How are institutional changes manifested? Reasons and types of institutional changes

FEDERAL HEALTH AGENCY

AND SOCIAL DEVELOPMENT

NORTHERN STATE MEDICAL UNIVERSITY

INSTITUTE OF MANAGEMENT

Department of Economics

TEST

in the discipline "Institutional Economics"

Topic 11 “Institutional changes”

Arkhangelsk 2011

Introduction 3

1. Mechanism of institutional change 4

2. State and institutional changes. 7

3. Institutional changes in a transition economy. 10

Conclusion. 14

Literature 15

Introduction

Institutions are the “rules of the game” in society, or, more formally, the man-made boundaries that organize relationships between people. Consequently, they set the structure of the incentives for human interaction - be it in politics, the social sphere or the economy. Institutional change determines how societies develop over time and is thus key to understanding historical change.

The main role that institutions play in society is to reduce uncertainty by establishing a stable (though not necessarily efficient) structure of interaction between people. But the stability of institutions in no way contradicts the fact that they undergo change. All institutions develop - from traditional conventions, codes and norms of behavior to written law, customary law and contracts between individuals. Thus, the set of choices available to us is constantly changing. Changes on the periphery of an institutional system can be so slow and smooth that only historians can see them, although in the modern world the speed of institutional change is obvious.

Institutional change is a complex process because changes at the margin may result from changes in rules, informal restrictions, or the manner and effectiveness of enforcement of rules and restrictions. Moreover, the process of institutional change is usually incremental rather than discrete. The explanation for how and why incremental change occurs, and why even discrete changes (such as revolutions and conquests) are never completely discrete, lies in the embeddedness of informal constraints in society. Although formal rules can be changed overnight through political or legal decisions, informal restrictions embodied in customs, traditions and codes of conduct are much less susceptible to conscious human effort.

These cultural constraints not only connect the past with the present and the future, but also give us the key to understanding the path of historical development.

Incremental change occurs because leaders of political and economic organizations come to believe that they can achieve greater success if they introduce some marginal changes into the existing institutional framework. But the validity of such judgments depends to a very large extent on the information received by managers and on the methods of processing it. If political and economic markets were efficient (that is, if transaction costs were zero), then leaders would always make the right choices.

In other words, the “actors” would always have models that reflect the real state of affairs, and if initially their models did not correspond to the truth, then information feedback would correct these models. However, such a model of rational human behavior simply misleads us.

In fact, actors often have to act on incomplete information and process the information they do receive into mental constructs that can lead actors to make persistently ineffective decisions. The presence of transaction costs in political and economic markets explains the existence of inefficient property rights, and imperfections in the subjective models of players trying to understand the complex problems they face can lead to the persistence of these inefficient property rights.

1. Mechanism of institutional change

Institutional changes are always a producer of human activity. They define how society develops over time, essentially symbolizing historical change. The point of view according to which institutions can change independently, without human participation, seems definitely unfounded. If some institution arose as a result of human activity, and we cannot have another result in the social world, even if later this institution was in independent sailing, which is an incredible course of events, then in such an ideal situation a person was present at the starting point. Therefore, the characteristics of an institution represent a vector of information created by man, and all further institutional genesis depends on the initial state of this vector. In other words, dividing changes into two types - genetic and teleological - looks like an evaluative construct, not the best analytical solution, since as difficult as it is to divide changes into two types in general, it is just as difficult in an intellectual sense to then combine these changes in order to have an overall picture, a systemic a look at the problem of institutional change.

Since institutions influence the functions of economic systems, and long-term differences in the functioning of these systems are formed under the influence of the work of specific institutions, it is important to accurately understand what is included in the composition of these institutions.

The formation of an effective institutional structure of the country's economy in general and the urban economy in particular depends on the pace and mechanism of institutional changes. This mechanism can be viewed from two perspectives:

1) changes in formal institutions that make up the institutional structure in the course of institutional engineering of government bodies of various branches and levels;

2) changes in informal institutions during evolutionary processes.

According to Douglas North: "Evolutionary theory justifies the conclusion that, over time, ineffective institutions die out and effective ones survive, and therefore there is a gradual development of more efficient forms of economic political and social organization." But the economic development of many countries gives us examples of negative evolution of institutions, when ineffective institutions and institutional structures exist for a long time.

The ineffectiveness of the institutional structure of a number of countries can be explained by a special type of institutional changes and state control over them, which determines their resistance to modernization. “The main role that institutions play in society is to reduce uncertainty by establishing a stable (though not necessarily efficient) structure of interaction between people.”

Coordination in the economy is carried out on the basis of current prices. In the long run, resource allocation and hence economic coordination will depend on institutions. Thus, the role of institutions and rules in the long term and in the evolutionary aspect is identical to the role of prices. In a planned economy, there was virtually no price coordination, but there was institutional coordination, which is usually not taken into account. Therefore, North’s main source of institutional change did not exist: “The source of change is changing relative prices or preferences.”

This situation is consistent with Schumpeter's fundamental idea that the essence of economic development lies not so much in the accumulation of capital and the increase in additional labor force, but in the redistribution of available capital and available labor from less efficient areas of economic activity to more efficient ones. And such redistribution depends equally on relative prices and institutions.

The mechanism of institutional changes may also differ depending on the economic order within which it is carried out.

The complexity of studying institutional changes is also determined by the fact that such changes in most cases are incremental and continuous in nature (as opposed to discrete, revolutionary changes). Therefore, it is quite difficult to assess marginal institutional changes, since they “may result from changes in rules, informal restrictions, and in the methods and effectiveness of enforcing the use of rules and restrictions.”

Unlike biological evolution, in social evolution skills, abilities, knowledge and experience are not inherited, but are learned, acquired, and inherited during training in social organizations and groups. If in biological evolution there is inheritance of the characteristics of parents, then in social evolution it is the inheritance of the traditions of social groups and society as a whole.

If prices in the market are formed due to competition, then long-term guidelines that determine the very order of economic organization also compete with alternative behavior options. If the institutional structure is in the stage of formation or change, then the institutions constituting it will emerge and be consolidated depending on the comparative effectiveness of alternative methods of coordinating economic activities.

We are interested in the question of why an ineffective institutional structure arises in a certain type of economy, and how to explain its inefficiency and sustainability. The answer can be sought in an explanation of the method of institutional selection depending on the marginal return from the use of a particular institution.

To explain this, the following hypothesis can be proposed:

1. In an expanded manner, institutions are established that, with a significant increase in the number of individuals following their rules and restrictions, give increasing marginal returns (marginal returns, by analogy with marginal utility, are an abstract quantity and cannot be accurately measured, but only assessed as a trend) for the entire group within which this institution is applied. Moreover, the group, apparently, should be large, following traditional group theory. Actions within such institutions will be attractive to the majority of individuals in the group, so there is no need for violence or any other coercion to comply with the rules and restrictions prescribed by the institution. Here individuals make their own choices. An example is the increasing marginal return from the institution of individual property, or a system of free contracting, or market exchange.

