Alexander Auzan
The economy of everything. How Institutions Define Our Lives
© Auzan A., 2014
© Edition in Russian, design. LLC "Mann, Ivanov and Ferber", 2014
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This book is well complemented by:
Freakonomics
Stephen Levitt, Stephen Dubner
Economy myths
Sergey Guriev
How people think
Dmitry Chernyshev
Superfriconomics
Stephen Levitt, Stephen Dubner
Dear reader, I have not written the book that lies before you. I slandered it, dictated it, read it like mini-lectures. The first idea of this format was expressed by Valery Panyushkin, who five or six years ago made with me the first column for Esquire magazine in the style of a mini-lecture. A couple of years after that, Philip Bakhtin, who was then the editor-in-chief of Esquire magazine, convinced me to make a whole series of such columns. And Dmitry Golubovsky, the current editor-in-chief of Esquire, suffered with me for six months, listening to my lectures and editing them.
Why has institutional economics turned out to be attractive for this kind of public lecture? One wise historian said: “Leading economists worry that institutional economics is claiming to be the mainstream in world economic theory. They are deluded. Institutional economics dreams not of a dominant position in economic theory, but of transformation into a new social philosophy. " I think that the ideas of institutional economists deserve attention because they allow us to draw conclusions about the structure of life in general and the attitude to it in particular: why we always face certain forces of social friction, why perfection is unattainable, but diversity is possible, how to choose in this diversity and etc.
I am sometimes asked if I can give a new public lecture in a week. I usually answer: "Yes, of course, just add three or five years to this." Because a public lecture is actually easy to do: you need to think a lot about these topics, speak and speak in different audiences, give lectures to students, make scientific reports; after that it is not difficult to give it some formats and briefly present your ideas. Several years have passed since the appearance of "Institutional Economics for Dummies" - under this title the first edition of the book was published - and now, taking into account new experience and new reflections, I would make my lectures somewhat different. But I didn’t change anything in those columns that were once published in Esquire magazine, and now formed this book. In my opinion, they have already begun an independent and separate life from me. This can be seen from the discussions on the Internet, to which I also listened with attention and interest. But, probably, I also have the right to a life separate from this book and the opportunity to think about other topics, dream of creating a theory of informal institutions, reflect on how the mission of the university works, and maybe in three or five years I will tell about this in some new little lectures.
Alexander AuzanWhy is the world a bunch of irrational and immoral opportunists, and how can one survive in such a world?
Why are people forced to duel, sometimes bribe traffic cops and never bargain in supermarkets?
How do vertical, diagonal and horizontal costs affect the government hierarchy, the judiciary, and your personal relationship with the laundry?
Why is it believed that the state can do everything that makes it related to a bandit, and how do we agree with it?
What is social capital, the freeloader problem and selective incentives, and British disease, red sclerosis and other socioeconomic disorders?
Why can any object be private, public, public or anyone's? Using the example of a wardrobe, Bangladeshi industry and apples from the Sparrow Hills.
How do institutional theory and practice help to understand criminals, protect undersized people, and define the political face of the state?
Why is a revolution a bad thing, why did the Americans abolish economically efficient slavery, and what rut Russia has fallen into?
Why are the elites in Russia facing the "prisoner's dilemma", everyone needs modernization, but not now, but it can be achieved with the help of schools, courts and a consumer society?
At first glance, starting a conversation about institutional economics with a person is strange. Because in the economy there are firms, there are governments, and sometimes, somewhere on the horizon, there are still people, and even those people are usually hidden under the pseudonym “household”. But I immediately want to express a somewhat heretical view of the economy: there are no firms, states and households - there are different combinations of people. When we hear: “This is required by the interests of the company,” we need to scratch a little finger and understand whose interests are meant? These can be the interests of top managers, the interests of shareholders, the interests of some groups of employees, the interests of the owner of a controlling stake or, conversely, minority shareholders. But in any case, there are no abstract interests of the firm - there are the interests of specific people. The same happens when we say, "The household has received income." Why, the fun begins here! The family is going through its own complex distribution process, very difficult tasks are being solved, in which many different negotiating forces are involved - children, grandchildren, the older generation.
Therefore, in economics, we will not get away from the question of a person. This is usually called "the statement of methodological individualism," but the name is extremely unfortunate, because it is not at all about whether an individualist is a person or not an individualist. The question is, is there anything in the social world that does not consist of various interests of people? No. Then you need to understand: what kind of person is he?
Man vs. Homo Economicus
The father of all political economy, Adam Smith, is considered the author of the idea of man as Homo economicus, and this model has been walking through all economic textbooks for many decades. I want to speak out in defense of the great ancestor. We must remember that Adam Smith could not teach at the Department of Political Economy, because in his time there was simply no such science. He taught at the Department of Philosophy. If in the course of political economy he talked about an egoistic person, then in the course of moral philosophy he had provisions about an altruistic person, and these are not two different people, but one and the same.
But Smith's students and followers no longer taught at the Department of Philosophy, and therefore a very strange, flawed structure, Homo economicus, was formed in science, which underlies all calculations of classical economics regarding behavior. To a great extent, the formation of this structure was influenced by the French educational philosophy of the 18th century, which said that human consciousness is infinite, reason is omnipotent, man himself is beautiful, and if he is freed, everything will flourish around. And now, as a result of the adultery of the great philosopher and economist Smith with the French Enlightenment, we got Homo economicus - an omniscient selfish bastard who has supernatural abilities to rationalize and maximize his utility.
This construction lives on in many economic works of the 20th and 21st centuries. However, a person who pursues exclusively selfish goals and does so without any restrictions, because he is omniscient, like gods, and all-good, like angels, is an unreal being. The new institutional economic theory corrects these ideas by introducing two provisions that are important for all further constructions and reasoning: the provision on the limited rationality of a person and the provision on his inclination to opportunistic behavior.
Man versus rationality
The enlightening idea that a person has unlimited rational abilities is refuted by the life experience of each of us. However, in our own life, we clearly underestimate the fact that our rationality, as well as someone else's, is limited. Economist and psychologist Herbert Simon received the Nobel Prize for solving the question of how bounded rationality manifests itself and how, at the same time, a person, not having infinite abilities for obtaining information and processing it, solves many life issues.
Alexander Auzan, head of the Department of Applied Institutional Economics at Moscow State University, proves that the world is a bunch of irrational and immoral opportunists, and explains how to survive it. The book is very relevant from the point of view of understanding current Russian problems.
Institutional economics is a branch of economics that studies economic relations within and between public institutions. The industry has been quite popular lately among economists, among whom there are many Nobel laureates.
Alexander Auzan. The economy of everything. How institutions define our life - M .: Mann, Ivanov and Ferber, 2014, 160 p.
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Chapter 1. Man
Human versus Homo economicus. When we hear: "This is required by the interests of the company," we just need to scratch a little finger and understand whose interests are meant? These can be the interests of top managers, the interests of shareholders, the interests of some groups of employees, the interests of the owner of a controlling stake or, conversely, minority shareholders. The same happens when we say, "The household has received income." Why, the fun begins here! Because the family is going through its own complex distribution process. In general, is there anything in the social world that would not add up from different interests of people? No, it doesn't exist. Then you need to understand: what is he, this person?
The father of all political economy, Adam Smith, is considered the author of a model of man that walks through all textbooks and is called Homo economicus - an omniscient selfish bastard who has supernatural abilities to rationalize and maximize his utility. The new institutional economic theory corrects these views by introducing two provisions that are important for all other constructions and reasoning:
- the provision on the limited rationality of a person;
- the provision on his propensity for opportunistic behavior.
Man against rationality. Economist and psychologist Herbert Simon received the Nobel Prize for solving the question of how limited rationality manifests itself, how does a person, not having infinite abilities for obtaining information and processing it, solve many life questions? Herbert Simon argued that a decision is made in the following way: when a person chooses a spouse, he makes several random tests, sets a template, a level of claims, and the first person who meets this level of claims becomes his spouse or spouse.
Man against good intentions. Nobel laureate Oliver Williamson (who won the prize in 2009), the author of the idea about the tendency of people to behave opportunistically, defined it as behavior with the use of the means of cunning and deceit, or behavior that is not burdened with moral norms.
One of the clearest examples of how these mechanisms work is the Lemons Market Model, for which the economist George Akerlof won the Nobel Prize back in 2001. The lemons model describes the so-called pre-contract opportunistic behavior and is built on a very real problem - the used car trade in the United States. The main criteria for choosing buyers: appearance is the price. But who can lower the price more? Someone who sells a not-so-good car. It turns out that as soon as a person begins to make a decision based on the appearance and price of a product, the most unscrupulous participant wins the competition, the seller of "lemon" - this is how a low-quality car is called in the jargon of American auto dealers. Decent cars are starting to be pushed out of the market. Due to the fact that the buyer is limitedly rational and cannot know everything, and the seller hides some information - behaves opportunistically - competition does not lead to economic prosperity. Moreover, it may simply collapse this market, because the quality of sellers will constantly decline. The introduction of the seller's guarantee can solve the problem. But this is already a solution to the problem by introducing certain rules - institutions.
Man versus contract. However, opportunistic behavior can be not only pre-, but also post-contract. Many of us, if not all, have had the misfortune of changing dentists. Almost always, the first phrase of a new dentist will be: "Who put the fillings on you?" He hints at the fact that everything needs to be redone, and when the rework begins and the need for additional costs arises, you have neither the criteria nor the ability to say no. There are opportunities for blackmail in construction. The theory of management even formulates the so-called "principle of Cheops": "since the time of the pyramid of Cheops, not a single building has been built in compliance with the deadlines and estimates." Having entered this process, you are forced to continue it. An obvious form of post-contract opportunistic behavior is called shirking. An employee can comply with all the formal requirements of the contract, but the result that the employer expected is not.
A person is against his own interests. People can behave and not selfishly - this is called "weak behavior" when a person identifies himself with some kind of community - with a village, with a clan. For example, South Korea has built on the basis of consanguineous loyalty chaebols - huge business conglomerates consisting of separate, formally independent firms. As a result, Koreans got extremely low costs of running a concern, because they used "weak behavior", the recognition that you are part of something larger. In Russia, this is impossible, because we have long ceased to have traditional communities and, accordingly, people have nothing to identify with.
