Mechanism of coordination in a centrally controlled economy. The mechanism for coordinating the interests of the producer and consumer in the command and market economy
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Economic systems- this is a set of interrelated economic elements that form a certain integrity, the economic structure of society, the unity of relations that develop over the production, distribution, exchange and consumption of economic goods.
As a result, 4 types of economic systems are distinguished:
1. traditional economy;
2. administrative-command economy;
3. market economy;
4.mixed economy.
Traditional economy- a closed system of subsistence farming, characterized by manual labor, routine technologies, a multistructural structure in the economy, a low level of development of productive forces, an active role of the state in the economy, etc.
Administrative command economy- an economy with dominant state ownership, state monopoly, where commodity-money relations are formal, the movement of resources is carried out by the administrative center, rigid centralism of the entire economy.
Market economy- an economy with a predominance of private property, limited state intervention in economic processes and a market mechanism for coordination.
mixed economy- has several lines of shaping, that is, a combination of private and public sectors, a combination of market and state regulation, a combination of capitalism and the socialization of life. In addition, there are various elements in a mixed economy, for example: a joint-stock company, social partnership, contractual relations, etc.
Economic theory considers two various ways coordination: spontaneous (spontaneous) and hierarchical (centralized).
In spontaneous orders the information needed by producers and consumers is conveyed by price signals. An increase or decrease in the price of resources and the benefits produced with their help prompt economic entities in which direction to act, i.e. what, how and for whom to produce. In any economic system, the producer must calculate his costs and benefits. However, the cost-benefit ratio can only be calculated using price mechanism. This mechanism coordinates the economic choice of people. Such a mechanism or order is called spontaneous (spontaneous). Spontaneous order arose naturally in the course of the development of human civilization. The market is the spontaneous order.
There is another way to obtain information about what, how and for whom to produce. This is a system of orders and instructions, going from top to bottom, from a certain center to the direct producer. Such a system is called hierarchy. An example of a hierarchy is a primitive community, where the leader determines everything and everything. Hierarchy is also a command and administrative system (the state with the help of the State Planning Commission). In the form of a hierarchy, the enterprise also carries out its activities. The hierarchy is based not on price signals, but on the power of the leader or central government agency.
In reality, there is a coexistence of spontaneous orders and hierarchies.
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As the number of parties involved in transactions grows, so does the complexity of transactions. In fact, the initial buyer and seller very rarely see each other in direct negotiations. Goods are often produced before purchase with a price already set, before the buyer even knows the existence of the product. What is it that coordinates these thousands of people working to contribute, perhaps years before the end product is consumed? How will they know what to do? How can they be sure they are making the right product?
PRACTICAL EXAMPLE
Let's take a slice of bread as an example. Before the consumer sees the bread in the store, someone has to bring it to the store, bake it, order flour, which in turn must be ground by someone, and before that grain must be grown. Hence, in order to produce that particular loaf of bread, hundreds of separate decisions had been made long before.
Neoclassical economic theory assumes that the price (the "invisible hand") is able to provide all the information to act according to the requirements of consumers for the optimal allocation of resources.
The invisible hand of the market is an economic tool developed by A. Smith that manages buyers and sellers in the market within the framework of market self-regulation without government intervention.
However, in reality, the distribution of resources does not occur randomly, but it is not “optimal” at all. All parties involved in the decision are examining their own parts of the system, considering individual possibilities. That is why the parties have different needs regarding the system. These needs can sometimes be in conflict with each other.
FROM THE PRACTICE OF MODERN RUSSIA
There are four types of associations (institutions) representing professional and industry interest groups and differing in the individual characteristics of their members, the maturity of the organizational structure, access to resources and functions performed, and which are the result of the process of institutionalization of the interests of economic entities included in them.
The first type is the most famous and influential business associations - RSPP, CCI, OPORA Russia and FNPR, which in their activities rely on a vast and highly diversified set of business entities and are in constant, active interaction with state authorities.
The second type is the so-called "appendage associations", their main characteristics are a wide, but rather heterogeneous set of participants and insufficient resources.
The third type - "industry representatives" - numerous and dynamic associations, including representatives of large and medium-sized businesses, to a greater extent than all others, focused on realizing the interests of the subjects included in them (ATOP-Association of Tour Operators of Russia, NP Russoft-Association software companies, etc.).
The fourth type - self-regulatory organizations - is the smallest group of associations that unites fairly homogeneous business entities, closely interacting with government authorities at various levels, but with certain restrictions on lobbying activities.
Today, there are 174 chambers of commerce and industry in Russia, including 81 chambers of subjects of the Federation and 93 chambers of municipalities. Members of the Chamber of Commerce and Industry of the Russian Federation are 207 unions, associations and other associations of entrepreneurs of the federal level, 500 business associations of the regional level. As of June 2014, there are 356 organizations in the Register of RSPP members. Among Russian associations of entrepreneurs, 41% are public organizations, 32% - associations and unions, and 27% - non-profit partnerships.
R. Marion (1976) defines coordination as a process within which the harmony of various functions of the vertical value added of the system is established. The following issues are important for the coordination process.
- 1. What is produced and sold (quantity and quality)?
- 2. When is it produced and sold?
- 3. Where is it manufactured and sold?
- 4. How is it produced and sold? (That is efficient use resources?)
- 5. What adjustments and adaptive mechanisms are needed to respond to rapid changes in demand, new technology, or other changes in profit incentives?
Shaffer and Statz (1985) define four levels of coordination.
- 1. Coordination in firms (micro-coordination).
- 2. Coordination between individual firms (micro-coordination).
- 3. Coordinating the total supply with the total demand for commodities or industries at every step of the production and distribution process (macro-coordination).
- 4. Coordination of aggregate demand with aggregate supply for the economy as a whole (macrocoordination).
