The cultural architecture of failure: reintegration, stigma, and the long-run conditions of entrepreneurial dynamism

Abstract

Institutional economics holds that informal institutions shape which formal rules communities adopt and how those rules work, yet it has not specified which informal institutions govern which outcomes. This paper identifies one, cultural reintegration architecture: the mechanism by which a community judges the failure of an economic actor and opens or closes the path to commercial standing. Its four observable elements, narrative scripts, moral attribution, ceremonial pathways, and community acceptance, locate a community on a spectrum from stigmatising to reintegrative. Six historical cases spanning eight centuries, Venice, the Hanseatic League, Meiji Japan, the Nattukottai Chettiar, the nineteenth-century United States, and Silicon Valley, ground three claims: the architecture is a structural variable separable from formal institutions, it conditions long-run entrepreneurial dynamism, and it shifts over time. The account specifies a mechanism within the informal-institutional space that North, Greif, and Putnam jointly occupy, grounded in the older institutionalism of Veblen and Commons.