INVESTMENT, SYSTEMIC EFFICIENCY AND DISTRIBUTION

This paper argues that, similarly to the case of institutions, ineffic ient economic systems can exist and be stable. Even when systemic chan ge is devised and implemented to improve systemic efficiency there are three factors that explain why this goal may not be implemented: the role of investment in system-specific assets, the costliness of system ic change as envisaged by transition costs, and the existence of vario us asymmetries in the original situation and of those produced during systemic change. As a consequence of their action, individual choices ate based on subjective models derived from system-specific capital an d investment that are non-convergent and originate non-convergent acti ons. These, giving pre-existing and new asymmetries and positive trans ition costs, may impede the development of a new efficient system and lend to socially inefficient selection of investment. In fact, because of the similarity of systemic change with a public good, rational act ors prefer to invest directly in the distribution of property rights o ver existing assets. The prevalence of distribution over production ma y follow in the process of transition, that diminishes the possibility to capture potential social gains from systemic change and reproduces an inefficient system.