Man against the system. It must be remembered that the concept of limited rationality and opportunism extends not only to the relationship of people with each other, but also to their relationship with the state. It is appropriate to recall the famous formula: "do not be afraid, do not hope, do not ask", which absorbed a rather tragically obtained understanding of bounded rationality and opportunistic behavior.
Opportunistic behavior is also possible within the government. And if, moreover, it is formed taking into account the effect of deteriorating selection, then it is very likely that in power you will encounter people who are not limited by moral considerations.
We should rather rely on the rules that we can use in communication with each other. It is necessary to rely on institutions.
Chapter 2. Institutions
There is an opinion that institutions are not about Russia. After all, institutions are rules. The great Russian philosophers Ivan Ilyin and Nikolai Berdyaev said that in Russia there are no institutions, but there are persons. On the one hand, the denial of institutions is associated with the undoubted selfishness of the authorities, for which, of course, it is much more convenient to live without rules, because for them this is a rather "economical" position: as I decide, it will be so. On the other hand, the denial of institutions largely grows out of our own consciousness, out of the famous Russian ingenuity. After all, an institution is an algorithm. And if you are ready to find an original solution every time, then you do not need an algorithm. Almost half a century ago, economist and future Nobel laureate Douglas North put forward the slogan "Institutions matter." Probably, for no other country in the world it sounds so controversial as in Russia.
Institutions as Convenience. A hundred years ago, the founder of institutionalism, Thorstein Bundé Veblen, discovered three such rules, which were later confirmed statistically and econometrically and were called the "Veblen effects." The first effect is called "conspicuous consumption": you buy what is more expensive because you think it is by definition the best. The second option is “joining the majority”: everyone does it, and I do it. The third option is the "snob phenomenon": you buy what no one buys. So, unless you intend to become a merchandiser and engage in lengthy market analysis, your free will in consumer decision making is that you choose between these three rules.
Institutions as coercion. Veblen said that ostentatious behavior is a form of status affirmation incorporated into credit relations, and into monetary culture in general. This is beneficial behavior. Each community imposes its own set of rules and signs, and when this system starts to work, there is a corresponding demand and predictability of the economy. There is a coordination effect.
Institutions as punishment. Any institution is not only a set of rules, but also a mechanism by which they are enforced. In formal institutions, this mechanism boils down to the fact that there are some specially trained people - tax inspectors, jailers, police officers, military - who are engaged in coercion. Within the framework of informal institutions, coercion is provided at the expense of the entire community as a whole - they will not shake hands with you or stop issuing loans.
Institutions as Struggle. Are there informal institutions in Russia? Of course have. At the same time, they are quite obviously sharpened to oppose formal institutions. Formal and informal institutions can actually live in symbiosis, supporting each other, or they can be in a state of war. India and China have a huge number of informal and illegal institutions that provide cheaper schemes than legal institutions, and this is one of the factors of economic efficiency. The problem for Russia is that many informal institutions do not lead to cost savings, but, on the contrary, create opportunities for additional costs to appear.
Any rule has both coordination and distributional meaning. As a result of any rule, the costs of some people become the income of others - simply because the rule is so designed. Therefore, no country in the world has an optimal system of rules. In relation to the war of formal and informal institutions, institutional economists talk about so-called mistakes of the first and second kind in the design of laws. The first are mistakes that are a consequence of bounded rationality, and the second are mistakes that are a consequence of opportunistic behavior, when a corruption trap is laid during the drafting of a law. And in Russia, I must say, for many centuries, legislation was built with a huge number of errors, not only of the first, but also of the second kind. This was at the same time in keeping with the corrupt interests of the bureaucracy and the political interests of the highest echelons of power.
When the body of laws is drafted in such a way that it is fundamentally impossible to enforce them all, every person is potentially a criminal, and the population as a whole is much easier to govern. As a result, a social contract is formed, in which the current system is beneficial for officials, because they can extract income from it, and it is beneficial for the authorities, because it can easily control both the population and officials - all of them are outside the rule of law. That is why informal institutions in Russia are geared not for cooperation with formal ones, but for war, because people need to survive in conditions of hostile legislation.
Institutions as a way of life. I will insist that living by rules - even bad rules - is better than no rules. A demon can only live on short horizons, planning for several months ahead - you don't even have to think about 10 years. The second takeaway I would like to suggest concerns where institutions come from. At first glance, institutions are created by the government, legislators, but in reality they are created by each of us, and every day. We always choose between several options. An apartment can be rented out under a contract, or without a contract; in the contract, you can indicate the entire amount, or you can specify a smaller one in order to avoid additional taxation. Goods through customs can be brought in and cleared in white, gray or black.
Institutional theory has a concept named after Nobel laureate James Buchanan - "Buchanan good", which is defined as a pair consisting of a "regular" good and certain contractual packaging, rules and institutions with which you buy the good. You choose not just between different products, but also between different institutions.
Chapter 3. Transaction costs
Recently, the expression "transaction costs" has become very fashionable. But if the second part of it is more or less clear, then the first requires explanation. In theory, the transaction looks like this: there is the Chicago Mercantile Exchange, the main commodity on it is grain. And now, for example, the harvest of 2011 is being sold on it: brokers conclude deals, buy futures and options, fix profits, and it is not known whether there will be a harvest. 2011 has not come yet. Property rights (and the freedoms that are inextricably linked with them) move separately from the material object.
An operation in which property rights and freedoms move separately from a material object is a transaction. And transaction costs are nothing more than the costs of this kind of movement. The study of transaction costs is based on a theorem formulated in the middle of the 20th century by the future Nobel laureate Ronald Coase. Formally, it says: regardless of how the assets are initially allocated, in the end, their optimal distribution will be achieved. But then comes the most interesting thing - a postscript in small print: if you do not take into account the so-called effect of income (which market participant has how much money) and if the transaction costs are equal to zero. Why is this theorem great? The fact that if we do not read the postscript, it reflects the usual liberal view of the functioning of the market, which puts everything in its place. But the postscript changes everything. The main takeaway from Coase's theorem is that equilibrium will be achieved, but it will be poor equilibrium because frictional forces prevent assets from being optimally distributed.
What determined the initial access of certain people to assets in the course of privatization in Russia? The fact that they had additional opportunities that the rest did not have: closed data, connections, acquaintances. Why did many owners who emerged during privatization turn out to be ineffective? Not necessarily because they were stupid or inexperienced. It's just that efficiency in our understanding and efficiency in our understanding are two different things. The real social costs of creating assets seized in the 1990s were disproportionately higher than the transaction costs incurred by new owners to get to these virtually free assets. ... And no matter how badly they manage assets, for them it is effective use.
Horizontal costs. The famous economist John Commons identified three main types of transactions, and, as it turned out later, each of them has its own costs: deal- that is, trade, control- that is, a hierarchical system, and rationing- complex ways of making decisions, in which the initiative comes from one side, and the decision is made by the other side. If you describe these types of transactions in terms of geometry, you get a horizontal, vertical or diagonal. But we are not talking about abstract figures, but about quite real things that make it possible to understand how the Chicago Stock Exchange, the Russian vertical of power or the Thai court are arranged.
Let's start with horizontal lines- transactions. For a lawyer, the deal looks very simple: freedom of contract, equality of parties. This is not the case for an economist. Formally, in a peer-to-peer, symmetrical transaction, you, as an individual, begin to experience problems that can ultimately affect the price or, for example, the quality of the product you are buying. And the decisive factors here are the costs of seeking information and negotiating. If we want the deal to be a deal after all, and not a monopoly diktat, we need special institutions. For example, consumer protection legislation in most countries assumes that the consumer has more rights than his counterparty. Part of the costs, such as the obligation to compensate for damage, is artificially shifted to the opposite side. This allows you to align the transaction, to compensate for those transaction costs that fall on the head of the consumer.
Vertical costs. From the point of view of institutional theory, an attempt to build a vertical (for example, power) is rather amusing - because institutional theory has long ago found out that it is impossible to build a vertical. Where the vertical is built, prohibitively high management costs arise. The basis of any hierarchy (for example, a state or a company) in modern society is a contract according to which you give part of your freedoms to a governing entity - be it a government or an employer.
In any vertical, the rights of those at the top are limited by a number of circumstances, including your interests and your ability to disregard the rules of the contract. Take the classic manifestation of opportunistic behavior - "shirking." You are sitting at the computer, but instead of working, that is, to observe the contract with the employer, see the Odnoklassniki website. What is the employer's way out? If he puts a controller behind you or prohibits access to certain sites, this means additional costs for him. Therefore, the employer begins to insert a transaction inside the management transaction. He says, "Old man, I know you would like not to come to work on Friday, but I ask you to do this by Thursday evening - and we will not notice that you do not come to work on Friday." And at this moment, the proud vertical begins to tilt a little.
There are other reasons why the vertical is not very vertical. For example, the more links in the transmission of information, the larger the hierarchy itself, the more opportunities for distortion in the transmission nodes. With a certain number of links and with its own interests in each node, the signal can be distorted up to the opposite. Under the influence of bounded rationality and opportunistic behavior - both from below and from above - some strange patterns remain from the vertical. And this is the result of transaction costs that are inherent in this type of transaction, when property rights and freedoms are organized through the principle of a team.
Diagonal costs. The third type of transactions is rationing. There is, for example, one common feature between England and Thailand - the operation of an autonomous, independent judiciary. When the initiative is on the side of some, the decision-making power is on the side of others. For example, parliaments adopt the country's budget, but they do not draw up the draft budget, at the most they make amendments, and the draft itself comes from the government.
Any process can be organized according to any of three types of transactions - horizontal, vertical or diagonal. They compete with each other, combine with each other in different proportions, ultimately determining the diversity of the modern world. For example, an independent judicial system operates according to the principles of diagonal transactions, but if it does not exist, the ruler administers justice - that is, a vertical is built. To understand how a court can work, I refer to a lawyer who became a great economist and founded a whole line of institutional economics - Richard Posner. He is a specialist in antitrust cases and, analyzing Coase's theorem, formulated his own theorem about how a judge should make decisions based on the presence of transaction costs. The meaning of Posner's theorem is as follows: the court must do what the market cannot do because of blood clots and congestion in the form of positive transaction costs. In its decision, the court must simulate the movement of assets that would have occurred if there were no frictional force. This is a kind of superstructure on top of the Coase theorem, which should make up for the imperfect structure of the real world.
