Kuzmin E.A. The nature and origin of stability in economic processe

Kuzmin E.A. The nature and origin of stability in economic processe Научная статья. Опубликована: Journal of international scientific researches, Vol. 5, No. 1-2, 2013. — рр. 68-71 Abstract. The article clarifies the substantive aspects of emergence of stability in dynamics of development of ec... more
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ECONOMY The nature and origin of stability in economic processes1 Evgeny A. Kuzmin, Postgraduate student, Ural State University of Economics (str. March 8, 62 Ekaterinburg, Sverdlovsk Region, 620219; e-mail: KuzminEA@gmail.com) Аннотация. В статье уточняются содержательные аспекты возникновения устойчивости в динамике развития экономических субъектов. Приводится и доказывается условие проявления устой- чивости в экономических процессах через меры неопределенности и определенности. Обосновывается тетралистический характер устойчивости как одновременно свойства, состояния (положения) и ре- зультата самоорганизационного механизма экономического субъекта. Аргументируется авторская позиция о неисключительной роли скорости протекания преобразований в организации и внешних флуктуационных возмущений, выражающихся в асинхронности колебаний и ответных реакций на них. Раскрывается роль прочности и надежности в характеристике устойчивости по ходу адаптации к нежелательным отклонениям от идеалистической траектории жизненного цикла. Abstract. The article clarifies the substantive aspects of emergence of stability in dynamics of development of economic entities. The condition of stability demonstration in economic processes through the measures of uncertainty and certainty is provided and proved. The tetralistic nature of stability as a property of both state (posi- tion) and result of a self-organization mechanism of the economic entity is grounded. The author's position on the non-exclusive role of the rate of transformations in organization and external fluctuations expressed in asynchro- nous oscillations and responses to them is reasoned. The role of strength and reliability in stability characteristic in the course of adaptation to undesirable deviations from the idealistic path of a life cycle is given. Ключевые слова: неопределенность, устойчивость, экономические субъекты, надежность, прочность, адаптивность, «эффект памяти». Keywords: uncertainty, stability, economic entities, reliability, strength, adaptability, «memory effect». 1 1. Introduction nature and essence of stability, study of its influence In today’s world of exponential growth of on economic development, definition of conditions complexity in social and economic interaction, the of its origination and many other aspects. The sub- categories of uncertainty and certainty, stability and sequent development of the stability idea is reflect- self-organization, controllability and steadiness be- ed in modern works of V.V. Kosterev (2008), V.B. come of particular significance. Many domestic and Sirotkin (2008), V.M. Ryabov (2011), I.V. foreign works and publications that have covered Bryantseva (2004), V.Ph. Merzlyakov, A.E. Yagunov several centuries of development of scientific think- (2002) , etc. ing are devoted to study of them. Herein, uncertain- It is worth noting that in the economic ty as instability represents one of the central con- thought the category of “stability” can be found long cepts in various areas. Understanding and first of all before the first systematic and well-developed re- knowledge of mechanisms of uncertainty influence searches of the middle - second half of the XX cen- on the condition of economic entities allow to realize tury. In one form or another, the concept of stability their effective, rational and optimal control in every is present in periodic publications of the XIX century respect. period and earlier, for example, in “Moscow Gov- In fact, development of any organizational ernment Statistical Yearbook”, where the term is and economic system mainly depends on how the used in the meaning of constancy and invariance: system adapts to the emerging changes in the in- “stability in the difference between ... price ...” (Mos- ternal and external environment, as well as how cow Government…, 1896: 4). However, the concept economic factors achieve the stability condition. of stability is used interchangeably with the category However, with a variety of scientific publications of “strength” as, for example, in “BesЪda” journal covering stability issues, there is still a range of un- concerning the light industry when both strength and solved problems, among which the most important stability “... stand to strengthen ...” (Chuprov, 1871: one is to reveal substantial aspects of stability origi- 215) conditions of a company and their independ- nation in the economic environment and its