2. There may also be predominantly diminishing returns from following the rules and restrictions of an institution.

Although for a narrow circle of people the marginal return may be positive, as the circle of people within the scope of the institution increases, the marginal return will certainly decrease. An example here is the institutions for the distribution of economic benefits and benefits in a command economy. Following such institutions is impossible without coercion (at least over a fairly long period).

Such coercion is carried out by the state and can be expressed in total control over the economy or simply in various forms of “state regulation”. We in no way want to dispute the need for “state regulation”, but we only want to draw attention to its quality, and in particular its impact on the process of institutional change.

The phenomenon of an economy with ineffective institutions that persist for a long time can be explained using the above provisions. In such an economy, freedom of economic activity exists only formally (or exists to an insignificant extent, or is relatively unprofitable). The state is trying to replace market institutional restrictions with its own directives and preferences (which are nothing more than formal institutions). Obviously, this can only be achieved by suppressing economic initiative.

And here we are faced with the second case of institutional development, when a small group of people can benefit from following institutional restrictions, and when the action of this institution expands, there is first a relative and then an absolute decrease in economic returns. Therefore, such an economy can also be called the economy of power groups, that is, groups benefiting from such an institutional organization of the economy and society as a whole.

Consequently, measures of state regulation of the economy should be aimed at creating conditions for the evolution of institutions and the institutional structure of the economy in the first direction.

Modern economic institutions are the result of centuries of evolution and consistent institutional changes.

Institutional changes– changes in the institutional structure as a set of interrelated formal rules and informal restrictions that determine the system of incentives for economic agents. Therefore, institutional changes occur within two types of institutional frameworks that structure the relationships between people in various spheres of their activity - formal and informal. However, a third type of framework can also be distinguished - a framework chosen spontaneously, based on intuition, which represents a “joint strategy”, is not accompanied by sanctions, and transactions in this case are not formalized in any way (crowd behavior, “herd instinct”). Institutional changes also occur spontaneously in this case.

When studying the mechanisms of institutional change, it is important to understand: what is the role of the past in the modern development of institutions and how strongly does the previous development of institutions influence their modern evolution?

On the first issue, there is an opinion in the economic literature (“economic optimism”) that, in accordance with evolutionary theory, over time, ineffective institutions die off, and effective ones survive, resulting in the gradual development of more effective forms of economic, political and social organization.

Proponents of the second approach believe that effective institutions and organizations do not necessarily survive in the process of evolution. There is a possibility that development has taken a suboptimal path in the past. One of the arguments in favor of this statement is the phenomenon “path dependence” – “history matters”). Indeed, it is difficult to understand alternatives to modern economic development without knowing the path of previous development of institutions. At the same time, there are 3 forms of dependence of modern development on the trajectory of the past path:

· 1st degree (weak form) – one institutional outcome chosen in the past is no less effective than the alternative (left-hand and right-hand traffic in different countries). It is impossible to correct the trajectory of movement.

· 2 degrees (medium form)– the development trajectory is associated with the ineffectiveness of the chosen path, however, rebuilding the system is ineffective, because significant investments have been made in the chosen option. The trajectory of development cannot be corrected

· 3 degrees (strong form)– the previously chosen development path turned out to be ineffective, but abandoning it is characterized by a high level of economic, ideological and information costs associated with the transition to a new path. Correction of the trajectory of movement is possible.

If the institutional structure is in the stage of formation or change, then the institutions that define it will emerge and consolidate depending on the comparative effectiveness of alternative methods of coordinating economic activities. At the same time, determining the ineffectiveness of some and the effectiveness of other coordination mechanisms is the result of institutional meta-competition. In the economic literature under meta-competition competition between institutions is understood, therefore, if any form of economic organization exists, this means that it is effective because it has survived the process of competitive struggle, when the strongest, i.e., the most effective institutions survive.

The process of institutional change is quite complex because marginal changes result from changes in rules, informal constraints, and the quality and effectiveness of controls. Institutional changes most often occur at the margin or in small increments, continuously. But even discrete (intermittent) changes (revolution), in essence, are not so revolutionary. The reason for this is informal restrictions (habits, traditions, codes of conduct), which not only connect the past with the present and future, but are also the key to understanding the paths of historical change. If formal rules change, then informal restrictions cannot change quickly, since they are based on ingrained cultural heritage, stable stereotypes of thinking and ways of acting.

Rice. 18. Incentives for knowledge and skills acquisition and institutional changes

Currently, there is no single, generally accepted theory of institutional change in economic science.

Theory of institutional change counts exogenous, if institutional changes are explained on the basis of the action of external factors. In this case, institutional changes are studied using the method of comparative statics. Comparative statics is a research method that compares two equilibrium states without taking into account how the transition from one to the other occurs. Among the variety of approaches in the theory of institutional change, D. North's concept seems to be the most systemic.

According to D. North The process of institutional change has the following characteristics:

· Source of institutional change is the organization's perception (correct or incorrect) of the opportunities available within the existing institutional environment;

· Maintaining or changing the institutional environment depends on how the organization will balance the benefits of concluding new contracts within the existing institutional structure with the benefits of investing in changing the institutional environment. If an organization perceives its current position as relatively unlucky, it may be inclined to participate in the political process in an attempt to change the system of relative prices to its advantage;

· Change process, both formal and informal rules, occur mainly gradually;

· The economic growth depends on the relationship between formal rules that stimulate productivity growth and rules that promote rent-seeking behavior - the development of monopolism, income redistribution and inefficient allocation of resources. If the first type of rules predominates in the institutional structure, then the prerequisites for long-term growth are created;

· Direction of change determined by the trajectory of development, since changes occur in a direction determined by the interests of existing organizations that have the greatest bargaining power. Wherein
the development trajectory may change due to the high degree of uncertainty in the results of the policies pursued by organizations. The unintended consequences of this policy and environmental changes lead to the weakening of existing organizations and the emergence of new ones.

Main reasons institutional changes according to North are changes in the external environment :

· Shifts in the structure of relative prices. Technical progress, the opening of new markets, population growth - all this leads either to a change in the prices of the final product in relation to the prices of factors of production, or to a change in the prices of some factors in relation to the prices of others. Under the influence of these changes, some of the previous forms of organizational and institutional interaction become unprofitable, and economic agents begin to look for new forms. As for informal norms, they are gradually “corroded” by price shifts, when fewer and fewer people begin to comply with them;

· Ideology. In the works of D. North under ideology refers to a way of perceiving daily problems that arise in a way that minimizes the amount of information required to solve them (positive definition) and a judgment about the fairness or legitimacy of the institutional framework within which an individual operates (normative definition). With the help of ideology, the external environment and behavior of interaction participants are interpreted. If a practice cannot be interpreted within the framework of the previous ideology, then individuals change it. Ideological biases are not free from the influence of economic calculations: the more profitable opportunities one's subjective perception of the world blocks, the greater the incentive to revise it. However, ideology, according to North, often acts as an independent factor in institutional change.

