Manser Olson
Manser Olson (Mancur Olson, 1932-1998), one of the most influential economists in the contemporary era, professor of economics at the University of Maryland, USA, and the main founder of public choice theory . His academic contributions far exceed the scope of economics and have played a significant role in the development of political science, sociology, management and other social sciences. Olsen died of a sudden heart attack on February 18, 1998. Two weeks later, the Economist magazine published an obituary and included a line of instructions under his portrait, calling him "the whipster of interest groups."
In Market economy , only when individuals and manufacturers have a broad and solid set of personal rights will a large number of important benefits derived from trade be formed, and many important types of production activities will occur. In fact, trade gains beyond the primitive society can only arise in an environment where individual rights are both broad and solid. Similarly, at least in a market economy, those production type that are not so basic that they can protect themselves can only appear under conditions where property ownership and contract execution are very reliable.
However, individual rights are often regarded as morally desirable, but are expensive to economic activities and are regarded as a luxury, which may not be needed by underdeveloped countries or countries in particularly difficult situations. We can now see that at least for market economy , this view is completely wrong, and it can also be explained by arbitrary and democratic theory. For example, we can now discover the extreme importance of short-term time effects that will inevitably occur sooner or later for arbitrary.
We can also find out why this is not accidental: a developed democratic society with the best established individual rights, and also a society with the most complex and extensive transactions (such as transactions in the futures market, insurance market and capital market) to achieve trade returns. They are generally also societies with the highest level of per capita income.
Personal rights and high-intensity incentives
The importance of personal rights to economic performance is also reflected in other aspects. When we think about the uncertainty inherent in economic life, we can see one of these other aspects. No one has the foresight to make the right decisions about where resources should be invested. As an old proverb says, prophecy is difficult, especially when making predictions about the future. The fact is that prophecy is much more than just difficulty: John, Maynard Keynes once said: "What must have happened never happened, what was not expected always happened." He was just a little exaggerated. As Rousseau points out, it is necessary to have the ability to "foresee certain things that are unforeseeable".
Although some people are less good at making predictions than others, no one can make general and reliable predictions regularly. However, every investment activity requires certain clear or implicit predictions. The modern economy is an extremely complex system that continues to move closer to general balanced . But it can never reach an equilibrium because it constantly faces new opportunities and shocks. There is not even enough information to calculate the current situation of the economy in detail or accurately, let alone future situations. Society as a whole is even more complex than a market economy, and there are uncertainties in international relations.
It is precisely because uncertainty is so common and unfathomable that the most dynamic and prosperous society are those that try many different things. Such a society has countless entrepreneurs who have relatively good channels to obtain credit and venture capital.A society has no way to predict the future, but if there is a wide range of entrepreneurs in the society who can engage in a wide range of mutually beneficial transactions, including transactions for credit and venture capital, such a society can cover a large number of opportunities to choose from, which is more than any individual or single-institution might imagine.
At least when a society has appropriate systems and government policies, the overwhelming majority of manufacturers that generate huge profits provide huge services to the people. In a society with correct systems and public policies, the dominant price level will roughly equate to the real value and cost of the commodity's marginal output and the productive input. The large surplus of revenue exceeds the cost means that the value of the enterprise injecting society almost certainly exceeds the value it obtains from society.
Much of wealth comes from luck
Because no one knows the future, most of the wealth and losses in the modern economy are explained by luck, just as they are also explained by the abilities and mistakes of the entrepreneurs involved in it. Some people correctly praised the social importance of entrepreneurs and emphasized the impossible to get the information needed to design a rational plan for the economy, but they did not point out that many entrepreneurs succeeded because of their luck. Similarly, many unsuccessful entrepreneurs have too little luck.
Partly because luck plays a big role, there is a trend everywhere, treating very high profit margins as unreasonable, and treating unusual losses as social problems, which a benevolent government should solve. This idea, in turn, often leads to financial subsidies to loss-making industries, enterprises and regions. In a transitional economy, these subsidies are part of the budgetary soft constraints analyzed in one of the previous chapters.
Social security for individuals and groups
At the individual level, it is morally meaningful to use the unexpected wealth of people with good luck to make up for some of the losses of people with bad luck. In the market democracy system, the private insurance market and the modern welfare state's social security system redistribute income to victims of bad luck. I have explained elsewhere that certain consumption transfers from the people who receive the most to the fewest can increase the welfare and utility of individuals in society.
The relevant argument here is to provide subsidies to loss-making industries, manufacturers and regions, although assuming the losses are entirely due to bad luck, the source of subsidies is the industries, manufacturers and regions that generate profits, and although assuming that profits are purely derived from luck, such practices still have typical catastrophic effects on the efficiency and vitality of the economy, in a sense the same as the unnecessary transfer of wealth to the poor. As mentioned earlier, if any meaning is the current dominant price level, activities that produce unusually high returns may produce social balance, and those that suffer extraordinary losses may cause net losses to society. Thus, if certain resources are transferred from loss-making activities to those that produce returns, the value of social output will usually increase significantly. In market economies with appropriate systems, this transfer tends to be automatically realized due to differences in returns. It is irrational to not transfer resources from loss-making activities to society that produces social surplus activities, because it wastes useful resources in ways that harm economic activities and at the same time simply cannot guarantee that it will be helpful to low-income individuals. So a rational and kind society limits its distribution transfer to helping poor and unhappy individuals.