It would seem that if we want more perfection from this world, the ultimate task should be to reduce transaction costs, to bring them to zero. But even the great Coase said: it is impossible to eliminate the damage. When you try to repair the damage, you simply roll the ball under the tablecloth, from one side of the table to the other. For example, if you declare a moratorium on inspections of small and medium-sized businesses, have you destroyed the damage? No. You have eliminated the damage from inspections for the entrepreneur, but rolled this damage onto the consumer, to the budget, to potential competitors. New people can no longer enter the market because unscrupulous entrepreneurs dominate there. The fundamental inability to eliminate transaction costs leads to the fact that we start looking for options, we run the ball on the tablecloth and see what happens to it. Costs may need to be shifted to the side where they are easier to handle. In the language of institutional theory, this idea of choosing between different options, which follows from Coase's theorem, is called the choice of a structural institutional alternative.
Based on the ideas of transaction costs and choice from many options, the world looks different, there are no normative pictures, but there are many roads, and none of them leads to complete perfection. Everywhere you will have some displaced damages, costs and your own set of pros and cons, and you must choose what is right for you.
What really affects the level of transaction costs? First of all, of course, institutions that overtake these costs from one side to the other and can affect the efficiency of the system, but not only. In the 19th century in America, any immigrant could get free land in the west of the country. In the first half of the 19th century, this operation cost as much as the paper on which the title to the property was written out. But in the second half of the century it became expensive. As the efficiency of land use has skyrocketed, so has the right to land itself. Thus, the level of transaction costs can be influenced by the most unexpected factors that are not directly related to rule systems.
All produced goods can be conditionally divided by the level of transaction costs into three classes - researched, experienced and trusted... When you come to the market for apples, you are dealing with researchable goods, the quality of which is easy to verify. In this situation, the best work institutions associated with horizontal transactions - deals. Moreover, if you try to create a hierarchy in order to be fed with cucumbers, apples and honey, then honey will disappear first, and then cucumbers with apples. Trying to reduce transaction costs, you raised them terribly because you applied the wrong institution: as we know from Soviet experience, the vertical distribution system leads to scarcity.
Things get a little more complicated when you are dealing with experienced goods, the quality of which only becomes apparent after a certain period of time. For example, buying a used car. This may still be a completely market-based scheme, but it will be more complex than in the first case, because it will include elements of industry self-regulation or insurance legislation.
The most dizzying situation occurs when you are faced with trust goods, the quality of which, strictly speaking, cannot be verified at all. The most striking examples are treatment and education. When dealing with a good of trust, rather complex institutions are needed to avoid serious failures. Depending on the level and type of costs, you will have to use completely different institutions, and if you are wrong, then transaction costs will not decrease, but will increase, the forces of friction will increase.
We can draw two practical implications from the Great Coase Theorem and transaction cost theory. The first conclusion is that there are costs that we often do not see and do not calculate, but should be. The second conclusion concerns the choice of transaction costs. Evaluate how many options you have, and don't look for options that don't have drawbacks. There are no such options. The damage is irreparable.
Chapter 4. State
The state as an excess. Douglas North once said: "On the question of the need for the state for the economy, the court retired to a meeting and has not yet returned." Studies have shown that if the State is needed, then it is not at all for what it was considered earlier. The state has substitutes everywhere. Any issue that the state decides can be resolved without its participation.
The state is like a bandit. It is necessary to change the very formulation of the question: if the state is optional, then it must exist on demand - where it is comparatively more effective than others. The more public goods you need, the more you make the state. In the Scandinavian countries there is a huge redistribution of taxes, there are many states there. This is not how the Americans work. For many centuries they said: "I do not need anything from the state, except for the provision of law and order." This was the case before the arrival of Barack Obama. The president breaks the traditional social contract. He says, "Americans need more public goods." And therefore, a not very significant, at first glance, dispute about, for example, how broad and obligatory the health insurance system should be, causes debate throughout the country - a fundamental change in the view of what is needed from the state is taking place.
There is no purely liberal answer: a small state is good, a large state is bad. Bad is when the state does not match the demand for public goods. Because then the compulsion begins. After all, the state has exactly one competitive advantage: Max Weber wrote a hundred years ago that the state is an organization with a comparative advantage in the implementation of violence. Therefore, the state is good not because it cares about people, but because it is more effective than anyone else, can coerce or threaten. That is why the mafia is his own sister.
According to neo-institutional theory, the state is derived from the model of the so-called "stationary bandit". This has been very convincingly proven, both historically and mathematically, by Mansour Olson and Martin McGuire.
The state as a resource. The Olson-McGuire theory also raises another question that is very interesting for modern Russia: how does the transition from the stationary bandit regime take place to more civilized forms of the state? The whole history of Russian privatization in terms of the theory of institutional economics looks like this: interest groups close to the government (using administrative resources) divide assets. When everything is already divided, they find themselves at a fork. The first way is that they can seize assets from each other. But this is a war, it is difficult, it is very expensive. The second way - it is necessary to change the system of rules, and from those rules that facilitate the capture, go to the rules that contribute to the efficient use of resources.
There is one caveat in the Olson-McGear theory: the transition from one type of social contract to another occurs only if there are no new hungry groups. But in Russia 2000-2004. such groups appeared, and they began a new redistribution. The repartition ended in 2008, and the former hunger groups were faced with the question of establishing new rules.
The state as a treaty. A series of property redistributions, which has been going on in Russia since the early 1990s, is tied to how the Russian state is structured and how a social contract was formed in the country. In the late 1980s - early 1990s, we did not have a social contract at all, the external manifestation of which was the collapse of the state - the Soviet Union. This breakdown occurred when the Soviet model of the social contract was exhausted.
There were two such models in the USSR. The totalitarian Stalinist society had a very powerful social contract mechanism. It consisted in the fact that people give up almost all of their personal rights, including personal freedom, in exchange for the possibility of growth - personal growth and growth of the country. In this case, the person himself as a result can be destroyed or, say, taken from the capital to the Kolyma, but these are the terms of the contract. In the USSR, the Russian peasant society was destroyed, but a peasant son could make a career and fly up to a general or a member of the Politburo - and then fall under the knife there, and then another peasant son became a red general or a member of the Politburo. In the later Soviet era, the social contract was fundamentally different: people were actually given back their rights to life and, at the same time, they were offered social guarantees. However, from the 1960s to the 1980s, these guarantees were emasculated. That is why the great empire left the historical arena in 1991 without any special convulsions.
Russian citizens approved the constitution (new treaty) in a 1993 referendum. The constitution was a compromise: Russia is both a liberal state and a social one, with a separation of powers and a super-presidential power. In fact, two ideas collided: one of them came from the president and was formulated as "freedom in exchange for support", and the other came from the majority in parliament and was formulated as "social benefits in exchange for support." The two groups "split" the articles of the constitution on the liberal and social state and were in continuous competition. By the late 1990s, there was a natural disillusionment with democracy, because democracy was idling. Another emasculation of the social contract took place, and then a formula arose with which part of the Yeltsin elite went to the elections together with Vladimir Putin: "taxes in exchange for order."
In my opinion, in 2003-2004, a revision of the social contract took place in Russia. The so-called "Putin's package" (cancellation of gubernatorial elections, reform of electoral legislation) was based on another exchange: you give us your political rights (you deposit them, do not use them), and we give you economic stability.
The state as a redistribution. In the recent history of Russia, there were not so many of them: the first generation of new hungry groups appeared in the early 1990s, the second in the early 2000s. Now in Russia, perhaps, there is only one corporation left that did not participate in the power merry-go-round and can produce a new hungry group - the military. At the same time, the social contract of the mid-2000s is rapidly exhausting itself. Putin's formula "political freedoms in exchange for economic stability" can be implemented as long as the state has reserves. As long as Putin's pact is alive, it will have to be reformulated for one of two reasons. Either because the resources to maintain it will run out, or because it is impossible to seriously engage in modernization under the conditions of a conservative treaty that ensures stagnation.
Chapter 5. Society
Community development and social sclerosis. Economists for a very long time did not want to discuss the role of society in the economy and got along with only two concepts: government and market. Where the market fails, the government shields it. But after the totalitarian regimes ruled the world in the middle of the twentieth century, it became clear that the failures coming from the state are much heavier than the failures coming from the market. There was even a special concept of "bureaucratic failures". If bureaucracy closes market failures, who closes its own failures? The place remained vacant, and then economists began to assume that society still has some kind of economic functions.
In the middle of the twentieth century, totalitarian regimes in Central Europe and East Asia were liquidated - and in 10-15 years a German and Japanese economic miracle took place; in the late 1980s, authoritarian regimes in Eastern Europe and North Asia are liquidated - where is the economic miracle? The fact is that both before the Japanese and before the German economic miracle, very important social changes were taking place in these countries. The levels of mutual trust of people have sharply increased and the scale of public activities has increased, large organizations have begun to operate, and negotiation platforms have emerged. After this surge, when the so-called social capital, and a sharp economic growth began. However, reverse processes are also possible: small organized groups pull the blanket over themselves, have enough influence to distribute the budget, and as a result, each of these groups achieves its goals, and the country moves more and more slowly, slower and slower.
Public good and the freeloader problem. It turns out that the way society is structured can depend on whether the country will forcefully develop or stop in its development. And the point here is not in the schemes of state administration, not in the government's policy, but in how active various groups of interests, large and small, are in society. The mechanisms of functioning of these groups are precisely studied by the theory of collective action, formulated by Mansur Olson. If you produce a public good, you must take into account that it has two characteristics: first, it is not competitive in consumption, and secondly, it is not excluded from access. Everyone has equal access to the public good, and it is not diminished by the fact that everyone uses it. As a result, however, it is not very clear how to cover the production costs of this public good. How is the "freeloader problem" solved? There is no single solution, but there are many private solutions, which are determined by the fact that, firstly, public goods themselves are very different, and secondly, very different groups are engaged in their production: large, small, homogeneous, heterogeneous.