In other words, the mechanism of institutional change is triggered by combining external changes and internal knowledge accumulation:

· changes in formal rules– this is the result of legal changes, legislative changes, changes in regulatory rules introduced by government structures, changes in the constitution that defines the meta-rules by which the entire system of rules is built;

· changes in informal restrictions are carried out gradually and form in individuals alternative models of behavior associated with a new perception of benefits and costs.

The main role in institutional development belongs to institutional innovation , i.e. innovations that are carried out in formal and informal rules and in their interaction.

J. Schumpeter identified five main types of innovation: the introduction of new technology for the production of known products, the organization of the production of new products, the opening of new markets for products and resources, and organizational innovations. The role of the main creator of new combinations of factors of production here belongs to the entrepreneur. Under the influence of these innovations, the economic system is brought out of equilibrium, and the entrepreneur performs a destabilizing function.

According to D. North, an entrepreneur has not only a destabilizing function, but also a creative one - the function of creating prerequisites for achieving a new equilibrium.

Many institutional innovations, institutions and rules are in the nature of public goods, which have three properties:

· indiscriminateness: the use of an institution by one person does not reduce the degree of its accessibility to others, which contributes to the coordination of the activities of agents;

· non-excludability: no one is prohibited from using the rule (institution), even if he did not participate in its creation;

Until now, neo-institutional analysis of economic phenomena has generally proceeded within the framework of a static model, so beloved by neoclassical theory. This lecture will examine the views of representatives of neo-institutional economic theory on the processes of institutional change, which represent a dynamic aspect of the problem under consideration.

As has been repeatedly noted, institutions are the “rules of the game” in society, or, more formally, the boundaries created by people that organize the relationships between them. At the same time, institutions not only create restrictions and incentives, but lie at the very basis of people’s perception of reality. There are many definitions of institutions, but everywhere their main elements are:

restrictions in the form of rules and regulations;
procedures for detecting deviations from them;
moral (ethical) standards of behavior, within which rules and regulations are formed;
mechanisms for enforcement of rules.

Being limiters of human behavior, institutions, in particular economic ones, throughout human history have contributed to the delimitation of the forms of activity within which needs were satisfied, and ensured their relative stability in space and time. And it is no coincidence that one of the characteristics of institutions is their conservatism.

The first lecture on institutions emphasized their coordination nature, which in this capacity are intended to formulate order in society, ensuring, among other things, predictability of behavior in conditions of incomplete information. But this represents the static aspect of the analysis. In this lecture, we are interested in the dynamic aspect, namely, the causes and mechanisms of the emergence, development and disappearance of certain institutions. In other words, the causes and mechanism of institutional change. And we cannot answer this question if we ignore the distributive nature of institutions or rules.

The distributive nature of institutions is a consequence of limited resources in relation to the needs of the human community, which inevitably entails the emergence of one or another mechanism for their rationing. The latter is nothing more than a set of rules that determine the order of access to resources. And due to the non-neutrality of the rules regarding the results of their distribution, with a high degree of probability a conflict regarding them should be expected. Thus, the rules determining access to a limited resource, the mechanism for determining the share received, etc., will be an arena of competition. That is why, despite the presence of a coordination aspect, abstraction from the problem of distribution, which in conditions of limited resources presupposes coercion, makes the analysis of institutions meaningless.

Let us begin the analysis of institutional changes with a certain set of established formal and informal rules that act as a given and as such determine the institutional space of a given society. At the same time, being limiters of human behavior, these rules, among other things, set the structure of incentives for human interaction - be it in politics, the social sphere or economics. It is important to emphasize that, by creating it, the institutional structure of society stimulates the individual’s acquisition of those knowledge and skills that will subsequently ensure his reward within the framework of certain institutional restrictions.

For example, the institutional environment of a market economy (primarily the institution of private property), having created appropriate incentives, made wealth creation activities more attractive and played a decisive role in the formation of a certain type of knowledge. This knowledge was determined by the desire to search for new products, new technologies, and new organizational forms. In the words of the famous Austrian economist J. Schumpeter - new combinations of production factors, which in his theory were called innovations.

A representative of the neo-institutional movement, D. North, also draws attention to the fact that institutions such as patent law, trade secret laws and other regulations that took place during the formation of a market-type economy increased the profitability of innovation, and also led to the creation of an “industrial invention” .

However, the institutional environment can block entrepreneurship and economic activity. As noted in the first lecture, the institutions of traditional societies, such as the institution of apprenticeship, or the institutions of corporate organization of economic activity with its practical prohibition of competition, were an almost insurmountable obstacle to innovation. At the same time, they directed the accumulation of knowledge into the field of further improvement of traditionally manufactured products, highlighting their beauty and perfection. It is no coincidence that such a widespread institution in the period under review was the institution of craftsmanship.

The institutional environment may also make income redistribution the preferred economic activity, and as such, knowledge and skills develop in a slightly different direction (the institution of piracy, the institution of the Communist Party, the institution of bureaucracy). In the latter case, remuneration and other economic incentives are determined not by effective innovations associated with economic activity, but by knowledge of the laws under which the bureaucratic system operates.

Thus, the information and knowledge that an economic entity needs are to a large extent derived from the specific institutional environment, which determines the direction of their acquisition. Moreover, this direction can be a decisive factor in the long-term development of society.

Of interest in this regard are the views of Schumpeter, who in his works draws attention to the fact that the accumulation of society's wealth is accompanied by the emergence of the institution of corporations and the depersonalization of innovative activity. This is due to the fact that the main figures in the business world are managers, managers of large corporations, who have completely different traits than an entrepreneur. In particular, instead of the desire for innovation, risk and independence, the manager has caution, a desire for career advancement and power, and for consistency in decision-making at all levels. And this is not accidental, since the hierarchical (bureaucratic) structure of a large corporation gives rise to both relatively weak incentives for innovation, which are inadequate to the risk incentives of entrepreneurs, and a certain loss of responsibility for running a business. And the very behavior of a “man of the organization,” which presupposes loyalty, obedience, reliability, has nothing in common with the behavior of an entrepreneur. As the figure of the entrepreneur disappears, the possibility of economic development also disappears. Moreover, the departure from the scene of the entrepreneur means, according to Schumpeter, the imminent death of the bourgeoisie, since the interest is paid from his profits.

This point of view on the prospects for the development of capitalism does not seem indisputable. But what is important here is the recognition that the incentive structure generated by the institutional environment determines the behavior of the person who adapts within the existing system of rules. However, individuals can not only adapt to this system, but also try to revise it. If successful, this will mean a change in the institutional environment.

Institutional changes are expressed in the emergence of new rules with the corresponding mechanisms for their enforcement and the disappearance of old, existing rules. And here the next question is interesting. What underlying factors encourage participants in economic activity to try to change the existing institutional structure, in particular, the system of property relations - a basic economic institution?

Within the framework of neo-institutional analysis, the mechanism of institutional change was proposed by D. North. North identifies the institutional entrepreneur as the subject of institutional changes, and fundamental shifts in the price relationship as the source of such changes. In his opinion, it is shifts in the structure of relative prices that influence changes in the proportions between the prices of factors of production (land and labor, labor and capital, capital and land), changes in the cost of information and changes in technology, primarily military.

