Building Resilient Mechanisms for Joint Socio-Economic Activities: Insights from Institutional Design Principles

1 Building Resilient Mechanisms for Joint Socio-Economic Activities: Insights from Institutional Design Principles Sergey Parinov, [email protected] https://www.linkedin.com/in/sergey-parinov/ December 2024 Abstract: This paper explores the application of the "Institutional Analysis and Development" (IAD) framework, pioneered by Elinor Ostrom, to develop an abstract model for mechanisms facilitating joint socio-economic activities. By generalizing IAD's principles of institutional design, the study describes the structure and key functions of an abstract mechanism for joint activity and identifies a set of building blocks enabling the creation of real-world mechanisms such as networks, hierarchies, markets, and institutions. These mechanisms are analyzed through the lens of communication modes—direct, indirect, and absent—highlighting their role in coordination and governance. The research conceptualizes mechanism design as an optimization task. The construction of joint activity mechanisms is viewed as a task of selecting the optimal combination of building blocks to suit the specific characteristics of the joint activity and its surrounding environment. The prospects for developing a formal model of joint activity mechanisms are also discussed. The study introduces the notion of a "metamechanism" to guide the evolution and hybridization of the traditional mechanisms. This approach enhances understanding of how diverse mechanisms emerge and adapt to socio-economic complexities, providing a theoretical basis for improving collective action systems. The findings have broad implications for the study of governance, organizational design, and the management of commons. Keywords: principles of institutional design, joint activity, abstract mechanism, network, hierarchy, market, institution JEL: B41, D02, D7, D82, D83, D9 1. Introduction The "Institutional Analysis and Development" (IAD) framework (Ostrom, 2005; Lara, 2015), co-authored by Nobel laureate in economics Elinor Ostrom, is based on empirical analyses of the creation, use, and improvement of institutional structures in different countries. One of the fundamental outcomes of this research is the identification of universal building blocks for creating institutions, along with the development of design principles for building sustainable institutions. This study focuses on the institutional design principles developed within the IAD framework (Ostrom, 2005, p. 259). These principles consist of eight key points, some of which include sub-points (Ostrom, 2010, p. 653). The proposed study explores the hypothesis that these design principles describe concepts common to different mechanisms regulating joint socio-economic activities. These common concepts are conceptualized in this study as an abstract mechanism of joint activity, designed to create conditions for the sustainable generation of benefits for participants in an environment characterized by unpredictable disturbances. Thus, all hypothetical and observed mechanisms analyzed in this study are considered as implementations of this abstract mechanism in various types of joint activity and contexts. 2 A generalization of the IAD design principles provides a set of requirements for the abstract mechanism: 1. Fulfillment of necessary initial conditions related to both the joint activity and its participants. 2. The presence of a method of coordination that optimally accounts for the capabilities and intentions of participants. 3. The presence of a governance method that ensures the resilience of joint activity under conditions of random changes. 4. Integration of the mechanism into an existing system of joint activity mechanisms and participant relationships. Requirements 1 and 4 emphasize the need for synchronization within the mechanism and across the broader socio-economic system. The structure and key functions of the mechanism itself are determined by the methods of coordination and governance (requirements 2 and 3), which align with ideas presented in studies by Ostrom and her colleagues. Among the many factors influencing the practical implementation of the abstract mechanism, the process of information exchange between participants in joint activities plays a crucial role. These processes are largely determined by the modes of communication among participants. The study identifies three primary modes of communication: a. Direct communication. b. Indirect communication. c. Absence of communication. These modes encompass all possible forms of communication among participants. Incorporating communication modes into the abstract mechanism description allows for the consideration of different implementation options for joint activity mechanisms. The resulting implementations of the mechanism’s functions under the three communication modes form the initial set of "building blocks" that can be used to create real mechanisms for joint activities. This set can be expanded by exploring additional aspects of the mechanism’s functions. Such approach can be seen as a response to the challenge that Ostrom described as the need to identify universal building blocks that will allow one to describe the mechanisms of joint activity in markets, hierarchies, families, sports, legislatures, etc. (Ostrom, 2009, p. 5). Using this set of building blocks, the study describes real mechanisms of the “network,” “hierarchy,” “market,” and “institution” types. The analysis reveals that a “network” mechanism represents an implementation of the abstract mechanism using direct communication, where coordination is achieved through negotiation among participants. The “hierarchy” mechanism is derived from the “network” mechanism, with participants delegating the right to determine the content of their activities to managers. The “market” mechanism represents an implementation of the abstract mechanism using indirect communication, where coordination occurs through trial and error, a process referred to as “Walrasian tâtonnement” in the literature (Hurwicz & Reiter, 2006). The “institution” mechanism represents the use of the abstract mechanism in the absence of current communication, where coordination relies on shared rules and norms established during prior communications. This approach frames the construction of mechanisms for joint activities as an optimization problem: selecting building blocks that maximize the mechanism’s efficiency, defined as the 3 ratio of benefits from joint activity to costs related with the mechanism. The characteristics of the joint activity and its environment establish the constraints for this optimization. The choice of a specific method or model framework for formalizing the general model of the joint activity mechanism and its optimization technique is beyond the scope of this study. Additional opportunities to enhance mechanism efficiency may arise by modifying the socioeconomic system’s structural components. To address these possibilities, the study introduces the concept of a "metamechanism," which governs the processes involved in constructing joint activity mechanisms. The results of this study contribute to the methodological foundation for describing the patterns that lead to the formation of hybrid mechanisms and studying principles for constructing effective mechanisms for various types of joint socio-economic activities. Section 2 examines the structure and functions of the abstract mechanism for joint activity, based on generalized IAD design principles, which are presented in Appendix 1. Section 3 focuses on forming the initial set of building blocks by describing the implementation of the abstract mechanism’s functions in three communication modes. Appendix 2 provides a detailed description of 18 building blocks. Using these building blocks, descriptions and analyses of mechanisms of the “network,” “hierarchy,” “market,” and “institution” types are presented. Appendix 3 includes a case study based on an example from the IAD framework. Section 4 addresses the problem of modeling mechanisms for joint activity. Finally, the conclusion outlines research questions for future exploration. 2. Abstract Mechanism Based on the Principles of Institutional Design To suit the study aims it is necessary to clarify and generalize certain concepts used in the IAD framework . 2.1. Generalization of Key IAD Concepts The IAD framework introduces several novel concepts to describe the components of institutions and explain human behavior in various situations (Ostrom, 2005). Some concepts relevant to this study are outlined as follows: • Individuals engage in a variety of action situations, defined as “the social space where participants with diverse preferences interact, exchange goods and services, solve problems, dominate one another, or fight” (Ostrom, 2005, p. 14). The IAD framework identifies seven groups of variables that form the structure of an action situation, which are universal and minimally necessary for constructing formal models of decision-making in joint activities (ibid). • To formalize decision-making in action situations, individuals create or use preexisting institutions, which the IAD framework recommends designing based on eight principles (Ostrom, 2010, p. 653). Institutions are understood as sets of “rules-in-use” adopted by individuals in the form of norms, agreements, and formal rules to structure social interactions and guide collective action (Ostrom, 1990; 2005). • Action arenas encompass individuals, action situations, various external resources and conditions, and the institutions regulating individual behavior in these situations. An action arena is the environment where all these elements interact and outcomes are produced (Ostrom, 2005, p. 13). Action arenas can exist in diverse contexts, such as households, neighborhoods, local or international councils, firms, and markets (ibid). 4 The types of activities that emerge from applying the principles of institutional design can be clarified as follows: a) Institutional construction activity: developing institutions using design principles. b) Institutional application activity: utilizing institutions to regulate the core activity. c) Core activity: generating benefits for participants within action situations regulated by institutions. Thus, activity type (a) creates mechanisms, while type (b) applies these mechanisms to support activity type (c). Ostrom identifies similar structures, where constitutional situations (activity type “a”) define rules-in-use for collective-choice situations (type “b”), which, in turn, determine the rules for operational situations (type “c”) (Ostrom, 2005, pp. 58–59). For the purposes of this study, joint socio-economic activity is broadly defined as the actions of individuals who expect to gain mutual benefits by working together. According to this definition, all three types of activity “a”-“c” can be classified as joint activities. In the context of this study, we focus solely on core activities (type “c”) as joint activities. A notable example is the use of common-pool resources, such as fishermen sharing a water basin with limited fish stocks. Here, individuals are compelled to engage in joint activity because they cannot exclude others from accessing the resource, yet their actions affect its availability for everyone. Appendix 3 examines this scenario, where joint activity arises from mutual dependency. To generalize the above IAD concepts for studying mechanisms like “network,” “hierarchy,” “market,” and “institution,” we define the key concepts: 1. Individuals engaging in joint activities. 