François Facchini and Subandono contribute to the modern Austrian theory of economic development by elaborating an original theory of institutional flexibility. An institutional system is flexible when it constructs an order that is neither contingent nor determinist. Private property rights, contracts and money organize human behaviour without determining it. By protecting economic freedom, these institutions give people good reason to believe that they can act to change the future to their advantage. Exploiting Indonesian provincial panel data for the period 1994–2010, the authors collect evidence to support their proposed theoretical framework.