Changes in prices, interpreted as income, mean changes in the economic power of various social groups acting as owners of certain factors of production and suppliers of certain goods and services. In turn, changes in the balance of power between the parties entering into contractual relations lead to attempts to renegotiate the terms of the contract. However, since economic contracts are embedded in a hierarchical system of rules, revision of their terms is impossible without changing the higher order hierarchy of the set of rules. In this case, the party that seeks to strengthen its negotiating position is able to spend resources on changing higher-level rules, which include political and social ones.

Bourgeois revolutions, for example, should be seen as a struggle to change political rules and, accordingly, rights. As is known, the English bourgeois revolution (1640) was a reaction to the right of kings to arbitrarily determine and levy taxes. And the revolution of 1688-1689, which went down in the history of England under the name of the “glorious revolution”, consolidating the country’s political system as a constitutional monarchy, finally fixed the right of parliament to set taxes and adopt the state budget. The slogans of the Russian revolution of October 1917, such as “land to peasants,” “factories to workers,” can also be considered demands for changes in institutions.

There are many examples of this kind, and they all indicate that economic entities can react to changes in the price ratio not only directly, i.e. direct resources to the implementation of new profitable opportunities that have opened up, but also - if this cannot be done within the framework of the current rules - make an attempt to change them. At the same time, an “economic” person will, in his actions, weigh the costs and benefits of allocating resources for these purposes. Awareness of the benefits of changing rules, primarily economic ones, as well as reducing the costs of fighting for these changes, will lead to actions that disrupt the existing institutional balance. If successful, this will mean establishing

introducing a new set of rules and, accordingly, a new distribution of wealth.

Let us note that within the framework of modern democracy, the costs of the struggle to change the rules have decreased in the sense that, unlike traditional societies with their sacred nature of power, a claim to power on the part of applicants does not threaten them with deprivation of life and freedom. This factor, and the potential for increased revenue from changing them, explains the enormous growth of organizations (trade associations, various business unions and lobbying groups) created to influence the government in the hope of benefiting from changing the rules.

Within the framework of neo-institutional analysis, organizations are considered as players in the institutional field. According to D. North, organizations are purposefully operating units created to maximize wealth, income or other goals. And if institutions are defined as rules, then organizations should be understood as a group of people united by the desire to jointly achieve some goal. At the same time, the existing set of institutional restrictions creates opportunities for corresponding activities; these restrictions can either help or hinder it. Therefore, it is not surprising that in the process of moving towards a goal, organizations act as the main agents of institutional change.

And, as already noted, these actions can be aimed at maximizing income within the framework of existing rules or institutions, and at changing the latter. In other words, there is an alternative: to play and achieve goals within the existing rules, or to try to change them in order to achieve more favorable results than those that were possible within the framework of previous institutions, primarily the previous scheme of property rights. Let us emphasize once again that it is the structure of incentives that determines with what intensity and in what direction economic agents will act - whether they adapt within the framework of the existing system of rules or try to revise them.

Attempts at institutional change can be interpreted as attempts to regroup property rights. They occur when certain groups strive to restructure the system with a willingness to bear the costs of its implementation. As already noted, incentives to change property rights are generated by changes in the balance of forces in the existing social structure of society, which is a consequence of economic transformations caused by many factors. These include technological progress, the opening of new markets, population growth, etc., which ultimately lead to changes in relative prices, which, according to North, are the decisive factor in institutional changes.

Of course, it cannot be denied that one of the sources of institutional change is ideology. It can be interpreted as a set of subjective models through the prism of which people perceive and evaluate the world around them. However, here too, within the framework of the neo-institutional approach, there is an attempt to rationalize people’s behavior.

Recognizing that the question of the extent to which prices influence ideas is not fully developed, North nevertheless tries to connect changes in ideology with changes in prices, believing that over time they lead to people changing behavioral stereotypes and rationalizing what constitutes standards of behavior. He notes that ideological biases are also not free from the influence of economic calculations. The more profitable opportunities someone's subjective picture of the world blocks, the stronger the incentive to revise it.

Ultimately, according to representatives of the neo-institutional movement, it is economic growth, accompanied by a change in the structure of relative prices, that provides incentives for institutional changes, in particular, the existing system of property rights. As such, they are accompanied by the rejection of certain forms of organizational and institutional interaction that functioned previously, and the adoption of new formal rules that mediate them.

The struggle is for the revision of formal rules (or institutions), fixed in writing and which are the object of lawmaking. The revision of formal rules, carried out politically, is ultimately determined by economic interests and leads to a change in economic rules, or a regrouping of property rights, considered as a bundle of powers. This means that the fight to revise the rules is taking place in the political sphere.

Or, in other words, there is bargaining on the political market, which can be interpreted as a set of subjects and procedures that determine the formation and change of the most important elements of the institutional environment. Hence the interest in political coalitions (there is a close connection between the structure of coalitions and the resulting systems of property rights).

What is the trend that representatives of the neo-institutional trend reveal in the process of long-term institutional changes, primarily in the economic sphere? According to North, in the process of historical development, institutions that promote economic growth survive. In other words, the most efficient survive, i.e. institutions that provide the best balance between transaction costs and benefits from exchange and division of labor. Here the statement is taken as an axiom that the main role of institutions is to reduce transaction costs.

However, North does not deny that this happened because, under certain conditions, the private goals of those whose positions allow them to change institutions led to institutional decisions that turned out to be - or gradually became - socially effective. Let us recall that within the framework of neo-institutional analysis, the effectiveness of institutions is interpreted based on the criterion of creating the most favorable conditions for economic growth. Economic growth is directly related to the possibilities of division of labor and the scale of exchange. These provisions were expressed by the founder of the classical school, A. Smith. What is new that the neo-institutional approach introduces is the position that these opportunities themselves are determined by the size of transaction costs.

As noted in the first lecture, the lack of guarantees in non-personalized exchange (exchange not with “one’s own”) determined such a value of transaction costs that, in essence, blocked exchange, which, in turn, placed restrictions on the further division of labor. Thus, transaction costs turned out to be a limiting factor in economic development.

It is not surprising that saving transaction costs is the main function of institutions within the framework of neo-institutional analysis. In other words, institutions justify their existence by minimizing transaction costs, thereby ensuring economic growth. To paraphrase the Coase theorem, we can say that with zero transaction costs, economic growth would be inevitable, it would automatically occur everywhere and always. And if it does not happen, it is only due to the ineffectiveness of most institutional structures that history has known, since existing institutions do not provide any incentives for economic initiative.

In turn, within the framework of the neo-institutional direction, the long existence of ineffective institutions is explained through the economic approach, through the category of marginal benefits and costs. The preservation of existing institutional forms is explained by such a magnitude of costs for changing them that this will exclude the transition to a more advanced (effective) institutional structure.

Attention has already been drawn to the distributive nature of institutions. And this is the reason that the ruling elite often considers unprofitable those institutional changes that, in traditional neoclassical models, are consistent with the principle of wealth maximization: such changes increase the costs of agency relations and may pose the threat of a complete loss of control over the situation. Therefore, within the framework of a stable institutional environment, all choices made by individuals and groups ruling the state are limited by the requirement to maintain power.

