The Soviet Union of Kos

Thirty years ago at this time, at the end of December 1991, two seemingly unrelated things happened in the world. The major event was the collapse of the Soviet Union and the suicide of the superpower. Everyone knows that. Little is known about the fact that Ronald Coase, an economist at the University of Chicago, won the Nobel Prize. Even fewer know the inner connection between these two things. How little? Anyway, I don’t dare to say “I wake up alone”.

Coase was an Englishman who later came to America. The characteristic of his knowledge is that he plays economics with his left hand and science with his right hand. He uses two sets of knowledge to figure out the concept of “transaction cost”. He lives by these four words all his life. The Coase Theorem” won a Nobel Prize.

The concept of Coase’s theorem is expressed in the “New Palgrave Dictionary of Economics” as follows: As long as transaction costs are equal to zero, the initial allocation of legal rights does not affect efficiency. Outsiders may not understand this sentence, it does not matter, we will give an example below. Before giving an example, let’s give an example of an important keyword mentioned in the definition, transaction cost, otherwise, you will not be able to understand the Coase theorem – whether it is an admirable understanding or a critical understanding.

Transaction costs are all kinds of expenses incurred by people in economic exchanges. Some of them are necessary, and some of them are simply costs caused by man-made economic frictions. Today, everyone is talking about “involution”, which is A mechanism dedicated to creating frictional transaction costs. Frictional transaction costs, there is nothing academic, we don’t care about it, we only discuss the “necessary” part – the economics of necessary transaction costs.

For example, we know that some countries in the world charge tolls for expressways, and some countries do not. At first glance, this is just a matter of distribution relationship, or it is a matter of one pocket and another pocket, or one pocket and one pocket. The pockets do not go in, anyway, the meat is rotten in the pot, and there is no difference in the overall interests of the society at all charges. Looking at it this way ignores an important economic fact – transaction costs. When we look at the issue of expressway tolls from the perspective of transaction costs, we will find that there is a huge difference in the sense of social efficiency when tolls are not charged. Suppose a researcher went to a highway toll station to do a simple sample survey and found that: because of the parking fee, the average parking time of each vehicle at each highway entrance is two minutes, and the time it takes to exit is one minute. After conversion, the average time of three minutes is 6 yuan. In addition, if the gasoline consumed by two stops and restarts is worth 4 yuan, then the average cost of a single trip of this ten yuan is multiplied by the daily average cost of each trip across the country. The number of vehicles entering and leaving the expressway entrance shows that this is a huge transaction cost, and this transaction cost is the efficiency loss of the whole society caused by expressway tolls.

So why do some countries charge highway fees while others don’t? This problem can also be explained by transaction costs. Toll and no toll are actually two mechanisms for expressway operation. The first is the market mechanism, where businesses invest in road construction, businesses spend money to maintain them, and businesses charge fees; the second is financial mechanism, where the government uses fiscal revenue to build roads and maintain them, and provide them free of charge to the people. People may think that, of course, it is a good financial mechanism, because it does not have the transaction costs and social waste caused by card fees. If this is the case, why do some countries use bad methods while putting good methods out of use? The answer is because, in some countries, the transaction cost of the fiscal mechanism is higher than that of the market mechanism, and in some countries, the transaction cost of the fiscal mechanism is lower than that of the market mechanism. To be more specific, let’s talk about China and the United States. Why are China’s expressways charged? Because in today’s China, the transaction cost of the fiscal mechanism is so high that we can’t imagine whether this state machine can still do such a thing. It has to leave things to the market to do. Why doesn’t the US charge a fee? Needless to say, anyone who has lived in the United States knows how rigorous, serious and efficient its national tax and fiscal system is. That is, America’s highways are not toll-free because its fiscal mechanism has lower transaction costs than market mechanisms.

The concept of transaction costs is academically useful, right?

Coase himself was the first to use this theoretical tool to explain the world. In the early 1930s, when Coase was an undergraduate in his early twenties, he wrote an article, “The Essence of the Enterprise”, in which he studied the following issues: There are two ways for people to have economic connections with society. One is the market. , One is the enterprise. Market approach—produce products and sell them in the market, so as to participate in social division of labor and cooperation; enterprise approach—go to work in an enterprise, and participate in social division of labor and cooperation by playing a role in the division of labor structure within the factory. Which of the two mechanisms of division of labor and cooperation is more socially efficient? Why does society not form a big market where everyone works as an individual, nor does it form a big enterprise where everyone works? Why does society have both enterprises and markets? Most importantly, what determines the size boundaries of the two? Faced with so many question marks, Coase answered with a truth: transaction costs. The division of labor in society, if there is only one mechanism of the market or only one mechanism of the enterprise, and everyone works as an individual or as a wage earner, the transaction cost will be very high, and the reasonable combination of the enterprise and the market in terms of scale, will definitely be able to match one. The lowest point of the total social transaction cost, that is, the highest point of social efficiency, and the reasonable ratio between the enterprise and the market, is determined by this.

