Economics /14. Economic Theory

PhD student Olga Demydiuk

Faculty of Economics of Taras Shevchenko Kyiv National University

Institutional interpretation of the nature and characteristics of modern economic systems

The study of the nature and characteristics of modern economic systems gained great importance during the last quarter of the last century due to social and economic transformations in both developed and developing countries. Despite numerous studies and significant results achieved in this field, more and more researchers’ attention attract institutional theory that can be the basis of their complex and generalized analysis.

A significant contribution to the study of the nature and specifics of modern economic systems made well-known Western researchers A. Smith, F. List, K. Marx, J.M. Keynes, M. Weber, W. Eucken, M. Porter, J. Stiglitz, P. Samuelson, R. Kaufman, F. Lopez-de-Silanes, A. Shleifer, G. Kleiner and others. New theoretical and methodological research tools of modern economic systems based on principles that are different from classical economics offered by representatives of institutionalism. Among the scholars of this area should be mentioned Western economists such as O. Williamson, D. Grosman, H. Demsets, D. North, O. Hart and Ukrainian scientists V. Bazilevich, G. Bashnyanin, A. Galchinsky, V. Geyts, N.Grazhevskaya, A. Gritsenko, P. Eshchenko, B. Kulchytsky, S. Panchishin, Y.Pahomova, A. Filipenko and others. At the same time, complications of structural characteristics and dynamics of the development of modern economic systems require further researches in this area.

Generally accepted that the characteristic features of modern economic systems are complexity and ambiguity of relations between their structural elements. In our view, it is caused by increasing system load – diversify of human needs and the necessity of their optimal satisfaction in terms of limited resources. These circumstances increase the instability of modern economic development, which becomes a source of economic tensions both at the level of national economy and in the global economy [3, p.19].

In these circumstances, arises the need in the formation and use of unorthodox theoretical and methodological approaches to the analysis of the nature and characteristics of modern economies. In this context, deserves attention an institutional economics, which reveals new meanings to familiar economic phenomena and processes. From the perspective of institutional paradigm adherents, economic system appears as a “product” of the social environment, specially formed and aimed in a certain direction under the influence of external and internal determinants [5, p.76]. Here we are talking about evolutionary open environment, which is exposed to external influences and responds to it. Hence institutionalists criticized one of the main tenets of neoclassical theory - equilibrium in the economy, believing that the pursuit of market forces to equilibrium deforms a more powerful impact of social forces [2, p.38].

It is important to note that institutionalists recognize the active role of the state in the development of economic system at all stages of social reproduction, but they understand it not in a Keynesian and Marxist sense (as demiurge of economic process), but in the context of continuous and contradictory interaction of business entities [4, p.92]. Therefore they substantiate the thesis according to which the state should carry out selection of institutions and resist opportunistic behavior of firms and individuals. Thus the notion of “institution” is directly related to systemic beliefs about society, because the institutions purpose lies in implementation functions that provide functioning of society as a whole [6, p.211].

Institutional approach to the study of the nature and characteristic features of modern economic systems determines their study in the general and social context considering integration, interdependence and dominant influence of institutions on the economic environment. According to the institutional research program specifics of economic system is determined by type of society and existence of historically stable institutional arrangements for the operation of the economy and society as a whole. Scientific objectives of economic analysis primarily consist in the fact to empirically identify and describe appropriate institutional factors of development of economic systems and determine their prospects [7, p.3-4].

Within the framework of institutionalism modern economic system is not seen as a result and a product of the individual economic entities behavior but as a system of relations that is “standing above them” and describing the development of the structure as a whole. This approach allows not only take into account the complexity and structural diversity of exogenous and endogenous factors of development of modern economic systems, but also takes into account their national characteristics [1, p.176]. Thus, the use of the institutional approach to the analysis of the economic system of modern Ukraine allows to identify its following characteristics: asynchrony of functioning of the economic system components; discreteness of transformations related to the degree of readiness of the society to change the familiar rules and regulations; poor quality of social protection of population and environmental safety; unfinished transition from informal to formal institutions and incompleteness of system of guarantee conditions to maximize their performance. Consideration of these features is an important prerequisite for the development and implementation of post-crisis development strategies and integration prospects of the national economy.

References:

1. Bazilevich V.D., Ilin V.V. Metafizika ekonomiki: Monografiya. [Metaphysics of economy: Monograph] – K: Znannya; M.: Ryibari, 2010. – 619 p. [in Ukrainian]

2. Furubotn E. G., R. Rihter. Institutyi i ekonomicheskaya teoriya: Dostizheniya novoy institutsionalnoy ekonomicheskoy teorii [Institutions and Economic Theory: Achievements of new institutional economics] / Per. s angl. pod red. V. S. Katkalo, N. P. Drozdovoy. SPb.: Izdat. dom Sankt-Peterb. gos. un ta, 2005. – XXXIV 702 p. [in Russian]

3. Grazhevska N. I. EkonomIchnI sistemi epohi globalnih zmIn. [Economic systems of the era of global changes] – K.: Znannya, 2008. — 431p. [in Ukrainian]

4. Kastels M. Informatsionnaya epoha: ekonomika, obschestvo i kultura [Information era: Economy, Society and Culture] / Per. s angl. pod nauchn. red. O.I. Shkaratana. M.: GU-VShE, 2000. – 711 p. [in Russian]

5. North, D. Structure and Change in Economic History, New York, W.W. Norton. 1981.- 419 р.

6. Ohmae, K. The End of the Nation State: The rise of Regional Economies. – N.Y.: Free Press, 1995. – 190 p.

7. Williamson, O. The Economic Institutions of Capitalism: Firms, Markets, Relational Contracting, New York, Free Press. 1985. – 402 р.