How to understand the broad and narrow sense of' system'?

What is a system and how do we understand it?

The most general meaning of the system is: the procedure or code of conduct that everyone is required to follow. A system is often an institutional system in a certain field, such as political system, economic system, legal system and cultural system.

On the chessboard of human society, each individual has his own rules of action, which are different from the rules that legislators try to impose. If we can be consistent with each other and act in the same direction, the game of human society will have a happy ending like running water. But if they contradict each other, the result of the game will be miserable, and society will fall into high chaos at any time.

-Adam Smith's The Wealth of Nations, 1776.

Traditionally, economists have been devoted to analyzing the operation and influence of market mechanism. There is no doubt that the market can be regarded as one of the most striking systems created by mankind. However, in recent ten years, in order to understand the different economic performances of different countries, it has become more and more important to realize that "institutions are very important" (North1990; World bank (200 1). The terminology system cited here does not only refer to the market. Indeed, a series of events and phenomena related to this system in the last decade of the 20th century have had and will continue to have a profound impact on the economic performance of the countries concerned. For example, the collapse of socialist countries in the Soviet Union and Eastern Europe and the subsequent economic transition, the Silicon Valley phenomenon and the emergence of e-commerce, the unification and market integration of the euro, the financial crisis in Japan and Southeast Asia, the persistent apartheid and long-term economic stagnation in Africa, the global integration of financial markets and the emerging currency crisis, the re-examination of the role of international organizations composed of member States, and the deepening influence of global non-governmental organizations. On the surface, some of these examples can be regarded as pure market phenomena. However, if we try to understand the underlying causes and consequences of these events and phenomena, we must bring their institutional aspects into the scope of investigation.

What is a system? Whether we can equate institution with legal provisions, informal norms, organizations, contracts, people's consciousness or the combination of all these factors, so as to give any concept such as "institution" a proper definition will depend on the purpose of analysis. As a concrete example, we might as well consider the following questions: Since institutions are so important to economic performance, why can't other countries learn and adopt the best institutions among countries with better economic performance? This is the main question raised by North in a groundbreaking book on systems (North 1990). In order to analyze this problem, North defined the system as "the rules of the game". He divided the rules of the game into two categories: formal rules (constitution, property rights system and contract) and informal rules (norms and customs). Even if good formal rules can be borrowed from abroad, if the local informal rules are difficult to change because of inertia, then the new formal rules and the old informal rules will inevitably conflict. Therefore, the borrowed system may be neither implemented nor effective.

System is not limited to economy, but is the norm of people's behavior in human society. People rely on systems to measure their behavior. The system includes: established moral concepts, laws and regulations, etc.

Therefore, economists have a strong interest in enforceability. When can the rules of the game be implemented? Is it time for the law enforcement to come? But how to motivate the executive to implement the rules of the game that he should implement? In short, how can we drive the executors to do their duty? In order to avoid this endless circular reasoning, one way is to try to explain that the rules of the game are generated internally. They will eventually strengthen themselves through strategic interaction between game participants (including implementers). The most reasonable way to think about the system from this angle is to generalize the system as a game equilibrium. In recent years, we have seen some important documents based on the game equilibrium system view come out one after another. Although most of these documents are inspired by the study of historical cases (we will discuss some representative works in the next section), can we apply the same idea to the contemporary economy as a complex of multiple systems? Is this complexity just a mixture of relatively independent systems, or is it an internally consistent whole? As an equilibrium result, it is obvious that treating the system and its complex as an equilibrium phenomenon does not mean that the system is immutable; They will change. The collapse of the socialist economy in Central and Eastern European countries and the subsequent planned economic transformation are an obvious example. The question is, how do we explain the origin or change of the system in theory? Theoretically, the game model may have multiple solutions (equilibria), or the model solutions are highly dependent on the setting of the model itself. Given the game structure, can the emergence or change of institutions be interpreted as the process of choosing one of many equilibria with equal possibilities, or the change from one equilibrium to another? If so, the process of balanced selection or transition is induced by technology or market and finally locked in, is it because of technology economies of scale? System is the result of "cultural gene" programming. Can the system be designed by political entrepreneurs or triggered by innovative economic entrepreneurs? Will unpredictable political events have a random impact on institutional choice? In particular, where does the usual novelty of new institutions come from?

Therefore, the basic research ideas put forward at the beginning of this section can be more clearly summarized as the following two aspects: First, the complexity and diversity of the overall institutional arrangements of different countries in contemporary times are understood as some kind of multiple equilibrium phenomenon (* * * timeliness problem); Secondly, we should understand the mechanism of institutional change under the framework consistent with the balanced institutional view, and at the same time allow novel possibilities (diachronic issues). Please let me explain the specific meaning further.

In order to understand the diversity of institutions and the complexity of contemporary economy, it is necessary to study the interdependence among economic, political, organizational and social systems and the nature of the systems connecting these fields. This study should not only think within the framework of orthodox economics, but also learn from the important contributions of sociology, political science, cognitive science and other adjacent disciplines to institutional issues. But different from traditional institutional economics, we try to analyze the source and influence of institutional diversity under a unified game theory framework, instead of simply accumulating rich institutional types and then classifying them randomly and randomly. Developing a unified theoretical analysis framework, combined with the important contributions of other disciplines, is of great benefit to deeply understand the operation of the economic system.

At the same time, we must also realize that game theory analysis is incomplete as a theoretical tool for systematic research on institutions. Examining the interdependence of institutions from this framework may lead to the multiplicity, suboptimal and Pareto inseparability of institutional arrangements. In other words, even if faced with the same technical knowledge and linked by the same market, the institutional arrangements will vary from country to country. Therefore, in order to understand the reasons for the evolution of specific institutional arrangements in specific countries, it is not enough to confine ourselves to the framework of game theory. We must rely on the knowledge of comparison and history (Greif 1999).

In other words, institutional analysis is comparative in nature, so it is called comparative institutional analysis (CIA for short)1.

In the ninth chapter of this book, when we examine the diachronic process of institutional evolution, we will deviate from the traditional game theory (including classical game theory and evolutionary game theory) and make major revisions to it. We will abandon the assumption that game participants (and their analysts) fully understand the objective structure of the game process. On the contrary, we assume that the game participants have only an incomplete personal view of the game structure-we call it subjective Game model. When the participants' action decisions based on the subjective game model are consistent (that is, balanced) in each period, then their subjective game model will be confirmed by the observable facts that their actions are the same. Therefore, we define the system as the obvious and ** identical factors in the subjective Game model of the participants-that is, * * * common beliefs) * the actual way of playing the game. When the action decisions caused by these subjective game models fail to produce the expected results, a general cognitive crisis will follow, which will lead people to look for new subjective models. Before the new equilibrium is realized, understanding the process of institutional change is equivalent to understanding the way participants revise their beliefs in coordination. From this perspective, we can analyze the role of technological and environmental changes, political factors, legal provisions, innovative experiments and cultural heritage in the process of institutional change. Of course, all this will be after we analyze the timeliness of * * *.