The analysis of coordination should include all these levels. Coordination issues and mechanisms are interconnected between these levels, and thus management structures at all levels should look to the expertise of coordination issues.
When commodities are physically transferred in an economic system, economists usually talk about exchange and transaction.
A transaction is a legalized transfer of property from one economic entity to another.
PRACTICAL EXAMPLE
If I own an apple, then I can either eat it or save it for the future, sell it or give it away. By selling or giving it away, I release myself from the right of ownership and transfer it to someone else, who in turn gets the opportunity to eat it or, for example, sell it, etc. The apple may be untouched and lying on the table during this process, only the ownership relationship changes.
A deal is a central concept in institutional economics. Changes in property rights are constantly taking place between people or groups of people. The transaction phases in the theory of the firm are shown in Fig. 7.1.
Rice. 7.1.
The most common type of transaction is trade in the market.
A barter transaction is a transaction under conditions of scarcity, in which the buyer and seller have equal legal status with respect to the transaction.
The reason for trade is scarcity. Both parties - the buyer and the seller - have equal legal status regarding the transaction.
A managerial transaction is a transaction within an organization not because of a shortage, but with the aim of achieving efficiency.
A managerial transaction takes place in a hierarchy, for example, when a favor is moved from one department to another in an organization. The cause of the managerial transaction is not scarcity, but the efficiency brought about by the division of labor.
Regulatory transactions differ from barter and managerial transactions in the following way: an integral part of it is negotiation to reach an agreement among several participants with the authority to distribute advantages and disadvantages to the members of the joint venture.
A regulatory transaction is one in which negotiations are an integral part of reaching an agreement among several participants with the power to allocate advantages and disadvantages to the members of the joint venture.
This is the type of bargain that prevails in political decision making, where citizens and their representatives try to reach a political agreement.
A grant or status transaction is a one-way transaction where the owner of the goods loses ownership without compensation.
This kind of deal can be based on friendship or status, habit or altruism. Such transactions are common between friends and relatives, such as between family members. Most transactions in tribal societies base their transactions on status and grants (Table 7.1).
Organized societies build formal institutions through legislation and other means of making rules. However, even in the most "organized" societies, most of the rules are not official and are based on cultural habits and behavioral norms.
Table 7.1. Comparative analysis of various types of transactions
Institutions are the rules of the game in society or, more formally, the designed constraints that shape human interaction.
Rules help predict the behavior of others in different situations. If the set of rules that one individual uses differs significantly from the set of rules of another, this may hinder their interaction and prevent them from making a deal. "Knowing" a person means learning something about the rules that a person uses in certain situations. This knowledge of the expected behavior makes the interaction easier. In other words, it reduces uncertainty and thus transaction costs.
Institutional societies create its own rules based on common law and laws for special purposes. Organizations have their own rules for managing interdependence. The organization's rules may be less explicit, such as a common trading culture, or active modes of accommodation, such as commercial marketing. The internal rules of an organization can be explicit, such as an organizational description of the structure, or implicit, such as the prevailing organizational culture. People form their own rules for interaction.
Rules are the cumulative product from past transactions. They form a hierarchy.
Rules evolve over time; at the top of the hierarchy (individual behavior) rules develop more rapidly, and at the bottom (culture and custom) more slowly. Rules for these types of interdependence may appear in different cultures at different levels of the hierarchy.
Culture and traditions act as the basis for human interaction. Throughout the life of a person or organization, experience from the past is added to the body of knowledge, often resulting in gradual changes in shared traditions. Past transactions affect the behavioral practices of the people conducting those transactions, which in turn increase the pressure to change the standard operating procedures of organizations.
If the pressure is strong and widespread enough, it often affects legislation and gradually becomes part of the culture, custom and history. Another way to form a rule is to actively acquire knowledge from other cultures. Thus, exploration and interaction with other cultures can play important role in developing ways to reduce society's transaction costs over time.
If the conditions creating interdependence remained constant, then the established setting would evolve to adapt as much as possible to the existing conditions of interdependence. This development would ultimately reduce transaction costs to a minimum. Planning deals would be easy, because the behavior of people and organizations could be perfectly predicted.
However, the terms of interdependence are constantly changing, rendering the existing rules obsolete. New products must be adapted to the environment that is the result of past transactions. These new products (such as biotechnology products) may require rules that do not exist in the structure containing the legacy rules.
The hierarchy of rules is the result of a process of interaction between various actors that can influence the implementation of the rules.
Given a certain distribution of power, the hierarchy of rules reflects the process of saving transaction costs in society. A transaction with characteristics may need special rules, or the rules may need to be determined in court, often after the transaction has taken place and a dispute has arisen. The key question for society is what level of rule creation (and enforcement) is the least costly for a given type of transaction (Figure 7.2).
Rice. 7.2.
Due to the interdependence of the various rules, they do not all correspond exclusively to categories. Cultural heritage can directly affect individual behavior, which in turn can affect the formation of laws. Another way to explain the hierarchy of rule formation is that, starting from the foundation of culture and tradition, higher levels take care of maintaining the necessary rules. Organizational rules provide the basis for individual behavior.
PRACTICAL EXAMPLE
In different cultures, the combination of monetary and non-monetary transactions may occur according to rules created at different levels of the hierarchy. For example, many conflicts in Japan are resolved by the parties in private. In the United States, the same types of conflicts are resolved in court. The number of litigations per capita in California is 20 times greater than in Japan.
In most developed countries, liability for an unsatisfactory product or service is placed on the manufacturer through consumer laws. Without this legislation, the responsibility for the transaction would be placed primarily on the consumer, and only secondarily on the manufacturer.
