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Cooperation versus Competition in Works of Russian Evolutionists

Cooperation versus Competition in Works of Russian Evolutionists

Journal of Institutional Studies, , Vol. 9 (no. 1),

One of the fundamental assumptions of mainstream economics is that competing agents maximising individual utility comprise the near totality of economic activity. However, this assumption attracts criticism because there is little experimental evidence to suggest that the competitive model is the only form of economic activity. Therefore, searches for other plausible theoretical foundations for economic activity, such as cooperation and mutual aid, are still relevant. In this connection our inquiry reintroduces a debate which occurred in Russia in the 19th and early 20thcenturies. Responses to Charles Darwin’s “The Origin of Species by Means of Natural Selection ..." (1859) are considered, especially critiques that stress Darwin’s emphasis upon competition and struggle in natural selection that can be traced to his reliance upon ideas taken directly from Thomas Robert Malthus, and that appear integrated into “Origins … “ as Chapter Three “Struggle for Existence”. The historical basis of the similarity between both these British scientists’ views are analysed. We consider challenging contributions made by Russian scholars about the role of cooperation and mutual aid in evolution as an alternative and additional principle to competition and it is shown that this approach has been dominant among Russian researchers, regardless of their political views and preferences. We place special emphasis upon Peter Kropotkin’s focus upon cooperation and mutual aid in natural selection and evolution in his book "Mutual Aid. A Factor of Evolution" (1902). We show the relevance and prospects of this approach of Russian evolutionists. It is confirmed by the latest developments of evolutionary game theory which show the long-term instability of the individualistic Zero-determinant strategy. In conclusion, Thorstein Veblen ’s connections to Peter Kropotkin are considered and the similarity in their approaches to the role of cooperation in social evolution is demonstrated.

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Institutional Reinforcement: Three Types of Relations

Institutional Reinforcement: Three Types of Relations

Journal of Institutional Studies, , Vol. 9 (no. 1),

The paper highlights the issues related to the concept of institutional reinforcement, both associated with endogenous institutional change and institutional reproduction as well as with other institutional phenomena. The concept of institutional reinforcement is analyzed through the prism of three relationships – between the institutions in the diachronic, between institutions and their carriers in the synchrony, between the counteragents while choosing a particular type of institution as a mechanism of regulation of transactions.
 
For the characteristics of the first type of relationship we use the concepts of institutional reinforcement and quasi-parameters – endogenously varying parameters of the infinitely repeated game which directly do not cause the behavior of the players. Changes of quasi-parameters called by institutions may reinforce or undermine them. Reinforcement refers to the case when quasi-parameters changes lead to a self-sustaining behavior.
 
For the characteristics of the second type of relationship is introduced a distinction between a standard type of agent – "economic man", motivated to achieve the economic goals, and a type, introduced as an alternative, known as "institutional man", acting under the influence of institutions and motivated to change his institutional position.
 
The need to address to the third type of relationship occurs in a situation of institutional choice when economic agents are faced with the dilemma of which of the institutions or some combination of them prefer as a mechanism for implementation of the transaction. Examples of such a choice are the formal institutional mechanisms of contracts and informal ones of trust, which, being jointly used, can both reinforce and undermine the relationships of counteragents.
 
Features of institutional reinforcement in all types of relationships are discussed in relation to the stationary and non-stationary economy, bearing in mind, above all, a Russian non-stationary economy.

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The Reasons of Differences in Dynamics of Economic Grown in Portugal and Holland in the XV-XVII Centuries: an Institutional Viewpoint

The Reasons of Differences in Dynamics of Economic Grown in Portugal and Holland in the XV-XVII Centuries: an Institutional Viewpoint

Journal of Institutional Studies, , Vol. 9 (no. 1),

The paper is devoted to comparative analysis of socio-economic development of Portugal and Holland – two small nations who during certain periods of their history obtained European leadership and played pivotal role in Europe’s transition from Middle Ages to Modernity. Analysis is performed on the basis of the institutional theory. Based to a large extent on theoretical concepts of D. North and D. Acemoglu-J. Robinson, the author notes substantial similarity of the initial conditions in both countries in the Middle Ages – their size in terms of territory and population, geographical location, long coastal lines, early successful development of navigation, fishing and construction of vessels, emergence of strong navy and trade fleet, non-fertile arable land, grain imports, etc.
 
Following that the author then looks for “small disparities” which gradually and having been influenced by external shocks have led to different paths of socio-economic development. These shocks include climatic changes in Holland in XIV century and – in case of Portugal –foreign policy issues (struggle against Kingdom of Castile); and then – the Great Geographical Discoveries.
 
The paper analyses in detail the impact of foreign (especially colonial) trade on development of both countries. The process of gradual loss of leading positions in international trade first by Portugal and then by Holland is considered. Author states that as opposed to Portugal, who remained backward agrarian country until XX century, Holland preserved its position of one of the richest and most advanced countries in Europe even after having lost its monopoly position in international trade.
 