In accepting such premises, it must be recognized that rules not only arise on the basis of self-interest, but are also directly related to the problem of power. Any institution presented as a “rule of the game” can be considered as a result of power, since the rule is established by people, expresses their interests and is implemented on the basis of their power to enforce it. In this sense, power is primary in relation to institutions, and institution is a consequence of power.

What does power consist of? Within the framework of the sociological approach, first of all, in the ability of one person or group to impose their goals on others. And, as such, power includes the following elements:

special positions in the distribution of resources, finished products, income;
control over access to information as a special resource;
the right to interpret events and put forward development goals;
the ability to dictate the rules of activity, prohibit certain actions;
the ability to personally influence people.

As for the mechanisms for exercising power, it can be realized both through direct violence and economic coercion, as well as through the legal assertion of authority. The latter can rely on the force of law or custom, or on the special personal qualities of the person in power, the so-called charisma.

Within the framework of the economic approach, the problem of power also occurs, but it is directly related to the preconditions of inequality in relations between economic agents. First of all, with inequality in the distribution (degree of monopolization) of ownership of a certain resource. And:

unequal elasticity of demand for goods on the part of transaction participants;
different amounts of costs for the parties to the exchange associated with leaving the relationship with this agent and searching for alternative resources;
lack of balance between supply and demand in a competitive market;
asymmetry of information between the principal-agent parties;
unequal access to resources of coercion and violence (public and private). Let us note that within the framework of the economic approach, power is interpreted almost exclusively in quantitative terms, as a situation of inequality in the bargaining power of exchange participants. But this is enough to recognize that the economic world is a world of predominantly unequal relations. As a consequence, the economy must be viewed as a system of power. The key to both sociological and economic approaches is that the problem of power is directly related to special positions in the distribution of resources.

Of course, we cannot reliably know what caused the primary distribution of resources. Let us assume that it was determined by existing informal rules. It is important for us that the inequality of distribution was the basis for the emergence of an asymmetry in the distribution of power in the conflict over the establishment of formal rules. And the distribution effect, which has already been mentioned, arose on the basis of the existence of advantages of one of the parties in the bargaining for the establishment of one or another version of the rules. It was this side that subsequently made efforts to formalize the rules, fearing that the weaker side would cease to obey the conditions of the game imposed on it.

This once again confirms that the rules, at least most of them, are created in the interests of private rather than public welfare. In other words, institutions are not necessarily - and not even always - created in order to be socially effective. Institutions, or at least formal institutions, are created rather to serve the interests of those in positions to influence the formation of new rules. As a consequence, it is impossible for institutions to arise randomly, since they serve the interests of groups, and therefore the existence of ineffective institutions should not be surprising.

However, all of the above does not at all detract from the importance of the coordination nature of institutions. Let us note once again that at any given moment an institution contains coordination (in this capacity being a public good) and distribution aspects, without guaranteeing the minimization of transaction costs. At the same time, it is difficult to deny that the formation of economic institutions is a consequence of a certain alignment of political forces, and therefore the problem of power. And thus, it is political organizations that initiate changes in formal rules.

As history shows, the struggle to change formal institutions acquired a special scope at the early stage of the formation of a market economy; evidence of this is the bourgeois revolutions of the 17th-18th centuries. Why is there a struggle specifically for changing formal rules? Yes, if only because the condition for the effective functioning of the market is the presence of formal institutions that promote the development of non-personalized exchange and political power capable of ensuring the implementation of contracts.

In turn, a change in formal institutions also involves costs associated with changes in the institutional environment, which are logically presented as the costs of its transformation. This, first of all, includes the costs associated with the liquidation of old institutions, the formation of new institutions and their adaptation in the economic system.

The most important element of these costs is the costs associated with overcoming resistance to institutional changes from those sectors of society whose economic interests are affected.

It has already been emphasized that, within the framework of neo-institutional analysis, the main forces constraining institutional change are groups with power and pursuing their own personal interests. Their resistance is overcome either by persuasion, which leads to the development of compromises, or by imposing new rules of the game by force. And by the way, the political market is an area in which the issue of compensation to the losing side in connection with the creation or abolition of certain rules is especially acute.

However, resistance to institutional changes can be determined not only by economic interests, but also by the so-called existing institutional matrix, which includes both formal and informal rules, as well as values and ideas that permeate a person’s worldview, inherited from previous generations. It is no coincidence that a radical change in the institutional environment presupposes a change in the person himself, if the latter is considered as the bearer of a certain value system.

It is natural to assume that the evolution of the institutional environment, which involves a gradual change in the set of rules through small increments, is a less painful process. It means, first of all, a change in informal institutions - the usual way of thinking, which is inertial in nature, and then formal rules.

A revolutionary change in the institutional environment comes down, first of all, to a change in the formal framework according to known models. This sample can be an ideal model, acting as a kind of mental construct. It is also possible to attempt to return to the past - the golden age of mankind, or to reproduce institutions that take place in other countries.

countries, the so-called import of institutions. It is assumed that informal rules will maintain inertia for some time, and then die out as fewer and fewer people follow them.

The possibility of revolutionary change in the institutional environment, explicitly or implicitly, is based on the assumption that there is no dependence on previous development, that we are free to choose the trajectory of institutional change. However, there are serious doubts about the validity of this approach.

It is enough to refer to the institute of language (language system).
Needs can also be interpreted as instincts - innate and social. Yu. Olsvich proposes to group them as follows: instincts of individualism, instincts of development, instincts of sociality. To the first group he attributes the instincts of nutrition, procreation, self-preservation, appropriation, and aggression. The second is the instincts of freedom, competition, play, curiosity, creativity. The third (sociality) includes the instincts of justice, sympathy, imitation, group (herd), hierarchical. T. Weblin also writes about social instincts, highlighting the instincts of mastery, idle curiosity and parental feelings, believing that they, along with the instincts of imitation and envious comparison, form the face of the socio-economic system. In the categories of needs, the same problem is considered by another representative of early institutionalism, T. Vsitling, highlighting the need for acquisition, the need for pleasure, and the need for knowledge. And he notes that these needs can be met in different institutions. In particular, satisfaction of the need for acquisition can be realized in the institution of private property, earnings, as well as in the institution of theft, usury, and deception. Thus, the point of view is substantiated that it is institutions that determine the form of realization of innate human needs or instincts.
In one of the previous lectures, it was already analyzed how established property rights generate positive and negative incentives and through them influence the behavior of economic agents.
We emphasize that incentives for acquiring knowledge are influenced not only by monetary rewards, but also by the system of punishments and society’s tolerance towards certain forms of behavior. Institutional Economics 199
Returning to Lecture 6, we note that the firm is also the distributor of certain institutional relations. The successful experience of an individual organization and the effectiveness of the contract system used in it, as a rule, encourage similar structures to use these methods of organization. In addition, being a form of organization of economic activity, a firm, when hiring workers, involves them in the scope of formal and informal rules, i.e. makes workers bearers of a certain norm.
But we must recognize that in societies with a fixed social structure there are also incentives to change the existing structure of property rights. As M. Olson notes, it is in such societies that fertile ground is created for the formation of coalitions seeking to redistribute property rights in their own interests.
This idea is nothing more than an interpretation of the idea of institutional meta-competition, dating back to the works of F. Hayek. Representatives of the neo-institutional movement also consider the evolution of social institutions as a spontaneous, organic process.
In his eulogy to the division of labor, or specialization, he notes that it is through the division of labor that the volume of production can increase without increasing the number of producers.
It has already been noted that the legalization of informal frameworks of interaction, i.e. giving norms the force of law is the basis of case law, which is the framework of the Anglo-Saxon legal system.

