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And rights: external and internal institutions, a modern view of the issue

Each individual (person) performs economic actions, and this process cannot take place in isolation, this action requires a society. That is why the question of society as a whole is so important and Institute of Economics and Law in particular.

Institutions are nothing more than actions performed by an individual. These are behavior matrices, algorithms and schemes that are more or less effective under certain conditions. An eloquent example: the restrictions that are imposed on the economic behavior of a person due to the influence on him of different religious cultures.

On external and internal institutions of economics and law

First, let's define the concept of an institution and an economic institution.

An institution is a set of statuses and roles, the purpose of which is to satisfy certain needs of a person in particular and society as a whole. The semantic definition of the concept of "institution" can also be found in social psychology and political philosophy. Economic theory was first enriched with this concept, thanks to the analysis of Thorstein Veblen.

An institution is considered a way of thinking that has become widespread. When talking about institutions, they mean:

• separately taken relations between society and the individual;
• the system of life of society as a whole;
• standardized social habits;
• prevailing spiritual position;
• common opinion about the way of life in society.

Other treatises present a slightly different definition to the public. An institution is a set of rules and mechanisms, the main purpose of which is to ensure interaction between people. Institutions are a collection of formal rules and informal norms. They are designed to structure the interaction of an individual within the systems of a modern economy.

Institutions of economics and law must regulate the legal use of valuable natural resources and guard the principles of access to them. Scarce resources and the desire to own them are the basis for conflicts. Institutions, on the other hand, structure and consolidate the rights of individuals to certain resources and thereby prevent such a struggle of interests.

Institutions are concerned with defining the rules of the game, as well as the goals to be achieved in this game. However, institutions are not allowed to calculate the moves that players make during the game. Thus, they leave the choice of moves and incentives to the players. One of the main purposes of institutions is to find ways to mitigate or prevent conflicts and bring them to full resolution.

The economic literature defines the internal (local-organizational) and external (systemic) types of institutions.

External and internal types of the institute of economics and law

External (system) are considered institutions that are designed to determine the dominant type of economy. They establish and follow the basic rules of economic activity, include political and ethical norms.

Internal (local-organizational) institutions are created to regulate structuring interactions. Their work is aimed at concluding various types of transactions in the open and domestic markets. For example, trading exchanges, firms and banks are institutions that regulate transactions between economic entities. They reduce transactional, potential risk. Such institutions function in conjunction with related organizations. Through this interaction, a dichotomy is created.

Dividing the institutions of economics and law into two parts: systemic and local, one can analyze the institutional equilibrium. The most obvious thing that can be taken from this analysis is that institutional “markets” of external and internal types have different functionalities. However, this does not mean that they do not function among themselves. The functioning of external and internal institutions is similar to the interaction of goods of a higher and lower order, described by K. Merger. External, local-organizational institutions can be compared with the goods of the highest level, and internal, systemic ones - with the lowest level of goods.

The economy in transition ideally characterizes the features of various institutions based on the development of corporations and the market economy. Institutions for the economy in transition were created to protect and guarantee property rights, liability and contractual obligations.

The institutions of the external economy are elements of a free order at the level of the State, pursuing a general legal and democratic policy. Both types of the institution of economics and law have common features: they arise when the division of labor acquires a system and these institutions operate on contractual relationships.

Systemic institutions determine the type of economic concept. Local organizational institutions structure relationships in markets, commodity exchanges, investment and credit and financial industries.

Institutions of modern economics and law: a modern view of the issue

The theory clearly shows the quality of the legal structure and the definition of property rights. All this constitutes modern economic development as a whole. Modern institutions of economics and law determine certain rules of the "game" of the individual in society.

Economic development is impossible without investment, and investment would not exist without the development of the credit system. The successful functioning of domestic financial markets is not possible without protecting the interests of creditors. All this together constitutes an institutional structure with its own characteristics, rules and privileges.

Modern economic institutions in appearance are characterized by independence obtained from the State, while modern internal institutions have independence from society. If an economic institution is weak and lacks outside support, it only shrinks the economy of unitary and federal systems.

A unitary economic system with weak institutions has vague boundaries separating private powers and the public sector. In the Russian Federation, the main problem of budgetary federalism is the weakness of external institutions. Within the public sector, socially sanctioned institutes of economics and law.

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It is known that the Soviet economic system lacked those mechanisms and institutions that are the main subject of study of Western economic science: competitive (albeit imperfect) markets, currency exchanges, many financial instruments, etc. Russian economists had to develop certain blocks of economic theory, and they did it in spite of the ideological pressures. Let us consider several specific institutions of the Soviet economy and the problems associated with them. These institutions set the framework for the Soviet economy, and the country will feel its consequences for another 20-25 years. Up to 80% of the fixed assets that are used by today's enterprises were created under Soviet rule. During the same period, it grew to 70% of workers who work now, and up to 50% of workers who will work in 10 years. Their economic, legal, technological culture was formed in the conditions of the Soviet-type economy. Consider institutions such as: the party, the state plan and the enterprise.