Understanding rule structures important for creating new rules. If the proposed rules are too different from the existing ones, the transaction costs of adopting the new rules may be so high that they remain unaccepted. In some developing countries, one can observe double rule structures.
PRACTICAL EXAMPLE
For example, during the colonial era, rule structures based on foreign cultures were built in the colonies. The original set of rules based on tradition and history prevailed among the people, especially in rural areas, and the new culture spread among the new institution. A similar situation lay down after the collapse of the USSR.
The dynamics of the rule formation process creates an institutional environment for each transaction. Since each transaction occurs within a certain set of rules, transactions can also form a structure of rules.
- Zudin A.Yu. Associations - Business - State. "Classic" and modern forms of relations in Western countries. Moscow: State University Higher School of Economics, 2009. S. 8.
Market mechanism
Which of the following principles best characterizes a centrally controlled economy
In the market economy model
situations, problems
Answers and comments
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Section 7. Main directions and current problems
modern economic theory
At the end of the twentieth century in modern economic theory, there are clearly three main directions: institutional, neo-liberal or neo-classical and Keynesian with the prefix "monetary". But such a division can be accepted only with a certain degree of conventionality, since, in general, the development of economic science in the twentieth century. It went very rapidly and it is very difficult to offer an absolutely unambiguous classification. In any case, there remains a certain part of theories and concepts that did not fall under the "roof" of the designated areas. In the 50s–70s. institutionalism experienced rapid development. Called late institutionalism, it went beyond the United States and spread to Europe, giving a wide variety of theories that can be divided into two types: transformation theories (diffusion of property, revolution of managers, diffusion of benefits, consumer society, mixed economy, electronic cottage, deproletarianization of the worker class, information society, etc.) and the theory of convergence (the theory of stages of economic growth, the theory of industrial society, post-industrial, super-industrial society, etc.). The undisputed leader of this period is the American J.K. Galbraith.
Like the founders of institutionalism, later institutionalists accused competing theories of ignoring the real socio-economic structure and problems of social development.
However, the real move economic development, directed towards strengthening the forces of the market (actualization of monetarism in theory and practice), and not towards the expansion of planning and the convergence of socialism and capitalism, could not but be noted by modern institutionalists of the late twentieth century, who focused on the contradictions within the institutional current itself . Some began to consider their work as an addition to the neoclassics (a new institutional theory that comes from a microeconomic understanding of the institution), while others began to look for contradictions between the old and new institutionalism (the methodology of holism and individualism).
The founder of the first direction is R. Coase, his followers are O. Williamson, J. Buchanan, S. Pejovic, A. Alchian and others. where the main research method is not a comparison of imperfect institutions with perfect ones, ideal with real ones, but a comparative institutional analysis of existing institutions and alternatives that exist in practice. The subject of economic research is the impact of individuals or organizations on each other within a single economic system, the ideal should be the minimum negative impact of economic entities on each other, in real life this is achieved through a variety of forms of the main economic institutions (organizations): the market and the firm.
The second direction is represented by J. Hodgson, E. Skreptani, W. Samuels and others. They consider the methodology of both holism and individualism to be unsatisfactory. The challenge is to formulate the relationship between action and structure in such a way as to preserve the structural nature of action and the reality of choice and action itself. The concept of the subject of economic theory should not exclude some predetermined methods or premises.
Economics is the science of the processes and social relations that govern the production, distribution, and exchange of wealth and income. (The authors point out that in this case the term "political economy" is preferable, but for tactical reasons it should not be used, lest the "enemy" interpret this as a retreat from the field of theoretical battles.) However, no matter how fair the reproaches are, they do not in themselves represent a positive economic theory, and in this sense, the representatives of this trend have nothing to brag about yet.
An approach that advocates the need for and effectiveness of government intervention in modern conditions, started by R. Klatzer, A. Leijonhufeud, S. Weitraub, H. Minsky - the authors of the updated Keynesianism, now continued by J. Taylor, J. Stiglitz, J. Akerlot and others. These economists build new equilibrium models, but without their main premise - automatic "clearing" of markets, i.e. without automatic adjustment of supply and demand through rapid price changes. The impossibility of "clearing" is associated with the lack of complete and reliable information, various institutional restrictions (the concept of imperfect information), which are an organic component of the monetary economy.
A monetary economy is an economy of uncertainty, which is proposed to be overcome through the model of a "representative individual" (one for all), this "one" is the state. It can maintain equilibrium through monetary regulation by setting interest rate at the level of the "natural norm", counteracting any temporary change in economic conditions and employment, and thus becoming the basis of stability. This concept is also called monetary Keynesianism.
Regarding the neoliberal or neoclassical direction, it should be noted that in the last decade of the outgoing century, the theory of the "extreme right" was gaining special strength. This is the theory (school) of rational expectations, whose representatives are J. Muth, R. Lucas, T. Sargent, N. Wallace, E. Perscott, R. Barrow and others.
The essence of the theory of rational expectations is that in order to make decisions in the present and predict the future, economic entities use all possible information about the economy, and not just the experience of the past, and therefore do not make systematic errors in their forecasts; in this sense, their predictions are rational.
From the point of view of rational expectations, a wide range of economic problems was analyzed, in particular, investment under uncertainty, money neutrality, the natural rate of unemployment and the effectiveness of government intervention in the economy, as well as the Keynesian model of government regulation.
The initial conclusion of the economists of this school was that the Keynesian doctrine of state regulation is ineffective, and then the Friedman model of regulation, since money is not just neutral, but super-neutral to the economy. Consequently, the state actually has no leverage on the economy. The Rational Expectations school argues that under certain circumstances, it is possible to have a one-time short-term impact on some economic indicators, and it does not matter what orientation the government belongs to - Keynesian or monetarist. Macroeconomic policy can, in fact, only imitate the purposefulness of actions at the cost of introducing additional confusion into economic life.