2. To make decisions on the content of joint activity that will bring individuals the expected benefit, they create new or use already created mechanisms of joint activity. IAD design principles allow us to describe the structure and functions of a certain abstract mechanism of joint activity, special cases of the implementation of which are mechanisms of the "network", "hierarchy", "market" and "institution" types. 3. The individuals, their joint activities, and corresponding mechanisms, form a socioeconomic system. The interconnectedness between the system components exists because all activities and mechanisms in a certain sense "compete" with each other for the limited resources (at least, the time and effort spent) of individuals. Individuals allocate their limited resources among joint activities according to their perception of the required contribution of each activity to the expected total benefit. The main objects of this study are the structure and functions of the abstract mechanism of joint activity (item 2 in the list above). To simplify the study, we do not consider in detail the issues of describing the properties of individuals and the structure of joint activity (item 1), a good basis for which is the structure of the action situations proposed in IAD. We also do not consider the issues of the functioning of the entire system (item 3), which IAD defines as an arena of actions. 2.2. Abstract Mechanism of Joint Activity A generalization of IAD design principles (see Appendix 1) reveals the following requirements for an abstract mechanism of joint activity: 5 1. Necessary Conditions: For joint activity to occur, participants must have access to resources with specific characteristics (design principle 1) and a shared understanding of the activity’s content (principle 2). Additionally, participants must be able to exchange information and optimize the activity content for maximum benefit. This corresponds to the first structural element of the abstract mechanism, which ensures the necessary conditions for operation. 2. Coordination Methods: Participants require methods to account for each other's capabilities, intentions, and actions during decision-making. According to IAD design principle 3, mechanisms of collective choice should be adaptable. This structural element provides following functions: o Accounting: Considering participants’ individual capabilities, intentions and current activities. o Choosing: Selecting optimal joint activity options based on expected benefits and costs. o Coordinating: Agreeing on the chosen option to align individual activities. 3. Governance Methods: In the most general form, the task of the "governance method" is to maintain the joint activity in the sustainability against the flow of disturbances (IAD design principles 4–6).This structural element provides following functions: o Responsibility: Fixing responsibilities and implementing joint activities. o Monitoring: Monitoring implementation, tracking disturbances in the conditions for implementing joint activities. o Sustainability: Adapting activities and/or mechanisms to maintain the sustainability of benefiting from joint activity in following main ways: • elimination of sources of disturbances, if possible (for example, exclusion of certain participants from joint activities); • if elimination of disturbances is impossible, then re-coordination of the core activity is performed for the changed conditions; • if re-coordination does not produce the required result, then a change in the mechanism itself is performed to adapt it to the changes that have occurred. 4. System Integration: The mechanism must align with existing relationships of individuals, labor divisions, and other related mechanisms (principles 7 and 8). This structural element ensures integration into the broader socio-economic system. For simplicity, this study examines the coordination and governance elements (points 2 and 3) of the abstract mechanism, excluding the emergence (point 1) and integration (point 4) elements. The proposed abstract mechanism enables participants to conduct sustainable and coordinated joint activities, ensuring mutual benefits while addressing potential disturbances. 3. Building Blocks of Joint Activity Mechanisms The methods of coordination and governance, which form the functional foundation of the mechanism, naturally depend on the characteristics of the process of information exchange between participants in joint activities. Ostrom notes that the type of communication is typically assumed to be present in the action situation (Ostrom, 2005, p. 52). To clarify how communication is integrated into joint activities, we assume that the information exchange process is defined by specific modes of communication between participants. In this study, these communication modes are categorized as direct communications, indirect communications, and the absence of communications. 6 Incorporating these three communication modes into the description of the abstract mechanism allows us to define the initial set of building blocks for the mechanism. This set consists of various implementations of the mechanism's functions across all these communication modes. It is referred to as "initial" because it can be expanded with additional building blocks that detail other possible implementations of the abstract mechanism's functionality, such as methods for analyzing information, choosing optimal activities, making collective decisions, etc. 3.1. Communication Modes Based on general concepts regarding individuals and their shared activity environments, we propose that the following primary communication modes exist between agents: 1. Direct Communications: This mode involves "face-to-face" interaction among participants in an "all-to-all" manner. It allows for intensive information exchange, negotiations, and mutual agreements among participants. 