1. Institutional Picture of Economic Interactions

Some parts of economic discipline have different points of view on what are interactions between economic objects and describe those by different kind of economic models (Alan Kirman). Below we will base on a picture of economic interactions accepted from New Institutional Economics approach. From the point of view of institutional economics, rules of behavior in a society or “to be more formal, the limitations created by man that organize interactions between human beings” (D. North , 1997, p.17), are society institutions. Those institutions set the pattern of stimulating motives and include various limitations, created by man in order to shape up human interactions (D. North, 1997, p. 18). Following this concept, we shall differentiate between, on the one hand, the institutions that form the opportunities for society members and acting as “limitations within which people interact with each other”, on the other hand – organizations that use those opportunities and “similar to institutions, structure the interaction between people (D. North, 1997, p. 19, 23).

Certain types of activity exist in the society that raise institutions as economic reality and maintain their efficiency. In this respect, specific human activity aimed at maintaining the performance of institutions can be presented as a certain mechanism that provides for interactions between organizations and individuals. At the “entrance” to this mechanism are economy participants in a free, unorganized state. At the “exit” – the same agents but connected via a system of established short- and long-term relationships. Thus, institutions and activity that supports them transfer a set of economic agents from free, “chaotic” state into a certain ordered institutional pattern (organization consisting of the above agents and relationships between them). Here, some types of relationships and corresponding organizations exist for quite a short period of time (e.g., acts of exchange at the market), other live for much longer periods (e.g., firms and corporations). We shall call this process as the action of “institutional mechanism” meaning that within internal environment of an organization a other mechanism is working that manages organization itself.

It is possible to depict the general institutional cross-section of economic world. At each given point in time the entire set of agents is broken down into 2 groups: 1) agents in free, “chaotic” state; 2) agents being in the bound state in the form of a set of organizations. Several types of institutional mechanisms are working in the economic system space that continuously transfer the multitude of free agents into a multitude of organizations (bound state). Due to certain reasons, relationships established between agents in the form of organizations, are regularly exhausted (they fail to correspond to objectives for the sake of which those relationships had been established). After that relationships are broken and agents resume to the free state. Thus, work cycles of the mechanisms are repeated time and again.

Fig. 1. (see bigger image)

Human interactions are mediated by their habitat in society; to a large extent it is established as the result of employing the technologies accumulated by the society. Maturity of technologies, particularly their information and communication constituents, is determined (in addition to institutional limitations) by one more – purely technical – type of limitations on human interactions within society. Similar as institutions set opportunities those are further used by organizations, information-communications technologies (ICT) determine the average level of information interactions (doing by information exchange) in a society and set their possible ceiling. Institutions structure interactions of the people within the framework of those technical limitations. The question is how we can describe the institution mechanism as information interactions between agents.

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