Lecture 7.

1. Concept and scheme of institutional changes

2. Mechanisms of the emergence of institutions and institutional changes

3. Mechanisms for the spread of institutional changes

4. The problem of overcoming institutional inertia

Basic concepts:

Institutional change

Diagram of institutional change

Spontaneous institutional change

Purposeful Institutional Change

Institutional design

Market for institutions

Institutional balance

Trajectory of institutional change

Institutional inertia

Locking effect

Institutional change is a change in one or more components of an institution, i.e. changing the content of rule components that allow individuals to make decisions about their actions.

D. North's scheme of institutional changes:

1.changes in the level of knowledge lead to changes in technology;

2.new technologies change the relative price levels for resources;

3.new price levels create incentives for the potentially increasing cost of resources to transform property rights to them;

4.new price levels lead to the emergence of new rules to maximize the value of such rules;

5.non-zero transaction costs in the political market prevent the implementation of potentially possible institutional changes useful for creating value.

Spontaneous emergence or change of an institution occurs without anyone's prior intention or plan

The purposeful emergence or change of institutions occurs in accordance with some consciously developed plan.

The purposeful introduction of an institute can be carried out on the basis of:

1. agreements within a group of individuals to realize the interests of all group members;

2. forced rule by the most powerful individual or group to realize his private interest, incl. by infringing on the interests of other individuals.

Forming purposeful institutional changes is called institutional design.

Propagation of a change can be done in two ways:

1. centrally through the use of the coercive potential of the state, while the idea of change must first be selected through the political market;

2.decentralized, through natural diffusion with the help of another competition mechanism.

Competition between institutions can occur in different forms and be described by different theoretical models.

The market concept for the institution: involves conducting institutional transactions (explicit and implicit) on the institutional market.

Explicit institutional transactions are joint actions of individuals directly aimed at changing the existing institutional structure and relate to transactions on the political market (actions to establish new rules for state registration of a company or its trademark).

Implicit institutional transactions are the joint actions of individuals to choose one or another rule in accordance with which commodity transactions are carried out (along with a specific commodity transaction, a firm is also selected) - concluding a transaction with prepayment or in barter form.

Institutional equilibrium is a situation in which, given the balance of power of the players and a given set of contractual relations that form the economic exchange, none of the players finds it profitable to spend resources on restructuring agreements.

In terms of the institutional market model, the definition of institutional equilibrium means a situation in which the amount of demand for the services of guarantors of a certain rule is equal to the amount of their supply.

The trajectory of institutional change is a sequence of changes that some consistent (basic) institution undergoes.

For all trajectories of change in institutions, it is necessary to distinguish between two types:

1.territories formed by incremental changes (changing the law through amendments, changing a custom from mandatory to optional.

2. territories formed by discrete changes containing certain breaks, jumps or institutional shocks, meaning that the existence of the original institution ends, and another institution begins to perform its functions in the economy.

Institutional inertia (dependence on the trajectory of previous development) - at any moment in time, not any (arbitrary) institutional changes can occur in the economy, but only those that turn out to be feasible in the previously prevailing conditions.

The phenomenon of institutional inertia is based on the limited rationality of economic agents who chose and began en masse to master not the best institution, as well as economic factors that made it inappropriate to change an institution due to the emergence of significant costs

Emerging institutional changes are not arbitrary in nature, but are subject to a certain institutional inertia - at each moment in time there are not any institutional changes in the economy, but only those that turn out to be feasible in the previously established conditions, which, in turn, arose as a consequence of earlier similar situations .

The effect of blocking is to create barriers to changing rules by entities that receive distributive benefits from the use of existing rules.

The blocking effect explains situations often encountered in practice in which an institutional change that can significantly improve the conditions for the production of value, despite this, is not implemented in practice.

THE CONCEPT OF INSTITUTIONAL CHANGE

In order to understand what institutional changes are, it is convenient to use the “formula” of the institution given in Chapter 2 of the textbook. Let us recall that, in accordance with it, the institute can be divided into:

description of the situation, characterizing the conditions for application of the norm;

characteristics of the individual, or the addressee of the norm;

definition of the prescribed action, or the content of the norm;

description of the sanction for failure to comply with an order;

characteristics of the norm guarantor, those. a subject that applies sanctions to a rule violator.

Institutional change- change in one or more components of the institution.

Changing an institution is a process that is not identical to the mistakes and inaccuracies made by individuals when following the rules. That is, institutional change is not a change in behavior, which can be caused by a variety of reasons, including random ones, but a change in the content of the components of the rule that allow individuals to make decisions about their actions.

Each of us has observed examples of institutional changes more than once: the transition to admission to higher educational institutions based on the results of a unified state exam, amendments to the Code of Administrative Offenses regarding tougher penalties, legalization of the purchase and sale of currency, permission to privatize state property, the emergence of the tradition of celebrating St. Valentina.

Institutional changes can be the result of a wide variety of actions and phenomena. Many of them have been described in detail in previous chapters. For example, interaction with other institutions can lead to changes in the components of an institution. This may depend on how strongly the rules conflict with each other (coordination effect), or on differences in distributional consequences and alignment with the interests of different groups (distribution effect).

Institutions that determine the mechanisms for coordinating transactions can change in order to select the most effective alternative, or, conversely, to complicate the transaction, increase transaction costs, as in the case of growing administrative barriers in the economy due to the actions of rent-seeking groups.

MECHANISMS OF THE EMERGENCE OF INSTITUTIONS AND INSTITUTIONAL CHANGES

The emergence of the idea of an institution can occur in three ways: it can be spontaneously invented and purposefully formed (designed) or borrowed.

Important for characterizing the emergence and change of institutions is their division into spontaneous and purposeful.

The spontaneous emergence or change of an institution occurs without anyone's prior intention or plan.

The mystery of the emergence of order from chaos is one of those that occupies not only economists, but also representatives of many other sciences. Order in dynamics is manifested in the repetition of events. However, we have already noted that not all regularity of behavior is a consequence of the existence of a rule.

Thus, the mystery of the spontaneous emergence of institutions lies not in the emergence of regularities of behavior as such (they can arise either as a consequence of natural causes or as a result of the repetition of someone else’s successful experience), but in the emergence of an external mechanism for forcing adherence to a certain standard of behavior.