Such an interpretation of the role of the state is an illusion and opposes not only supporters of state regulation, but also those who traditionally opposed this action, i.e., both A. Smith and M. Friedman. On this basis, the representatives of the school of rational expectations called themselves the new classics.
In addition to the main areas, you can pay attention to a number of problems that are of particular relevance in modern economic analysis. These are various theories of the world economy, including economic comparative studies and theories devoted to globalization trends and problems of the future.
learning goals
1. Determine the main directions of development of economic theory at the present stage.
2. Characterize traditional institutional theories or theories of late institutionalism.
3. Describe the theories of new institutionalism.
4. Show the features of the views of theorists of the new classics.
5. To reveal the specifics of the views of the representatives of the updated Keynesianism.
6. Find out conceptual approaches modern theories world economy.
7. Show the specifics of comparative analysis.
Tests
I. BUT . Match the term or concept with its definition
A) convergence theory;
B) the theory of transformation;
C) an institution as an expression of the principle of holism;
D) an institution as an expression of the principle of individualism;
E) the concept of rational expectations;
f) the concept of imperfect information;
G) economic comparative studies.
1) Explanation of institutions through their correspondence to the interests of individuals who seek to form a framework structuring interaction in various fields;
2) understanding that different economic agents have different opportunities for obtaining and using information, i.e., the study of decision-making in conditions of information asymmetry;
3) theories that emphasize the main changes (from the point of view of the author of the theory) in modern society and determine its modern specificity;
4) explanation of the behavior and interests of individuals, which determine the interaction between them, through the existing stereotype of thought;
5) theories that see in social development in the modern era (50–70 years of the XX century) the prevailing trend towards the convergence of two social systems - capitalism and socialism, with their subsequent synthesis in a "mixed society" that combines the features and properties of each of them;
6) one of the sections of the theory of international economic relations, dealing with a comparative analysis of economic systems;
7) interpretation of the method of decision-making by economic agents, which proceed not only from the prevailing stereotypes of economic behavior (information about the past), but take into account state of the art economic environment and therefore do not make mistakes in making decisions aimed at achieving personal gain.
I. B . Match the characteristic features of economic systems from a) to d) and from 1 to 8 statements
A) property relations market economy;
B) property relations in a centrally controlled economy;
C) the mechanism of coordination in a market economy;
D) the mechanism of coordination in a centrally controlled economy.
1) The variety of economic activities is agreed in advance (ex ante);
2) individual members of the economic community realize their goals through the market, i.e., taking into account the needs of others;
3) each individual has the right to engage in productive activities, consume, use his income and transfer property;
4) private ownership of the means of production is replaced by public ownership;
5) all planning powers are transferred to households and enterprises;
6) enterprises are passive recipients of instructions that are called upon to fulfill planned production targets;
7) the flow of information about production tasks goes from top to bottom;
8) sanctions are taken mainly at the behest of the authorities.
II. Choose the correct answer
a) the rules of the road;
B) daily purchase of cigarettes in the nearest kiosk;
C) regular morning meeting with a neighbor on the porch.
2. Choose from the given series those judgments (institutional frameworks) that fall under the definition of an agreement:
A) during a thunderstorm, do not be near tall trees;
B) at the table, the fork should be held in the right hand, and the knife in the left;
C) getting lost in the forest, you should orient yourself in the area by the sun, stars or signs (for example, the location of moss on a tree trunk);
D) do not smoke in public places, do not disturb the public peace.
3. Which of the following is an illustration of the incomplete rationality model of action?
A) the behavior of the average student in preparing for the exam;
B) the behavior of an excellent student;
C) Robinson's behavior.
4. Representatives of what direction of institutional theory would agree with the expression: "Tell me who your friend is, and I will tell you who you are."?
B) "new" institutional economics;
5. Representatives of what direction of institutional theory would agree with the expression: "Every nation has the government that it deserves":
A) "old" institutionalism;
C) new political economy.
6. Representatives of what direction of institutional theory will not be interested in the following argument of a student who has not prepared for the seminar: "The university library was closed, in the district library - no desired book, and, in general, this week there are two tests and one independent work in other subjects, for which you also need to prepare"?
A) "old" institutionalism;
B) "new" institutionalism;
C) new political economy.
7. The centrally controlled economy model is characterized by:
A) the absence of a system of sanctions;
B) individual planning;
C) the principle of economic subordination;
D) the lack of an information system.
8. :
A) there are no economic plans;
B) there is no mechanism of sanctions;
C) prices serve as an indicator of scarcity;
D) the state coordinates economic activity.
9. Market mechanism:
A) makes the plans of individual economic units unnecessary;
B) serves to coordinate the unified state plan;
C) coordinates the plans of households and enterprises;
D) does not have a system of information and sanctions.
10. Which of the following principles best characterizes a centrally controlled economy?
A) cost coverage
B) implementation of the plan;
B) the desire for profit;
D) profitability.
11. In the market economy model:
A) maximum welfare is guaranteed for every citizen;
B) the state determines the content of economic activity;
C) a person's desire for acquisition is specially encouraged;
D) there is an even distribution of income.
III. Determine who is superfluous in the proposed list of names, where three out of four should be united by one school or one concept
1. a) Coase; b) Williamson; c) Mut; d) Buchanan.
2. a) Galbraith; b) Williamson; c) Rostow; d) Aron.
3. a) Friedman; b) Lucas; c) Sargent; d) Mut.
4. a) Friedman; b) Lucas; c) Laffer; d) Veblen.
5. a) Robinson; b) Taylor: c) Stiglitz; d) Akerlot.
IV. Establish a correspondence between authors (sources) and ideas, theories, concepts
A) 1. Coase. 2. Buchanan. 3. Williamson. 4. Pejović.