In the final part of the paper the author analyses the reasons for divergence of Holland’s and Portugal’s development routes. In relation to it, the following concepts are considered: the concept of the cultural capital by L. Harrison; theory of limited/open access societies by D. North, J. Wallis and B. Weingast; theory of D. Acemoglu and J. Robinson on the role of extractive vs. inclusive political institutions. In conclusion the author analyses the impact of the economic structure of both countries at the moment of their active involvement into international trade on further economic development.

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The Capitalism, Rent and Democracy

The Capitalism, Rent and Democracy

Journal of Institutional Studies, , Vol. 9 (no. 1),

By inertia, which derives from Adam Smith, modern capitalism is described as a free-market competition. This historical model has worked while the market expands and the availability of resources increases. It provided the opportunity to maintain the political order of the welfare state as a form of non-economic egalitarian distribution of resources, which mitigates inequality and class antagonisms generated by market. However, once capitalism has engulfed the whole world, it is more prone to crises: competition intensifies, markets of demand and market outlets do not expand, technological progress creates a growing structural unemployment, economic growth due to the completion of the global village-city transition stagnates, the resources of all the peripheries are almost exhausted. As a result, nationalism and protectionism arise, the polarization between the global center and the periphery increases, and there comes the image of undemocratic and non-egalitarian labor less society on the horizon of the future, with the precariat and the unemployed growing in numbers and demanding large amounts of rent to maintain their livelihoods. Due to this, the market model of capitalism is gradually transforming into a rental one, where the pursuit of profit, the main motivational factor intrinsic to the market, is removed by the pursuit of rent and the redistribution of markets by non-economic ways. In this context, the state becomes the key economic actor, which distributes resources by extra-market means within the hierarchy of rental groups that form the framework of a new structure of the political community.

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Transaction Cost and Activity of Economic Agents

Transaction Cost and Activity of Economic Agents

Journal of Institutional Studies, , Vol. 9 (no. 1),

The goal of the present paper is to clarify the role of transaction cost for existence of an economic agent. It is demonstrated that the opposition of transaction cost and transformation cost is not rigid and there are costs that contain both transaction and transformation component. In addition the amount of transaction cost depends on parameters of company’s activity. This is why it is hardly possible to find the precise minimum of transaction cost and the model of organization of transactions within firm will be flexible.
 
The firm’s structure contains special transaction divisions (centers of transaction cost) that are necessary for existence of the firm as a mechanism of organization of transactions (opposed to market). The status of these divisions depends on firm’s size.
 
Transaction divisions can also exist outside the firm. They will minimize transaction costs of other economic agents on the basis of external effect of scale. External transaction divisions can exist both as collective structures (coordinating centers of strategic alliances) as well as independent ones (franchisors).
 
A comparative analysis of transaction divisions and centers of cost was done. It was demonstrated that these elements of the firm have different economic and organizational structure.
 
The notion of cost of external profitability was introduced. This notion can be used to analyze reasons for merger of companies or for their existence as independent structures. It is demonstrated that one of the functions of the firm is to use resources that cannot be used within independent production units.

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Consumption Behavior of Middle Strata in Times of Economic Crisis

Consumption Behavior of Middle Strata in Times of Economic Crisis

Journal of Institutional Studies, , Vol. 9 (no. 1),

Based on the data of national representative surveys carried out by IS RAS in 2014-2016, the author presents analysis of consumption specifics in middle-income groups in times of current economic crisis. It is shown that although in modern Russian society middle income groups make up the majority of population, they cannot be directly correlated with the middle class defined in class theory framework. Middle-income groups are heterogeneous in different aspects, including their consumption specifics. Their standard of living remains quite modest, although it is significantly higher than the “survival standard”. New economic conditions led to widespread economy practices among them - primarily on consumption, followed by economy on hobbies and vacations. Economy practices also seriously affected middle-income strata investments in human capital – usage of paid educational and health services (this type of economy was more widespread among lower middle-income group than higher). Although representatives of the middle-income strata are quite actively using paid medical services (and relatively rarely – paid educational services), the reason for this more often lies in inaccessibility of free analogues rather than in search for the higher quality. Process of durables renewal in middle strata during the crisis was not as active, but their standard set of durable goods still widened over the past two years - primarily due to the relatively complex technological durables that they are gradually transferred from the category of innovation goods to the extended standard. In this regard, the upper middle income group successfully performs the function of the innovative consumer.

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Approaches to Identification of Institutions in Institutional Economics

Approaches to Identification of Institutions in Institutional Economics

Journal of Institutional Studies, , Vol. 9 (no. 1),

The paper deals with the methodology for identification of institutions from institutional economics perspective. The differences between the perspectives provided by old and new institutional economics are highlighted. These differences are interpreted in the context of compared pragmatist and postpositivist methodologies. This paper applies to the post-positivist approach to the identification of institutions.
 