2. Indirect Communications: This mode is mediated through changes in the shared environment. Participants modify the environment (e.g., leaving signals or labels) and observe these changes to gain information about other participants. Decisions about individual activities are then made based on this information. Coordination is achieved through a trial-and-error process. A prominent example of indirect communication is market activity, where a consumer purchasing a product indirectly communicates preferences, which are reflected in pricing and market adjustments. 3. No Communication: In this mode, participants rely on pre-established common rules, norms of behavior, cultural backgrounds, or shared experiences created during prior direct or indirect communications. Coordination emerges from participants independently choosing their activities based on these common rules, assuming that others are making decisions similarly. While no real-time communication occurs, participants may still exchange information on unrelated matters through direct or indirect means. 3.2. Initial Set of Building Blocks The methods for implementing the functions of the abstract mechanism are analyzed for each of the main communication modes: direct, indirect, and no communication. This analysis focuses only on the structural elements of the mechanism related to the coordination method and governance method for simplicity. For each function of the coordination and governance methods, implementation options are detailed in Appendix 2 (Tables 2.1–2.3 and Tables 2.4–2.6, respectively). These options constitute the building blocks (BBs) for constructing mechanisms for joint activities with various characteristics. Table 1 summarizes the building blocks associated with communication modes. The numbering of each BB in Table 1 corresponds to its number in the respective Appendix 2 tables. Table 1. Building Blocks of Joint Activity Mechanisms by Communication Mode Mechanism Functions Direct Communications Indirect Communications No Communications Coordination Method 7 Mechanism Functions Direct Communications Indirect Communications No Communications Accounting 1.1. Direct information exchange 1.2. Observation 1.3. Rule-based Choosing 2.1. Negotiations 2.2. Assumption-based 2.3. Rule-based Coordinating 3.1. Agreements 3.2. Trial and error with feedback from participants 3.3. Trial and error without participant feedback Governance Method Responsibility 4.1. Collective 4.2. Individual with feedback 4.3. Rule-based with feedback from a regulator Monitoring 5.1. Collective 5.2. Observation and a regulator 5.3. Observation and a regulator Sustainability 6.1. Collective maintenance 6.2. Individual/regulator maintenance 6.3. Individual/regulator maintenance A simple way to use BBs for a given joint activity is to implement all the mechanism's functions using a single communication mode that best aligns with the characteristics of the activity and its environment. In such cases, the mechanism's functions are implemented according to one column in Table 1. This configuration is referred to as the canonical version of the mechanism. However, participants often use multiple communication modes simultaneously. In these cases, BBs are dynamically combined based on complex algorithms, where participants optimize BB selection to maximize the benefits of joint activities while minimizing the mechanism's operational costs. The actual mechanism thus becomes a dynamic combination of BBs and communication modes. This topic requires further research, with some aspects addressed in the subsequent sections. 3.3. Describing Mechanism Types Using Building Blocks Based on the characteristics of mechanisms of the “network”, “hierarchy”, “market” and “institution” types presented in the literature, we will describe these mechanisms based on the building blocks from the previous section and analyze some properties of the mechanisms using these descriptions. Network The main properties of the “network” type mechanism, described by the concepts of “decentralization”, “flexibility”, “cooperation”, “interdependence” (Powell, 1990; Granovetter, 1983; Provan & Kenis, 2008), correspond to the greatest extent to the implementation of an abstract mechanism in direct communications. In this case, the functions of "accounting" and "choosing" within the coordination method are implemented by direct exchange of information (Tab. 1, BB 1.1) and negotiations (BB 2.1), and coordination of activities is achieved through agreements between the participants (BB 3.1). The functions of the governance method are implemented by collective efforts, which can take various forms. At the same time, direct communications with an increase in the number of participants in joint activities lead to a rapid increase in the participants' costs for 8 coordination and governance. This explains why the "network" type mechanism is usually used in small groups and why direct communication can fosters innovation and efficiency in small, flexible groups. Open-source software development provides real-word examples of the network mechanism. E.g., the Linux project relies on direct commutation and decentralized collaboration. Open-source software contributors self-organize through platforms like GitHub, negotiating responsibilities and code contributions directly. Hierarchy The hierarchy-type mechanism, the main