charac- ence. In modern works the non-changed definition teristics. of stability supplemented by new characteristics that 2. Scientific literature review detail its demonstration can be still found after more The works of such domestic scientists as than a century. D.K. Akhmetov and G.N. Chubakov (2000), At that, there is practically no uniform defini- A.A. Bogdanov (1989), I. Prigogine (1985), G. tion of the “stability” term in the scientific community. Nicolis (1978), who have made the most significant The dualism of this concept underlined in study of contribution to the formation and substantive filling O.V. Mikhalev’s (2010) particularly in study of the of this research line, are devoted to the study of the specific entities and events, strikes a chord and ac- knowledgment with scientific publications. On the 1 one hand, stability represents a property of organi- The work was performed by the Ministry of Education and Sci- ence of the Russian Federation financial support under the Federal zational and economic system and each of its ele- Program “Scientific and scientific-pedagogical personnel of innova- ments. It, “being an intrinsic property ... depends on tive Russia” for 2009-2013 on the event 1.3.2. (XLVI, Lot 2012- both internal and external conditions” (Mikhalev, 1.3.2-12-000-3002) entitled “Combinatorial study distinctions of 2010: 11). On the other hand, it is possible to say transaction costs actors organizational and economic systems” that stability is a condition in which the system can application № 2012-1.3.2-12-000-3002-034; and Russian Founda- either be or experience instability as a sign of ex- tion for Basic Research (RFBR), project № 12-06-31031. Journal of international scientific researches, Vol. 5, Nom. 1-2 68

Evgeny A. Kuzmin The nature and origin of stability in economic processes cessive influence of uncertainty and risks, their ac- “the ability to withstand adverse internal and exter- companying changes and rate of such changes. nal forces, while retaining development parameters, As a result, “stability” – is not just a property stable indicators and optimal proportions, develop- and not just of a state system, but a property, that ment dynamism and effective use of conserved and demonstrates itself in a state depending on its rela- reproduced resources” (Vorobyeva, 2012: 20). In tionship with the environment” (Mikhalev, 2010: 13). addition, the obvious at first glance indicators with Significant and rather precise definition of stability the help of which it is possible to judge about the suggested by O.V. Mikhalev allows us to trace the presence or absence of stability: “sustained eco- genesis of stability understanding in processes, in- nomic growth”, “sustainable natural resource poten- teraction between elements, in the internal organi- tial”, etc., which is not truly correct – are distin- zation of economic entities and economy as a guished. The processes of achieving stability are whole. Among the common points of view, the much more complicated than it seems to be, and standpoints of L.I. Arkhipov and his colleagues, who these indicators cannot be used to describe the fact are inclined to believe that the economic stability that stability does occur. “reflects the strength and reliability of its elements, Synectically similar discrepancies can be vertical, horizontal and other diverse relations within found in the study of stability of companies in the the system, as well as the ability to withstand inter- real sector of economy, which has been held by I.V. nal and external loads” (Arkhipov etc., 2009: 791), - Bryantseva. The particular static condition manifests are mostly highlighted. It appears that this view is the delusion concerning the stability assessment. gradually losing its relevance giving way to a new The stability assessment formation should take into paradigm of preconditions and incentives for devel- account the fact that deviations and changes repre- opment of economic entities, purposes of their ex- sent natural phenomena. Important is the fact that istence and activities. According to the author, when these changes will put into action the self- the security descriptor in the stability interpretation destruction mechanism, whether this is the econom- can be accepted in some way, the situation with ic factor or economy as a whole. Indicators, condi- strength characteristic is more ambiguous. tionally lined up in a three-level system according to 3. Substantial characteristics of stability I.V. Bryantseva (2004: 80), at best give an idea of 3.1. Reliability and strength in adaptation, the company moment state, but cannot be involved variability and stability of systems in the dynamic assessment of stability, since there Reliability, as it is believed to be, is associat- is no any key element – a standard or reference ed with probability of