Parse of China: Gradual Reform Logic Based on Bargaining Game

267 Pages·2017·3.71 MB·English

by  Yilun Tong (auth.)

Yilun Tong
Parse of China
Gradual Reform Logic Based on
Bargaining Game
Parse of China
Yilun Tong
Parse of China
Gradual Reform Logic Based on Bargaining
Game
123
YilunTong
Hunan University of Science
andTechnology
Xiangtan, Hunan
China
ISBN978-981-10-4477-9 ISBN978-981-10-4479-3 (eBook)
DOI 10.1007/978-981-10-4479-3
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The book is dedicated to my mother Yu Guixi
Foreword
The Bureaucratization Trend of the World and its Outcome
“Will this world be better” once asked by Liang Shuming, the last confucianist of
China,inthe1980s;BertrandRussellalsoaskedinthe1960s:“whatwillhappento
humanbeingstomorrow?”Now,itturnstoourgenerationtoaskthesamequestion.
My answer is: the world won’t be better, because it develops generally towards
bureaucratization,andtheultimateoutcomeistheinternalrevolutioninpopulation
or its extinction as a whole. The bureaucratic process of the world is just like a
spiraling screw which is destined to have such an end-result since its first ring.
However, as one of the complex phenomena in Hayek’s discourse, the bureau-
cratization of a society is more complex than the process of tightening a screw.
When we areall utterly ignorant, some bureaucraticfactorshave gradually formed
from some little buds in many aspects of social organizations, such as politics,
economics,andlaw,atawideranddeeperlevel.Thosefactorsreinforcefromeach
other. Finally, bureaucratization becomes an irreversible process of social evolu-
tion.Atthistime,wecan’taffordtheburdenofthebureaucraticmachineandtryto
getridofthevisibleendarrangedforusbythefate,butitistoolate.Wearekeptin
an iron house and feel suffocated, regardless of those opening the eyes or being in
lethargy.
Max Webber is perhaps one of the few sober persons in the iron house. He has
realized a certain inevitable connection between the tool nature of rationality and
the bureaucratization of social organizations. Human history also supports his
opinion.Itseemstobealwayswanderingbetweentwoextremestates.Oneiscalled
“the period of value creation”, and the other is called “the period of value
depletion”.
Value creation is the social function of some leaders with Charismatic charm.
These leaders can make the public obey their charismatic authority from the heart.
Menciusonce said:“there mustbe anew king inevery fivehundred years, among
whom there must be some famous ones”. According to his observation, the period
of value creation appears at an interval offive hundred years. The so-called king
vii
viii Foreword
refers to the Charismatic men like Chengtang, the Duke of Zhou, and Confucius.
Here, the public and the leaders are combined into a social organism full of cre-
ativity. And in decades of years, new material life, sociallife, and spiritual life are
created.
Max Webber pointed out whereafter, firstly, Charismatic characters could live
for only decades of years after all; secondly, passion would return to rationality
soonerorlater.Inordertomaintainthenewlifebearingnewvalue,thesocietymust
rely on the professional bureaucratic group. Then, it is inevitable to form the
bureaucratic process which gradually kills the creativity of the society, which is
known as the period of value depletion. The social management period of
bureaucratizationcanusuallybeverylongwithonehundredastheunit,succeeded
from generation to generation with the lasting influence.
Asoundsystemofbureaucraticinstitutionmaylastforhundredsofyears.Ifwe
say that the eternal dilemma of Charismatic characters is “cultivating the succes-
sors”(becausethecharismaticcharm cannotbecopiedorinherited),butthesound
bureaucratic institution seems to be able to replicate itself, as long as it allows the
social members who are the most suitable for maintaining the existing institution
share enough vested interests.
In the long term, the bureaucratic social institution is unsustainable in units of
onehundredyears.Afterall,thecreativityofindividualsisthesourceofallvalues.
Therefore,thebureaucraticprocessisalsotheprocessofself-destructioninthelong
run.ReaderscanrefertoATheoryofEconomicHistorybyHicksformoredetailed
demonstrations.Thus, inthe long term, no any human societycanavoidthe threat
ofrigidnessanddeath.Agreatsocietymustconsistentlyseekinstitutioninnovation,
soastoinspiremanydifferentindividualstocreatevaluesinalldifferentdirections.
When explaining the economic growth phenomenon, Acemoglu, the economist
at Massachusetts Institute of Technology, published a paper in the Journal of
Theoretical Economics (two of his partners are from Spain and Switzerland
respectively) to discuss the competitive relationship between two forces causing
economic growth, namely, innovation and standardization. That standardization,
pleasenote,meansmanagementbureaucratizationtoagreatextent.Thusthekeyto
sustainable economic growth is to achieve a balance between innovation and
standardization. Through standardization, the enterprises can acquire the scale
economic benefits of new products. At the same time, they must pay the price of
creativity decrease. The optimal choice is to achieve a balance after offsetting the
marginalcostbythemarginalrevenue.However,theauthorsofthepaperprovethat
the balance is not the only one.
Afterinvestigationonamoregeneralsocialprocessbeyondtheeconomicfield,
it is not hard to imagine the balance between value creation and value depletion
similartotheaboveone.Ifasocietycanmaintainsuchabalanceforalongterm,it
can be expected to maintain the long-term prosperity, like hundreds of years of
prosperity.Whyisitdifficultforustoobservesuchasociety?Obviously,itisvery
difficult to maintain the balance. In other words, the balance lacks the necessary
stability. So, we should ask: is the balance above naturally instable?
Foreword ix
Ofcourse,Ihavenoreadyanswertotheaboveproblem,butIholdapessimistic
negative expectation; or, I don’t believe the stable balance existing between value
creation and value depletion. Therefore, Keynes’ following expression strikes a
sympathetic resonance in my heart: human civilization is extremely fragile. In a
