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Radical Institutional Economics and Fakery for the 21st Century

Radical Institutional Economics and Fakery for the 21st Century

Journal of Institutional Studies, , Vol. 9 (no. 4),

The article summarises some results of the discussions about radical institutional economics (RIE) for the 21st century. The discussions took place at the 38th Conference of the Association for Institutional Thought, held in April 2017 (San Francisco, California, US). The contribution of radical institutional economists of the 1990s in the development of institutional thought is presented in the article. The works of William M. Dugger – the founder of RIE – are stressed, as well as the roles of other radical institutionalists such as Edythe Miller, J. Ron Stanfield, Ron Phillips, Dell Champlin, Janice Peterson, Charles Whalen, Doug Brown, Rick Tilman, Louis Junker and Howard Sherman. The reasons for the reintroduction of radical institutional economics onto the agenda in the modern US are considered, among them being the increasing fakery in economies and the growth of inequality in incomes and distribution of economic benefits. The article then suggests a hypothesis that an external factor in the radicalisation of science and public consciousness in Western and other countries is associated with a change in world leaders and poles of growth, and is a turning point in history. It is argued that the power of countries in which the X-matrix dominates is beginning to surpass the influence of countries where the Y-matrix dominates.

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The Evolution of the Collective Forms of Interaction between Foreign Business and Government in Russia

The Evolution of the Collective Forms of Interaction between Foreign Business and Government in Russia

Journal of Institutional Studies, , Vol. 9 (no. 4),

The paper uses the evidence from Russia to analyze the arrangements for interaction between foreign firms and key national partners in the countries of their operations. We identify the main stages and factors that were driving the evolution of the two main channels of collective action for foreign firms in Russia over the last 25 years – the Foreign Investment Advisory Council under the Office of the Russian Prime Minister and foreign business associations. We also provide the comparative analysis of the effectiveness of these two main channels, as well as highlight the factors contributing to higher effectiveness of individual foreign business associations under the current Russia’s circumstances. We show that political rather than economic or institutional factors play a more significant role in explaining the changes in the effectiveness of collective efforts of foreign firms. Russia’s experience suggests that the mechanisms of interaction between foreign business and the authorities can work effectively only if there is mutual interest in such interaction. In Russia since the mid-2000s there have been relatively favorable political conditions for the dialogue between the Government and foreign firms, and the respective interaction mechanisms produced some positive effects regarding e.g. attraction of additional foreign investment inflows and modernization of the regulatory framework. However, with worsening the political situation in 2013, political priorities of the Russian Government became markedly more important than the economic ones, and thus, the effectiveness of the existing instruments for collective action of foreign firms significantly decreased. One consequence of this has been the greater willingness of foreign business associations to cooperate with Russian business in order to promote jointly a pragmatic reform agenda.

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National Models of Technological Development: a Comparative Analysis

National Models of Technological Development: a Comparative Analysis

Journal of Institutional Studies, , Vol. 9 (no. 4),

In the article, suggestions are made for the development of methodological approaches to using factor analysis of technological development of countries and revealing the related weaknesses. The article presents an overview of the ideas for the study of such categories as national innovation system, its elements – the scientific and technological sector and approaches to efficiency measurement and comparative analysis of national innovation systems of different countries. For the purposes of assessing the scientific and technological potential of countries, a method of constructing a scientific-technological balance which links the efficiency of the national economy to the sphere of generation of knowledge and technologies, is proposed. Analysis of the relative scientific and technological parameters showed that each country has its advantages and disadvantages for research and technological development. In particular, in China, the scale of research sector is not adequate to the scale of the national economy and its growth rate; Poland has been experiencing low returns from the sphere of applied research; in Russia the bottleneck for scientific and technological development is low efficiency of the scientific work expressed in the publication activity. Overall, the study showed that the scientific and technological balance constructing method is a successful one in assessing the impact of knowledge generation and technology development on the level of productivity in the economy.