It can be seen that although the concept of transaction cost is simple and easy to understand, its economic theoretical value is still quite high. The high value is that people often ignore its existence, and many economic phenomena are difficult to explain without it.

Well, “as long as the transaction cost is equal to zero, the initial allocation of legal rights does not affect the efficiency”, this definition of the Coase theorem, in which the concept of transaction cost, we have roughly explained it. Now let’s face another concept mentioned in this sentence, statutory rights.

These four words, the first two words are logically redundant. The concept of “rights” already includes the meaning of “legal”. It is precisely because rights are legal that there is a problem of “initial configuration”. Who will configure it? Law. The entitlement has an initial configuration, so is there a secondary configuration? Second-level configuration can not be called configuration, but should be called transaction. Since the right is legal, it is a resource and an asset of the owner of the right, and it can be bought and sold, so there is a market transaction of the right. Institutional economics even believes that what is traded in the market is essentially all rights. When a person sells a basket of apples in the market, he is actually selling rights, a set of rights he owns to the basket of apples. Rights can be disassembled or packaged. When institutional economics understands all transactions as rights transactions, it not only deepens the understanding of economic life, but also broadens the explanatory power of economic phenomena.

The Coase theorem is a theoretical conclusion based on this ideological background: the free exchange of rights will bring efficiency gains to the society. Coase gave several examples to illustrate his theory. Today, I will borrow the material of an example in his “The Problem of Social Costs”, and change the content and logic into a more understandable example, so as to help readers understand Coase theorem.

Suppose there are two farmers, Zhang and Li, who manage two adjacent plots of land. Zhang grows wheat on his own land, and Li raises sheep on his own. This created an annoying problem: Li’s sheep kept slipping into Zhang’s fields to eat wheat seedlings. As far as the interests of the two companies are concerned, this matter is very simple, it is just a lawsuit, there is nothing to study. What Coase economics cares about is not the interest relationship between the two families, but the interests of the whole society, social cost and social efficiency. From the perspective of the overall interests of society, sheep and wheat, the palms and backs of the hands are meat, and whether sheep eat wheat is a good thing or a bad thing, the knowledge is not simple. The experience of farmers is that wheat seedlings, if slightly eaten by livestock, are not detrimental to the wheat harvest. That is to say, when the sheep eats the first bite of wheat seedlings, the sheep gain the most, while the loss of wheat is zero. At this time, it is a good thing for sheep to eat wheat. Of course, if you keep eating, the marginal gain of the sheep will decrease, and the marginal loss of wheat will increase, and eventually the equilibrium point will be crossed, and the sheep will turn from good to bad when eating wheat. This means that it is a social benefit for sheep to eat only a few mouthfuls of wheat seedlings in the neighboring fields every day. Afraid of overeating. Under the overeating, the sheep will endure, and the wheat fields will be ruined. The loss of wheat is greater than the gain of sheep, and the social cost will come out.

How to prevent overeating? There is no need for the two to go to court. Coase believes that as long as the relevant rights are clearly defined in the law, then the free transaction between Zhang and Li can solve the problem.

For example, if the law stipulates that the Zhang family has the right to inviolate their own wheat fields, then the Li family can spend money to buy this right if they want their sheep to properly eat the wheat seedlings of the Zhang family. The Zhang family would also be happy to sell part of their rights to the Li family. How much to sell? How to sell? Both Zhang and Li will weigh the pros and cons between the fees they receive (pay) and the wheat they lose (eat), and find the point of mutual interest. The trading conditions of time, number of sheep, and fees are three factors. Every day, ten sheep are charged ten dollars, and they are allowed to eat in the wheat field for half an hour. The point of interest compromise reached by the two parties is the lowest point of social cost and the best point of social efficiency.

So, what if the initial property rights are reversed? If the law does not stipulate that the Zhang family has the right to protect their own wheat fields, but the Li family has the right to let their sheep eat the Zhangjia wheat seedlings, what should we do? Also easy to do. The Zhang family in turn pays the Li family. The Li family will sell part of their property rights (the right of sheep to eat wheat seedlings) to the Zhang family. Which part? The portion after eating half an hour later. The Zhang family can bear it for only half an hour, but no matter how long it takes, the Zhang family will choose to pay the Li family and ask him to restrain the flock from eating any more. The equilibrium point between the increasing marginal loss of Mai and the decreasing marginal income of the sheep is also at the point of half an hour and ten dollars. The Li family keeps the ten dollars and continues to eat it, which is not cost-effective, so they take the money to “close the team”.

In this way, through the clear definition of rights and the free exchange of rights, not only the interests of Zhang and Li have found a point of compromise, but also the process of free trade between the two for their own interests is a process that helps society achieve Pareto efficiency. .

