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The Social System Approach to Institutions: Examples from Western Economic History

The Social System Approach to Institutions: Examples from Western Economic History

Journal of Institutional Studies, , Vol. 8 (no. 3),

While there is a general acceptance of a broad definition of social institutions as accepted rules of conduct in agent interactions, there are overlapping views on how institutions come into being and develop. Different views see institutions as the result of evolution, contract, convention, game theory, political power, or legal necessity. Once created, institutions can live their own life and gain influence on the whole economy/society in respects beyond their intrinsic origins. The overlapping views give the impression of pursued piecemeal approaches in addressing the issues. Treating issues of institutional formation and development in the framework of social system theory and analysis can be shown to simplify the picture appreciably and bring more insight. This paper intends to do that. It will display and apply the social system perspective to understanding institutional formation and development.
 
The paper falls in two sections. First, it develops an analytical framework that views the economy as a social system with interactive subsystems that initiate and maintain their own subsystem institutions. Some subsystems expand faster than others, gaining more influence. Interaction of agents across subsystems facilitates the dominance of the more influential subsystem and the spread of the subsystem’s allied institutions to the whole social system. Second, the paper illustrates the validity of the social system perspective via reviewing a timeline that highlights the changing and evolving dominance of the major subsystems and their attached institutions in the economic history of the western world, and in particular, the interactions between the firm subsystem and the state subsystem.

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The Post Keynesians and Douglas North about Uncertainty and Institutions: the Missing Link?

The Post Keynesians and Douglas North about Uncertainty and Institutions: the Missing Link?

Journal of Institutional Studies, , Vol. 8 (no. 3),

The paper compares the Post Keynesian and North’s approaches to an analysis of uncertainty and uncertainty-reducing role of institutions. Author emphasizes that Post Keynesianism was the first school of economic thought that has made uncertainty the starting point of own research program. Many of North’s line of reasoning about uncertainty were mentioned by the Post Keynesians long before his works had been published. It is not fortuitous that in the course of discussion of ergodicity and non-ergodicity North cites Davidson, leader of Post Keynesianism. Both approaches conclude that Neoclassical theory cannot be applicable to the solution of the real world’s problem because it ignores “genuine” (fundamental) uncertainty. The paper considers also differences between these two approaches. Whereas North’s theory explains inability of many systems to grow steadily, the Post Keynesians emphasize problems of systems perceived as successful. These problems exist due the fact that institutional evolution decreases effectiveness of uncertainty’s reduction and are revealed in macroeconomic and financial crises.

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Professional Organizations As Drivers of Social Changes in Developing Countries

Professional Organizations As Drivers of Social Changes in Developing Countries

Journal of Institutional Studies, , Vol. 8 (no. 3),

The present paper reviews the activity of professional organizations of advocates as a factor of transfer from limited access order to open access order, in terms of the theory of North, Wallis and Weingast. Using the analysis of the experience of advocates’ collective action in developing countries, the paper proposes a model explaining the process of mobilization of the legal community for countering the violations of the law by the ruling elite. It shows that collective action of advocates plays a significant role in implementing the principles of rule of law. However, the efficiency of such collective action in a particular country depends on the institutional capacity of its legal association (in terms of Doner & Schneider (2000)) and on the position of the professional elite that is heading it. The elite of the advocates’ community in developing countries is confronted by a difficult choice between identifying itself with the national political elite and the need to respond to the demand of grass-roots members of the profession regularly encountering violations of the law by representatives of the authorities. On the example of various countries, we show, how the choice of professional elite leads to different scenarios, and make conclusions for the situation in Russia.

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The Effect of Closing Hour Restrictions on Alcohol Use and Abuse in Russia

The Effect of Closing Hour Restrictions on Alcohol Use and Abuse in Russia

Journal of Institutional Studies, , Vol. 8 (no. 3),

Since 2006 onward various regions have been putting and toughening local regulations for alcohol sale hours. The effect of these policies is uncertain in a specific social and economic environment featured by poor observance of the law; long tradition of the excessive consumption of strong spirits; and significant supply of home-made or surrogate alcoholic beverages. This paper uses on the data from the RLMS for 2005-2012 to discuss the effect of the restriction of trading hours on the use of alcoholic beverages falling under the restriction, as well as the substitution effect for the beverages not under the restriction. The adult respondents were broken into the treatment group and control group assuming that the former was more sensitive to the hour restriction. The hypotheses tested are that these policies decrease the use of factory-made vodka and increase the use of home-made vodka (samogon) and factory-made light beverages. Overall use, binge drinking, and the consumption of vodka, samogon, beer, and wine were examined. The paper discusses the existing estimates of the econometric specification difference-in-differences designed for testing the hypotheses. The conclusions are that the sales restrictions led to a decrease of factory-made vodka consumption and its partial substitution by samogon for people most exposed to the restriction.

