We contribute to the post-crisis literature on macroeconomic stability by arguing that polycentric banking systems can better achieve stability than monocentric systems. Building on the theories of E. Ostrom, we engage the literature on free banking systems to show that these systems met the...

We develop a theory of financial stability based on insights from the literature on polycentric governance and institutional resilience. We contend that top-down regulatory approaches to achieving financial stability will prove ineffective, due to various knowledge and incentive problems. In...