One example of institution is provided by power-property institution. Identification of this institution in the historical and economic research is based on several theoretical generalizations and supported by array of historical facts. Another example is provided by identification of institution and institutional change in higher education based on discourse analysis and interviews with the main actors. In this paper, the regulatory institutions of higher education are analyzed as well. The concept of power-property institution is extended to the higher education by proposing hypotheses on the functioning of state governing-regulating institution in this sphere. This institution prescribes the actors to behave in accordance with the objectives of public policy, which can only be implemented in the form of bureaucratization of higher education. The paper describes the behavioral regularity generated by an identified institution. Functioning of the governing-regulating institution in higher education is illustrated by examples of behavioral regularities emerging from activities in accordance with this institution. The paper also shows the possibility of falsification of proposed hypothesis.

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Higher Education: Reputational Effects, Distorted Signaling and Propitious Selection

Higher Education: Reputational Effects, Distorted Signaling and Propitious Selection

Journal of Institutional Studies, , Vol. 9 (no. 1),

In the paper the authors attempt to underpin the hypothesis that under certain conditions a propitious selection may take place on the higher education market. It is a phenomenon when brand universities automatically reproduce their positive reputation without improving the quality of teaching due to influx of talented entrants. The authors apply econometric modelling and regression analysis based on survey of first-year students from Moscow to demonstrate that graduates with high USE marks really prefer to choose among brand universities; moreover, they appreciate a possibility to obtain a prestigious diploma even more than that of acquiring a particular profession. However, entrants do not possess full information about the quality of teaching in a particular university. The analysis presented in the paper shows that university rankings do not contribute to overcoming of this information asymmetry, since they transmit distorted signals caused by the methodology of ranking. The rankings, first of all, accentuate academic activity of teachers rather than educational process and interaction with students. For this reason, higher schools often adopt such a strategy to meet the ranking criteria as much as possible; they also tend to improve namely these indicators disregarding the other to become a leader. As a result, brand universities may surpass ordinary universities not due to rendering educational services of higher quality but due to selection of best entrants and peer-effects. These factors allow them to have excellent graduates, thus maintain positive reputation in employers’ opinion and simultaneously raise the brand value by advancing in a ranking.

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Regional Institutional Structure in the Context of Innovative Industry Development

Regional Institutional Structure in the Context of Innovative Industry Development

Journal of Institutional Studies, , Vol. 9 (no. 1),

The paper proves that successful innovation-oriented development of the industrial complex of the region can be ensured through the creation of adequate institutional structure. As a theoretical and conceptual platform for this task the use of regional institutionalism is suggested. It is reasoned that integration component plays an important role in providing of the innovative development of the industry in modern economic realities and the potential effects of integration on meso- and micro-levels of economy are provided. Integration of industrial structures potential at the same time assumes expansion of a partner segment of the entities relations in the market environment on the basis of network, cluster, and integration approaches convergence to management in the industrial development. On the basis of the international experience analysis it is illustrated that forming of multichannel partnership of actors in the industrial sphere with a vector on an innovatization requires creation of the corresponding institutional conditions. It is established that the main objectives of the relevant institutes consist in legitimization of various forms and technologies of partnership and stimulation of economic entities interactions. The first problem is solved by means of legal support of integration and partners’ interactions, the second one - with the use of a program and project approach. The basic structural elements and functional areas of regional institutional structure in the context of innovative industry development are determined. It is shown that the institutions of the partnership and monitoring of the obligations implementation by integration formations participants can have formal and informal nature, at the same time the trust institution is especially important. In work significant influence of regional specifics on institutional structure and integration of economic entities is proved.

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In a Trap of Neoclassical Economics and Marxism

In a Trap of Neoclassical Economics and Marxism

Journal of Institutional Studies, , Vol. 9 (no. 1),

This paper is a reaction to the book "Economic ideas and the world economic environment: a retrospective of interaction". The idea of writing a book with this title is just excellent. Traditional consideration of the development of economic ideas as exclusively intellectual history cannot give understanding of their evolution, since this evolution is influenced (often critically) by a large number of external "factors". Why did I take the word "factors" in quotation marks? It is because this term is not very suitable to explain the evolution of economic ideas. It orients us to the causal model explaining this evolution, which for this purpose is totally inadequate. What kind of model, instead of causal, must be used here? In order to answer this question it is necessary to keep in mind that economic ideas are generated, developed and transmitted by people, immersed in certain social relations. These social relations are governed by certain rules, so in order to understand the evolution of economic ideas it is necessary to identify these rules. These rules are not confined to the desire of economists to understand economic reality. As it is shown by many historical studies of the real development of the economic discipline, the hypothesis, that social relations within the community of economists are motivated solely by the desire for a more accurate reflection of economic reality is fundamentally wrong. The author of the book is based on the hypothesis that "the theory is... more or less truthful reflection of contemporary to it conditions". The main, I would say fatal, mistake of the author of the book under consideration here is to use a causal model explaining the evolution of economic ideas, and selection of "technological factor" as a decisive factor acting in the framework of this model.

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