Community organizations and selective incentives. But what if we are dealing not with small, but with large groups? Mansour Olson proposed a solution that he himself called positive and negative " selective incentives". Remember when Ostap Bender, when meeting him, tries to treat Shura Balaganov with beer and comes across the inscription “Beer only for trade union members”? This is a typical case of a positive selective stimulus. As for negative selective stimuli, their effect is well known to everyone who has watched the movie The Godfather. Why does the mafia immediately appear where there are trade unions? Because it is beneficial to both parties. If there are not enough positive incentives for large communities of people to produce public goods, abide by rules, and support informal institutions, then organizations that have an advantage in perpetrating violence begin to do this. The most powerful such organization is the state - the closest relative of the mafia.
Social capital and Russian fences. Why, then, in some countries, different groups produce a lot of public goods, while in others - little? This is due to how high the transaction costs of communication, contacts between people. These costs are a variable that is fixed by a special indicator called social capital, testifying to the level of mutual trust and honesty in society. Social capital can be measured in two ways. The first is through sociological surveys, in which respondents answer how much they trust other people: relatives, friends, neighbors, strangers, residents of their city, region, country. We now have 88% of people say that others cannot be trusted. But in the late 1980s, everything was completely different: 74% of people said that you can trust others. And we see how this manifests itself: now, when 10 thousand people go to rallies in Kaliningrad or Vladivostok, everyone is terribly surprised, and 20 years ago, half a million took to the streets of Moscow for anti-government demonstrations, and it was in the order of things.
The second method of measuring social capital is practiced by Americans: you throw a wallet with a hundred-dollar bill and the owner's address and see how many people will return it. I can suggest a third, typically Russian, way to measure social capital. The higher and tighter the fence, the lower the level of mutual trust in society.
Social connections and bridges along rivers. When social capital grows, the costs of communication between people fall, collective activity becomes more massive, intense, effective, and as a result, more public goods are produced. There are two types of social capital that have very different effects on later life. The first is called bonding, from the English word bond - "bond". This is a kind of enclosure within one group of people: I trust but only their own. But there is another type of capital, bridging, from the English word bridge - "bridge". This type of social capital is more conducive to economic growth because it allows you to build connections between different groups of people.
What can be done to ensure the accumulation of bridging social capital? I would say three things are required here. First, since formal and informal institutions are in opposition to each other in our country, it is necessary to bring them closer together. Second point. One Russian entrepreneur remarked very accurately: "Nothing strengthens faith in a person like a 100% prepayment." That's right, this is a huge step towards building trust. First, the prepayment will be 100%, then 50%, then 25%, and then it will be possible without any prepayment at all - because the history of relations, credit history, as the bankers would say, has accumulated. In public relations, you need to go the same way. You have to say: “We don't trust each other” ... And start developing trust.
Chapter 6. Property
Worldwide property question is, in fact, a religious issue. The most effective way to reduce the costs of protecting and maintaining property rights is to develop a consensus ideology in society that existing property is ideal, legitimate and should be recognized by everyone. The authoritarianism of the Russian government is also a consequence of the fact that people do not really recognize the legitimacy of existing property. An authoritarian political regime has very simple methods of business persuasion. He says: “I’ll step aside now - and they will tear you like a hot water bottle, because you use the folk, you have stuffed your pockets at the expense of the people! And I protect you from the people, and therefore you will give me as much as I tell you. " There is no answer to the question of which property regime is better.
The traditional economic paradigm provides for three ownership regimes - private, public and communal... The main innovation of institutional economists is that they have added another option to this model - the regime of "non-ownership" or the so-called " free access mode».
Lack of ownership. Why has no one before institutional economists been able to discern and explain the free access regime? Because it was usually believed that there could be things in the public domain that are very widespread. But it turns out that in the free access mode, economic benefits can also appear, that is, things are quite rare - for example, computer programs, or musical works, or a park bench. This phenomenon can be explained only with the help of the concept of transaction costs, which is key for institutionalists: if the costs of securing ownership of a particular asset are higher than the benefits that you receive, it becomes freely available. You will simply lose more trying to prove that it is yours and punish the one who freely uses it. And yet, in most cases, an exit is required from the free access mode. Why? There is, as economists put it, dissipation of rent, overuse of resources and undermining reproduction.
Communal property. Elinor Ostrom received the 2009 Nobel Prize in Economics for her research on communal property. James Buchanan and Gordon Tullock investigated this issue in connection with the zoning of cities - where they should be located in residential, business and economic areas, how they should be arranged. Usually, in urban zoning, only two options were considered - either state property or private. But communal property is no less important for the city. It is needed where you cannot do something without the consent of the residents. Often, opposition to private property in cities is due to the fact that the usual objects of communal property fell into private ownership.
Private property. Fifty years ago, practically all economists, when asked which property will prevail at the end of the twentieth century, answered more or less unequivocally: state property. There was only one scientist and a relatively small school formed around him, who said that private property would dominate. The name of this economist is Friedrich von Hayek, and his school is called Austrian, and they were the ones who turned out to be right in the end. Hayek was able to see the property of private property that allowed it to spread so dramatically during the telecommunications and information revolution of the 1970s and 80s. This property is associated with the so-called "hidden knowledge".
Each person knows quite a lot of things that are not easy to convey to another person. For example, a peasant knows that puddles gather on the right side of his field in April, and vegetables must be planted first on the left garden bed, and then on the right. This is a long-term experience. Now imagine how many people and efforts are needed to verbalize the entire amount of his knowledge and make it understandable to another person. But he can forget something, not say something ... on purpose. Therefore, when a situation arises in which knowledge becomes an important factor in the functioning of an enterprise (be it a farm, firm or factory), the most likely and effective choice is to make the owner of the knowledge the owner of the enterprise. Then he will use them to the fullest.
Private property has not only hidden advantages, but also hidden disadvantages. They were very well defined by the Peruvian economist Hernando de Soto, who showed that private property is unproductive when illegal or semi-legal. The point is that private property splits up assets. And it is possible to combine them and attract resources for development only if all these assets are identified. However, the owners, of course, do not want to reveal illegal assets. In his book The Mystery of Capital, de Soto proved that there are illegal funds in Third World countries that exceed all the amounts that the developed world sends them as aid. But the very illegality of these funds does not allow them to turn into capital. The easiest way out of the situation, which de Soto suggested, is capital amnesty.
Private property is a fairly expensive property regime. If you can enter the communal property regime quite quickly, then in order to enter an effective private property regime, you must first spend on a huge number of things: legalization, cadastres, accounting, property titles, information bases, and so on. On the other hand, the private regime, in comparison with the communal regime, has incomparably lower costs in making complex innovative decisions.
State property. Does state ownership have any competitive advantages? Oh sure. When mobilization, extensive development is realized, you cannot imagine anything more effective than state property. It allows you to quickly mobilize a huge amount of resources, and resources are free. That is why the first half of the twentieth century passed under the sign of a total strengthening of state regimes. It is clear that in the Stalinist USSR, Nazi Germany and Roosevelt USA, these regimes were completely different.
What is the vulnerability of the state regime? The fact that there are very high costs of making and carrying out decisions, because there is a hierarchy. A private owner can say, as George Soros likes to say: "I changed my mind" - "I changed my mind." In the state hierarchy, this is impossible, there is a huge inertia of movement. Therefore, for example, when planning development, if you guessed right, honor and praise, but if you missed, then the huge state ship will sail in the wrong direction for a long time.
Choice of property. We will not go anywhere from communal, state, private property and the free access regime. The choice of ownership regime depends on what type of transaction costs you manage to lower and what you are able to go for. For example, if the negotiability of people is high, you can more easily use both communal and private regimes. If the negotiability is low (as in Russia), you will have to use the state regime, because the state is rarely interested in how much you agree with its actions. It seems to me that it is important for a person not to create from the property of an idol. After all, these are nothing more than ways to reduce certain costs.
Chapter 7. Economics and Law
The economist is interested in the law that works, which, in essence, is a formal institution. Economists understand working laws as a collection of certain barriers, costs, which direct mass behavior. One of the researchers of institutional change, Robert Vogel, talking about the assessment of costs, said that freedom of expression has always existed, just the price was different: for the same statement in the 16th century they burned, in the 18th century they were excommunicated, in the 19th century they were challenged to a duel , and in the XX was criticized in the newspapers.
Crime and Punishment. When Gary Becker formulated the economic theory of crime and punishment, according to which criminal activity can be viewed as a kind of economic activity in the market, where there is supply and demand, she turned over many approaches and assessments in real law enforcement policy. What is the demand for criminal activity? Demand can be indirect - when you do not lock the doors, keep the windows open, you lower the costs of the perpetrator. But it can be direct - if you buy unlicensed programs or drugs, you order a competitor's killer. Hence the idea arises: it is possible that some of the crimes can be prevented by influencing not supply, but demand.
As for the supply in criminal activity, the concepts of risk and risk appetite are very important here. There are types of activities where income directly depends on the level of risk: the higher the risk, the higher the income. If people who are gambling are engaged in these types of activities, then an increase in risk means for them an increase in the attractiveness of this area. The second fact that needs to be taken into account when analyzing the offer of criminal activity is how the mafia is legalized? It is no coincidence that the thieves' law prohibits an authoritative thief from having a family and property. As soon as a criminal has permanent sources of income and assets that he is afraid of losing, these interests begin to put pressure on his behavior, because ordinary criminal activity is stochastic, probabilistic, with failures and gains. And there is a gradual displacement, legalization of mafiosi. It turned out to be possible to explain this only through the theory of crime and punishment.
Severity and non-performance. However, for this theory to work correctly, it is necessary to introduce two amendments that follow from the provisions of institutional economics. First, criminal activity should not be considered purely rational. Second, it’s not only about understanding, but also about honesty. The level of deterrence of crime is determined mainly by two factors - the degree of punishment and the likelihood of its occurrence. In fact, there is nothing particularly new for the Russian reader here, because even Pyotr Vyazemsky said: "In Russia, the severity of laws is tempered by their non-fulfillment."
