by incorporating elements from other intellectual traditions such as critical t ...
, and
Evolutionary economics
Evolutionary economics is part of mainstream economics as well as a heterodox school of economic thought that is inspired by evolutionary biology. Much like mainstream economics, it stresses complex interdependencies, competition, growth, stru ...
*
Institutional economics
Institutional economics focuses on understanding the role of the Sociocultural evolution, evolutionary process and the role of institutions in shaping Economy, economic Human behavior, behavior. Its original focus lay in Thorstein Veblen's instin ...
*
Thorstein Veblen
Thorstein Bunde Veblen (July 30, 1857 – August 3, 1929) was a Norwegian-American economist and sociologist who, during his lifetime, emerged as a well-known critic of capitalism.
In his best-known book, ''The Theory of the Leisure Class'' ...
and
John R. Commons
John Rogers Commons (October 13, 1862 – May 11, 1945) was an American institutional economist, Georgist, progressive and labor historian at the University of Wisconsin–Madison.
Early years
John R. Commons was born in Hollansburg, Ohio on ...
References
{{reflist
Emergence
Political economy
Systems theory
Economic theories