sense,civilizationisonlymaintainedbytheheartsoftheminorityofus.Thusalso,
we have the courage to bear the inescapable mission.
Then,isthefightagainstthebureaucratictrendeffective?Thisisfirstapractical
problemwhosesolutiondependsonthepracticeartofthereformers.Secondly,asa
theoreticalproblem,theeffectofthereformdependsonwhetheritisthoroughness
or not. The reform fails always because it is not thorough. Therefore, in order to
make the society move forward, it is inescapable to convert the reform into a
revolution.
ThisarticleisinspiredbyDr.Yilun’sbook.Itissuitabletobeapreface.Readers
mustreadthebookpatiently;oryouwillnotunderstandwhytheshortpassagecan
be the preface of such a book.
Xiangtan, China Wang Dingding
Autumn, 2016
Preface
To understand China, it is necessary to parse China’s reform of social institution.
ThegreatchangesinpoliticandeconomyofcontemporaryChina,formorethan
30 years, not only have the empirical significance of the Chinese context but also
become an important event in the history of modern human civilization. Different
from the violent revolution process of traditional centralized politics, nor the
democratic election process of traditional western politics, she began with the
practice consciousness of pure Chinese local meaning, but has owned the core
connotation of western civilization sense with the outstanding achievements in
social transformation. Despite the controversial opinions since its appearance, she
has been developing according to her own logic, in which the political economic
principle involve the academic debates between the radical reform of the new
Classical Liberalism “Washington consensus” and the gradual reform of the
Chinese model, and connect with the practice direction and path selection of
China’s reform as well.
Adhering to the academic tradition of the thought of classical political eco-
nomics since Adam Smith, the book tries to regard the institution change as the
non-violent process of bargaining game for continuous adjustment and agreement
of social contract by related participants so as to give a unified logic based on the
bargaining theory around the institution phenomenon of gradual reform since
China’s “reform and opening up”.
Allthespontaneousfolkbehaviors,suchasthehouseholdcontractmanagement
inXiaogangVillage,townshipenterprisedevelopmentinWenzhou,andevenearly
explorationofShenzhenSpecialZonesincethebeginningofthereform,1aretaken
assomekindsoftheobjectivelystrategicactsofthegeneralizedbargaining,andthus
the related policy changes of government as the results of game equilibria of bar-
gaining between two forces of the market economy and planned system. For this
1WetakethepracticeprocessofShenzhenSpecialZoneasanevolutionaryprocessratherthana
simpleplanningdecisionofthecentralgovernment,whichisconsistentwithitsfoundingprocess.
TherelateddiscussioncanbefoundinthememoriesandrecordsofHuYaobang,XiZhongxun
andRenZhongyi.
xi
xii Preface
purpose,thebookwillarguethattheinherentlogicofbargaininggamerequiresthat
two parties with contradiction not only reach the cooperation of compromising
transactionin reform plans but also play abargaining game ontheexpected return
of the reform, so as to make the institution reform balanced the cooperation effi-
ciency with the fair values of confrontation.2 This kind of reform of “priority to
efficiency with due consideration to fairness”, namely the reform principle of
Chinesecharacteristics,givesChinareformtwokeyconnotationsofpractice:firstly,
it liberates the institutional constraints through the institution adjustment of
non-violent bargaining which is required for developing the market economy sys-
tem; secondly, it preliminarily realizes the reform goal of Washington consensus
through the market-oriented economic restructuring—complete competition in the
economy,resourceallocationbythemarket,andeffectiveprotectionoftheproperty.
That is, the theme of the book is the pure institution reform theory. By the
method of combining the bargaining theory in K. Binmore’s sense with the utili-
tarianismfromJ.Bucanann,itworksatthescientificandrationalanalysisinvolving
both economy and politics, and examines how the social institution reform occurs
andformsintheprocessofthegeneralizedtransactionofpeople’ssocialbargaining
behaviors.Since thebargaining institutionreformconsistentitsinherentlogicwith
the mass line of “seeking truth from facts” and the political practice of the CPC3
which corresponds to the real social life in contemporary China, it possesses a
unique practical value and the fundamental connotation. Of course, the bargaining
institution reform is not the whole story of social institution change in China. In
reality, the latter is more like a mixed institution change process which shows an
interaction between upper and lower, linkage between left and right and even a
wanderingofinternalrepetition.However,thebookplanstoshowthatthecorefor
the social and economic development in contemporary China is exactly the bar-
gainingmechanism ofinstitutional reformthat we argued. Thus,the general social
reformprogramofbargainingisthemainreasonfortherelativesuccessofChina’s
institution reform, as well as the social process of political democracy in an
endogenous sense under the oriental context. In other words, if the efforts of the
book are appropriate, it will prove the following conclusions.
First of all, the bargaining institution reform is of efficiency. Its economic logic
lies in that the transaction equilibrium of bargaining has the efficiency mechanism
ofParetoimprovement:“itcanimprovetheutilitylevelofatleastonepersonwhile
not reducing the social welfare of any other members”. Here, the best evidence is
2Thetheoreticaldifferenceofthedualityofcooperation-conflictofthebargaininggamefromthe
traditional games can be found in Tong Yilun’s specific review (the Review of New Political
Economy,2008,totalNo.10).Theunpopularstatementofthebookisbasedonthegeneralization
oftherelatedreview.
3AccordingtoDengXiaoping,“theessencesofMaoTsetungthoughtareseekingtruthfromfacts
andthemassline”(seetherelatedcontentdiscussioninSelectedWorksofDengXiaoping,P231).
This is the core of the book which may give a mathematical logic of game theory to the good
traditionsoftheCPConthosetwoprinciples.