GOVERNMENT-MARKET RELATIONSHIPS AS AN EVOLUTIONARY GAME

The notion of mixed economy says nothing about the equilibrium in the system "Government-Market". There is an open question even about the existence of the equilibrium. Besides, the unstable situations are so typical for the economy that they are worth studying. The market equilibrium is not the topic of this article (classical approach), but the equilibrium in the combined Government-Market system is considered.This system is treated in the article as an evolutionary game which allows to use the ideas of evolutionary game theory (Saari, 2010). Government-Market system has a dynamic structure. What is big now could be small tomorrow, in a new historical situation. The system evolves, the degree of government intrusion in the economy changes, so the structure of the system "Government-Market" changes too. Structural evolution of the "Government-Market" system may be regarded as a result of a game. Market and Government are the participants of this game. The outcome of the game is a change in the economic size and power of the market in relation to the economic size and power of the government. Two extreme outcomes of the game are obvious: absolute power of the government (non-market economy) or unbridled market system with zero power of the government. The use of the evolutionary game theory reveals the existence of three possible situations between these two extremes: the first is a stable equilibrium called "attractor" in the theory, and two others are unstable ones. For an unstable situation the theory uses the term "repeller" (Saari, 2010).For each stable equilibrium there should be two unstable ones. The attractor in the "Government-Market" system may be achieved with the help of proper regulation. Two correspondent repellers are interpreted as two different types of crises.