Institutional uncertainty in transitional and developing economies

Abstract

The institutions improvement is one of principal conditions for the transitional and developing economies growth. This study on the bases of multidisciplinary approach investigates the necessity of using the concept “institutional uncertainty” in economic and social researching, proves that the institutional uncertainty exists as a result of imperfect knowledge of economic agents rooting in economic agents’ mentality. The institutional uncertainty is an obligatory attribute of institutional environment, because institutions have capability to generate not only “certainty”, but also “uncertainty”, and “risks” for economic agents. The institutional uncertainty as Knightian uncertainty reflect the unpredictability of changes of institutional environment and basic institutions (ethic, ethnic, cultural, ideology, political, business and so on), and the unpredictability of it influences on economic agents’ behavior. In this connection it needs to specify the institutional uncertainty from political risks and political uncertainty. Leading reasons of the institutional uncertainty are presented on the micro-level at performance of different types of incomplete contracts widespread in market and in pre-market economies. On the macro-level the concept of institutional uncertainty is reflecting not only unpredictability of institutional changes, but also uniqueness of combinations of driving forces of transition to new frames of economy and society. Some directions of using this concept at investigation of historic institutional changes and institutional changes in modern transitional and developing economies are considered in the last parts of the study.

Keywords

• institutions
• uncertainty
• risk
• transitional and developing economies
• rule of law
• virtue
• industrial revolution