Institutional Reform Design: А New Chapter of Economics

Polterovich, Victor (2014): Institutional Reform Design: А New Chapter of Economics.

Abstract

In this paper I argue that the Theory of Reform may be considered as a comparatively new but intensively forming chapter of Economics. In spite of great variety of concrete reforms, the problem of institutional reforming admits general formulation and general approaches of solving it.

I discuss some important steps in the development of the Theory of Reform, and then describe its state-of-the art. Since the theory is new, its architecture is not set completely. In the final part of the paper, I will present my own visions of this architecture.

It is a typical case in the practice of reforms, when a reformer, who seeks to build an institution with desired properties, discovers that its immediate implementation is impossible because of resource, technological, cultural, political or institutional constraints. In this case, one has to construct a sequence of interim institutions which, for each moment of time, satisfy the existing constraints, and, in the end, provide the implementation of the desired institution. I describe some methods and constructions that can be used to create sequences of interim institutions; illustrations are extracted from the reform experience of China, Russia, and other countries.

• Item Type: MPRA Paper
• Language: English
• Keywords: shock therapy and gradualism, institutional trajectories, interim institutions, dysfunctions, institutional trap, transaction and transformation costs, norm fixing mechanisms, promising trajectories, manual for reformers
• Subjects: D - Microeconomics > D0 - General > D02 - Institutions: Design, Formation, Operations, and Impact; E - Macroeconomics and Monetary Economics > E0 - General > E02 - Institutions and the Macroeconomy; H - Public Economics > H7 - State and Local Government ; Intergovernmental Relations > H75 - State and Local Government: Health ; Education ; Welfare ; Public Pensions; L - Industrial Organization > L8 - Industry Studies: Services > L85 - Real Estate Services; O - Economic Development, Innovation, Technological Change, and Growth > O1 - Economic Development; P - Economic Systems > P5 - Comparative Economic Systems

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