The logic of the spontaneous, spontaneous emergence of norms can be represented in the form of the following schematic model. Individuals, observing the behavior of other individuals, build the forecasts of their actions necessary for them to make their decisions. If such a prediction is repeatedly confirmed, the individual develops an expectation regarding the behavior of the other(s). Thus, he begins to have not only the forecast as such, but also the confidence that his forecast will always be correct. Confidence is a purely psychological state, but for boundedly rational individuals it is as significant for decision-making as reliable knowledge.

Let individual I α form a set of expectations regarding the actions of another individual I β . Based on them, he makes decisions regarding his own actions, pursuing certain goals. If the actual behavior of I β at some point reveals a discrepancy with the formed expectation of I α, so that it creates obstacles to achieving its goal, I α experiences frustration - an emotional state of stress caused by the inconsistency that has arisen. Frustration, in turn, is often overcome by manifestations of aggression towards the one who caused such a state 1 . An individual I β who has become the object of aggression may perceive it as a punishment for his action, especially if the violent action is accompanied by a message about its cause, i.e. an indication on the part of I α of the “wrong” behavior of individual I β. The natural desire to avoid punishment subsequently develops in I β - the recipient of the sanction - a “conditioned reflex” that restrains the manifestations of behavior that causes sanction from I α, whose expectations have been frustrated.

In this case, for I α it does not matter at all whether the behavior of I β that “deviates” from his expectations is a real or imaginary obstacle to achieving his goal. For frustration and subsequent aggressive behavior, it is enough that he believes that such behavior is a hindrance that can cause him harm.

As a result, a stable connection is formed in the consciousness (or subconscious) of individuals who have encountered manifestations of aggression several times in response to similar actions: if I do A, a sanction follows ; I don't want sanctions; therefore I don't need (I do not have) do A.

In order for the proposed schematic model to correspond to reality, an important condition must be met: the potential for violence of the “guarantor of the norm” must be higher than the potential for violence of its addressee. If the actual ratio of these potentials for the individual experiencing frustration and the one who caused it is the opposite, then aggression (punishment of the offender) becomes unlikely: the costs of sanctioning may exceed the benefits from it 2. Since we are talking about the emergence of norms in groups, the obligatory presence in them of leaders occupying positions A in the hierarchies suggests that they will most likely be the effective “guarantors” of emerging intragroup norms.

From the above logic, it follows that the resulting rule will maximize the leaders' utility. Thus, the mystery of the emergence of ineffective (in the sense of ensuring the growth of social welfare) institutions ceases to be such: the whole point is the uneven distribution of the potential for violence within the group. In other words, spontaneously emerging norms of behavior, by the very mechanism of their genesis, are “tuned” to the realization of the private interests of the individual who has the maximum potential for violence.

Of course, situations are quite possible in which the interests of the leaders coincide with the interests of other group members. For example, the security of property rights is important for both the leader and ordinary group members. Likewise, protecting the execution of contracts is as desirable for the leader of the group as for its ordinary members.

Alternative explanations for the emergence of institutions can be found in work on game theory and economic analysis of law.

Institutional inertia (dependence on the trajectory of previous development) - at any given moment in time, not any (arbitrary) institutional changes can occur in the economy, but only those that turn out to be feasible in the previously prevailing conditions.

This point is widely used in the literature devoted, for example, to studies of differences in the course of reforms in the countries of Central and Eastern Europe, on the one hand, and in the states formed on the basis of the former Soviet Union, on the other hand. It is argued, in particular, that the slower and more difficult path of reforming the economy of the latter is explained precisely by this dependence.

Divergent development trajectories: England and Spain, North and Latin America 1

One of the most striking examples of institutional inertia is D. North’s explanation of the sharp divergence in the economic power of England and Spain that occurred in modern times, after a long state of approximately equal strength in the 16th-17th centuries, when these countries, according to the parameters that are usually looked at attention, economists, were not much different from each other, they were very close in terms of population, and in the types of employment of the population, and in the fact that in both countries there was a struggle for rights between the monarch and parliament, and in the fact that both countries carried out expansion with an attempt to create overseas empires, and according to the peculiarities of industrial development, the development of sheep farming, and the emergence of textile manufactories.

From these external signs, a researcher who tried to say by simple extrapolation what would happen to these countries in the 19th century could assume that they would again be at similar levels of development. But in the 19th century. England becomes, in the literal sense, the first country in the world - the world's workshop, and Spain is one of the most backward countries in Europe.

According to North, the reason for the growth of the English economy and the stagnation of the Spanish economy was not resources as such (Spain received more of them from the American colonies than England), but the nature of the relationship between royal power and the economically active nobility. In England, the crown's ability to seize income and other property was significantly limited by the parliament, which represented the nobility. The latter, thus having reliable protection of its property from governmental encroachments, could make long-term and profitable investments, the results of which were expressed in impressive economic growth. In Spain, the power of the crown was limited by the Cortes purely formally, so the expropriation of property from potentially economically active subjects was quite possible. Accordingly, it was very risky to make significant and long-term capital investments, and the resources received from the colonies were used for consumption rather than accumulation. As a long-term consequence of the basic political-economic (constitutional) rules adopted in these countries, Great Britain became a world power, and Spain was transformed into a second-rate European country. Institutions, which were by no means ways of state regulation of the economy, in this example manifested themselves in Spain as powerful restrictions on business activity, which actually suppressed economic initiative.

The same story repeats itself with the North American and South American colonies, later republics. In the 18th century they are very similar to each other, in the 20th century. The USA is a powerful developed country, and the South American republics are far behind in development. These amazing transformations are associated with those rules that were once formed and which require significant effort and costs to change.

If we consider this provision as a particular expression of the general principle of the dependence of the present and future on the past, it can hardly raise any doubts or objections. However, interpreted as a specific way of explaining ongoing institutional changes, as an operational means of distinguishing between possible and impossible institutional changes in the situation under consideration (i.e., as a tool for developing practical recommendations), it needs a more detailed description and transformation into an applied, working tool of analysis .

The concept of path dependence was originally introduced in articles by Paul David 1 and Brian Arthur 1 to characterize the characteristics of changes in production technologies. It meant situations in which the continued use of not the most effective technologies was determined by the influence of random choice at the initial stage of their use and was consolidated due to the effect of increasing returns, which generally gave rise to the phenomenon of blocking (lock-in) alternative paths of technological development (more about the blocking effect in processes of institutional change, see below).

Effect QWERTY

According to Arthur and David, a situation in technological development is characterized by dependence on the trajectory of previous development if:

The choice of mass technology observed in reality was not predictable;

This choice is almost impossible to change due to the magnitude of the costs that must be made in a coordinated and simultaneous manner (or within a short time);

Massively distributed technology is likely to be ineffective.

The emergence of such situations, in turn, is the result of the functioning of two mechanisms: a) increasing returns to scale; b) the impact of small random events.

Increasing returns are a consequence of the interconnectedness of technology and improving skills to work with it as part of the human capital that arises as a result of the learning process during the application of technology ( learning by using), and network externalities and investment immobility.

