Professor Cheung wrote about Liu Xiang (刘翔) and Usain Bolt in this entry “从刘翔弃赛说黄龙觅士“. I have written about Liu Xiang here and have nothing much to add.

What I do want to humbly point out is I think the Professor is wrong in his assessment of Bolt,

“牙 买加的飞人博尔特可谓不识时务。冲线之前他伸臂拍胸，明显地缓慢了下来，仍然以九秒六九破了一百米的世界纪录。如果此公不搞搞震，九秒六○易过借火，这样 的纪录可能维持数十年。“

Given the talent of Usain, I think he is so good that he can pretty much break the world record a few times as he improves. So, economically, why would he want to push it all the way out to something that will take him years to break? If I had Usain kind of talent, then theoretically speaking I can break a world record once and get it to 9.60 OR break it a few times (or nine times) over a few years, one for each of 9.68, 9.67, 9.66, … 9.60. If I were Usain, it seems rather obvious that I would definitely want to choose the later option and gain the benefit & hype of extending my “wow” factor and sustaining people’s attention. To me, the commercial and advertising values will certainly be higher after each contract negotiation every few years.

Here is a link to my brief “Dear Usain Bolt“.

P.S. And I think there is prize money for breaking a world record in some of the international track competitions too.

P.P.S. Sorry I haven’t blogged about The Professor’s “Economic System of China” yet as I have been preoccupied with many things on my plate. I will blog about the article when I find some time. I will.

My guess is that in a country with under developed institutional arrangement, regional competition is particularly helpful.  If region A is getting too unreasonable in terms of policy, taxation and corruption, investors can shift to region B instead.  In other words, the regional competition can, to a certain extend, serves as a powerful tool to reduce ‘crazy practices’, including corruption.  In the long run, to strengthen the institutional arrangement (i.e. delineation and enforcement of property rights) is still inevitable.

Wallace

對於張五常教授的《中國的經濟制度》，仍在反覆沉思。思考方向主要有兩點，其一是相較於早已以資產界定權利的國家，地區競爭制度為甚麼在權利結構從以等級轉為以資產界定時特別重要。其二是地區競爭制度在創造中國經濟奇蹟的同時，是否同時存在阻礙中國經濟發展的特性。

上述兩者未有結論，不妨先分享近日閱讀中國近代史所得。

包產到戶作為中國經濟改革的開始，卻原來並非由政府倡議。七八年的十一屆三中全會，中央仍然指出不許包產到戶，但同年部分地區的災情，卻迫使部分地方的農民及幹部，自行「發明」了包產到戶的制度。

地區競爭制度有賴中央下放權力。這種安排最早見於五八年，中央把國企、計劃經濟管理、基建審批等權力下放地方。只是中國此後屢生政治風波，不時反左反右，於是地方權力收收放放，未能貫徹推行。

After reading Professor Steven Cheung’s paper (Chinese version), there are a few issues that maybe worthwhile to think about.

1. 層層承包 is a clever way to conduct the economic reform Without creating too many shocks and resistance.  The label of ‘Communist’ can still be kept.  Having said that, is this system the Best in human history?  If not, should China continue to upgrade 層層承包 (走自己的路)or gradually shifts to the American system?  Should the American system be the final destination (Cheung disagrees but Demsetz seems to hold this view)?  These are all very important questions to answer.
2. Monetary policy: One major reason that Zhu was able to maintain rather stable exchange and inflation rates had to do with China’s capital control.  Unlike Cheung, my concern is not that China is shifting to US’ monetary approach, but rather how China may relax her capital control without having to suffer severe financial crisis.  The improvement of existing financial infrastructures, unfortunately, is not covered in the paper.
3. Unlike most papers and reports that focus on statistics and figures, this paper focuses a lot on the institutional arrangement, which is definitely essential to interpret China’s emergence.

I have a feeling that China may not go all the way to the British/US’ approach, but would definitely need to borrow some key elements from the British tradition.

1.  Rule of law (a constitution that protects human rights and property rights and most importantly, is well enforced);

2.  Independence of courts (China seems to be very hesitant to use the term ‘separation of powers’.  Even so, the increasing dependence of courts is a MUST!);

3.  The relationship between businessmen and officials (the problem is that many officials are now taking up businessmen’s role to promote business opportunities; the competition among provinces helps to control; the degree of corruption <an official who ‘charges’ too high would lose the business to other regions>; even so, China should start to redefine officials’ role and keep them away actively involved in businesses);

4.  Freedom of media must be further enhanced to monitor the government(s)

 Whether Universal suffrage and muti-party system…are necessary?  These are the two elements that I am not so sure and keep asking myself.  The bottom line is to be correct rather than politically correct.