For example, what is easier for the state to do - to increase the likelihood of punishment or to increase the punishment itself? Of course, to increase the punishment - for this it is enough to change the law. This is a natural tendency arising from the interests of the authorities applying the law. And what is the society interested in? The likelihood of sanctions coming is much more important than the level of sanctions. It is important that the perpetrator of the crime is punished. But this is very expensive: after all, you need to spend money on the search, on the investigation, on the proof of the crime in court. For the state - a net cost, but for society - a gain,
At the same time, the theory of crime and punishment provides a functional answer to the question of why such an invention of Europe as human rights is needed. They set a standard that makes them investigate, search, conduct an objective trial in order to find and punish a real criminal. When law enforcement agencies are forced to take into account all these barriers, they begin to work more efficiently. When these barriers disappear, personal interests and the desire to lower personal costs come to the fore. Having received the opportunity to reduce their costs, the state finds the easiest way for itself to reach the goal, which often does not at all imply that real criminal behavior will be restrained. As a result, our costs are growing.
Law and precedent. However, civil law is of no less importance for the economy than criminal law. And then a very interesting question immediately arises: where should the norm of civil law come from? Actually, there are two ways of the emergence of the law: either it is adopted by legislators (continental system), or it is born in the course of a judicial conflict (Anglo-Saxon). Economists quite amicably consider the Anglo-Saxon system to be much more efficient. Why? Let's reintroduce those two restrictions that we constantly talk about - that people are not gods or angels, that they are not omniscient and are not inclined to follow all moral rules. When the legislator accepts some norms of civil law, we intuitively proceed from the fact that the legislator knows and understands everything, and besides, he also does not have his own interests. Both are obviously wrong.
The norms that governments and parliaments produce are often burdened with two diseases at once: selfish interests and a lack of understanding of where the real problems are. But with the court everything is a little different. Of course, the judge is not omniscient either, and court mistakes also happen. But the civil court cannot hear cases on its own initiative. If there is no conflict, there is no court, and if there is no conflict, then perhaps the norm is not needed. If everything is decided within the framework of informal institutions, why introduce formal institutions? The result is a much less redundant system than, for example, in Russia, where the State Duma considers the number of laws passed as an indicator of its effectiveness. The court produces norms where informal life has failed.
At the same time, I believe that the rumors about the venality of the courts are greatly exaggerated. Institutional economics has the so-called Oldenburg effect: in Indian society, rumors about corruption are inflated by intermediaries, who thereby increase their income - after all, in the end it is not known whether they give bribes to judges or not.
Freedom and state. First, every time a force majeure occurs in the security sphere (and this is not uncommon in Russia), conversations begin: let's exchange some of the freedoms for security. Don't trade freedom for security - bargain. The reason is simple: when you trade freedom for security, you remove that level of claims to the state that makes the most effective part of the formula work - the likelihood of punishment. You will receive punishments that will be applied as intimidation, and not as retribution for a really committed crime, the effect will be twice negative: criminals will not be punished, and innocent citizens will live in fear. Second, the role of the courts for society and the state should not be underestimated. In general, it seems to me that the historically correct use of the state begins not with parliaments, but with courts.
Chapter 8. Institutional Change
Change and revolution. The author of the theory of institutional change, Douglas North, has not found a larger leap in history, well described and documented, than the October Revolution of 1917. Using her example, North showed that waves of negative consequences from a strong revolution last through the entire century. How are revolutions explained in terms of the theory of institutional change? It is clear that formal institutions - laws - can be changed quickly. But informal institutions are customs, they cannot change in leaps and bounds.
With a sharp change in legislation, a gap arises between formal and informal institutions, which can have two consequences. First, there is high criminalization: customs require one thing, laws require another, and in this rift, crime can take off. Secondly, freedom of creativity: revolutions are often accompanied by a sharp introduction of innovations, a cultural explosion, and creative searches. But the tension between the poles of formal and informal institutions is growing, and this leads to a two-way restructuring: informal rules begin to slowly tighten up, adapt to the changed vectors of life, and formal rules roll back to more familiar forms.
At some point, these two lines intersect, and the country enters a period of economic prosperity and political reaction. What happens next? The next wave begins: formal and informal rules keep moving and diverge. A kind of restoration of the previous, old order, ineffective institutions is beginning in the country. And such a wave-like movement, a chain of systemic negative effects, fading away, can go on for a long time.
If a country enters a totalitarian phase, then a layer of informal institutions is burned out, and subsequently it is very difficult for it to recover. Why was there an economic boom during the NEP, but not under Gorbachev? Because in the 1980s, the country had already gone through the era of a totalitarian state that strangled informal institutions.
Change and evolution. Naturally, institutional theory is not limited to the question of "how change occurs." It is necessary to understand why they occur. There are two main versions. One of them assumes that changes cannot arise within the system, an external shock is needed: cold snap, plague, flood, war. The second version was put forward by Douglas North, and it assumes that changes arise within the system, follow from the self-learning of people. Robert Vogel, with whom North received the Nobel Prize in Economics, explored many of the turning points in history and showed how this could work.
Change and track. What is hindering and even blocking changes? "Rut effect". In essence, it is institutional inertia that keeps the country on a certain trajectory. The very idea of such trajectories along which countries move was developed thanks to the works of the great statistician Angus Maddison. When economists saw the Maddison table, they gasped. It became obvious that most of the countries of the world are divided into three groups, and this division is very clear. The first group follows a high trajectory and consistently shows high economic results. The second group is just as steadily following a low trajectory: it often includes traditional countries that simply do not set the task of achieving high economic results, but focus on other values - family, religious, etc.
But there is also a third, most volatile group of countries that are constantly trying to move from the second group to the first. They have left the state of tradition, but they cannot complete the modernization in any way. Examples of such transitions are extremely rare, most often the countries of the third group jump up, but then hit the ceiling and slide down again. This is exactly what the "rut effect" is. And Russia belongs to the third group of countries.
But why does this stagnation repeat itself, where does the blockage come from? There are at least three hypotheses explaining the rut effect: genetic disease, chronic disease, measles in adulthood. "
Genetic disease. The economists of the so-called neo-Schumpeterian school extended to the economic history of countries the theory of "creative destruction", which the Austrian-American economist Joseph Schumpeter formulated for the development of technology. According to this theory, what we usually take for development is nothing more than the recombination of elements: their reshuffling gives a semblance of new pictures, but they all lie within the same paradigm. The paradigm itself rarely changes. The country is undertaking various modernization efforts, the picture seems to be changing, but it will still not be possible to jump over one's head until the paradigm changes.
Chronic illness. This version, which is now dominant in economic thought, is based on the theory of institutional change, which brought Douglas North the Nobel Prize in 1993. Like the theory of "creative destruction", it grew out of observation of the development of technology, or rather, from Paul David's article "Clio and the Economic Theory of QWERTY", published in the mid-1980s. Despite the fact that the arrangement of letters on the QWERTY keyboard is far from optimal (there are much more ergonomic layouts), no one is going to change it - everyone is already too much used to it.
Douglas North decided to apply this idea more broadly - to development in general. Operating instead of technical solutions with the concept of institutions, he suggested that countries that are vainly trying to enter a high trajectory of development have made mistakes of initial institutional choice. He proved this on the example of England and Spain. By the 16th century, these countries were on absolutely equal starting positions. Both were approximately equal in terms of population and employment structure, and both carried out foreign policy expansion. Any macroeconomist would say that they will be at similar levels in a hundred years, and in three hundred. But already in the 19th century, England, without any reservations, was the main world power, and Spain was one of the most backward countries in Europe. What's the matter? North showed that what happened was an accident. It just so happened that in the 16th century in England the question of the distribution of taxes fell into the competence of parliament, and in Spain - the king. As a result, Spain, which took out much more wealth from the colonies than England, very quickly squandered its treasures - because kings love wars and leaky budgets. There is no point in investing in the economy if the king can confiscate these investments at any time. In England, on the other hand, the conditions for accumulation and investment have developed. At the same time, the recognition of the error comes, by historical standards, rather quickly. However, on the wrong path, so many institutions and interests are growing, working against cardinal changes that Spain has been moving through revolutions and civil wars for two hundred years, trying to jump out of the rut into which it got, but it is not yet very clear whether it succeeded or not.
Measles in adulthood. As Theodor Shanin wittily noted, developing countries are countries that do not develop. De Soto was trying to show why they do not develop. The novelty of de Soto's approach was that he looked at the problem not from within the developed world, but from the outside. It turned out that all those problems that are now observed in developing countries were also in the current developed countries - just much earlier.
However, current generations in developed countries have already forgotten how these problems were solved in their time, and therefore the solutions they offer to developing countries often do not work. What are the causes of childhood diseases in adult countries? According to de Soto, the whole point is in the rupture of formal and informal institutions, behind which is the struggle of dominant groups seeking to preserve the status quo that is beneficial for themselves. There are several thriving centers that live within the law and which are restricted from dominant groups. And the rest of the country lives by informal rules that conflict with laws and are supported by such groups of influence as the mafia. A cure for this disease is possible if a compromise is found between formal and informal institutions, involving the maximum number of groups - and in particular, the mafia. To do this, first of all, it is necessary to identify the most effective informal institutions - and de Soto has a number of methods to do this. As for the compromise, Soto considers various types of amnesties that allow informal communities to legalize themselves as one of the most effective ways.
A revolutionary and evolutionary cure. Getting out of a rut is very difficult. On the one hand, it is obvious that the stagnation and reactionary political regime is kindling a revolutionary fire in souls. But don't want a revolution! I keep repeating to my students the phrase of Stanislav Jerzy Lec: “Well, let's say you break through the wall with your head. And what are you going to do in the next cell? " A great metaphor for revolution. On the other hand, do not trust evolution - do not assume that the curve itself will take out. It is quite easy to predict where exactly the current curve will take Russia. There is such a country - Argentina. In the first half of the 20th century, in terms of gross product per capita, it was on a par with the United States. The thing is that the country grew on traditional resources - grain and meat. During the Great Depression, when Roosevelt abruptly changed course in the United States, the Argentine elite decided that they would not change anything, because people will always need grain and meat (our elite thinks that people will always burn oil and gas).
Thus, the problem of institutional changes for Russia rests on the problem of modernization. Over the past 50 years, the very formulation of the question of modernization has changed a lot. And first of all, this is due to what was happening in the world with the concept of "institution". Half a century ago, in the 1960s, modernization was understood as a more or less inevitable process. American economist Armen Albert Alchian formalized these ideas in evolutionary hypothesis: Institutions compete with each other, and the most effective of them must win in this struggle.
