Market-Building vs. Market-Preserving
Term
Market-Building vs. Market-Preserving
Idea level
Concept
Definition
Market-Building vs. Market-Preserving is a stage-variant concept coined by Yuen Yuen Ang in 2016 to distinguish institutions or approaches that create new markets from those that preserve established markets.
Within Ang’s theory of Coevolutionary Development, approaches that build new markets differ both in function (what they are used for) and in form (what they look like) from market-preserving institutions such as private property rights protection or technocratic bureaucracies.
Market-building institutions often emerge through the adaptive refashioning of indigenous resources (“using what you have”), which may appear normatively weak or wrong by modern Western standards.
Sources
First articulation:
Ang, Yuen Yuen. How China Escaped the Poverty Trap (2016), Chapter 5: “From Building to Preserving Markets.”
Ang, Yuen Yuen. “Do Weberian Bureaucracies Lead to Markets or Vice Versa? A Coevolutionary Approach to Development.” In States in the Developing World (2017). [SSRN]
Theoretical synthesis:
Ang, Yuen Yuen. “Adaptive Political Economy: Toward a New Paradigm.” World Politics (2024).
Ang, Yuen Yuen. “Polytunity: The Future of Development,” The Ideas Letter, 4 Sep 2025. (open-access)
Genealogy
[Paradigm] AIM (Adaptive, Inclusive, Moral Political Economy)
→ [Pillar] Adaptive Political Economy (APE)
→ [Theory] Coevolutionary Development
→ [Concept] Market-Building vs. Market-Preserving
→ [Application: Development] Stage-variant institutional functions across development trajectories
Quotes
“Dominant theories in political economy are about ‘good’ institutions (such as professional bureaucracies, rule of law, private property rights protection) that are necessary to preserve markets that have already been built. However, where markets barely exist, which is the situation facing pre-modernized societies, building markets from the ground up demands drastically different institutions and strategies.”
Whether in the cases of reform-era China (en masse investment recruitment by all bureaucracies), medieval Europe (contract enforcement through communal responsibility), the antebellum United States (risky taxless finance), or Nigeria’s Nollywood (piracy as informal distribution), adaptive agencies deployed preexisting '“weak” institutions—weak from the perspective of modern formalized standards—to build markets, producing unorthodox and surprising solutions.”
“The idea of building markets with weak institutions is counterintuitive, even paradoxically, because we normally think weak institutions are impediments… Standard binary labels of ‘weak/strong’ and ‘good/bad’ blinds us to the potential of nonmodern, nonformal, non-rule-of-law, and nondemocratic institutions.”
— Ang, How China Escaped the Poverty Trap (2016), p. 142 and 243-4.
“By mapping the process of coevolution, I arrive at a core conclusion that integrates and yet departs from conventional wisdoms: The types of state capacity for growth promotion vary over the course of development, not only among countries but also within a single country. Even more surprisingly, I find that the bureaucratic forms that initially sparked growth defied Weberian norms of ‘good’ bureaucracies, including technocratic specialization and impersonality. In other words, it is the adaptive refashioning of preexisting “weak” institutions that first built markets. Weberian bureaucracies serve to preserve markets.”
“State capacity varies not only by policy areas but also by stages of development.”
“[Why is that?] My short answer is that the goals, constraints, and resources of development are very different at market-building and market-preserving phases; therefore, the particular bureaucratic structures that fit these varying contexts are also different.”
“We must qualify both the functions and forms of bureaucracies at market-building and market-preserving phases of development.”
“Particular organizational forms, rules, and policies work only when they fit the goals, constraints, and resources of particular environments [and stage of development]. Even a Weberian bureaucracy – as universally desirable as it may initially seem – is not actually universally best.”
— Ang, Do Weberian Bureaucracies Lead to Markets or Vice Versa? (2017), p. 283 and 304
“In other words, this is a stage-variant theory of institutions. What works for advanced economies may not work for start-up economies, and vice versa.”
— Ang, Polytunity (2025)
Concept Constellation
Across Ang’s work, Market-Building vs. Market-Preserving consistently co-appears with the following concepts and analytic themes:
Chicken-and-Egg Fallacy of Development / endogeneity
Coevolutionary Development (China as demonstration)
Stage-Variant institutions / Normatively Weak, Functionally Strong
Fairy Tales of Western Development (in reality, Western economies also used unorthodox market-building institutions when they were developing, but this history is forgotten)
Using what you have
Beyond elite innovation
Related Descriptive Phrases (Non-Canonical)
These phrases are commonly used to describe aspects of “Market-Building vs. Market-Preserving” when the keyword is not used.
Market-building as market-creating
Form vs. function
Stage-tailored institutions / best-fit institutions / contextual fit / form and function of institutions that matters differ across context
Causal structures differ across context
In contrast to: Good institutions as the primary or root cause of development