properties of which are described by the concepts of "distribution of tasks and responsibilities", "centralized decision-making", "command system", etc. (Malone and Crowston, 1994; Weigand, et al., 2003), from the point of view of communication modes, most closely corresponds to direct communication. However, in this case, the participants-performers delegated the right to determine the content of their activities to the participants-managers. For the construction of mechanism, this means that the performers have transferred the execution of a certain part of the functions of the "coordination method" to managers. In the process, performers and managers have established certain relationships between themselves, which are regulated on the basis of rules and belong to the “institution” type mechanism. As a result, some of the direct communications between the participants have been replaced by the "without communications" mode. Due to this, the performers are largely excluded from the processes of direct communication, which reduces the costs associated with the mechanism and makes it possible to significantly increase the number of participants in joint activities and increase the benefits due to deepening specialization and developing the division of labor. Thus, the hierarchy type is a derivative of the network-type mechanism, in which the rejection of some of the properties of the network-type mechanism made it possible to increase the total number of participants in joint activities. A real-word example is the Toyota Production System. Hierarchies like Toyota’s lean manufacturing system delegate decision-making to specific roles, balancing authority and accountability. Market The “market” type mechanism, the main properties of which are described by the concepts of “information asymmetry”, “voluntary exchange”, “cooperation”, “competition”, “price regulation”, etc. (Powell, 1990; Williamson, 1975), is an implementation of an abstract mechanism through indirect communications. The “accounting” function for the coordination method is carried out by observing changes in the common environment among participants. The “choosing” is performed individually, and the coordination is achieved by trial and error, known in the literature as “Walrasian tâtonnement” (Hurwicz & Reiter, 2006, p. 19). In indirect communications, the governance functions are initially implemented individually by participants. However, in the practical application of the market mechanism, participants delegate some of the governance functions to a specially created centralized regulator, such as the state. In this case, the relations between the regulator and the participants are governed by rules, i.e., using a mechanism of the "institution" type. Additionally, to enhance the efficiency of the trial-and-error method in market operation, certain changes are made to the structure of the common market environment. Indirect communications, in their typical form, are supplemented in the common environment by a “signal” system. For instance, a system that communicates market prices, supply and demand indicators, etc., to participants. Such a signaling system increases the efficiency of the trial-and-error method by reducing the costs of obtaining necessary information in a processable form. Reducing the costs of the 9 mechanism through such a signal system, in particular, allows for a significant increase in the number of participants in joint activities. Real-world examples include mechanisms like the European Union Emissions Trading System (EU ETS), which uses indirect communication (pricing signals) to coordinate actions among participants. Companies make decisions based on market signals, such as carbon credit prices, demonstrating the role of indirect communication and market-based coordination. Institution The mechanism of the “institution” type, the main properties of which are characterized by the concepts of “common rules and norms”, “property rights”, “transaction costs”, etc. (Coase, 1998; North, 1995; Williamson, 2000; Ostrom, 2005), is most consistent with the use of an abstract mechanism in the absence of current communications between participants in joint activities. In this case, the coordination functions “accounting” and “choosing” are implemented by participants individually, and the coordination of their activities is achieved through their use of general rules developed and accepted for use in the process of past communications. Coordination under these conditions is achieved by the fact that participants determine the content of their individual activities based on the assumption that other participants determine the content of their activities on the basis of the same rules. The governance functions are implemented at the individual level. It is also possible to transfer some of the functions to a specially created regulator. A mechanism of this type does not incur current communication costs for participants. This allows it to regulate the joint activities of an unlimited number of participants. Real-word examples include communitybased natural resource management systems, e.g. as the fishermen fishing in a common body of water example provided in the Appendix 3. The descriptions above consider the properties of the types of mechanisms that are related only to the modes of communication. The types of mechanisms, as the consideration shows, can have a canonical form, in which all the functions of the mechanism are realized in the same mode of communication. However, in practice, combinations of several modes of communication are used in mechanisms. As a result, they acquire the characteristics of a hybrid (Ménard, 2004). The characteristic properties of the types of mechanisms considered are largely determined by the properties of the dominant modes of communication between the participants of the joint activity. Thus, the observed diversity of the types of mechanisms can be explained by the differences between the three modes of communication, which is supplemented by modification options of the canonical versions of the mechanisms (for example, the “hierarchy” type as a modification of the canonical “network” type). 