But it turned out that this is not the case. The most effective institutions do not always win. After all, eliminating ineffective institutions is difficult work, since any rule, no matter how bad it may be, carries not only costs for some, but also benefits for others. And interest groups are far from always ready to part with institutions that are beneficial to themselves. Then modernization began to be understood as task... What does this mean? You have a formula where you need to substitute the required values, and the task will be solved. The only problem that you may have is a lack of resources, but if, for example, you have money to buy technology, licenses, brains in the end, then there will be no further problems. Follow the formula and it will give you an upgrade. I would say that this performance lasted at least until the end of the 20th century. But here's the bad luck: dozens of countries were engaged in modernization, and five or seven have achieved success. Only a few were able to move from the lower trajectory of development to the upper one. Therefore, it should be recognized that modernization is not a task.
Modernization is problem, and not at all the fact that the problem has a solution. In any case, there is no need to talk about any universal solutions. It is necessary to find a unique combination of formal institutions, which we can introduce more or less deliberately, with informal institutions that are specific to this particular country and are linked to the values of this country. If we combine the first and the second, then the country begins to move along a higher trajectory.
Why is it not possible to "enter" the modernization? The main problem of Russian modernization is the demand for change. Almost everyone needs change, but only if we think about the long term, about our children and grandchildren. If we think within one year, then we absolutely do not need changes: this year we are already all right: there is enough oil money, and it’s better to divide budgets before they reach real projects, because we will get more ...
When everyone thinks short, it turns out that the most correct game is a game based on distrust. You need to satisfy your needs as quickly as possible, divide all the funds, but investing something anywhere is not worth it at all. In game theory, this behavior was calculated several decades ago within the framework of a model called the “prisoner's dilemma” (see, for example,).
So what about Russia? What values are we in short supply? What norms are necessary for our view to become more "long-term" and the transition to modernization to take place? Russia gives birth to talented and creative people from generation to generation. Is it good or bad? It seems to be good, and I dare to say that this can serve as a much more significant source of modernization of the country than hydrocarbons. However, creativity is in obvious conflict with such qualities as respect for standards and laws, that is, the rules of technical and social action. Only those things that require creativity are done well and are produced individually - spaceships, a nuclear project, water turbines. But mass production is not possible because it is based on a standard.
In the meantime, we have a thrombus - a sacred state, which is a value that hinders development, because it is impossible to improve what cannot be touched with our hands. When you start to treat the state pragmatically, as a producer of public services, you act as citizens who consume the state. To make this analogy clearer, you can do one simple thing: give people their 13% income tax in their hands, and have them take this money to the state every month. They will very quickly start asking questions: where are the schools? where are the roads? where are the hospitals? what did you spend our money on? Now, when the employer pays income tax for people, they have an inverted picture of the world: they believe that the state, although, of course, steals, but at the same time benefits them, but business cheats. Because of this strange vestige of Soviet practice, people cannot come to the simple idea that they do not owe the state, but the state owes the people.
Unlike the middle class, elites can use a foreign set of institutions and choose the best ones: technical regulation in Germany, the banking system in Switzerland, courts in England, financial markets in the United States. And as long as the elites have the opportunity to use international institutions, they will discourage institution-building within the country in order to squeeze out revenues that can then be used in international markets. But when the elites find themselves in a tight dependence on the rest of the population, who make a demand for institutions, they have no choice but to take up the construction of institutions. They will have to invest in the country, copy some experiences, and look for their own solutions. Institutions will appear and will work, because we, the inhabitants of the country, will present demand for them.
Another explanation may have to do with religion; Protestantism professes hard work and savings, support to myself and to God, and Catholicism - only to God; see for example.
The economy of everything. How Institutions Define Our Lives Alexander Auzan
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Title: The Economy of Everything. How Institutions Define Our Lives
About the book “The Economy of Everything. How Institutions Define Our Life "Alexander Auzan
This fascinating book by a Russian economist, dean of the Faculty of Economics, Moscow State University. MV Lomonosov, Doctor of Economics, professor, publicist Alexander Auzan will help to understand the essence of seemingly chaotic social processes, to understand what awaits us in the near future, and to think: is this how I live? You will see a different, completely unusual, economic picture of the world.
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Quotes from the book “The Economy of Everything. How Institutions Define Our Life "Alexander Auzan
Do you know how doctors say that there are no healthy people, there are people who are underexamined? And in Russia there are no innocent people, there are people who are not investigated.
With a certain number of links and if those who control them have their own interests, at each node the signal can be distorted to the exact opposite.
This is a completely natural phenomenon, which is called the asymmetry of the contract: you carefully consider your interests, but do not always remember the interests of the counterparty. The result is a skewed contract.
The pre-war economist John Commons identified three main types of transactions: transactions (trade), management (hierarchical systems), and rationing (complex decision-making methods in which initiative comes from one side and the other side decides). If you describe these types of transactions in terms of geometry, you get a horizontal, vertical or diagonal.
The one who does the worst will lose assets, and in the end they will end up in the hands of effective owners. Right? That's right, if you do not take into account the small print. Everything, of course, will flow as it should, on one condition: if there are no friction forces.
First of all, I will insist that living by rules - even bad rules - is better than no rules.
When the body of laws is drafted in such a way that it is fundamentally impossible to enforce them all, every person is potentially a criminal, and the population as a whole is much easier to govern.
Because in Russia denunciation is prohibited by informal institutions, just as it is welcomed by informal institutions in America and Europe.
Doctor of Economics, Professor, Publicist, Dean of the Faculty of Economics, Moscow State University. M.V. Lomonosov
Human
As a result of the adultery of the great philosopher and economist Smith with the French Enlightenment, we got Homo economicus - an omniscient selfish bastard who has supernatural abilities to rationalize and maximize his utility.
This construction lives on in many economic works of the XX and XXI centuries. However, a person who pursues exclusively selfish goals and does so without any restrictions, because he is omniscient, like gods, and all-good, like angels, is an unreal being. The new institutional economic theory corrects these ideas by introducing two provisions that are important for all further constructions and reasoning: the provision on the limited rationality of a person and the provision on his inclination to opportunistic behavior.
Opportunistic behavior is characteristic not only of producers of goods, but also of consumers. It can be the result of weakness or infringement of the position: if the consumer understands that he is opposed by a team with special knowledge, his resource in the competition may be cunning, deception. A classic example of such consumer opportunism and consumer extremism: a person takes out a loan, realizing in advance that he will not give it back. In the early 1990s, two aphorisms were in use in Russia: “It's very easy to become rich: you have to take out a loan and not give it back” and “In Russia, only cowards give loans.” Many fortunes were built on these principles. True, I want to remind you that a noticeable part of Russian cemeteries is filled with people who did not give loans.
Institutions
Any institution is not only a set of rules, but also a mechanism by which their implementation is ensured. At the same time, there are two different types of institutions - formal and informal, and they are divided not according to what rule they attribute, but according to what mechanism they use to enforce these rules. In formal institutions, this mechanism boils down to the fact that there are some specially trained people - jailers, tax inspectors, police, military, even mafia "bulls" - who are engaged in coercion. But within the framework of informal institutions, coercion is provided at the expense of the community as a whole: if you break the rule, specially trained people do not come to you, they simply won’t shake hands with you or stop issuing loans. From the perspective of this community, you are behaving inappropriately. It would seem a trifle and nonsense, but in reality - no.
The famous American politician Alexander Hamilton fought a duel with Vice President Aaron Burr. The day before he had been writing all night: a Russian would probably write poetry, and Hamilton wrote a whole Apology about why one should not go to a duel. He considered a variety of grounds - legal, religious, moral, historical, and all of him led to the fact that there was no need to go to a duel. He wrote an essay, put an end to it and went to a duel. And he was killed.
The problem in Russia is that many informal institutions do not lead to cost savings, but, on the contrary, create opportunities for additional costs to appear.
This case is very often discussed in the literature, and everyone comes to the conclusion that Hamilton did everything right: he wrote it right and did the right thing. Because if he had not gone to a duel, he would have faced sanctions provided for by the informal institutions that then operated in American society. And these "soft" sanctions, at first glance, can actually be much more terrible than the sanctions used by mafia "bulls" and jailers.
The problem in Russia is that many informal institutions do not lead to cost savings, but, on the contrary, create opportunities for the emergence of additional costs. After all, the same traffic police inspector can himself form a situation of squeezing money out of you, that is, you do not save, but you get an additional danger. It is the traffic police inspector who understands better than others that any rule has both coordination and distributional significance. My father-in-law always turned to Leninsky Prospekt in the same place, and one day he discovered that there was a sign prohibiting the turn. He nevertheless turned, and, of course, he was immediately stopped by the inspector. His father-in-law says to him: "Why, there has always been a turn here!" He replies: "He is still there, only paid." This is a perfectly correct idea, because absolutely all rules - not just traffic rules or tax rules - have distributional implications. As a result of the action of any rule, the costs of some people become the income of others - simply because this is the rule. Therefore, no country in the world has an optimal set of rules.
Transaction costs
It would seem that if we want more perfection from this world, the ultimate task should be to reduce transaction costs, to bring them to zero. This perception often dominates the views of politicians and determines the nature of their reforms. For example, now a lot of people have begun to talk about the elimination of all administrative barriers, the release of business
by globally reducing transaction costs. But this is where the problems begin.
Even the great Coase said: it is impossible to eliminate the damage. When you try to repair the damage, you simply roll the ball under the tablecloth from one side of the table to the other. For example, if you declare a moratorium on inspections of small and medium-sized businesses, have you destroyed the damage? No. You have eliminated the damage from inspections for the entrepreneur, but rolled this damage onto the consumer, to the budget, to potential competitors. New people can no longer enter the market, unscrupulous entrepreneurs dominate there, whom no one catches. By lowering transaction costs in one place, you increase them in another. If you could simply destroy them, you could one day remove all the rules - and all administrative barriers would disappear. Only now it is impossible to live in a world without rules: fraudsters and adventurers win there. We already went through this during the shock reforms of the 1990s, when there was practically no legislation in the country - just not everyone remembers this, and not everyone has learned the lesson.