performing the specified func- sample. In this regard, stability consideration in a tions and under certain conditions for a specified management and control context is quite interesting. period of time (Kosterev, 2008: 14). Economic enti- Finding connection between uncertainty and ties continuously and unavoidably are sometimes stability of the economic entity, the author suggests affected by a variety of factors different in strength that adaptability, directly underlying stability, is one and direction. The ability to adapt to these factors, of the versions of self-organization and acts as which inevitably lead to changes in the environment sublimative management construction including and within the organization by virtue of direct or indi- conscious and unconscious management reactions rect connections, shows reliability as a conse- inside the economic entity. Presence of conscious quence of this adaptation. However, in our opinion, management components in self-organizational the use of the given characteristic in stability inter- adaptation processes may seem to be strange. pretation is not quite correct. Reliability is more a However, according to the author, self-organization consequence than a reason of steady state (posi- means not only management actions created as a tion) and property of the organization. result of experience and “learning”, but also the re- A similar argument can be used with regard actions and messages that are generated at the to the strength, which is mentioned in the work of time of “correct” understanding of what is happening L.I. Arkhipov et al. Strength, according to the author, at the moment. In other words, self-organization of can be even opposed to stability. Understanding the economic entity as an adaptation includes man- strength as a property of resistance or resilience of agement components that occur in response to economic entity to destruction, resistance is ex- emerged fluctuations regardless of the source of pressed only in one form – inertness. Invariability as these reactions and management actions. This can a result of strength excludes any transformation and be confirmed in study held by T.Y. Ivanova and V.I. modification. But stability is not static; it is a dynamic Prikhodko, who come to the conclusion that “adapt- bilateral characteristic of the property and state of ability of the organization to environmental condi- the economic entity. As a consequence, strength tions [is carried out] as a result of a certain directed introduces certain “rigidity” in the model of an organ- impact on it” (2004: 138). izational order. As a result, the most important and It should be noted that in views of a number significant ability – the ability to develop and adapt – of scientists, whose point of view is shared by the is excluded. Establishment of connections, structure author, there is a certain amount of managerial in- and elements of economic entity and in all other fluence that can either lead the system to stability respects does not allow us saying that strength ex- condition or, on the contrary, move its path of mo- presses the stability essence. It appears that tion to a new development course absolutely differ- strength as well as reliability represents the indirect ent from the ideal one. These thoughts permanently result of adaptation, when adverse conditions are in and at the same time occasionally occur in some opposition with strength, while favorable ones lead scientists’ minds including V.I. Avdiysky and V.M. to modification of the internal microeconomic mech- Bezdenezhnykh (2011), V.M. Ryabov (2011), etc. anism of the organization. From theoretical and The main argument of such reasoning was that or- methodological point of view, this very important ganizational and economic systems are not initially remark about the need for stability development is systems possessing self-organization as such. Self- confirmed by the words of I.P. Vorobyeva. Accord- organization and adaptation as one of its forms ing to her vision, the economic system stability is arise due to intention to preservation of its exist- Международные научные исследования, № 1-2, 2013 г. 69