4. Discussion This study considers joint activity mechanisms as one of the fundamental components of the socio-economic system. The entire system encompasses numerous boundedly rational individuals who maintain various relationships with one another. These individuals operate within a shared environment, which influences how they communicate and execute their joint activities. The primary motivation for joint activities is to gain mutual benefits. However, the shared environment is subject to unpredictable changes (disturbances) that occur with a certain regularity, altering the conditions under which individuals derive benefits. Limited resources within the common environment—whether natural or produced by joint activities— 16 3. “Collective-choice arrangements. Many of the individuals affected by harvesting and protection rules are included in the group who can modify these rules” (ibid.). The third design principle, which concerns collective-choice and decision making, can be detailed using Ostrom's model of the individual. The three components of human behavior with making collective-choice and decision making (Ostrom, 2005, p. 103) are: 1. the way that participants acquire, process, represent, retain, and use information; 2. the valuation that participants assign to actions and outcomes; and 3. the processes (maximizing, satisficing, or using diverse heuristics) that participants use for selecting particular actions or strategic chains of actions in light of their resources. Benefiting from a joint activity implies that its mechanism ensures that the participants take each other's capabilities, intentions, and current activities into account. This is what allows them to receive more benefits from the joint activity than from individual one. Generalizing Ostrom's ideas, the mechanism of joint activity should contain collective-choice procedures that allow participants to mutually take into account each other's capabilities, intentions, and current activities in order to determine the content of their own activity. Such procedures of the mechanism should include methods for obtaining and processing information on factors important for joint activities, including information that is distributed between participants. Also, in the process of analyzing the information received, the participants should be able to assess the expected benefit from various options for joint activities, as well as the amount of costs associated with this. Based on the assessments received for different options for activities, the participants in one way or another agree on which content of the joint activity is the best. In fact, all these procedures represent a process of coordination of the participants in the joint activity. 4. “Monitoring. Monitors, who actively audit biophysical conditions and user behavior, are at least partially accountable to the users and/or are the users themselves” (ibid.). 5. “Graduated sanctions. Users who violate rules-in-use are likely to receive graduated sanctions (depending on the seriousness and context of the offense) from other users, from officials accountable to these users, or from both” (ibid.). 6. “Conflict-resolution mechanisms. Users and their officials have rapid access to low-cost, local arenas to resolve conflict among users or between users and officials” (ibid.). The next three design principles create conditions for the sustainable implementation of decisions taken by participants on the content of their joint activities. The need to maintain sustainability is created by random changes (disturbances) in the common environment and in the conditions for joint activities, including the state and actions of the participants themselves. In the context of this study, one more principle should be explicitly added to this: fixing the responsibility of participants. This means that it is necessary to develop an effective method for fixing the responsibility of participants for the implementation of agreed decisions. Then the set of conditions for the sustainable implementation of joint activities receives logical completeness. 17 With this addition, the monitoring system gives participants the opportunity to identify and analyze discrepancies between the expected and actual results of joint activities. The presence of responsibility of participants for the implementation of decisions made allows, when analyzing discrepancies, to identify the causes and culprits. Sanctions for violating the rules of joint activities and methods for resolving conflicts increase their sustainability. This set of procedures, in total, implements the process of governance of joint activities. 7. “Minimal recognition of rights to organize. The rights of users to devise their own institutions are not challenged by external governmental authorities, and users have long-term tenure rights to the resource” (ibid.). 