A) the theory of the social contract (contract);
B) economic theory of property rights;
C) the theory of transaction costs;
D) the theory of economic organization.
B) 1. Veblen. 2. Coase. 3. Hodgson. 4. Galbraith.
A) a new institutional theory;
B) new political economy;
C) late institutionalism;
D) early institutionalism.
C) 1. Mut. 2. Stiglitz. 3. Williamson. 4. Friedman.
A) monetarism;
B) new institutional economics;
C) new classical macroeconomics;
D) updated Keynesianism.
D) 1. "Old" institutionalism. 2. New institutional theory. 3. New classic. 4. Monetary Keynesianism
A) the concept of rational expectations;
B) the concept of imperfect information;
C) the concept of bounded rationality;
D) the concept of holism.
situations, problems
1. The norms and laws that characterize the way of society determine, first of all, the integration of each individual into society..
A) Based on this point of view, show the difference between the principles of individuality and collectivism.
B) What role do plans play in a market and centrally planned economy?
C) From the principle of order, acting in a particular case, it is concluded to what extent the state is endowed with the right to make economic decisions. Explain the differences between both economic systems.
2. The social system, which determines the coexistence of people, includes, along with the political, legal and economic, also the social system. In the nineteenth century there was a widespread misconception that the purposeful regulation of economic activity itself creates a reasonable social order.
A) Show the differences in the responsibility of each person for the conditions of his existence in accordance with the guidelines of the welfare state or society of effective competition, and critically justify your position.
B) Explain why social legislation should strike a balance between the principles of "additionality" and "solidarity".
C) Explain the importance of tariff autonomy for maintaining social compromise in society.
D) Highlight the features of private property and stable monetary exchange in a social market economy.
Answers and comments
I. A) a-5; b-3; at 4; g-1; D 7; e-2; f-6.
B) a-3; b-4; in-2.5; g-1,6,7,8.
II. 1-a; 2-b, d; 3-a; 4-a; 5 B; 6-b; 7-in; 8-in; 9-in; 10-b; 11-a.
III. 1-in; 2-b; 3-a; 4-d; 5-a.
IV. A) 1-in; 2-a; 3-d; 4-b.
B) 1-d; 2-a; 3-b; 4-in.
C) 1-in; 2-d; 3-b; 4-a.
Mechanisms and methods of regulation in the conditions of overcoming the crisis Author unknown
4.1. Organization of economic coordination in the global economy
Today, competition, as the principle of economic coordination in the industrial era, has been replaced by a system of economic coordination designed to ensure the coordination of interests of economic entities. Since the market sector is not able to regulate the social and environmental spheres, these “failures” of the market are coordinated by the state in accordance with established laws and regulations. But, in turn, the state, with its policy to correct the "failures" of the market, can cause new adverse consequences and problems, which leads to "failures" of the policy. The measures taken by individual states to overcome the financial and economic crises showed the world these "failures". One of these measures was to increase the liquidity of the banking sector of the economies, which caused a negative reaction in all other sectors.
Separated from a single whole, independent spheres in the economy do not exist. This unified whole in the subsistence economy is implemented by the mind of the leader, and in the large industrial world it is implemented by the economic order (in the terminology of V. Eucken) or the rules of the game, principles in modern sound. For this reason, any measure of economic policy is rational only within the framework of the total economic order in which the economic process takes place. In order for this economic order to be sufficient and rationally regulate the overall economic process, it is necessary that all separately taken forms of order complement each other, regardless of whether we are talking about state-established forms, namely those related to trade, price and credit policy, or about forms that have already become familiar. Therefore, each private order, or economic environment, must be considered as a link in the overall economic order or a structural element of the economic (market) environment. This state of affairs reflected the stage of development of countries in the 1950s. At present, all national economies are intertwined with various cooperative (corporate) relationships, forming a global economic system.
The principle of economic coordination of competition in a market environment causes scientific disputes to this day, determined by various scientific schools. But all scientists agree on one thing - there is no economic development without competition. That the mechanism of competition contains the forces of self-destruction, like J. Schumpeter, was confirmed by A. Rich, who considered competition to be the principle of coordination of activities put forward by the real market economy of the 1980s: “ It's about on the preservation of such competition, which ensures profit as a result of active entrepreneurial activity that takes into account the interests of everyone, but which effectively prevents the extraction of income due not to entrepreneurial activity, but to the power of fashion, the market, objectively aimed at curbing competition or even at its complete exclusion from economic activity. His conclusions are consistent with the Pareto optimum: no one's well-being can be improved without worsening the well-being of someone else. Pareto's proposed criterion of well-being means a situation where some people win, but no one loses.
The social market economy is a liberal concept that differs from classical liberalism in the principle of economic competition, according to W. Eucken's ordoliberalism, when an economic order with framework planning guarantees competition that brings the market economy closer to a perfect competition model, excluding the possibility of establishing power over the market by monopolies and cartels. But its social orientation must be ensured by targeted intervention from outside, which is in the nature of regulation by the state economic policy, correcting the “failures” of the market.
Human economic activity is determined by various goals and interests. If the goal of a profit-oriented economy is income for the sake of personal or collective enrichment, then this motive becomes the dominant structural principle. Factors of objective necessity and coercion arise, the source of which lies not in the rational structure of economic activity as such, but in the dominance of the enrichment motive and in the corresponding economic mechanism: “Then competition in a market economy from a stimulus and regulator of economic production and consumption easily degenerates into an aggressive , unbridled competition, the decisive factor of which is not ability and perseverance, but, above all, economic dominance in the market, which favors the formation of blocs. Thus, a system of coercion arises, which individual subjects of the economy are not able to avoid without exposing themselves to the risk of economic damage or even catastrophe.
