Zhang Wuchang: What Did The Market Save?

The oracle bone shows in China.

Transaction costs are zero mistakes.

Knight said in 1924 that there would be no market for private property; Coase said in 1960 that as long as rights were clearly defined (private property), paction costs were zero (he said), through the operation of the market, no matter who defined the right, who would have the same resources to use.

In 1982, I raised objections in the book "will China go to capitalism?"

"If the paction costs in the broad sense are really zero, we have to accept the consumer's desire without the exact exact expression; the auctioneer and the supervisor will collect and sort out the message free of charge; the workers and other factors of production will get free guidance to engage in the output that is fully consistent with the desire of the consumer; the products and services each consumer will obtain will be consistent with his desire.

The arbitrator will determine the total income of a worker or consumer free of charge: the marginal value of the worker, plus a share of all the other resources of the society, which is determined according to any of the rules that everyone agrees with.

Such reasoning, Kos's effect can be achieved without market price.

Kos and K. Arrow agreed with this passage.

Brain block for twenty years!

This brings me a problem that has been baffling me for many years.

Market trading is undoubtedly a great benefit to the society, but this interest is not enough to explain the existence of the market. If the paction cost is really zero, the greater interests can not be obtained through the market.

In fact, most of the economic literature in the first half of twentieth Century is directed at socialism, and the central government will guide production and distribution more efficiently than the market.

This view is relentlessly overturned with the historical facts.

Transaction costs are all zero and there will be no market. The emergence of the market proves that there is paction or institutional cost in society.

Obviously, the emergence of the market will not be because of the increase in these costs, but in the cost savings of some cost markets.

However, whether it is the cost of property definition, the cost of information pmission, the cost of determining the market price, the cost of measurement, the cost of contract, and others, because of the existence of the market, what is the cost that the market can help to save? The problem of brain block is a problem I have thought for nearly twenty years.

Inspiration from grassland animal husbandry

One night in two, I thought of an article with only two pages.

The author, A. Bottomley, published the grassland in Tripoli, Tanya, Africa, in 1963.

In two, eight, in my own "China's economic system", I have the following comments on the inspiration of this article:

"The author's argument is that Tripoli's Tanya prairie is very suitable for planting almond trees, but because grassland is public, it is used for animal husbandry.

I have always suspected that the phenomenon of whether the valuable resources are allowed to be used by the public without restraint. However, if it is true, the rent dissipation is the result.

So what is the paction or system cost of the grassland public livestock in Tripoli? The answer is the dissipation of rent. In my 1974 article on price control, I pointed out that rent dissipation is a paction cost.

In the case of Tripoli's Tanya, the same view is rather difficult, but in the two area, the rent dissipation of land is really a paction or institutional cost.

On the one hand, the dissipation of rent will not happen in one person's world; on the other hand, the cost (the cost) is the highest price. The cost of animal husbandry in Tripoli's Tanya is the land rent value of planting almond trees.

It is defined that the total paction or institutional cost of converting grasslands to planting almond trees will not be less than the rent dissipation. Otherwise, this will change.

The implication is that if we can identify where these costs have changed, the pformation of the system can be deduced.

This is exactly the way in which I deduced that China would move towards a market economy in 1981.

As can be seen above, the dissipation of rent is not limited to the situation of fishing on the high seas: competition for fishing in the high seas has increased the cost of labor involved, partly or wholly, replacing the value of the rent that the ocean can get under the restriction of private ownership.

The example of Tripoli's Tanya is that the prairie can be planted with fruit trees, and the rental value is higher. But because of animal husbandry, the high value of tree planting has been abandoned.

In other words, rent dissipation can be done in many different ways, and the definition of private property and the emergence of the market are helping to reduce rent dissipation.

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This brings about the basic nature of rent dissipation.

The use of any resource or asset is varied. It is not easy to achieve the purpose of maximum rental value, because there are limited constraints such as information cost.

The concept of rent dissipation does not mean that the use of the maximum rental value can not be achieved.

Users make wrong decisions, causing rent values to drop to zero or rent value dissipation.

The concept of rent dissipation must be seen from the loss of rent caused by competition between people.

Robinson's single world is so stupid that he is starved to death and has no rent.

Robinson's income is all rental value, because no competition has not dissipated at all, although he can make wrong decisions frequently, so that the rental value or output of the beautiful pool in the fertile field is reduced to nothing.

The grassland of Tripoli's Tanya is used for livestock instead of planting. It is obviously the result of competition, so it can be seen as rent dissipation.

I mentioned in the contract structure of 1974 that cattle or sheep can be brought home at night, but trees can not be moved, so unless there is a clear demarcation line of land and protection of property rights, tree planting will be eaten by animals.

The example of Tripoli's Tanya is that livestock farmers compete for the use of public grasslands.

Rent values will dissipate, but not all of them.

The division of land as private property has legal fees, there are defined and protected costs, and political and other costs are institutional costs.

The rent dissipation is also the institutional cost, which is seen from the narrow paction cost expansion.

If the value of fruit trees rises rapidly, or the cost of defining land as private property decreases, the system of the right of the grassland in Tripoli will change, and the cost of such a system will be reduced, but the cost of defining private property will rise.

Institutional cost is bound competition, cost competition is bound to be able to survive.

Where there is competition in society, there must be a system of competition.

The formation of the system is to reduce the dissipation of rent value, that is to say, substitute one system cost for another.

From an optimistic point of view, this substitution reduces the cost of the system. From a pessimistic point of view, these costs can be increased by selfishness.

It's later.

In the choice of system, I will bring my classmates to a deeper level: the arrangement of restricting competition is contractual arrangement; the cost of restricting competition is paction or system cost.

To talk about the market is a system and, of course, an arrangement to restrict competition, and market price is the criterion for binding and deciding the outcome of competition.

In many criteria that determine the outcome of economic competition, only the market price will not cause the rent to dissipate.

This section shows that the formation of the market and the adoption of the market price are not natural.

China's experience can be taught.

What did the market save? It saved the rent dissipation.

Among the many competitive criteria, only the market price will not cause the rent to dissipate.

The adoption and determination of market price should include property rights definition, information pmission, measurement supervision, contract negotiation, customs law and so on.

It's a luxury rule of competition, but the value of rent tends to be large. In order to survive, the choice of human beings is changed.

What a wonderful world and interesting knowledge.

However, if we push it further, human beings may self destruct.