Institutional Resilience and Economic Systems

Comparative economic systems literature deals extensively with ‘systemic functions’ and ‘performance criteria’ such as growth, efficiency and equity but rarely mentions the topic of resilience. This paper focuses on the issue of resilience while drawing several important lessons from the contributions in this respect of 2009 Nobel Prize in Economics co-recipient, Elinor Ostrom: The effects of alternative institutional arrangements and social norms as a source of both resilience and vulnerability; the problem of ‘highly optimized tolerance’ to specific sources of uncertainty; polycentricity as a possible structural solution to sustainability problems. A key point is that resilience is more than mere ‘absorptive capacity’ or ‘speed of recovery’: it depends on innovation and creative socio-cultural adaptations made possible by flexible and polycentric institutional processes. That has important implications for the ways we define and assess institutional performance and institutional design.