8. “Nestled enterprises. Appropriation, provision, monitoring, enforcement, conflict resolution, and governance activities are organized in multiple layers of nested enterprises” (ibid.). The last two principles, as applied to joint activities, require the establishment of multi-level relationships with the external environment and/or with the existing system of various types of joint activities. In particular, integration into the socio-economic system is required at the level of participants (principle 7) and at the level of mechanisms and content of joint activities (principle 8). In addition, the external environment should allow participants to determine the content they need both for the activity itself and, in some cases, for the corresponding mechanism. Appendix 2: Initial set of building blocks of the joint activity mechanisms For all functions of the "coordination method", as well as the functions of the "governance method", the options for their implementation are outlined below in Tables 2.1-2.3 and Tables 2.4-2.6, respectively. These options serve as building blocks for constructing mechanisms of joint activities of various types and characteristics. Table 2.1. Building blocks for implementing the function "Accounting" of the "Coordination Method" Communications Building blocks Direct 1.1. Direct exchange of information in an "all to all" manner. Informing participants about capabilities and intentions regarding joint activities. Indirect 1.2. Leaving labels and traces by all participants in a common environment. Observing changes in the environment, including those created by other participants. Forming assumptions about the capabilities and intentions of other participants regarding joint activities. Absent 1.3. Forming assumptions about others' potential activities based on the premise that everyone follows predefined rules for the current situation in joint activities. The building blocks from Table 2.1 differ in participants' abilities to enhance the completeness of mutual consideration of each other's capabilities and intentions to determin the content of their activities. The higher the completeness of consideration, the greater the likelihood of achieving the maximum possible benefit from their joint activities. However, increasing completeness raises the participants' costs for communication and information processing. 18 Table 2.2. Building blocks for Implementing the Function "Choosing" of the "Coordination Method" Communications Building blocks Direct 2.1. Collective simulation of various options for joint activities. Exchanging information on cost/benefit assessments for each option. Identifying the current set of options that different participants consider the best and informing everyone about these options. Indirect 2.2. Individual simulation of various options for the participant's own activity based on assumptions formed through observations of changes in the shared environment and the states of other participants. Individual assessment of expected costs/benefits for each option and selection of an activity option that considers the expected demand for the results of their activities. Absent 2.3. Individual assessment of costs/benefits for various options of one's own activities based on the assumption that other participants are acting under similar rules. Individual identification of the best options for their own activities that are possible within the rules applicable to the current situation. The blocks from Table 2.2 differ in participants' abilities to find the best option for their joint activities. Table 2.3. Building blocks for Implementing the Function "Coordinating" of the "Coordination Method" Communications Building blocks Direct 3.1. Participants use direct and feedback communications to negotiate and seek compromises in determining the best option for all under current conditions based on the expected cost/benefit ratio. Instead of agreeing on the best option, participants may settle for an acceptable option, as continuing the negotiation process increases their costs and reduces expected benefits. While selecting an acceptable option, participants can simultaneously continue searching for a better option. Indirect 3.2. Participants use indirect feedback loop, where they explore the content of their activities that will be best received by other participants through trial and error. By doing so, participants gradually move toward mutually agreed-upon content for their joint activities. Absent 3.3. Participants act by trial and error, but without feedback on each other's actions. Only feedback loop through observation of the state of the common environment operates. Determination of the content of the activity based on common rules ensures the coordination of their activity in a degenerate form. The participation of the regulator in the coordination process is possible. The elements from Table 2.3 differ in participants' abilities to collectively choose the best content for their joint activities based on the cost/benefit ratio. Table 2.4. Building blocks for Implementing the Function "Responsibility" of the “Governance Method” 19 Communications Building blocks Direct 4.1. The assignment of responsibility occurs within the framework of the process of collective agreement on the content of the activity and the decision to transfer the joint activity to the implementation mode. Indirect 4.2. Participants individually make decisions about the content and initiation of their activities, assuming the associated risks. Absent 4.3. Participants fix their responsibility, acting on the basis of the given common rules. They individually decide to transfer the activity to the implementation mode. The lack of feedback between themselves can be compensated by the creation of a centralized regulator. The elements from Table 2.4 differ in participants' abilities to adapt decisions to changing conditions. Table 2.5. Building blocks for Implementing the Function "Monitoring" of the "Governance Method" Communications Building blocks Direct 5.1. Monitoring of changes related to joint activities is collective in nature and is an integral part of the implementation