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Diversification of the Economy: Institutional Aspects

Diversification of the Economy: Institutional Aspects

Journal of Institutional Studies, , Vol. 9 (no. 4),

Institutional conditions are significant factors influencing motivation, behavior and performance results of different economic agents, which, in turn, determine directions and dynamics of structural shifts in the economy. There is a wide range of research on influence of various formal and informal institutions on processes of structural dynamics and diversification of economic activity through innovations in particular. We have carried out in-depth analysis of scientific publications on institutional impact at the level of the country as a whole and regions within countries, comparisons of different countries on the impact of institutional factors on production and technological diversification and their connection to economic development. As the main conceptual approaches, we emphasize evolutionary economics, theory of agglomeration economics and new economic geography. Based on the analysis we draw a conclusion, important for Russian economy, about priority directions of changing spatial and product specialization concerning resource regions of Russia. In conclusion of the article perspective directions for the future research on mutual influence of institutions and changes of production and technological structure, which are vital for Russian economy and its regions, are formulated.

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Conspicuous Waste and Representativeness Heuristic

Conspicuous Waste and Representativeness Heuristic

Journal of Institutional Studies, , Vol. 9 (no. 4),

The article deals with the similarities between conspicuous waste and representativeness heuristic. The conspicuous waste is analyzed according to the classic Veblen’ interpretation as a strategy to increase social status through conspicuous consumption and conspicuous leisure. In “The Theory of the Leisure Class” Veblen introduced two different types of utility – conspicuous and functional. The article focuses on the possible benefits of the analysis of conspicuous utility not only in terms of institutional economic theory, but also in terms of behavioral economics. To this end, the representativeness heuristics is considered, on the one hand, as a way to optimize the decision-making process, which allows to examine it in comparison with procedural rationality by Simon. On the other hand, it is also analyzed as cognitive bias within the Kahneman and Twersky’ approach. The article provides the analysis of the patterns in the deviations from the rational behavior strategy that could be observed in case of conspicuous waste both in modern market economies in the form of conspicuous consumption and in archaic economies in the form of gift-exchange. The article also focuses on the marketing strategies for luxury consumption’ advertisement. It highlights the impact of the symbolic capital (in Bourdieu’ interpretation) on the social and symbolic payments that actors get from the act of conspicuous waste. This allows to perform a analysis of conspicuous consumption both as a rational way to get the particular kind of payments, and, at the same time, as a form of institutionalized cognitive bias.

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Mutual Influence of Institutional and Transport Factors of Economic Development: Retrospective Analysis

Mutual Influence of Institutional and Transport Factors of Economic Development: Retrospective Analysis

Journal of Institutional Studies, , Vol. 9 (no. 4),

Numerous studies indicate that the transport factor significantly affects economic development and the development of market institutions. The history of mankind demonstrates that transport has always stimulated the socio-economic development of countries and regions, while changing the changing economic relations and people's needs, scientific and technological progress, in turn, contributed to the development of transport. In this regard, a special scientific interest is the study of the mutual influence of institutions and transport. Historical analysis has revealed a strong interdependence between transport and the establishment of institutions, primarily market ones. Water transport had been the catalyst for the market institutions development up to the time of industrial revolution. At the same time, the development of oceanic navigation in the XVI–XVII centuries had a different impact on the socio-economic development of the major maritime powers of that period (Portugal, Spain, Dutch republic, England). The industrial revolution strengthened the interdependence between transport and the factors of institutional development of advanced countries. The formation of the transport network and particularly the railway network as an innovative and the most «institutional» kind of transport in the most developed countries of that period (England, USA, France), has led these countries despite significant differences to very high positive economic results. This is explained by the essential coherence of the different variants of the capitalism existed in these countries, based on inclusive institutions. At the same time, private financing of the railway business required the consolidation of the efforts of many entrepreneurs. It stimulated the development of corporate institutions and the growth of joint-stock capital. Institutional features of the Russian Empire predetermined a special model of the railway network creation in the XIX century. One of these key features were personalized relations as the basis of the institutions of the «closed access society». The dynamic expansion of the Russian railway network was carried out through a railway concessions. It is quite progressive institution of public-private partnership. But the low level of the country's fundamental institutions that supported the archaic «closed access society» had a negative impact on the development of railway transport. This resulted in corruption in decision-making related to the concessions assignment. In turn, it was the main reason for irrational choice of new lines, ineffective procedures for determining concessionaires, overestimated construction costs and costly operation of many railway lines. Despite this, the creation of the railway network had a significant impact on the development of the industrial economy and institutions of capitalism in Russia. The development of transport infrastructure in conjunction with the development of socio-economic and public institutions can provide a huge synergetic effect, a powerful impetus to the development of the economy and society within the framework of current institutional modernization.