Below is the introduction Ronald Coase delivered at the beginning of the China conference which we have talked about here before. Thanks to Linda, Professor Steven Cheung’s wife, for kindly providing me with a copy of the introduction and granting me permission to reproduce it here:

China’s Economic Transformation

Ronald Coase

July 14, 2008

I now have the very pleasant task of welcoming you to this Conference on China’s Economic Transformation. When Steven Cheung wrote in 1982 his pamphlet for the Institute of Economic Affairs in London on the question “Will China go capitalist?” a question that he answered in the affirmative, I was one of the few people who agreed with him.

But I thought in terms of 100 or 200 years, not 25 or 30 years. What happened in China was a complete surprise to me, its scale, its character and speed – which means that I did not understand what was going on. I therefore determined to hold a conference that would uncover the facts about this extraordinary series of events. We sought out those best able to inform us, academics, businessmen, government officials, about the facts about what happened. I think we succeeded. We have a series of fine papers that greatly enlighten us about what has happened in the years since 1978. As we intent to publish an edited version of these papers (and of the discussions) in a book, they will inform a much wider audience.

Of course, although we will learn a great deal about what happened, it is not to be expected, although some things will be made clear, that there will be complete agreement in the views expressed – nor is it desirable that there should be. A subject in which everyone says the same thing is a dead subject and one which will not progress.

Competition in the market for ideas is as valuable as in the market for goods. The truth is found as a result of the clash of ideas. And it will be so at this conference.

Our first paper by Steven Cheung will be delivered by him on DVD. It is long (about 2 hours) and I decided to divide it into two parts, each about an hour in length with an interval with refreshments in between.

Unfortunately, one of our important discussants, Professor Mundell, will not be able to attend on the first day but will give his views on Tuesday morning. I should explain here that while I speak as though I organized this conference, in fact all I did was to have the idea that such a conference would be a good thing. The actual organization of the conference was carried out by Ning Wang, assisted more recently by Lennon Choy and Marjorie Holme. I have been largely a spectator and admirer of their work. I should also say that, approaching 98 years of age later this year, I get extremely tired and almost certainly will not be able to attend all the sessions. But those who present papers at sessions I do not attend should realize that my absence is in no sense of judgment on the worth of their papers.

I now turn to Steven Cheung’s talk. I came to know Steven when he came to Chicago from UCLA in 1967 on a fellowship and was later in 1968 appointed an assistant professor. I don’t remember how we met. But when we did, we formed an immediate bond and we had the most enjoyable and productive talks together.

Unfortunately for Chicago, he decided to leave Chicago and go to the University of Washington where he had as colleagues Douglass North and Yoram Barzel. However, our relationship did not end and Steve wrote a series of splendid articles published in the Journal of Law and Economics of which I was editor. Then, in 1980, Steve received an offer from the University of Hong Kong. I urged him to accept. I thought it would be a fine place to observe what was happening in China. Just how valuable it would be I did not then realize. But you will learn from his talk what he has gained from his close observation of events in China over the years. I won’t hold up this really important talk any longer. So here we have Steven Cheung speaking on China’s Economic Transformation.

Anyone may correct me if I am wrong. In regards of the ‘Alfred Marshall’s footnote’ (see note 35 & 36 in part 6), the concept is that regional government can charge different ‘land prices’ in order to compete with one another. Less attractive regions even offer ‘negative price’ to absorb investment.

I agree that regional competition is important to China’s growth. In fact, we may look at China, instead of a single country, as an union of regions that compete with one another. The EU model may help us to understand situation a bit more. Let’s see how Professor Cheung further develops the idea.

Wallace S.T. Chan

Many oversimply China’s reform as a change of central planning to market oriented. The fact is market, rather than a bundle of demand and supply curves, requires the backup of necessary institutions. At the end of the day, a pro-market institutional arrangement involves property rights, legislative & legal infrastructures etc, which is far more complicated than many Market anarchists realize. The enforcement of contracts is definitely one of the corner stones and I expect Professor Cheung to cover that later.

Wallace S.T. Chan

I am sure that Professor Cheung will unlock the secret code of China’s success.

*******

Kempton 30 June, 2008 Update: Following are links to the first five parts.

