POLITICAL ECONOMY OF REFORMS IN WARTIME THROUGH THE PRISM OF PROSPECT THEORY

Abstract

The purpose of the article is to substantiate the political reform of the economy in wartime conditions, using the tools of prospect theory D. Kahneman and A. Tversky, as well as the fundamental divergence between the war economic models of Ukraine and russia. The study uses a comprehensive interdisciplinary approach that combines the tools of political economy, war economy and behavioral science. The methodological basis is based on the key postulates of prospect theory, namely the concept of a subjective «reference point», the effect of «loss aversion» and the nonlinear value function. The methods of system-structural analysis are used to study the institutional asymmetry of gains and losses, comparative analysis to compare the models of «autonomous organization» of Ukraine and directive «extraction» of resources in the russian federation, as well as the method of strategic framing and the theory of economic obligations in the context of military conflicts. It is proven that the extreme nature of war destroys the usual «reference point» for society and transfers individual and collective agents into the «loss zone». This paradoxically opens a unique, time-limited «window of opportunity» for the implementation of ultra-radical reforms, which civil society and elites have not agreed to in the current world time. A key political economic paradox is identified and described – highly concentrated, organized interest groups («reform losers»), guided by an imperative aversion to losses, immediately and aggressively resist change, begin to lose specific and deterministic rents here and now. In contrast, some «beneficiaries» remain passive, since their future gains are diffuse and deferred in time. It is argued that the allocation of the time gap between immediate reform costs and their future dividends requires the reform team to apply «strategic reframing» – transferring the public discussion from the area of irrational fear to the zone of analytical calculation. It is established that Ukraine demonstrates a viable model of «autonomous organization», which is based on inclusive involvement of civil society, horizontal trust and international integration, which allows overcoming the trap of an «ineffective world».