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ⓘ Blog | Institutional sclerosis - social institutions. Societies or individual institutions that fail to adapt and change at a sufficient pace are sometimes describe ..




                                     

Institutional sclerosis

Societies or individual institutions that fail to adapt and change at a sufficient pace are sometimes described as displaying institutional sclerosis. It is associated with continuity and stability, and may hamper economic growth.

                                     

1. National level

The American political economist Mancur Olson, in his 1984 book, "The Rise and Decline of Nations", first offered "institutional sclerosis" as a partial explanation for the divergent growth rates experienced between the winners with relatively low post-war growth rates and losers with relatively high post-war growth rates of World War II. In liberal democracies experiencing continuity and stability, interest groups form over time and grow to exact rents, becoming vested. The accumulation of vested interests and rent-seekers ultimately slows the ability of a government to reform, adapt, and secure perfectly competitive markets thanks to a related phenomenon studied by Olson: the collective action problem. This sclerosis saps an economys dynamism and lowers growth rates. In liberal democracies with young institutions, by contrast, competition remains perfect and natural economic dynamism and creative destruction ensue, generating high growth.

                                     

2. Within an institution

Institutional sclerosis may also be applied to an institution that is effective in changing in some areas but unable to adjust to changes in other areas. Institutions can evolve efficiently either by expanding original goals to meet a changing environment or by including more members. At the same time, however, institutions or organizations face difficulties adjusting to new structures or internal policies.

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