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Institutional Analysis of Bounded Rationality of the Contemporary Russians

Institutional Analysis of Bounded Rationality of the Contemporary Russians

Journal of Institutional Studies, , Vol. 9 (no. 4),

The paper argues that behavior of present-day Russians is inconsistent with standard Neoclassical economics and can be better explained by the synthesis of various branches of Institutionalism and Post Keynesianism. Authors try to show that the present-day Russians are characterized by bounded rationality when they invest in health and financial assets, by fits and starts spend their incomes and cannot predict future levels of these incomes. Sometimes such bounded rationality manifests itself as investor myopia – a phenomenon that describes a situation when people exclude future variables from consideration starting from some threshold point of time. Investor myopia can lead to negative investment in health via smoking and heavy drinking, and also generate non-rational saving behavior. Furthermore, the contemporary Russians behave in the opportunistic manner. In particular, in the course of important examination writing the majority of people prefer to cheat off. Finally, the social pressure modifies the consumptive choice of the present-day Russians; in other words, this choice is not intrinsic. These statements are verified on the base of opinion poll findings by authors in 2016 and 2017. Sample included 521 persons, mainly young people. These data are analyzed by means of econometric – binomial and multinomial logit-models. The results of these studies show that the contemporary Russians are really characterized by bounded rather than perfect rationality. One of the conclusions is that fee-paying educated students are significantly less rational in their saving choice.

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The Impact of Institutional Changes on the Vertical Interaction in Trade

The Impact of Institutional Changes on the Vertical Interaction in Trade

Journal of Institutional Studies, , Vol. 9 (no. 4),

The Law on Trade was adopted in Russian Federation in 2009. Its main aim was to protect suppliers because suppliers have significantly less bargaining power than retailers (the weak position of suppliers in the bargaining power due to the difficulty of switching to alternative buyers, i.e., outside options (Dzagurova, Agamirova, 2014). The process of adoption of the law and its further application was accompanied by discussions among economists (Avdasheva, 2012; Radaev, 2009, 2010, 2011a, 2011b, 2011c, 2012; Novikov, 2009). On 15 July 2016, the new version of law “On the Principles of State Regulation of Trade in the Russian Federation” from 28.12.2009 has been enacted. This article analyzes the impact of change in regulation norms on the parties engaged in vertical interaction. In particular, the new law limits the premiums that suppliers pay to retailers for the sale of certain amount of goods and services from 10% to 5%. Besides that, it became a common practice to include promotion, logistics, preparation, processing and packaging in rewards. Also, changes involved extended payment terms reduction. However, new regulation norms can create serious problems for small suppliers whose rights had to be protected. In particular, it happens because of the absence of a classification of such vertical restraints that take into account the motives of the parties involved.

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Narrative and Institutional Economics

Narrative and Institutional Economics

Journal of Institutional Studies, , Vol. 9 (no. 4),

This article addresses a range of questions associated with the occurrence of a new field of study – narrative economics, which is considered in the context of modern institutionalism. Pioneering works of R. Shiller, G. Akerlof and D. Snower spotlighted the importance of analyzing narratives and narrative influence when studying economic processes. In this paper, a qualitative study of narratives is seen through the prism of an answer to the question: «How do prescribed narratives influence institutions and change them? ». Narratives have much in common with institutions since very often, explicitly or implicitly, they contain value judgements about social interactions or normative aspects shaping behavioral patterns. The identification of dominating narratives enables us to understand better how institutions influence economic (social) action. Repeated interactions among social actors are structured through understanding and learning the rules. Understanding of social rules comes from the language – we articulate and perceive the rules drawing on common narratives. Narratives and institutions are helpful when actors gain knowledge about various forms of social communication. Digital technologies, mass media and social networking sites facilitate the spread of narratives, values and beliefs; this process is characterized by increasing returns. Studying narratives and institutions is crucial for modern economic theory because it helps to improve qualitative and quantitative methods of analyzing empirical evidence and enables researchers to understand complex economic processes.

Views: 267

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