Market-Building vs. Market-Preserving Institutions
Term
Market-Building vs. Market-Preserving Institutions
Idea level
Concept
Definition
Market-Building vs. Market-Preserving Institutions is a stage-variant concept developed by Yuen Yuen Ang to distinguish institutional forms that kickstart markets from those that regulate and sustain mature markets. Within Coevolutionary Development, market-building institutions often emerge through the adaptive refashioning of indigenous resources and arrangements, which appear normatively weak by first-world standards, while market-preserving institutions—such as Weberian bureaucracies and private property rights—serve to preserve sustain markets once they are established.
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).
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 Institutions
→ [Application: Development] Stage-variant institutional functions across development trajectories
Concept Constellation
Across Ang’s work, Market-Building vs. Market-Preserving Institutions consistently co-appears with the following concepts and analytic themes:
Chicken-and-Egg Fallacy of Development / Endogeneity
Coevolutionary Development
Stage-variant institutions / stage-tailored institutions
Using what you have
Causal structures differ across context
Form and function of institutions that matters differ across context
In contrast to: Institutions as the primary or root cause of development
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.”
- Ang, How China Escaped the Poverty Trap, Chapter 5 (p. 142)
“By mapping the process of coevolution between bureaucracies and markets, 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… it is the adaptive refashioning of preexisting ‘weak’ institutions that first built markets. Weberian bureaucracies serve to preserve markets.”
- Ang, “Do Weberian Bureaucracies Lead to Markets or Vice Versa?”, p. 283
“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)