The Conflict And Integration Of Formal And Informal Institutions--An Institutional Analysis On China's Market-Oriented Reform

It's an integrated progress of social-economic development. Formalinstitutions can be designed and changed overnight, however, informalinstitutions have to evolve gradually. When the informal institution absent,only the change of formal institutions will inevitably increase the cost ofmonitoring and enforcement, and lead to the social chaos. This dissertationanalyzes and proves in a logical way the emergence of informal institutionsand the social mechanisms of interaction between formal and informalinstitutions; what the main characteristics of the informal institutions are inChinese marketing reform and the conflicts and their outcome betweenformal and informal institutions. An institution is a web of interrelated norms---formal andinformal---governing individual or collective actors and their socialrelationships. Informal institutions are norms of a group or community thatmay or may not be explicitly stated and that rely on informal mechanisms of 148monitoring, such as social approval and disapproval. Norms governinginterpersonal relationships both constrain or facilitate behavior by definingthe structure of incentives---material and nonmaterial---for individualssituated in a group. The same progress that account for conformity toinformal institutions apply to formal institutions as well, for rarely, if ever,do formal institutions, abstracted from social relationships, exercise a direct effect on individuals. The main difference is that formal institutions areexplicit rules that rely, in addition, on formal mechanisms—the state andorganizations—for their monitoring and enforcement, and the incentivesbacking compliance are often material, though never entirely so. Thoughformal institutions are the main governing structures that can be seengoverning the human behavior, concrete constraints of human behavior istaken on by informal institutions. Therefore, informal institutions are veryimportant to social-economic development. Since 1978 China has been in the process of institutional reform andsocial evolution unprecedented in Chinese history. The basic characteristicsof the institutional change in China is the transition from overwhelmingmandatory and planned economy toward market-oriented plural ownershipstructure. It is not just a marginal adjustment but some fundamentalevolution in economic and social rules and practice. Naturally it involvesplenty of complicacy and hardship. As well- known, China's reform towardsmarket system is a gradual process, took a special route with least resistance,so there have appeared a series of intermediate forms of institution. Inaddition, the compelling institutional change is another spectacular featureof China's reform. Being the main provider, government pay all mostattention to design and enforcement the formal institution but overlook theinformal institution which should be evolved with the shift of technologiesand experiences. Whereas, market system is an integrated institutional 149structure, besides the establishment of formal market rules, such as anefficient ownership system, mature market mechanism and legal system.The mandatory economy and market economy belong to entirely differentideologies and different ethics. So the transition of economic institutionrequires a complete transition of informal social conscience. The integrity of market structure requires the close coupling betweenformal and informal institutions. Every institution evolves under its ownhistorical and cultural circumstances. In the market system which is a resultof continuous development of equal exchange an division of labor, thefundamental logic is free choices and equal status of individuals. Thecorresponding ethics in market system is mutual respect, mutual benefit ,and mutual credit. What plays the most important role in Chinese society isrelationship order, in which "Renqing...