In literature, the Soviet people, members of the CPSU and the Politburo were positioned as owners in the Soviet-type economy. This is most likely not the case. It is enough to recall how the elections to the party bodies were held in order to abandon the idea that the Soviet people were the owners. The political structure that existed in the USSR opened the way to the top of the bureaucratic pyramid only for people who were party members. This was an option of 17 million party members. The Politburo could include 17 people, that is, one person in a million. But, at least, they did not choose from the non-party members, only the party members had a chance to enter. On the other hand, everything cannot be reduced to the Politburo, because the members of the Politburo could be re-elected if they lost the support of the secretaries of regional committees, members of the Central Committee, or clearly did not fulfill the tasks assigned to them, etc. self-picking, interest has always focused on the top. There are a number of serious works on this score. Svetozar Pejovich, a prominent institutionalist who wrote about the Soviet economy in the 1970s and 1980s, considers the Politburo to be the supreme owner, because its members bore some responsibility (liabilities) for their decisions. However, the fact that the Politburo was the ultimate decision-making authority does not mean that its members were the real owners.

Members of the Politburo did not exist as real owners - they were very significantly limited in their decisions and could not go beyond the rather strict norms of consumption. The limited possibilities of satisfying personal interests, material consumption for themselves and their families, which the members of the Politburo possessed, clearly demonstrate that they were not owners. They were the top executives, and they were as tightly squeezed as their subordinates, party bureaucrats, if not more. The owner is free in relation to the subject of his property, and the members of the Politburo were not free as much as possible. Mutual liability is a very accurate characteristic of the system that existed in our country.

The hypothesis was widely discussed (and it is closest to the truth) that the collective owner in the USSR was the nomenklatura. This point of view was shared, for example, by M. Voslensky and M. Djilas. The nomenclature included all the leaders included in the administrative and party systems of subordination (that is, about 1 million people). Party organizations nominated and approved their candidacies. All personnel movements were carried out from the corresponding department or the Central Committee, or regional committees, or district committees of the CPSU. By controlling personnel appointments, the party thus controlled the replenishment of the “new class” itself.

The economy of the Soviet type is often compared to the "Asian" mode of production, which was also characterized by a pyramid of officials (although there was a tsar at the top, but in many states he became a ritual victim after some time).

It can be assumed that the Soviet system is a unique system in which there was no supreme owner at all with a free choice in relation to objects of public property. There is a fundamental, from the point of view of economic theory, provision: always and everywhere you need a full unconditional private owner; if the interests of the private owner are not protected, then in any distribution of property the system will be economically ineffective.

The classics of Marxism believed that commodity relations in society are harmful because they stimulate egoism, and they viewed them from a purely technological point of view, believing it possible to collect all resources and all information in the center, calculate them in a planned way and distribute them in an optimal way. institute soviet economics planning

The idea of ​​a "one factory" dominated our political economy. In the 1960s and 70s. prominent mathematicians who worked at the Central Economics and Mathematics Institute (among whom was, for example, S.S. Shatalin), created a theory of the optimal functioning of the socialist economy - SOFE, which assumed the possibility of optimizing all flows at the level of the national economy, which he represented as “ of a single factory ”. Naturally, this was only a theoretical model, in practice it was not applicable. In reality, three types of transaction costs hinder society from functioning as a single factory - measurement costs; costs of acquiring and transferring information; agency costs. But all the same, public property, which acts as the property of the socialist state, had to find in itself some mechanisms of implementation, and state planning became such a mechanism.

1.moral hazard in market transactions:

By hiding the implicit characteristics of the product being sold

Unfair Disposal of Trusted Property

2. moral hazard in organizations. Leads to increased costs due to the following situations:

The need to increase monitoring

Extending a profit share to the employee as a way to solve the problem of moral hazard.

Types of managers' moral hazard.

1.excessive consumption in the workplace, that is, he consumes a large amount of goods

2. the difference in goals leads to the fact that investments in production can be carried out at the expense of dividends, that is, at the expense of the owner.

3. expansion of operations beyond the limits of optimality, since the manager of large companies is more respectable.

4. opposition to absorption.

The source of the manager's opportunism.

1. use of the position in order to obtain benefits at the expense of the owner.

2. time preferences - it is better to increase the volume of goods today at the expense of tomorrow, and the owner would do the opposite.

3. raising the position, career, that is, with the goal of career advancement, the manager acts in spite of the owner.

6. Opportunism. Extortion concept.

The concept of imperfection of information, together with limited rationality, leads us to the concept of opportunism. According to Williamson, opportunistic behavior is the pursuit of personal gain using deceit. There are 3 types of opportunistic behavior:

Adverse selection

Moral hazard

Extortion is a hold-up problem. It appears at the ex post stage. The agent's behavior is aimed at forcing the counterparty to revise (change) the terms of the contract, if the agent has greater bargaining power. For example, investments in specific assets. Their effectiveness is great within the framework of this transaction:

Val - the value of the asset outside the transaction.

Vt is the value of the asset within the transaction.

S = 1 - nonspecific asset

S)