The Evolution of Institutions: the medium, the long, and the ultra-long, run
How do institutions evolve when subject to random shocks and uncertainty? And how does this affect the convergence of informal and formal institutions? We propose to model these changes in an evolutionary game in which we distinguish between the Meta set of all existing and potential institutional arrangements and the de facto set of institutions that agents actually choose to uphold in equilibrium. In general, we formulate new stochastic evolutionary dynamics with drift and time-varying mutation rates, thereby relaxing some of the more rigid features of evolutionary games which limit their adaptability to social phenomena. Specifically, this provides a plausible model of institutional change in which, at the Meta level, the destruction of old institutions and the creation of new are unpredictable, which in turn defines, at the de facto level, the extent of agents’ bounded rationality and choice of strategy. We distinguish between the medium run – when the risk dominant, more “rational choice” strategy persists – vs. the long and ultra-long run when complex change may cause too much drift away from the risk dominant strategy in equilibrium. This provides a richer, and more intuitive framework in which to consider the scope of path dependence and the role of randomness in the endogenous evolution of social institutions.
There is now a very extensive and well-developed theoretical literature on the difficulties faced by durable goods monopolists in pricing their products. Surprisingly, the seminal article in this field did not come from a formal economic theorist but from Ronald Coase. Coase wanted to show that there are situations under which a pure monopolist might not be able to charge a monopoly price for durable products. The literature has since expanded to consider all manner of theoretical and formal conditions under which this hypothesis might or might not hold. And scholars have claimed that this body of work provides insights into everything from strategic leases to planned obsolescence and the problem of new model introductions. But how well has this literature really served to illuminate the problems facing actual business firms? While the safety razor industry has often been invoked as an example of durable goods pricing there has only been limited investigation into the actual behavior of the dominant firm in this industry – Gillette. We consider here the major ideas that have developed as an offshoot of the original Coase paper and the extent to which a case study of Gillette confirms or confounds this analysis.
In the article the author considers the factors, governing by people coming in a small business. These factors can vary depending on the social and economic situation. The author estimates an enterprise potential of the Russian society and analyzes the reasons on which people start to attend to business.
We review the transition of the Russian banking sector focusing on the interplay between ownership change and institutional change. We find that the state's withdrawal from commercial banking has been inconsistent and limited in scope. To this day, core banks have yet to be privatized and the state has made a comeback as owner of the dominant market participants. We also look at the new institutions imported into Russia to regulate banking and finance, including rule of law, competition, deposit insurance, confidentiality, bankruptcy, and corporate governance. The unfortunate combination of this new institutional overlay and traditional local norms of behavior have brought Russia to an impasse - the banking sector's ownership structure hinders further advancement of market institutions. Indeed, we may now be witnessing is a retreat from the original market-based goals of transition.
The article examines the specifics of small business sector institutional development in the transitional economy of Russia. It shows that small business adjustment has brought about a number of economic institutions, for example, business networks and vertically integrated structures. But business associations as a fully-fledged institution representing and protecting the interests of small business have not been established yet. Business ties and transactions are maintained through informal contracts, businessmen' personal relations. This practice has triggered the development of the shadow economy. A similar institutional development of the sector has had mainly negative results. The analysis has used the results of formalized surveys and in-depth interviews with entrepreneurs and small business managers held by IPSSA (with the participation of the article's author) in 1992 to 1998.
One of the most important indicators of company's success is the increase of its value. The article investigates traditional methods of company's value assessment and the evidence that the application of these methods is incorrect in the new stage of economy. So it is necessary to create a new method of valuation based on the new main sources of company's success that is its intellectual capital.
In this chapter, the tools of institutional economics applied to the comparative analysis of traffic rules as amended in 1998, 2010 and 2014. It is shown how the contract eliminated the holes in the different editions of traffic rules.
Selected works of George Kleiner on economics and mathematics in occasion of his 70th birthday.
The Summer School is aimed at creating and supporting the academic network of young researchers from all regions of Russia as well as from CIS and other countries, who work in the field of New Institutional Economics. The schedule of the Summer School includes lectures, seminars and plenty of possibilities for discussion and communication. This year we will focus on possibilities and challenges of applied research in the institutional economics framework.