ECONOMY ence, which leads to the fact that due to “memory a speed of changes in the external environment effect” the mechanisms of avoiding undesirable indicates presence or absence of potential stability, events and phenomena are spontaneously created. and finally, of such a condition. Scientists in different ways come to the idea According to the author, the actual path of of a sufficient or necessary measure of managerial life cycle and its interchangeability indicates that the impact on stability. V.I. Avdiysky and V.M. speed of life cycle for each economic entity is indi- Bezdenezhnykh’s study reveals the existence of a vidual. Only a few organizations follow the pace of “quantum of control action” (2011: 59) as the mini- ideal “universal” motion, the rest part makes the mum allowable impact on uncertainty constituting a bulk of “followers”. In addition, changes in the envi- certain resource, the application of which leads to ronment are determined by behavior of all partici- the changes in the development path. A little bit pants of the economic mechanism. As a result, mo- different is V.M. Ryabov’s approach simplifying the tion vector of the organization is either above or understanding of a reaction measure up to “optimal below the additive motion vector of the organiza- dosed managerial influence” (2011: 272) by means tional and economic system. As a consequence, the of which the organizational and economic system speed, at which internal transformations occur, will still remains in a stability condition. However, the be similarly higher or lower than the speed of envi- given stability condition has threshold boundaries, ronment changes. Also it should be added that sta- where “insufficient or excessive control can bring bility is non-uniform and its position is subjective in a the system out of this area”. way and depends on the purposes of the economic Thus, stability including balancing responses entity. Thus, conventional establishment of the ste- to external and internal disturbances involves find- reotype regarding the role of the speed and im- ing of the organization in such a condition at which portance in determining stability is, at least, hardly the process of following the ideal path will be in no applicable and doubtful. danger, as well as any directed path. Clarification of It is worth noting that forward and backward the fact that the path or motion vector does not nec- linkages for the economic entity supported by the essarily mean that the economic entity is aimed at memory effect in actions and reactions to them cre- progressive evolutionary growth. The behavior ate not only an adaptation mechanism to fluctua- strategy of the organization, in some cases, can tions, but also “provide a self-organization and regu- represent not only the market growth and domi- lation mechanism” (Akhmetov ets, 2000: 32). A dis- nance, but also maintenance of a stable position or tinct result occurs in its implementation – stability of even some reduction in their business activities in both organizational and economic systems, and those moments when it could threaten the existence economic entity, when both have all the necessary of the economic entity. Stability as a condition im- prerequisites for self-organization. plies the idea that, in any directed motion of the or- Thus, we can conclude that stability is rather ganization this path will be in some way stable, with a tetralistic category than a dualistic one. Besides no significant deviations. Therefore, it would be in- the fact that stability represents a property and a correct to say that “withering” is the result of an un- condition of the organizational and economic sys- stable situation. And that is why the nature of tem, it also demonstrates presence of the process movement process, rather than its direction that can of self-organization in the life of the economic entity. fully correspond to the economic entity’s interests, is This emphasizes the connection of the category of of great importance. diversified stability with such descriptors as uncer- 3.2. Asynchrony in adaptation transfor- tainty and certainty, stability and controllability. T.Y. mations Ivanova and V.I. Prikhodko’s work, where “"stability" Undoubtedly, the process of motion always is close in meaning with "controllability"” (2004: has a speed which cannot and should not act as a 138), mentions about the indirect demonstration of peculiar indicator of stability, which to some extent stability as an intermediate link of adaptability of the breaks the settled stereotype of its perception. Con- organization. However, the author distinguishes centration in time of changes in the environment these two terms specifying that management in- and organization faces only one basic limitation as- cludes control and opportunity of influence and sociated with the ability to adapt. Even if motion feedback. At the same time, stability determines the speed together with transformation capacity is rela- development nature of the economic entity in ac- tively large, the economic entity does not lose its cordance with its goals and objectives. stability, when these changes are smooth and quite 3.3. Uncertainty in stability natural for this life period of the organization. Behavior of organizations is often not coordi- Smooth and natural transformations in the nated, and that is why in stochastic systems it is economic entity are achieved only in the case when reduced to the basic principle and condition due to there is an “adequate variability allowing