State
The Olson-McGuire theory also raises another question that is very interesting for modern Russia: how does the transition from the stationary bandit regime take place to more civilized forms of the state? The whole history of Russian privatization in terms of the theory of institutional economics looks like this: interest groups close to the government or, in Russian, using administrative resources, divide assets. When everything is already divided
they face a fork. The first way is that they can seize assets from each other. But this is not at all the same as taking away assets from the state or from the population. This is a war, it is difficult, it is very expensive. The second way - it is necessary to change the system of rules, and from those rules that facilitate the capture, go to the rules that contribute to the efficient use of resources.
our country has been at the crossroads between stagnation and modernization for four centuries. for some reason it is not very successful to enter a higher trajectory of development
What happened in Russia in 1999-2003 and what should have happened in 2008 seems to me to be just such a fork in which those who seized assets begin to think: in order to use them effectively, an autonomous judicial system is needed (because you need to somehow protect your property rights from new applicants), long-term rules (because you need to invest), protection of contracts. And all this is necessary, mind you, for those people who have grown out of a completely gangster situation. However, oligarchic groups in Russia have behaved differently. While Yukos and, for example, Alfa Group tried to demand some new rules, other groups remained cautious in the old system, and it was clear that a conflict was inevitable. On the one hand, YUKOS performed an absolutely fantastic operation: it cost $ 500 million in 1999 and $ 32 billion in the summer of 2003, that is, it grew more than 60 times, moreover, due to the transition to new rules, and not only due to the rise in oil prices ... On the other hand, it was precisely because of these changes that he could no longer pay rent to officials in the same way.
Modernization
Somehow it turns out in the history of Russia that our country has been at the crossroads between stagnation and modernization for four centuries. We seem to want to leave that inertial trajectory of the country's movement, which does not suit us very much and does not provide the position in the world that we consider for
self worthy, but for some reason it is not very successful to enter a higher trajectory of development. Thus, the problem of institutional changes for Russia rests on the problem of modernization. Over the past 50 years, the very formulation of the question of modernization has changed a lot. And first of all, this is due precisely to what was happening in the world during this time with the concept
"Institute".
Half a century ago, in the beautiful 1960s, modernization was understood as a more or less inevitable process. The American economist Armen Albert Alchian has shaped these ideas into an evolutionary hypothesis: institutions compete with each other, and the most effective of them must win in this struggle.
consequently, over time, the same institutions will spread in very different countries, and they will become more and more similar. From this point of view, let's say Ghana goes through the same stages of modernization as, say, the Soviet Union - just a little later, you just have to wait, and the automatic process will lead it to the same results. But it turned out that this is not the case. If only because the most effective institutions do not always win. After all, eliminating ineffective institutions requires quite serious costs: it is a difficult job, since any rule, no matter how bad it may be, carries not only costs for some, but also benefits for others. And interest groups are far from always ready to part with institutions that are beneficial for themselves and ineffective for the country as a whole.
Modernization is a problem, and not at all a fact,
that the problem has a solution. there are no universal solutions. The national modernization formula will be unique in each case
Then modernization began to be understood as a task. What does this mean? You have a formula where you need to substitute the required values, and the task will be solved. The only problem that you may have is a lack of resources, but if, for example, you have money to buy technology, licenses, brains, in the end, then there will be no further problems. Follow the formula and it will give you an upgrade. I would say that this performance lasted at least until the end of the 20th century. But here's the bad luck: dozens of countries were engaged in modernization, and five or seven have achieved success. Only a few were able to move from the lower trajectory of development to the upper one. Therefore, it should be recognized that modernization is not a task.
Modernization is a problem, and it is not at all the fact that a problem has a solution. In any case, there is no need to talk about any universal solutions. The national modernization formula will be unique in each case. It is necessary to find a unique combination of formal institutions, which we can introduce more or less deliberately, with informal institutions that are specific to this particular country and are linked to the values of this country. If we combine the first and the second, then the country's energy rises, and it begins to move along a higher trajectory. At the same time, Russia now does not even solve the problem of combining formal and informal institutions, but only stands at the entrance to modernization. And here we are in for what the American economist Douglas North calls the blocking effect, and the Russian academician Viktor Polterovich calls the institutional trap. We stand at the entrance, but the door is locked.
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Alexander Auzan
The economy of everything. How Institutions Define Our Lives
© Auzan A., 2014
© Edition in Russian, design. LLC "Mann, Ivanov and Ferber", 2014
All rights reserved. No part of the electronic version of this book may be reproduced in any form or by any means, including posting on the Internet and corporate networks, for private and public use without the written permission of the copyright holder.
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© The electronic version of the book was prepared by Litres (www.litres.ru)
This book is well complemented by:
Freakonomics
Stephen Levitt, Stephen Dubner
Economy myths
Sergey Guriev
How people think
Dmitry Chernyshev
Superfriconomics
Stephen Levitt, Stephen Dubner
Dear reader, I have not written the book that lies before you. I slandered it, dictated it, read it like mini-lectures. The first idea of this format was expressed by Valery Panyushkin, who five or six years ago made with me the first column for Esquire magazine in the style of a mini-lecture. A couple of years after that, Philip Bakhtin, who was then the editor-in-chief of Esquire magazine, convinced me to make a whole series of such columns. And Dmitry Golubovsky, the current editor-in-chief of Esquire, suffered with me for six months, listening to my lectures and editing them.
Why has institutional economics turned out to be attractive for this kind of public lecture? One wise historian said: “Leading economists worry that institutional economics is claiming to be the mainstream in world economic theory. They are deluded. Institutional economics dreams not of a dominant position in economic theory, but of transformation into a new social philosophy. " I think that the ideas of institutional economists deserve attention because they allow us to draw conclusions about the structure of life in general and the attitude to it in particular: why we always face certain forces of social friction, why perfection is unattainable, but diversity is possible, how to choose in this diversity and etc.
I am sometimes asked if I can give a new public lecture in a week. I usually answer: "Yes, of course, just add three or five years to this." Because a public lecture is actually easy to do: you need to think a lot about these topics, speak and speak in different audiences, give lectures to students, make scientific reports; after that it is not difficult to give it some formats and briefly present your ideas. Several years have passed since the appearance of "Institutional Economics for Dummies" - under this title the first edition of the book was published - and now, taking into account new experience and new reflections, I would make my lectures somewhat different. But I didn’t change anything in those columns that were once published in Esquire magazine, and now formed this book. In my opinion, they have already begun an independent and separate life from me. This can be seen from the discussions on the Internet, to which I also listened with attention and interest. But, probably, I also have the right to a life separate from this book and the opportunity to think about other topics, dream of creating a theory of informal institutions, reflect on how the mission of the university works, and maybe in three or five years I will tell about this in some new little lectures.
...Alexander Auzan
Why is the world a bunch of irrational and immoral opportunists, and how can one survive in such a world?
Why are people forced to duel, sometimes bribe traffic cops and never bargain in supermarkets?
How do vertical, diagonal and horizontal costs affect the government hierarchy, the judiciary, and your personal relationship with the laundry?
Why is it believed that the state can do everything that makes it related to a bandit, and how do we agree with it?
What is social capital, the freeloader problem and selective incentives, and British disease, red sclerosis and other socioeconomic disorders?
Why can any object be private, public, public or anyone's? Using the example of a wardrobe, Bangladeshi industry and apples from the Sparrow Hills.
How do institutional theory and practice help to understand criminals, protect undersized people, and define the political face of the state?
Why is a revolution a bad thing, why did the Americans abolish economically efficient slavery, and what rut Russia has fallen into?
Why are the elites in Russia facing the "prisoner's dilemma", everyone needs modernization, but not now, but it can be achieved with the help of schools, courts and a consumer society?
At first glance, starting a conversation about institutional economics with a person is strange. Because in the economy there are firms, there are governments, and sometimes, somewhere on the horizon, there are still people, and even those people are usually hidden under the pseudonym “household”. But I immediately want to express a somewhat heretical view of the economy: there are no firms, states and households - there are different combinations of people. When we hear: “This is required by the interests of the company,” we need to scratch a little finger and understand whose interests are meant? These can be the interests of top managers, the interests of shareholders, the interests of some groups of employees, the interests of the owner of a controlling stake or, conversely, minority shareholders. But in any case, there are no abstract interests of the firm - there are the interests of specific people. The same happens when we say, "The household has received income." Why, the fun begins here! The family is going through its own complex distribution process, very difficult tasks are being solved, in which many different negotiating forces are involved - children, grandchildren, the older generation.
Therefore, in economics, we will not get away from the question of a person. This is usually called "the statement of methodological individualism," but the name is extremely unfortunate, because it is not at all about whether an individualist is a person or not an individualist. The question is, is there anything in the social world that does not consist of various interests of people? No. Then you need to understand: what kind of person is he?
Man vs. Homo Economicus
The father of all political economy, Adam Smith, is considered the author of the idea of man as Homo economicus, and this model has been walking through all economic textbooks for many decades. I want to speak out in defense of the great ancestor. We must remember that Adam Smith could not teach at the Department of Political Economy, because in his time there was simply no such science. He taught at the Department of Philosophy. If in the course of political economy he talked about an egoistic person, then in the course of moral philosophy he had provisions about an altruistic person, and these are not two different people, but one and the same.
But Smith's students and followers no longer taught at the Department of Philosophy, and therefore a very strange, flawed structure, Homo economicus, was formed in science, which underlies all calculations of classical economics regarding behavior. To a great extent, the formation of this structure was influenced by the French educational philosophy of the 18th century, which said that human consciousness is infinite, reason is omnipotent, man himself is beautiful, and if he is freed, everything will flourish around. And now, as a result of the adultery of the great philosopher and economist Smith with the French Enlightenment, we got Homo economicus - an omniscient selfish bastard who has supernatural abilities to rationalize and maximize his utility.
This construction lives on in many economic works of the 20th and 21st centuries. However, a person who pursues exclusively selfish goals and does so without any restrictions, because he is omniscient, like gods, and all-good, like angels, is an unreal being. The new institutional economic theory corrects these ideas by introducing two provisions that are important for all further constructions and reasoning: the provision on the limited rationality of a person and the provision on his inclination to opportunistic behavior.
Man versus rationality
The enlightening idea that a person has unlimited rational abilities is refuted by the life experience of each of us. However, in our own life, we clearly underestimate the fact that our rationality, as well as someone else's, is limited. Economist and psychologist Herbert Simon received the Nobel Prize for solving the question of how bounded rationality manifests itself and how, at the same time, a person, not having infinite abilities for obtaining information and processing it, solves many life issues.
