Instrumental support for designing mechanisms of institutional intervention

Abstract

The interaction of participants in the political-economic process cannot always be successfully described in terms of mechanisms of market coordination and is not always based on principles of a voluntary and mutually beneficial exchange that increases well-being. The fact is that economic actors are not uniform in the possession of power. Accordingly, activity for the rational use of limited resources is not based on competition between homogeneous economic entities in a spontaneous economic order, but on conflict between subjects with different power potentials in a hierarchical structure. Thus, power acts as a competitive advantage, which rational subjects tend to use for the purpose of force redistribution. One of its forms is institutional intervention — a behavioral model based on a coercive strategy through the establishment (change) of rules. The article describes the potential use of optimization and equilibrium models to describe the behavioral interventionist strategies. Optimization models characterize the interventionist behavior at the initial stage of institutional design, and equilibrium models determine possible variation in interactions between interventionists and victims during the redistribution of power. Methods for quantifying effects of institutional change are systematized. The proposition that violent equilibrium is not a specific distribution of mutual gains from cooperation, both with voluntary exchange and coordination level of tolerance (the maximum value of costs that the victim is willing to sacrifice) and a threshold (the lowest possible) values interventionist legitimacy, is substantiated. As guidelines for the evaluation of deviations from the equilibrium levels, we offer levels stability, efficiency, and legitimacy of institutional design.