Very often this system of coercion is perceived as an objective regularity, although, in most cases, it is nothing more than the sum of habits, rules, agreements that can be changed. Business coercion can be conditioned by certain value orientations that underlie the economic structure and policy, when changing which economic coercion is weakened or eliminated. In fact, such coercion reflects internal contradictions that serve as a source of the progressive development of society and reflect a systematic approach on a dialectical basis. A. Rich believes that: “the system of coordination of a market economy only to a small extent satisfies the requirements of full competition; the probability of its actual existence under the current technical and economic conditions is equally small. This does not at all mean, as is often asserted, that competition has generally exhausted itself as a principle of economic coordination. After all, even in the limiting case, in the presence of an absolute monopoly, when there are no direct competitors, competition persists, at least within the limited budget of the consumer.
Modern competition is primarily a struggle for technical leadership, for priority in opening new markets and in transforming old ones, the desire, as accurately as possible, to guess the direction of changes in consumer tastes and preferences and to embody them as much as possible in their products. This is a special type of competition - "innovative" competition, main task which is not the displacement of the opponent from the positions already occupied by him, but an attempt to get ahead of him in something new, more promising. Therefore, F. Hayek proposed such a definition of competition as a process by which people receive and transfer knowledge. It only leads to a better use of the abilities and knowledge of other procedures, how best to use the specialized knowledge scattered among millions.
The value of competition, in his opinion, lies precisely in the fact that, being a discovery procedure, it is unpredictable. AT otherwise there would be no need for it. The further development of these views of F. Hayek was carried out by T. Sakaya, who drew attention to the competitors giving their products a new form of value created by knowledge and made the following conclusion: contain the costs associated with their development. Such intense competition is likely to create conditions under which the "boom" in the sale of a popular product or technical innovation will become shorter and shorter. Based on this assumption, we can conclude that the life cycle of a consumer product is shortened.
In fact, the expansion of goods from China showed the development of the opposite trend - the imposition of counterfeit goods from the world's leading manufacturers on the whole world. The institutional mechanism for smoothing this trend has not yet been developed again for the same reason as the implementation of the plan of V. Eucken - because of the infringement of the interests of the world and industry elites. Since the struggle in this case is impossible, it is necessary to conduct scientific research to harmonize interests and prevent economic power in the developing sectors of information technology, communications, astronautics and some others.
P. Drucker, back in 1964, also wrote about the meaning of knowledge when neither results nor resources exist within the business itself: “Business can be defined as a process that turns external resources, namely knowledge, into external results - economic values” . The following regularity can be traced in the modern economy. The more diverse a certain product is on the market, the more difficult it is to replace it with a competing product and, therefore, the greater the power of their producer over the market. A so-called supply-side economy arises, when only minor details can be modified, and homogeneous goods presented on the market as a whole give the impression of their heterogeneity. This competition is called substitution competition.
The fact that competition, as a principle of economic coordination, has not exhausted itself is confirmed from the point of view of a post-industrial society, when the service sector makes up more than half of economic activity, where monopolization is extremely difficult. The development of the Russian market economy on a competitive basis consists in creating institutional conditions for achieving competitiveness by market entities. The starting point in theoretical studies on institutional conditions are the works of M. Porter, who in the 1980s characterized the competitive advantages of countries and the context of enterprises (institutional conditions).
In his research, he proved that the emergence of a national environment in which companies emerge and learn to compete is due to four components of the country's competitive advantages (the “diamond” rule): the presence in the country of the factors of production necessary to compete in this industry; the state of demand in the domestic market; the presence in the country of supplier industries or other related industries that are internationally competitive; the level of competition and the conditions for creating an organization and managing companies that are specific to a given country.
According to Porter, the context of the activities of enterprises (institutional conditions) is a social, political and institutional infrastructure that includes many elements, such as laws, rules, codes and procedures for resolving conflicts, determining responsibility, defining ownership, delineating the boundaries of property rights. It is also necessary to form a widely held belief that these rules are indeed the rules that govern economic life. For this to happen, a functioning public administration is needed. The market is not a substitute for the state, it is a supplement, without the state, or other mechanism of centralized coordination, the market cannot work.
In Russia, the formation of a market environment on a competitive basis began in the mid-1990s through the creation of institutions and institutional conditions. Analyzing the context (institutional conditions) of the activities of Russian enterprises, it is necessary to identify industries in which it is possible to produce competitive products. These are the so-called points of growth of the domestic economy, which include high-tech industries - power engineering, aircraft and space systems, military-industrial complex, heavy special machine tool building, telecommunications, computer industry, software. It is also necessary to take into account the development of the modern technological revolution, which includes five main components of the new technological order - information technology, synthetic materials, biotechnology, new energy sources and nanotechnology.
I.M. Kirzner because it does not replace the role of the entrepreneur. He focused not on the analysis of equilibrium, but on understanding the functioning of the market as a process. He recognizes the entrepreneur as the driving force of the entire market process, noting that the exclusion of the entrepreneurial element is common to all models of competition. In our opinion, the entrepreneurial element is the managerial aspect of the system of competitive relations. Back in 1921, F. Knight identified differences in the managerial function - to make decisions and the entrepreneurial function - to bear responsibility. Based on this, we can talk about a managerial economy in which management tasks related to the fulfillment of an entrepreneurial goal are implemented. The tasks of such management include the creation of institutional conditions.
The existence of some monopolies is unavoidable because the duplication of facilities such as a pipeline, a power line, or a research clinic would lead to unnecessary expense. The cost of attracting additional resources would exceed the potential benefit from the presence of competition. In such situations, the main role is played by the regulator, designed to ensure that the object is available to everyone at a reasonable price. However, regulators are not omnipresent or omniscient. Their own monopoly on power is not always used fairly. In addition to "failures" of the market, there are "failures" of policy.