In this regard, most of the Third World societies, most of the Soviet-type societies in a rigid stage, and most of the societies that implement transformation from communism, the policies they should implement are exactly the opposite of the policies they should implement.In most third world societies, it is very common to provide rationality for these subsidies on the grounds of seemingly reasonable egalitarianism, that is, subsidies prevent unemployment of workers in uneconomic industries. Even when the wages of uneconomic activities supported by subsidies are several times the social average capital, this policy often remains so that the net effect of subsidies is large-scale social injustice and obstacles to economic development. In many societies that have been transformed from the perspective of common sense, the amount of subsidies (usually implicit) to uneconomic industries has reached a surprising level. For example, in the first half of 1992, the growth of Russian inter-enterprise credit (apparently mainly funded by newly created currencies) reached 17% of the GDP of in this six-month.
Soviet society generally does not implement a national system with a progressive tax system, nor does it have an unemployment insurance system, or many other national security network projects applied in Western welfare countries. These societies rely heavily on socialized enterprises to provide welfare services. They transfer a huge amount of resources from profitable activities to industries, businesses and regions whose output value is not enough to compensate for the cost of consuming resources. Of course, such behaviors also occur frequently in the most prosperous countries in the West, but not so large. What should be used to explain this significant difference between Soviet society and market democratic system? Part of the explanation is a rigid factor hidden within this type of society that is particularly harmful. But there is another reason.
Personal rights reductionRedistribution of uneconomic behavior
The country with the highest level of per capita income—developed democratic countries—is also the country where individual rights are best protected. There are broad institutional mechanisms in these countries to protect individual rights, and individual rights often limit the extent to which institutions themselves obstruct changes in returns and reconfiguration of resources, which are needed for an efficient and dynamic economy. If the individual's rights are broad enough, political and administrative self-performing will inevitably be subject to some degree of constraint.
suppose that demand for Vijit, the most popular hypothetical product of economists, has seen a massive unexpected increase. In a market where democracies were established long ago, most people realized that if Jones happened to be producing Viagra when demand for Viagra soared, then Jones' luck would probably be too good. But if Jones got his factory that built Vijit through legal means, he would still have the right to obtain the excess profits of the factory. This right will be recognized by the court and protected by the police.
As long as the personal rights prevent the government from replacing the returns of enterprises with extraordinary profitability, these rights also allow the government to have fewer resources to help those enterprises that consume social resources. Similarly, contract holders have the right to be fair court protection, meaning that if the borrowing business costs more than their income and cannot return the loan, the lender who provides the secured loan can seize the assets of the defaulting borrower. This further reduces the social tendency to allocate resources to behaviors that consume the value of social output.
Therefore, the power of individual rights under a long-term democratic regime is a major reason why these democratic systems maintain a tolerance for large-scale changes in short-term returns between different manufacturers, industries and regions. Such tolerance is essential for the vitality and prosperity of the economy. It provides an incentive mechanism to reconfigure resources from activities with lower returns to activities with higher returns, thus achieving a more rational resource allocation. It also provides incentive mechanisms that enable manufacturers and individuals to engage in inherently risky entrepreneurial activities, which is required for technological and productivity advancements.
Brief retelling
We have seen the generalization of the market, but although there are countless markets in most society, they cannot enjoy high incomes and achieve rapid economic growth. The market permeates almost all countries because the benefits derived from trade are usually quite considerable and sometimes extremely large, and also because many types of trade are self-implemented (and thus can occur under almost any condition).
Although arbitrary setting of price levels and other forms of misguided intervention are common, especially in the second and third worlds, because transactions that usually provide the least profit are curbed by interventions, while transactions that provide the most profits occur, society is still able to obtain most profits from the market. Therefore, it can be said that people all over the world have benefited from spontaneously formed and even irresistible markets, and a large number of such markets exist in the large informal sectors of the second and third world economic fields. Many markets are mainly self-implemented, just as certain types of production, such as grain collection and handicraft manufacturing, mainly self-preservation. Self-implemented markets and self-protection production have extremely important value: we all benefit from it, and they feed the majority of the world’s population.
However, in order to achieve rapid economic growth or increase in revenue levels, society needs to benefit from non-self-implemented mutually beneficial transactions—such as transactions involving borrowing and purchasing spot forward shipments. These benefits can only be obtained through markets designed by governments or society. Society also needs to gain benefits from rights-intensive production. It requires the benefit of property-intensive production, which is necessary in the case of widespread use of plant and equipment, such as production requirements. It requires the benefit of contract-intensive production, which is provided by insurance companies, futures markets and banks. In short, the income level in most countries in the world is that people in these countries do not have reliable personal rights.
defines clear and reliable personal rights, and also makes it easier for society to transfer resources from activities that waste resources to activities that generate net wealth. This would be particularly true if the society had a social security system or social security network to protect individuals with poor luck.
In a society where personal property rights are established, if an individual's assets and enterprises generate particularly high profits, then he or she has the right to occupy these unusually high profits. Just as the winner of a lottery has the right to own the bonus it wins, in a rights-based democratic system, the owners of assets that produce particularly high profits are also entitled to own these unusually high profits, although the acquisition of these profits (and in reality it is indeed often the case) is purely due to luck.
's rights to unusually high profits prevent a large amount of resources from being transferred to industries and enterprises that consume social net output. The rights to contract execution increase the possibility that companies that consume net social output will be forced to close; if a company defaults on mortgage loans - this is the usual practice of the company when the cost exceeds the value of the output ^ the lender has the right to seize the company's mortgage assets.
This article is selected from "Power and Prosperity"
