Economic Theory of Institutional Changes: Approaches to Modeling Corrections and Dysfunctions of Institutions

Abstract:

The article deals with the issue of the methodology of institutional modeling that includes the features and types of institutions models used to describe institutional statics and dynamics. The subject of the study are institutional changes – corrections and dysfunctions of institutions and various types of models of institutions and their changes. The author gives an assessment of the possibilities of application and the limiting complexity model. As a method of research, a taxonomic approach and an institutional analysis, which allows giving descriptive and explanatory models of correction and dysfunction as types of institutional changes, are used. The author characterizes different types of institutions by their own set of quantitative and qualitative characteristics that determine the set of executable functions and dysfunctions. These characteristics allow distinguishing two classes of models of institutions and four states of formal institutions. The quality of institutions, the frequency of changes and the adaptation of agents are a minimal set of relevant characteristics in institutional modeling, which involves two main approaches. These approaches are the following: 1) when institutions are set and affect agents and the parameters of the economy; 2) when institutions change and determine the behavior of agents. The author provides a descriptive model of institutional correction that affects the efficiency of the functioning of the economic system. The received methodological results allow regulating scientific achievements in the field of institutional modeling. In order to obtain the results, the author selected directions of the further scientific search without focusing only on obtaining mathematical models that have limitations on the normative form of the criterion input.