Investigation of the institutional equilibrium of the market of social and environmental services of forest: conditions and development strategies

Abstract

Taking into account the peculiarities of the market of social and environmental services of forests as a new ecological and economic system of the forest sector of the Ukrainian economy, its institutional equilibrium should be understood as a state of the institutional environment in which there is no significant contradiction between informal and formal institutions.

The degree of correspondence between formal and informal institutions determines the amount of expenditure to eliminate possible contradictions, that is, the possible dynamics of transaction costs, and, accordingly, determines both the effectiveness of institutional provision and the effectiveness of the economic system as a whole.

The most typical situation of institutional disequilibrium in the market of social and ecological forest services is that when the introduction of new formal institutions, that is, the development of the state of the institutional environment in the position of institutional equilibrium is met with strong resistance from the informal. The economic conditions for development of such situation to the state of institutional equilibrium are such when the economic benefits of introducing new formal norms exceed institutional transactions. The strategy to achieve institutional equilibrium is the gradual evolutionary adaptation of informal institutions in existing informal constraints.

Another situation of institutional disequilibrium can be generated by the fact that formal institutions do not change when informal institutions change. Economic conditions for development of such situation to the state of institutional equilibrium are those when the price of the risk of penalties for certain informal shadow rules for the exploitation of social and ecological resources of the forest exceeds the benefits. The strategy to achieve institutional balance is in introducing of effective coordination institutions in the institutional environment.

A state of institutional disequilibrium is possible, when the acquisition of institutional equilibrium occurs through the adequate development of formal and informal institutions. The economic conditions for the implementation of such process are the conformity of the economic benefits that such transformation gives and the costs of providing informal formal status rules. The strategy for implementing such process should be to choose economically viable alternatives.

More theoretically, a state is possible when a certain institutional equilibrium is established between formal and informal institutions, that is, for some time, formal and informal institutions do not change. The economic condition for such provision is that institutional transactions will require more expenses than those benefits that can receive economic agents from institutional development. This situation requires a stabilization strategy, which consists in mutual compromises in resolving issues when concluding and implementing contracts.