Regime Failure and Workaround Formation: A Theory of Economic Transition

Abstract This paper develops a theory of economic transition in which regimes persist while they re main the least-maintenance viable architecture under resource constraints. A regime is defined not as a date range, ideology, or policy label, but as a stabilising architecture that absorbs systemic stress at tolerable maintenance cost. The central mechanism is stabiliser-transmitter reversal: the anchor that once reduced volatility eventually becomes the channel through which stress is transmitted. Agents exposed to that transmission adopt costly workarounds. If adop tion generates network benefits and raises systemic capacity, a workaround can become a vi able architecture before the incumbent anchor fully collapses. Transition occurs when that workaround becomes the least-maintenance viable architecture available to the system man ager. The model generates four main results: inefficient regime persistence, endogenous transi tion through workaround scaling, under-adoption relative to the social optimum, and a delay information tradeoff. Higher adoption frictions delay transition, but observed adoption under high friction is more informative about the domain of the future regime because costly adoption screens low-quality domains. The paper also defines a breakdown region in which no architecture is viable under the prevailing resource envelope, distinguishes transition from breakdown, and states the comparative statics implied by the model under explicit single-crossing and survival likelihood-ratio conditions. A short application to technology-regime precursors illustrates the model but is explicitly separated from empirical proof. JEL codes: B52, C70, D83, E02, E32, F60, O33, P16.