Let's imagine how a person, according to the standard textbook of economics, should spend the morning. After he got up, he must solve the minimum optimization problem in order to have breakfast, namely - lay all possible types of yoghurts, cottage cheese, eggs, ham and everything else that is eaten for breakfast, taking into account the difference in production, geography, prices. After he calculates all this, he will be able to make the best decision: buy eggs (and not avocados) in Moscow (and not in Singapore), in a specific store and at a specific price. There is a suspicion that if a person does not involve a couple of rules for such calculations - or, in other words, institutions - that day he will not only not have breakfast, but will not even have dinner. So how does he solve this problem?
Herbert Simon argued that the decision is made as follows: when a person chooses a spouse, he does not put billions of the opposite sex into the computer. He does a few random tests, sets a template, a level of aspiration, and the first person who meets this level becomes his spouse or spouse (well, then, of course, the marriage is in heaven and all that stuff). In exactly the same way - by the method of random tests and establishing the level of claims - the problem is solved, how to have breakfast or, for example, what suit to buy. Therefore, from the position of limited rationality of people it does not at all follow that they are stupid. It only means that people do not have the ability to process the entire completeness of information, but at the same time they have a simple algorithm to solve many different issues.
Man against good intentions
But people are not angels yet. They often try to circumvent the conditions and rules of life that are offered to them. Oliver Williamson, a 2009 Nobel laureate who originated the idea that people tend to be opportunistic, defined it as deceitful and deceitful behavior - or behavior not burdened with moral norms. Again, this hardly needs special proof, but Williamson's innovation lies in the fact that with the help of his ideas we can explain how people get around certain restrictions. One of the most striking examples of this mechanism is the “lemons” market model, for which the economist George Akerlof received the Nobel Prize in 2002.
The lemons model describes pre-contract opportunistic behavior. It is built on a very real problem - the used car trade in the United States. Imagine: a man comes to buy a used car. All the cars that he looks at are put in proper shape, all shine, but it is not known how well they drive, whether they will travel 500 meters and stand, or will drive another 100 thousand kilometers. What are the buyer's selection criteria? By and large, there are two of them: appearance and price. But all cars look the same. And who can lower the price more - the one who sells a good enough car, or the one who sells a worse car? Rather, the second. It turns out that as soon as a person begins to make a decision based on the appearance and price of a product, the most unscrupulous participant wins the competition, the seller of "lemon" - this is how a low-quality car is called in the jargon of American auto dealers. And "plums", that is, fairly decent cars, are beginning to be squeezed out of the market.
It would seem that the "lemons" model describes a completely pure situation - normal competition, no interference from outside forces, no monopolies. But due to the fact that the buyer is limitedly rational and cannot know everything, and the seller hides some of the information, that is, he behaves opportunistically, competition does not lead to economic prosperity. Moreover, it may simply collapse this market, because the quality of sellers will constantly decline.
The solution to this question is quite simple rules - for example, if you introduce a seller's warranty. He gives a guarantee on his own that any breakdowns during the year are repaired at his expense - and the prices are immediately equalized. But this is a solution to the problem by introducing certain rules - institutions. If we do not have these rules, we get the so-called “worsening selection”. Moreover, what Akerlof proved with the example of the used car market works, for example, in the Russian state apparatus. If you do not understand what public goods and for whom the Russian state produces, then the selection criteria are related to how the boss evaluates the activities of this or that employee. As a result, a career will not be made by the one who produces the best goods - deteriorating selection works wherever the consumer is not able to assess the quality of the product.
At the same time, opportunistic behavior is characteristic not only of producers of goods, but also of consumers. It may be a consequence of weakness and infringement of the position: if the consumer understands that he is opposed by a team with special knowledge, his resource in the competition may be cunning, deception. A classic example of such "consumer opportunism" and "consumer extremism": a person takes a loan, realizing in advance that he will not give it back. In the early 1990s, two aphorisms were in use in Russia: “It’s very easy to become rich — you have to take out a loan and not give it back” and “in Russia, only cowards give loans.” Many fortunes were built on these principles. True, I want to remind you that a noticeable part of Russian cemeteries is filled with people who did not give loans.
Man versus contract
The above examples illustrate the so-called pre-contract opportunistic behavior. But it can also be post-contract. I think many of us, if not all, have had the misfortune of changing dentists. Almost always the first phrase of a new dentist will be: "Who put these fillings on you ?!" You are always dependent on the dentist. It hints at the fact that everything needs to be redone, and when the rework begins and the need for additional costs arises, you have neither the criteria nor the ability to say no. After all, coming to another dentist, you will get the same problem.
Entrepreneurs are well aware of this situation in the construction industry. When I first came to the United States in 1991, I was struck by the contrast. In the USSR, construction was considered a very respectable activity, and trade was low. In America, I found that, on the contrary, trade is considered a highly respected occupation, and construction is somehow dubious. In part, such notions are justified by the fact that the mafia sticks to construction - much more strongly than to trade. Because if you steal a third of the turnover in trade, then the business will collapse, and if you steal a third of the materials in construction, then the building will still stand. But the main thing is different: there are opportunities for blackmail in construction. The theory of management even formulates the so-called "principle of Cheops": "Since the time of the pyramid of Cheops, not a single building has been built in compliance with the deadlines and estimates." Having entered this process, you are forced to continue it.
Another obvious form of post-contract opportunistic behavior is called shirking. It is well understood by both the employee and the employer: if an employee strictly adheres to the contract, arrives at 10 am, turns on the computer, sits and looks at the monitor, it is completely unclear that he is working at the same time and is not, for example, on the Odnoklassniki website or watching porn. All the formal requirements of the contract can be met, but the result that the employer expects is not. And he has to look for other ways to implement the contract, to make deals with the employee: "I will let you go on Friday night, if you do what you have to do in time." Why is there such a breakdown and completion of the contract? Because there is such a form of opportunistic behavior as shirking.
Why talk about a person such things that do not really adorn him? The fact is that if we want a realistic economic theory, then a person must act in it, who at least somehow resembles a real person. But real people are very different, and this difference must also be taken into account in some way in theory. This is not to say that all the people around are scammers. This is quite common, but people can behave selfishly and at the same time quite within the rules, and even within the rules of morality. Finally, they may not behave selfishly at all - this is called "weak behavior" when a person identifies himself with some kind of community - with a village, with a clan. True, usually "weak behavior" is found in patriarchal societies. And, by the way, that is why the ancient Greeks did not consider slaves to be people. In the Strugatskys' novel Monday Begins on Saturday, there is an image of an imaginary future: two people stand, play the kifar and with a hexameter state that they live in a wonderful society, where everyone is free, everyone is equal and each has two slaves. From our point of view, this is a colossal contradiction, but from their point of view, it is not. A person torn out of the community is like a severed hand, finger or ear. He lives only when he is included in a certain community, and if he is torn out of his community and transferred to someone else's, he is already an instrument, a “talking tool,” as the Romans used to say.
Sometimes the bundles that traditional society gives are very effectively used today, in international competition. For example, South Korea has built on the basis of consanguineous loyalty chaebols - huge business conglomerates consisting of separate, formally independent firms. Koreans got extremely low management costs because they used "weak behavior", the recognition that you are part of something larger. In Russia, however, this is impossible: we have no traditional communities for a long time - accordingly, people have nothing to identify with. Take, for example, the peasantry, which began to be squeezed out from the time of Peter I and finished off during the Bolshevik modernization. Having lost their habitual communities of identification, people, on the one hand, gave up their neighbors to terror with practically no resistance, and on the other, began to identify themselves with non-existent communities: with the European proletariat, with the starving blacks of Africa. The peasant stereotype of identification worked, but not on the scale of the village or community, which no longer exists, but on the scale of the people or even the whole world.
Man versus system
It must be remembered that the concept of bounded rationality and opportunism extends not only to the relationship of people with each other, but also, for example, to their relationship with the state. This very essence, the state, is quite illusory - like the essence of "people", it is an object of manipulation by a human individual or at least a group of human individuals. And so institutional economists don't talk about the state - they talk about rulers and their agents. Here it would be appropriate to recall the famous formula, originating from bondage, “do not be afraid, do not hope, do not ask,” which absorbed a rather tragically obtained understanding of bounded rationality and opportunistic behavior.
Why don't you be afraid? Because people tend to exaggerate some of the dangers. Take organized crime: the idea that the mafia is waiting for you around every corner is caused by your limited rationality. Any potential for violence is limited; it is a resource that has to be counted and economized. Another example: we may think that we are continuously being recorded by special services that control our lives. Have you ever tried to calculate how much this kind of surveillance would cost?
About ten years ago I was in the German department, which contains the archive of the Stasi, the East German political police. There is a whole room strewn with undeciphered magnetic tapes - a 1970s wiretap. Over the 40 years of its existence, the Stasi has conducted about a million cases-observations (they did not always end with arrest, let alone conviction). They were managed by 7 million employees - that is, there were seven people per case. So don't think too highly of the value of your person - and don't be afraid. Calculate how much it costs to fight with you personally, and make sure that many fears are exaggerated.
But don't get your hopes up either. An amazing thing: in the 1970s, remarkable Soviet economists, based on the work of one of our two Nobel laureates in economics, Academician Leonid Kantorovich, developed a system for the optimal functioning of the economy. In general, they understood that the country was governed by the Politburo, with all its internal interests, with internal competition, with not always complete secondary education ... But these economists had the idea that there is a certain subject, reasonable and all-good - the state. It will take their proposals and implement them. And these ideas are still alive. The problem is that power is not infinitely rational. Its rationality, that is, the rationality of the people who make it up, is rather severely limited. The expectation that power can do anything is based on the absolutely unrealistic notion that gods are in power. This is not true.
But the power is not all-good, and therefore the well-known thesis "do not ask" is also justified in its own way. It is clear that opportunistic behavior is possible not only outside the government, but also within the government. If, moreover, it is formed taking into account the effect of deteriorating selection, then it is very likely that in power you will encounter people who are not limited by considerations of morality.
With such a gloomy picture, is it possible to live in this world? Can. You just need to understand: our hopes for something powerful and all-good can hardly serve as a normal fulcrum. We should rather rely on the rules that we can use in communication with each other. It is necessary to rely on institutions.
