Within neo-institutionalism, there is a group of scholars that assumes that the evolution of institutions has a certain purpose, directive principle, or ultimate goal. For instance, it is posited that institutions tend to evolve from informal to formal, from “second-best” to “best”, and from autocratic to democratic arrangements. On this issue, credibility theory states that:
Why does credibility theory oppose teleology?
“Secure, democratic, and participatory institutions do not imply that they are credible. Contrarily, neither do insecure, autocratic, and (semi)authoritarian institutional arrangements mean that they are by definition non-credible or empty. In fact, democratic and transparent institutional arrangements, such as codes of good conduct or regulations for Corporate Social Responsibility (or CSR), might actually be disruptive in certain contexts, while autocratic, authoritarian, and non-transparent ones might not. (…) The credibility thesis makes no prediction of institutional teleology, nor does it pass moral judgment on institutional form, as it is concerned with function alone. Yet, the thesis does postulate that one might be able to gauge the extent to which institutions are credible or contested, as indicated – among numerous other indicators – by the level, incidence, and source of generated conflict.” See P. Ho, “The ‘Credibility Thesis’ and its Application to Property Rights: (In)secure Land Tenure and Social Welfare in China“, Land Use Policy, 2014, 40, Sept, p. 23.