A Hammer Is Not a Second-Best Screwdriver: Taking Institutional Fit Seriously in Development

It’s obvious that a hammer is not inherently better than a screwdriver or vice versa. The “goodness” of a tool is judged by how well it serves a given function, not by its conformity to a universally best tool. Yet in development, conventional wisdom has held firmly to the belief that that certain institutional forms—namely, those found in rich democracies—are the universal best, whereas all deviations from this standard are necessarily weak, wrong, or at best, second-best. My research challenges the conventional binary view of institutions and rejects even the compromising language of “second-best” and “good enough” institutions. By tracing the mutual evolution of economies and institutions in China since market opening, my analysis reveals that no single set of traits—including Weberian norms of legal-rational organization—is universally the best. Rather, “market-building” and “market-preserving” phases of development poses functionally different challenges that call for qualitatively different solutions. Institutional traits that best fit the start-up stage of development were, paradoxically, features that violated Weberian norms of specialization and impartiality.

For more information, read Ang's blog on the World Bank: "Which comes first: Good governance or economic growth?"