In a socially oriented model of the economy, the state establishes the formal rules and norms necessary to ensure the fulfillment of the goals set on the basis of increasing the efficiency of production and the competitiveness of goods and services. Although such norms and rules exist in all models of the state. In the Keynesian model, state intervention is considered necessary in crisis situations. But the allocation of the coordination aspect of institutions as a fundamental one, in comparison with the distributive aspect, is the methodological basis of the system of economic coordination of inter-firm relations developed by us.
We are interested in the mechanism of coordination of economic activity as a management structure (“governance structures”) in the concept of O. Williamson, which he identifies with the concepts of “economic institutions”. This mechanism reflects, in our opinion, the dominance of organizational and managerial relations.
The exaggeration of the logic of the market, as an absolute principle of coordination in society, means limiting the logic of the coexistence of people (the ethical idea of rationality) by the economic logic of a mutually beneficial exchange of goods. In this case, the research methodology used is based on two assumptions: economic determinism and reductionism. The first is based on the exclusivity of economic rationality due to the conditions of market competition. Reductionism in economics comes from the definition of a market that works for the benefit of all, caring for the common good. The same systemic rationality, but with normative content.
For example, in Russia, instead of adapting the market to social relations, these relations themselves are radically adjusted to the requirements of the market. Relations between people are reduced to exchange relations, which leads to the development of the idea of the efficiency of a market economy into the ideology of a total market society.
The current economic crisis has shown the mechanism of our system of economic coordination at the global level. The essence of the mechanism of the economic coordination system, in our opinion, is based on the identified three types of economic coordination (centralized, decentralized and global). We concluded that the mechanism of competition (self-regulating market) was replaced by a system of economic coordination of the activities of market entities. All elements of this system are interconnected, and each type of economic coordination is separate from common system can not exist at the present time, as demonstrated by the current crisis.
Centralized coordination by the government provides a competitive environment (the so-called "rules of the game"). Market entities operate in a certain environment that allows them to achieve competitiveness, taking into account the existing norms and rules established by the state depending on the development goal (centralized coordination). It should be noted that when A. Marshall analyzed the impact of the external environment on the organization of production, he spoke about the role of competition and cooperation in the development of the economy. Our understanding of cooperation lies in the fact that it allows us to coordinate the interests of business and the goals of the development of society. The system that implements the role of cooperation in a competitive environment is the system of economic coordination under study. W. Eucken proposed two constitutive principles for post-war Germany in the transition from a command economy to a market economy: the policy of the state is aimed at dissolving or limiting economic power groups; the political and economic activity of the state is aimed at creating forms of the economic environment, and not at regulating economic process.
Eucken complained that if economic and social power groups in the state have already taken strong positions and gained state privileges, then it is difficult to achieve their weakening or dissolution. But at the same time, he draws an optimistic conclusion: “However, history provides a lot of examples showing that this can be achieved within the framework of the confrontation between power groups and decisive state leadership.”
Decentralized coordination in the existing competitive environment ensures competitiveness. The history of economic development has shown that insufficient coordination manifests itself in a market economy due to the formation of power over the market by monopolies, oligopolies and groups with their own interests. As development trends show, monopolies and oligopolies, other formal and informal integrated structures, call into question the use of competition as a principle of self-organization, decentralized coordination in the market.
The mechanism of decentralized coordination of the activities of market entities (microeconomics) cannot replace macroeconomics and create conditions for development. Therefore, decentralized and centralized coordination constitute a system. The basis for highlighting the mechanism of decentralized coordination is the study of the concept of “internal (intra-company) organization” (“internal organization”) by F. Knight, which helps to emphasize the specifics of the tasks of the company as a non-market (administrative) mechanism of economic coordination. The decentralized coordination mechanism includes corporate planning (including cooperation in integrated structures), management, control, and effective management of state property.
We present these mechanisms in Fig. 4.1.
Rice. 4.1. Decentralized and centralized coordination mechanism
Global coordination through the inclusiveness (inclusion) of economic agents ensures the formation of world norms and rules of business. The main condition for perfect competition (the ideal of reforming the Russian economy) is that the market price is formed under the influence of the aggregate supply and demand of all participants. The structure of communication between market entities - the market structure - is such that no one individually can influence the price. But since the competitive market since the time of A. Smith has lost the ability to self-regulate due to the increasing concentration of production and capital in new forms, the competition mechanism is being replaced by other systems.
In a global strategy, choices must be made because of the many ways to compete: where to place activities and how to coordinate them. The principles of global coordination that allow companies to gain competitive advantages through a global strategy were highlighted by M. Porter. The mechanism of global economic coordination is presented in Table. 4.1.
Table 4.1. Global Economic Coordination Mechanism
The market and its infrastructure are manifested through institutions: the monetary system, commodity exchanges, currency convertibility, etc. At present, these institutions have acquired, in the main, a global character. The table shows that the mechanism of global economic coordination is associated with obtaining competitive advantages. Global coordination ensures the formation of world norms and rules of management through the inclusiveness (involvement) of economic agents, which manifest themselves in the modern world as the relationship between the center and the periphery in network spatial structures. This conclusion is made on the basis of the substantiation of the network society by M. Castells (1996), who, using numerous examples, proved that the dominant processes and functions in our societies are determined by the configuration of relationships in networks and between networks.
In our opinion, a new era has begun, characterized by the fourth stage in the evolution of the principle of coordination in the economy. The first stage represented the so-called "invisible hand" of Smith's market coordination and was expressed in the reduction of mass production costs in vertically specialized industrial enterprises coordinated by the market. Alfred Chandler (1977) called the second stage the visible hand of hierarchical coordination using the organizational innovations of the US management team. The third stage is solving the problem by improving the internal organization of the firm, and not productivity (reducing costs). This position contradicts the notion that developed in the 1990s in the United States and Great Britain about the economy as an object of central government demand management policy.