An example is given, in particular, of the QWERTY keyboard layout of typewriters and then computers (QWERTY- the first six letters of the Latin keyboard layout). This arrangement arose because it avoided the clutching of the levers when printing the most frequently repeated sequences of letters on mechanical typewriters. Subsequently, this drawback - the clutch of the levers - was overcome, but the keyboard QWERTY has already conquered the world. Typewriters with alternative, often more ergonomic layouts were not in demand, also because most typists had the skills to type on a keyboard QWERTY retraining them would be associated with prohibitively high costs.

The mechanism of small random events, i.e. such events that could not be foreseen in advance by an outside observer with limited knowledge are “responsible” for which of the available technologies is actually chosen and wins the competition with functionally similar technologies. “Thanks” to him, such a victory is usually not associated with greater efficiency.

Subsequently, institutional changes were also analyzed using the concept of dependence on the trajectory of previous development. Institutional inertia is the reason that at a given moment in the institutional structure of the economy, some of the well-known institutional innovations - in principle more effective than those actually used - are nevertheless not applied in practice.

The phenomenon of institutional inertia is based, first of all, on the limited rationality of economic agents who chose and began en masse to master not the best institution, and, in addition, purely economic factors that make it inappropriate to change an institution due to the threat of significant costs.

An alternative view of institutional inertia is associated with the Schumpeterian and neo-Schumpeterian tradition of analyzing technological change. In accordance with it, technological changes are carried out within certain clusters, which represent a limited range of technology options that can be formed from initial knowledge.

The described interpretations of the dependence on the trajectory of previous development in the field of technological changes, when applied to the field of institutional changes, lead to significantly different assessments of the possibility of significant or abrupt changes in the institutional structure of economies depending on institutional inertia.

According to the first interpretation, there are no restrictions on the content of the idea of a new institution (or system of institutions), except for restrictions on the creative abilities of individuals seeking to form an institutional environment that best suits their interests. The idea of institutional change can also be borrowed or purposefully created, i.e. be designed. However, only that institutional change will enter into mass practice, the benefits of which will exceed the costs of switching to following the new rule.

According to the second interpretation of institutional inertia, within the existing institutional environment, ideas for institutional innovations that are not a recombination of the components of the rules that make up this environment cannot arise. With this approach, the purposeful design of a new rule turns out to be fundamentally limited by the scope of diversity formed by a complete search of all possible combinations of the mentioned components. At the same time, a borrowed idea that does not fit into this framework is rejected not because of ineffectiveness (no matter - social ineffectiveness or ineffectiveness for special interest groups carrying out the restructuring of the institutional environment), but because of inconsistency with existing rules.

The existing experience of both technological and institutional changes convincingly testifies in favor of a more correct interpretation of institutional inertia given in the works of Arthur and David and their followers. In other words, freely emerging innovation ideas pass through a selection filter based on the criterion of efficiency, which determines which of them (taking into account the effect of increasing returns and the randomness of the initial choice) will receive mass distribution. Historical heritage (material or institutional) manifests itself within the framework of this concept not in restrictions on ideas, but in the specific structure of benefits and costs inherent in basically similar innovations competing for distribution in divergent economic systems.

Note that the heuristic value of the concept of institutional inertia lies not in the possibility of a “universal” explanation of any difficulties arising along the path of institutional transformations, but in drawing attention to the specific beneficiaries of the old rules, who, thanks to the latter, have economic and political opportunities that allow them to block potentially more effective innovations .

The concept of the locking effect was used by Douglas North to explain situations often encountered in practice in which an institutional change that could significantly improve the conditions for the production of value, despite this, is not implemented in practice.

CONCLUSIONS

Institutional change is a change in one or more components of an institution. Institutional changes can be divided into spontaneous and purposeful. Introducing purposeful institutional changes is called institutional design.

The basic scheme of institutional changes proposed by D. North includes the following elements: a change in the level of knowledge (1) leads to the emergence of new technologies, which, in turn, change the relative price levels for resources (2), creating incentives for owners of potentially increasing in value of resources to the transformation of property rights to them (3) and the emergence of rules that allow maximizing the value of using such rights (4). The presence of non-zero transaction costs in the political market (5) prevents all potentially possible institutional changes useful for creating value from being realized.

The spontaneous emergence or change of an institution occurs without anyone's prior intention or plan. The purposeful emergence or change of an institution occurs in accordance with some consciously developed plan. Conscious introduction can be carried out on the basis of: 1) an agreement within a group of individuals to realize the interests of all group members; 2) or the forced introduction of a rule by the “strongest” individual (or group) to realize his private interest, including by infringing on the interests of other individuals.

Propagation of change, i.e. The coverage by institutional change of all those addressees for whom the changed institution is intended can be carried out in two ways: centrally, using the coercive potential of the state, and decentralized, through natural diffusion.

The political market, through the functioning of which targeted forced institutional changes are carried out, can act as a mechanism for their dissemination only in cases where: either the state has an almost unlimited potential for violence, or economic agents have a high level of obedience to the rules, or the use of this rule is beneficial to economic agents regardless of the factor of state coercion (i.e. the rule is self-enforcing).

The spread of institutional change can also occur through a market for institutions, in which, through their voluntary interactions, individuals evaluate existing rules and determine and test the suitability of new ones. This market involves explicit and implicit institutional transactions. Explicit are joint actions of individuals directly aimed at changing the existing institutional structure, and implicit are their joint actions to choose one or another rule, in accordance with which actions are carried out in connection with the desire to complete a certain commodity transaction. Since as a result of such actions the frequency of use of rules relevant to a particular situation changes, the mode of functioning of these rules changes, and therefore, ultimately, the existing institutional structure.

Emerging institutional changes are not arbitrary in nature, but are subject to a certain institutional inertia - at any given moment in time, not any (arbitrary) institutional changes can occur in the economy, but only those that turn out to be feasible in the previously established conditions, which, in turn, arose as consequences of earlier similar situations.

The introduction of potentially more efficient institutions may be blocked by organizations that receive distributional benefits from the existing rules.

SELF-TEST QUESTIONS

1. In what cases does a deviation from the norm not lead to its change?

2. What is the difference between spontaneous and deliberate institutional change?

I, What is the reason for institutional changes according to G. Demsetz?

4. What are the main points of D. North’s scheme of institutional changes?

5. Do institutional changes always contribute to increased efficiency in the use of resources?

6. What is institutional equilibrium?

7. What is the market for institutions?

8. What is the difference between explicit and implicit institutional transactions?

9. What is the content of the process of competition between institutions?

10. What determines and how is the dependence on the trajectory of previous development expressed?

11. What is the blocking effect?

Chapter 13 INSTITUTIONAL CHANGES

Institutional change, Pattern of institutional change, Spontaneous institutional change, Purposeful institutional change Institutional design, Market for institutions, Institutional equilibrium, Trajectory of institutional change, Institutional inertia, Lock-in effect

How are institutional changes manifested? Reasons and types of institutional changes

Introduction

1. Mechanism of institutional change

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