（2008.06.17）《中国的经济制度》中译版（之一） (2008-06-17 07:39:41)

Thanks to my free lunch co-blogger Wallace for mentioning the existence of Prof. Steven Cheung’s first two installments of “The Economic System of China“, I ended up staying up 3+ hours (well passed 3am) to finish reading part of the paper and blogging about it. A paper that I had been waiting for since Sept 2007 . Yes, the paper is that good! (note: Prof. Cheung has dedicated the paper to his long time friend/mentor/colleague Prof. Ronald Coase).

Knowing myself, I will probably be staying up late for the other ten installments when they are published in the coming days on prof. Cheung’s Chinese blog. By the way, my apologies to those that don’t read Chinese as the only version I can find online is the Simplified Chinese version translated by the professor himself (note: the original paper is written in English, so be patient, I will try to find it for you).

Now, before I go on to comment on the substances of the first two installments, allow me to indulge myself by sharing a few random thoughts and comments.

1. As an appreciated bonus, I think my Simplified Chinese will improve by the end of this series. At school, I was taught reading and writing Traditional Chinese and nothing in Simplified Chinese.
2. When I have them, I will appreciate having both the English and Chinese versions of the articles sitting side-by-side as I see myself picking up Chinese/English terms and their equivalents in English/Chinese.
3. My further appreciation of English/Chinese translation is such a difficult art. In particular, technical English and Chinese.
4. I have 14 different books written by the professor. Many of these books are still in print and being sold. Since most (if not all) of the articles in these books are also available for free on the professor’s blog site, do they count as “free lunches”? (smile) I know they are ad-supported but they are still “free”? My fellow free lunchers, what is the economic explanation for this “free stuff”?
5. I finally appreciate what my dad must have been thinking from reading this quote by the professor, “我要专注于中国做对了什么。这里我只能再说，要批评中国我可以写很多本书。” (My translation: “I want to focus on what China did right. Let me repeat here, I can write many books if I want to be critical of China.”) Knowing what China has been through, my dad is probably more willing to focus on what China did right and give China the benefit of the doubt. Whereas I am more willing to ask a lot more from China, thus being naturally more critical (in hope of faster progress).
6. In the second installment, this quote intrigued me, “这一切之上是高斯的原创思想，当时容易推销。如果当时的中国像今天那样，我是不会那么幸运的。” (My translation: “Above all these were Coase’s original ideas, it was an easy sale then. If the China then were like today, I don’t think I would have been that lucky.”) I am trying to figure what the professor think is happening in China today?
7. Now, I am willing to put some money where my mouth is. I have one wild US$500 wish.

Here is my US$500 wild wish.

Assuming this series is not in the works already, I would be willing to be the first to put up US$500 to buy a DVD set of a 10-part documentary series hosted by Prof. Steven Cheung in similar format & style to Prof. Milton Friedman’s original 1980 classic “Free to Choose” (a series that I have watched more than twice now).

I don’t think I am exaggerating as I think a small percentage of professor Cheung’s millions of fans and admirers will probably be very willing to invest in an independent production of such a documentary series.

I know professor Cheung is a busy man but I see so much benefits in professor Cheung sharing his deep insight in Economics and the Economic System of China. I think such a 10-part series will definitely be appreciated by millions in China and also by many others around the world.

Now, here is a wild wish, if no one else is producing such a 10-part documentary series with Prof. Cheung, I would love to have a chance to give it a shot. May be I can beg (I mean beeeeg) my free lunch co-blogger Gary for an introduction and a possible chat/audience with professor Cheung to help convince him?

After all, prof. Ronald Coase gave an hour+ long lecture in 2003 when he was 93 years young. (smile) (file is 500MB, recommend downloading first before watch)

Interesting to read what Wallace considers as “the most important statement made by Steven Cheung“. For the curious readers who want to read the complete article where this quote comes from and the statement’s context, you can check out “假若人是不自私的（附后记）” (1984.02.17).

I don’t know enough to pick which is Steven Cheung’s most important statement. But I can say Steven Cheung’s way of thinking and analyzing problems play an important role in shaping my own. And Cheung has written this series of articles to share his insight in 1984,

思考的方法（上）, （中）, （下）

As an aside, some of my friends have commented that I read very broadly. Over the years, I’ve tried to learn from a diverse group of people. If you have time, I encourage you read and learn from people like Warren Buffett, Richard Feynman, and Bill Buxton (with videos and book recommendations). These three people are very different from each other but I believe we can learn from them just the same. For fun, I’ve created a series of posts call “Great minds of our time“ to share my personal picks of some of the great public minds of our time.