With the help of this example, the sentence “the initial configuration of legal rights does not affect efficiency” can be further expressed: as long as the ownership of property rights is clear and can be freely traded, it does not matter whether the property rights are in the initial link. How to allocate, according to what principle, to whom, whether to allocate to Party A or Party B, Zhang family or Li family, as a result, transactions through the free market will bring efficiency to the society. In a word, the truth of property rights should be found in the free transaction of private rights, not in the original configuration of rights.

Having said that, it is time to return to the main topic of this article: what does this have to do with the collapse of the Soviet Union?

This theory is too big a hint for the collapsing Soviet Union! Go forward boldly, the Soviet Union! State-owned assets do not know how to divide? The Coase theorem tells you that it can be divided. State-owned assets do not know to whom? Coase’s theorem tells you that it can be distributed to anyone. Property rights are not afraid of advocates, not afraid of Li, but of the lord, because the lord of the country means no owner, and without the owner, there is no free trade. Without free trade, there will be no optimal allocation of resources, and there will be no social efficiency. Imagine, if the wheat field and pasture land are not privately owned by the Zhang family and the Li family respectively, but are two pieces of land in the people’s commune, so it is impossible to explore the Pareto efficiency through the free transaction of private property rights, then we can only Seeing the loss of social efficiency is helpless. Therefore, whether it is stealing or robbing, or cheating, no matter what the path is, the key is to hand over the property rights to private individuals. It doesn’t matter how you divide it, and it doesn’t matter who you give it to. After the division is completed, free trade between thieves will create the best allocation of resources, create the best social efficiency, and create a new society.

Readers, reading this, do you feel a little bit about the relationship between the Coase award and the disintegration of the Soviet Union? It’s a bit like Christianity took over when the Roman Empire fell, and Coase’s theorem came to take over for the Soviet Union, right? This is not a religious takeover, but an academic takeover, a philosophy takeover, and an ideology takeover. Its significance is, first, theoretical guidance, and second, ideological emancipation.

Theory guides the way-isn’t the Soviet Union can’t play anymore, now I’ll tell you how to go next, in fact, there are two things, one is to clarify private property rights, and the other is the free market.

Emancipation of mind – tell all kinds of old and new powerful people in the Soviet Union, capital robbers, black-hearted foxes, bulls and snakes, second and third generations, see what Coase said, that is a Nobel Prize winner, academic authority, you put down your burdens and pack lightly. Let’s embrace it with confidence, kidnapping, exploiting power for personal gain, collusion between officials and businessmen, father-son collusion, no matter what the morals are, the Eight Immortals cross the sea to show their abilities. In Chinese, it is called “corruption is the lubricant of reform and opening up”.

When he won the award, the old man Coase was in his 80s. It is said that he was on a plane over Africa with his wife when he got the news, and he was very happy. Moreover, this year’s award, more than one million, was given to only one person. In previous years, the award was usually divided between two or three people. Does such a heavy award show the academic weight of Coase Economics?

Is it really like this? When we call the Coase Theorem a “theorem,” don’t forget that it has an assumption of zero transaction costs. This assumption is doomed that it cannot be a theorem, because there is no economic activity in real life without transaction costs. For example, in the above example of sheep eating wheat, whether the Zhang family pays the Li family or the Li family pays the Zhang family, the transaction cost cannot be zero. They have to calculate, negotiate, sign a contract, notarize, and even find an accountant and a lawyer. All these costs, time and energy are added, and the ten-dollar benefit has long been overwhelmed. Where can I get a deal?

The idea of ​​transaction cost was originally proposed by young Coase to explain its positive role in economic life, for example, it determines the quantitative boundary between the two economic connection modes of market and enterprise. In the 1960s, when faced with the problem of social cost, he went to the other extreme, assuming that the transaction cost was zero, and relying on this “null hypothesis”, he assumed a “Coase theorem”. I really don’t know, when the Nobel Prize Committee decided to give him this award, was it because of his theoretical contribution that he introduced the concept of transaction cost into economic life, or because of his theory that he excluded transaction cost from economic life. contribute? Some insiders even believe that the Coase theorem is not economics at all; what’s more, some people even doubt Coase’s status as an economist, saying that he is just a legal scientist. I don’t agree with these words, but I agree with this point: Coase’s rare “single room” in the history of the Nobel Prize, and won a single award, is not because of the public expectations of the economics community.

Why is that? Thinking space is left to the reader.

Of course, there is no reason to think that Coase was involved in this ideological strategy, he was just a blessed old man with a pie from the sky falling on his head.

The next year, in 1992, the Chinese economics circle set off a Coase fever. The “Theory of the Primary Stage of Socialism” and “Theory of Capitalism Supplementary Courses”, which have long been waiting to be fed, have ushered in their own textbooks.