to be which these systems reflect the realities of social changed at the same speed as the environment” and economic interaction. Both for the system and (Mikhalev, 2010: 14). In cases when an internal for the economic entity, stability affects several posi- transformation takes place at a slower speed than tions at the same time. Firstly, stability of the struc- the environment changes, the likely consequence of ture. Certainly, changes in the course of adaptation this may be a deviation from a certain path, which, can lead to the fact that the internal features of rela- by the way, does not allow us saying that “the sys- tions and connections between elements, their tem (or economic entity – author’s note) is in an number and hierarchical subordination, will also unstable condition and can be destroyed in a limit” undergo changes. Secondly, functional stability. (Mikhalev, 2010: 14). This conclusion contradicts Substantial and functional (process), as well as the common understanding of stability that stroke a structural stability are identical; the difference lies chord with O.V. Mikhaleva’s study. According to the only in the object on which assessment and defini- traditional point of view namely comparison of tion of stability are made. speed in adaptive transformations and modifications There are a lot of publications devoted to of the internal environment of the economic entity at structural stability. Thus, G. Nicolis and Journal of international scientific researches, Vol. 5, Nom. 1-2 70

Evgeny A. Kuzmin The nature and origin of stability in economic processes I. Prigogine’s study reveals the well-known condition the veil over the question of identifying the stability for stability observation, when “all the solutions de- condition and its assessment. scribing the changed system remain in a vicinity of 4. Conclusion the solution corresponding to the "initial" system” Thus, we can say with certainty that to the (Nicolis ets, 1978: 79). But difficulty lies not in the very extent of uncertainty and certainty the content solutions themselves, but in the area where they do and nature of stability, not only as a property or not change the system so far as to bring it out of the state (position), but also as a result and one of self- stability position. This study held by G. Nicolis and I. organization forms are focused. Therefore, in the Prigogine points out that in absence of such vicinity, adaptation mechanism two opposite tendencies – the system or its element is structurally unstable. of uncertainty or certainty growth / decrease – de- However, the main conclusion of the study is that “in velop at the same time. The strength of each ten- a structurally stable system the topological structure dency in their coincidence or non-coincidence of of phase path (if it is possible to create space of the “solutions” and “answers” to the emerging changes phase) remains unchanged”. This indirectly confirms in the environment will give the opportunity to de- the hypothesis made by the author that the motion termine the tendency to loss or stability restoration. vector of the economic entity in a steady state cor- Stability in this context will reflect the risk norms of responds to a target direction of such a motion. management responses, through which it is possi- While structural stability focuses on variability ble to admit the acceptability measure of risk for the of positions of the elements in the organizational economic entity. However, for the solution of this and economic system, as well as their hierarchical scientific task not only substantial stability aspects and interdependent connections, implementation of should be clarified, but also a methodological ap- decisions in a general perspective, functional or proach to its assessment and determination should process stability is aimed at allowable variability of be introduced. mechanisms and decisions that are focused on di- Referencies rected transformations. Complexity and diversity of 1. Avdiysky, V.I., Bezdenezhnykh, V.M. (2011) Uncertainty, variability stability in its obvious demonstrations lead to the and inconsistence in risk analysis problems of economic systems’ behavior need of searching a universal measure for variation [Neopredelennost', izmenchivost' i protivorechivost' v zadachah analiza and adaptation (self-organization). riskov povedenija jekonomicheskih sistem]. Effective crisis management, 3(66), 46–61. Linking of variability and adaptation has a 2. Akhmetov, D.K., Chubakov, G.N. Stability problems of social and certain result for the economic entity. The adapta- economic development of the region [Problemy ustojchivosti social'no- tion “quality” becomes the decisive factor in stability jekonomicheskogo razvitija regiona]. Moscow. Institute of Economics, RAS, 2000. 295 p. emergence and maintenance, when the influence 3. Bogdanov А.