process. Indirect 5.2. Monitoring is individual in nature and is a natural part of the process of observing changes in the common environment, including those related to the activities of other participants. Additional monitoring from the regulator is possible. Absent 5.3. Similar to indirect communications. The elements from Table 2.5 differ in participants' abilities to collectively track disturbances affecting joint activities. Table 2.6. Building blocks for Implementing the Function "Sustainability" of the "Governance Method" Communications Building blocks Direct 6.1. Collective resolution of problem situations related to disturbances by participants. This is achieved by returning to negotiations and agreements, resulting in participants either eliminating disturbances (for example, by changing the composition of participants), adjusting (re-coordinating) the content of their activities, or modifying the structure of the mechanism they use for joint activities to adapt to changes. Indirect 6.2. Participants can only address their individual disturbances. For disturbances that cannot be eliminated, participants may establish a centralized regulator to resolve emerging situations in their common interest. Absent 6.3. Similar to indirect communications. The elements from Table 2.6 differ in participants' abilities to collectively respond to disturbances. Appendix 3. Example of Description of an Institution-Type Mechanism Based on the Building Blocks of an Abstract Mechanism 20 We illustrate the description of an institution-type mechanism using one of Ostrom's examples (Ostrom, 2005, p. 248): lobstermen in Maine. We generalize this example as fishermen fishing in a common body of water. In this case, the fishermen are forced to engage in joint activities, since they cannot exclude each other from fishing. The activity of each of them at any given moment reduces the amount of fish available to the others. This creates interdependencies between them and turns their activities into joint activities. Since, with reasonable fishing, the amount of fish can be restored over time, the fishermen are forced to regulate their joint activities in order to maintain the ability to fish for a long time. Thus, the fishermen need a mechanism with some method of coordination that will allow them to coordinate their current activities, as well as a method of governance that will ensure the sustainability of their joint activities over time. In their joint activities, fishermen use all three modes of communication to perform the functions of coordination and governance of their joint activities. Coordination method. In the process of catching fish, fishermen observe the amount of fish in the reservoir, which allows them to make assumptions about the content of the activities of other fishermen. That is, the "accounting" function of the coordination method is implemented based on indirect communications (building block 1.2.). Let us assume that the process of catching fish is regulated only by common rules that do not require current communications between fishermen. Then the choice of options for joint activities and their coordination (the "choosing" and "coordinating" functions of the coordination method) are implemented by fishermen strictly individually based on their assumptions that everyone acts according to common rules, as well as taking into account the information received from observations. Implementation of these functions in the absence of communications means the use of building blocks 2.3 and 3.3. Governance method. The "responsibility" function is implemented on the basis of rules (building block 4.3.) regulating the activities of fishermen, i.e. fishermen individually assess their risks, and the regulator monitors their behavior. The "monitoring" function is implemented by fishermen through observation (building block 5.2.) of the amount of fish in the reservoir, i.e. on the basis of indirect communications. Observations provide them with information on how the common rules work or to what extent these rules are followed. The "sustainability" function, in addition to its implementation on the basis of the rules and actions of the regulator (building block 6.3.), can be implemented on the basis of direct communications (building block 6.1.). Upon receiving important information from indirect communications, i.e. observations of the amount of fish in the reservoir, fishermen can establish direct communications with each other in order to agree on adjusting the current rules, on applying sanctions, on changing the composition of participants, etc. The core activity, i.e. catching fish, is carried out by fishermen without communication with each other. Coordination, which in this case means reasonable behavior of fishermen, is achieved by following common rules for all, and indirect and direct communications are used in the governance process to ensure the sustainability of joint activities. Thus, for the operation of the mechanism of joint activity, fishermen use a certain combination of communication modes. It is logical to assume that the place of specific modes in this combination is determined, on the one hand, by the desire of fishermen to reduce their communication costs, and on the other hand, by the desire to obtain more benefit over a certain period of time. 21 In this context, a natural answer to Ostrom's slightly paraphrased question: how to create a mechanism of joint activity that can be dynamic, adaptive, and effective over time? (Ostrom, 2005, p. 271) is to define an algorithm for the dynamic selection of building blocks that will provide the best possible ratio between the costs of the mechanism and the benefit from the core activity under current conditions.