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The Problem of Power: Institutional Approach

The Problem of Power: Institutional Approach

Journal of Institutional Studies, , Vol. 8 (no. 3),

The authors of the paper discuss various reasons for power of one agent over another. These are status, the right to manage resources, force, monopoly, economic dependence, energy of a particular person. Examples of different types of power are given. The idea of interdependence and interpenetration of these types is explained. The main causes for emergence and stabilisation of various forms of dependence are analysed. It is shown that the widespread belief about the predominance of power of property in the market economy is based on a simplified model of market mechanisms.
 
Special attention is given to implicit forms of power, including hidden monopolies and voluntary economic dependence. Reasons for existence of hidden monopolies that lead to subordination of economic agents are highlighted. Situations when economic agents become subordinate after being tempted by current benefits of collaboration (the mousetrap effect) are analysed.
 
The historical development of power is examined. The authors come to the conclusion that in the modern world combined forms of coordination of economic activity as well as hybrid forms of power take place. It is mentioned that new types of power foundations do not replace the old ones but coexist with them modifying actions and traditional factors of economic dependence. At the same time foundations of this dependence become more and more disguised. Contemporary versions of voluntary alliances and coordination of activities of formally independent agents - relational contracts, networks, unions etc. - do not eliminate the problem of dependence as well as the problem of unequal distribution of costs and benefits making it even more complex.

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Discrete Institutional Alternatives of Public Administration Reforms in Countries with Developed and Developing Institutional Environment

Discrete Institutional Alternatives of Public Administration Reforms in Countries with Developed and Developing Institutional Environment

Journal of Institutional Studies, , Vol. 8 (no. 3),

The paper presents an approach to evaluation the impact of the level of development of institutional environment on the success of the reforms of public administration. The indicators that characterize the degree of development of the institutional environment, in particular, the level of protection of property rights, the development of political competition, civil society, corruption, and trust in society are shown. Depending on the elements of the political-administrative system, socio-economic features, that determine the trajectories of reforms, showing alternative purposes and characterized some indicators, that characterizing the results of reforms for the OECD-counties. Showing institutional problems is implementing reforms in the transition countries, depending on the elements of the political and administrative systems, and socio-cultural factors that determine the path of reform, showing alternative purposes and characterized by individual indicators characterizing the results of the OECD reform. From the point of view of the classification results, the emphasis is made on quantitative results of the operational type, in particular, the dynamics of the general government expenditure and the level of employment of civil servants in relation to employment in the economy as a whole.
 
Showing institutional problems in the implementation of reforms in the transition countries, in particular the gap of development of the bureaucratic ethos, the weakness of the market environment and the insufficient level of external pressure on the quality of public services. The significance for the success of reform and systemic cultural change within the state apparatus, which affects the quality of citizens' satisfaction with public services is observed. It is noted that the preliminary formalization of the public sector, the formation of Weberian bureaucracy type is essential for successful implementation of the New Public Management. The factors that determine the choice country-shaped governance model are underlined. Proposed as determinants of the choice of the level of development of "soft infrastructure" on the one hand and the availability of the resource and institutional capacity to improve the efficiency and quality of public administration on the other. As potential outcomes ideal models of states (lean, producing, coordinating) and designated conditions for state and society failure (fragile state) are considered.

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Opportunism of University Lecturers As a Way to Adaptate the External Control Activities Strengthening

Opportunism of University Lecturers As a Way to Adaptate the External Control Activities Strengthening

Journal of Institutional Studies, , Vol. 8 (no. 3),

At the present the Russian government is undertaking a higher education system reform actively introducing management tools of new public management. Implementation of these instruments is accompanied by the transformation of universities in the customer-oriented organizations and lecturers into the employees. There is a substitution of incentives based on the existing informal norms of academic standards and reputation mechanisms of control to the incentives based on the quasi-market conditions artificially generated by the state and corresponding to the mechanisms of external assessment and monitoring. Practices changing used by lecturers to follow their interests is the inevitable result and more widespread form is opportunism. The purpose of the paper is to characterize the forms of manifestation of opportunistic behavior of university lecturers emerging as a result of changes in the nature of lecturers’ contract in the conditions of university governance managerisation. The main forms of lecturers’ opportunism and assesses of its degree based on data analysis of the two waves of the expert survey on the problems of assessing the impact of implementation mechanisms of external evaluation of their activities and the questionnaire survey of lecturers more than 40 Russian universities of different status are described as well as lecturers’ strategy of behavior, which are presented as a combination of different severity practices used by opportunistic behavior is highlighted. It shows the relation between the non-observance of academic freedom and the choice of lecturers’ strategies conduct. It is proved that the lecturers of Russian universities depending on the accumulated stocks of human and social capital as well as the resource capacity of separate universities are choosing different strategies to follow their own interests, which differ in the level of shirking in different areas of activity. All this is accompanied by deterioration in the academic environment, the restriction of academic freedom and the reduction of academic standards.

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