А. Tectology (Universal Organizational Science) on changes is impossible. Naturally, the scale and [Tektologija (Vseobshhaja organizacionnaja nauka)]: [in 2 books] / [edit. scope of changes are not constant values and often collective L.I.Abalkin (Executive Editor), etc; Economics Department of change, testing the strength of solution selection ASUSSR. Institute of Economics ASUSSR]. Moscow. Economics, 1989. Book l. 304 p. mechanism for new tasks and problems, which rep- 4. Bryantseva, I.V. (2004) Criteria assessment system of economic resent the pure organizational adaptation. V.R. stability of a company [Sistema kriterial'noj ocenki jekonomicheskoj Vesnin’s study rightly points out that selection rep- ustojchivosti predprijatija]. Bulletin of Saint-Petersburg State University of Economics and Finance, 2, 79–90. resents “creation and improvement in accordance 5. Vesnin, V.R. General theory of organization: study guide [Obshhaja with the objectives set in any system ... on the basis teorija organizacii : ucheb. posobie]. Moscow. МSIU, 2007. 156 p. of regulating adaptive mechanism” (2007: 22-23). In 6. Vorobyeva, I.P. (2012) Economy stability and problems of its ensur- this case, the process of adaptation mechanism ing in the modern Russia [Ustojchivost' jekonomiki i problemy ee obespechenija v sovremennoj Rossii]. Vestnik of Tomsk State University, includes on the one hand, the emergence of new 1(17), 17–25. elements and relations that improve the reaction of 7. Kosterev, V.V. Reliability of technical systems and risk management the economic entity to the changes in the environ- [Nadezhnost' tehnicheskih sistem i upravlenie riskom]. Moscow. MEPhI, 2008. 280 p. ment, and also leads to “complexity, new properties 8. Merzlyakov, V.Ph., Yagunov, А.Е. (2002) The impact of economic ... as a result of which ... ingression occurs” (Vesnin, stability in the development process of a company [Vlijanie 2007: 22-23); on the other hand, braking structures jekonomicheskoj ustojchivosti na process razvitija firmy]. Vestnik of Nizhni that cannot make correct selection of solutions re- Novgorod State University. Economics and Finance Edition, 1(4), 163–166 9. Mikhalev, O.V. Economic stability of managerial systems: methodol- garding the changes emerged, which leads to sim- ogy and practice of scientific research and application analysis plification of the organization, are excluded from [Jekonomicheskaja ustojchivost' hozjajstvennyh sistem : metodologija i mechanics or are modernized. Based on simplicity praktika nauchnyh issledovanij i prikladnogo analiza]. St-Petersburg. Edition of St-Petersburg Academy of Management and Economics, 2010. and complexity characteristics, the assumption that 200 p. in the adaptation process two opposite tendencies 10. Nicolis, G., Prigogine, I. Self-organization in non-equilibrium systems face each other – simultaneous increase of uncer- [Samoorganizacija v neravnovesnyh sistemah]. Moscow. Mir, 1978. 512 p. tainty and certainty, and on the contrary their reduc- 11. Prigogine, I. From Being to Becoming [Ot sushhestvujushhego k voznikajushhemu]. Moscow. Nauka, 1985. 328 p. tion – becomes quite logical. In this regard, it should 12. Ryabov, V.M. (2011) Sustainable development of industrial establish- be pointed out that the selection can be demon- ments under current conditions [Ustojchivoe razvitie promyshlennyh strated in different ways, which eventually creates a predprijatij v sovremennyh uslovijah]. Vector of Science TSU, 4 (18), 271– 273. certain result of the linking changes and adapta- 13. Sirotkin, V.B. Ensuring stability of economic growth [Obespechenie tions. ustojchivosti jekonomicheskogo rosta]. Moscow. GUAP, 2008. 277 p. According to the author, internally conflicting 14. Moscow Government Statistical Yearbook. Moscow. Printed by S.P. tendencies for growth or decrease in entropy and Yakovleva, 1896. 15. Ivanova, Т.Yu., Prikhodko, V.I. Organization theory [Teorija negative entropy in the course of adaptation creates organizacii]. St-Petersburg. Peter, 2004. 272 p. changes in the status quo in relation to the level of 16. Chuprov, А.I. (1871) Light industry in connection with craft beginning aggregate uncertainty and certainty. Apparently, the and land community. Besѣda: scientific, literary and political journal, [first year, the V-th book. Printing house of A.I.Mamontov and Co], 5 (5), 215. heuristic correlation potential of relative quantitative 17. Arkhipov, L.I. [etc.] under editorship of Arkhipov, L.I., Bolyshakov, changes in the environment (both internal and ex- L.K.. Economics [Jekonomika]. Moscow. Prospect, 2009. 839 p. ternal) with absolute or specific quantitative change of uncertainty or certainty give the opportunity to lift Международные научные исследования, № 1-2, 2013 г. 71

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