The fourth stage we propose is based not on obtaining competitive advantages by reducing costs (the first and second stages), or obtaining strategic advantages by constantly improving the production process and product (the third stage), but by using an economic coordination system in which the mechanism of coordinating business interests is implemented. and development goals of society. Based on the identified principles and mechanisms of economic coordination (centralized, decentralized and global), we concluded that the mechanism of competition (self-regulating market) was replaced by a system of economic coordination. Centralized coordination by the government provides a competitive environment (the so-called "rules of the game"). Decentralized coordination in the existing competitive environment ensures competitiveness. Global coordination ensures the formation of world norms and rules of business.
From the book Risk Management, Audit and Internal Control author Filatov Alexander Alexandrovich6. Features of information interaction in the implementation of management / coordination of the function 6.1. As part of the management / coordination of the internal audit function, the employees of the IAS MO need to establish a procedure for information interaction with others
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From the book ON DEMOCRACY. GENERATION WAR author Gorodnikov SergeyABOUT THE PROJECT “Center for Global Policy Development” In Russia, the absence of a serious systemic policy, a policy with a strategic focus, has been prolonged. The current state of affairs is understandable and natural. For a decade and a half, the main task of those who
From the book Who Said Elephants Can't Dance? The Resurgence of the IBM Corporation: An Inside Look author Louis GerstnerCHAPTER 8 Building a Global Company So far, we've put out a fire. Now it was necessary to restore the fundamental strategy of the company. This strategy, as I spoke for half a year, stemmed from my belief that IBM's unique competitive advantage was
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From the book Economic Theories and the Goals of Society author Galbraith John KennethChapter XXI The Negative Strategy of Economic Reform Chapter XXII The Emancipation of Opinion Chapter XXIII The Just Organization of the Household and Its Consequences Chapter XXIV The Emancipation of the State Chapter XXV Policy for the Market System Chapter XXVI Equality in Planning
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by William Wells From the book Advertising. Principles and Practice by William WellsWho is responsible for coordinating the choices that people make in the course of their daily economic activities? After all, each person is unique, each has his own tastes and preferences, his own ideas about the ways in which it is necessary to carry out the production and distribution of goods.
Economic theory considers two different modes of coordination: spontaneous, or spontaneous order and hierarchy.
In spontaneous orders, the information needed by producers and consumers is conveyed through price signals. An increase or decrease in the price of resources and the goods produced with their help tells economic agents in which direction they need to act, i.e. what, how and for whom to produce. In any system, the manufacturer must calculate their costs (costs) and benefits. This also applies to the consumer. But how can this be done if the person leading household or the head of the enterprise is not able to take a look at the entire "economic space"? Of course, in a Robinson household on a small island, or within a relatively small primitive tribe, the amount of resources available, and the combination of their alternative uses, is a (quantitatively) quantifiable quantity. But how is it possible to calculate the ratio of benefits and costs not in small groups, but in the "extended order of human cooperation", as F. Hayek calls the modern economic system called capitalism? After all, information about available resources, about the tastes and preferences of consumers is dispersed, dispersed, it is not located in a certain Center. Under such conditions, only the mechanism of price fluctuations, or opportunity costs, can coordinate people's economic choices. Such an economic system is called by F. Hayek a spontaneous (spontaneous) order, which emphasizes the evolutionary nature of its emergence, independent of anyone's intentions or plans. Spontaneous order arose naturally, in the course of the development of human civilization.
But there is another way to get information about what, how and for whom to produce. This is a system of orders and instructions that goes from top to bottom, from a certain Center to the direct executor (manufacturer). Such a system is called a hierarchy. An example of a hierarchical order can be a primitive community, where the leader of the tribe decided who, how and what to do in the process of economic activity. Hierarchy is also a command-administrative system, or socialism, where the state, represented by the State Planning Commission or the highest party authorities, gave orders on what to produce, distributed resources, attached suppliers to consumers. In the form of a hierarchy, the company also operates, where the head of the enterprise gives orders to his subordinates. The hierarchy is based not on price signals, but on power personified in the person of the head of the firm or the central governing body of the state.
In the real world, there is a coexistence of spontaneous orders and hierarchies. But on what does the very fact of this or that organization of society depend?
For this, it is important to introduce a new category that is used by economic theory, namely, transaction costs. These costs are not associated with production as such, but with the costs associated with it: the search for information about prices, about counterparties of business transactions, the costs of concluding a business contract, monitoring its execution, etc. Not all components of transaction costs are listed here. However, already from this brief definition it is clear that this or that system will function as a hierarchy or as a spontaneous order, largely depending on the magnitude of transaction costs.
Imagine that in the "extended order of human cooperation" it is necessary to collect information about potential counterparties of exchange transactions, control the execution of the contract, etc. Spontaneous order will turn out to be the cheapest way here, because "gathering into a single fist" all the scattered information will be an impossible task for any Center. But within the firm, a way that saves transaction costs is hierarchy. Here, workers interact with each other not through price signals; about what to do and what to produce, the worker (for example, a worker in the assembly of cars or a clerk in a bank) learns from his immediate superiors.
Thus, we have come to an interesting conclusion: it is necessary to evaluate the effectiveness of spontaneous orders or hierarchies not from the point of view of normative assessments (bad or good), but from the point of view of saving transaction costs. Of course, this is not the only criterion, but it is very important. This approach helps to understand why the socialist economic system turned out to be inefficient: an attempt to build all social production according to the type of a firm, or a “single factory”, as V.I. Lenin wrote, turned out to be untenable due to the huge transaction costs associated with regulation from the Center (Gosplan).