Under Financial Pressure Cycle Changes The Behavior

This paper is aimed to explain the new theoretical base of public policy.It inspects the change of government behavior in the frame of fiscal pressurefluctuating periodically.The research to the relationship between government and market is the baseof studying public policy, and its essential is to make clear what the governmentacts. In generally, there are many views to study the government action, andthe economists are accustomed to consider the government should change his rolesuccessively along with the institutional change. In the beginning ofinstitutional change the government constructs a basic market framework firstly,and then the government turns his function to protect the coordinated growthof nongovernmental department. After the nongovernmental department is advancedenough, namely, the market is ripe very much, the government begins to retirebackstage and offset the market failure. They are the views of governmentpropelling development, market promoting and market goodwill, which are madein the hinting hypothesis that the institutional change are certain and couldbe predicted. However, institutional change has the aspects of complexity andnot being predicted of result, so the aim is random, which is important to thestudy of government action in the transition especially. Furthermore, theanalysis about what the government should do obeys the original intention ofeconomic interpretation. To economists, to research the public policy not onlychallenges but also suffers setbacks, so, both the process to design and theresults of public policy are not according with the expectation of people.This paper insists on explaining the government behavior in theinstructional frame with the fluctuating of fiscal press periodically. Whypublic policy exists due to institutional reform and poverty gives rise to thedesire for change, and fiscal pressure is the most important variables that ledto institutional change. According with the axiom that fiscal way is thegovernment nervus, government tax equals to the government itself, the fact isthat all of government's work depends on it etc., we could consider the changeof policy as the adjustment that the government carry on public revenues andexpenditure in order to get fiscal income, and the reform is the relativeviolently policy only. If we are going to observe the government behavior based on the fiscalpressure fluctuating period1y, we should make the transition from thetheoretical hypothesis about the research of public policy. First of all, it is necessary to change the object of government behavior.The paper check out the change on the hypothesis of government behavior aimsthat economists put. First making the transition from the heaven model to therational government model, then disintegrate the government into personal. Basedon the maximization of government utility, we try to apply Darwinism to economicsand give up the hypothesis which the rational person is similar. We point outemphatically that the authority has the unique character among the economics,politics and morals comparing with commons, so he gives especial play duringthe process of institutional evolution. In order to maximize its utility, thegovernment will do different choice under the circumstance of fiscal pressure,which means government object is dynamic. So we can persist in the logic whichis fundamental and running through the whole article. Generally, the valuefunction is concave, and government is risk aversion while its fiscal benefitis certain. The value function is convex,government is risk seeking, whileits loss is certain. This is the try that applying the research fruit of behavior economics intothe study of public policy. In addition,the article apply the concept ofgovernment mental account on the base of human mental account used by behavioreconomics, and then modify the concept of public finance under a frame ofincomplete contact. The public finance is defined as the transition betweenprivate right and collective right with the incomplete contact. The governmentmental account change according with the fiscal pressure rise and fall, so thepolicy will make corresponding changes. While the change of mental account will directly affect the change ofgovernment behavior object, which decide government act as a planner or a doer.The planner are concerned with maximization of fiscal revenue over a long periodof time, however a doer is interested in the short time, the difference resultsin the contract between policy manipulating short time and the institutionconstruction long run. Normally, government is more interested in themaximization of revenue short time than the long run. Public finance failurecould lead to government failure according to the theory of principle agent.As a agent, the gist of government behavior is to prolong the time in powerthrough guaranteeing the fiscal pressure relax with policy manipulations. So government does not keep its spirit young, and it has life cycle. Thispaper designs a government life cycle model to discuss policy change due to thechange of fiscal pressure comprehensively. Bring the change of policy withinthe system which both fiscal pressure and intuition fluctuate periodically showthe necessity to observe the base of public policy dynamically, which provideprerequisite to study government action in the system of uncertainty ofinstitution change.Institution change has features of fluctuating periodically which composedwith institution rigidity –institution innovation –institution equilibrium.Correspondence to it, the fiscal pressure fluctuates periodically. They havethe line with economy growth long run and interact. This paper begins to discuss from institution rigidity when government fallsinto the fiscal crisis. Inequitable distribution causes institution rigidity,and the poor desire to innovate but no ability, however the rich have the abilitybut have no wish to innovate, so economy stop growth. The market could not solvethe public sorrow by itself, and allocating wealth violently will cause"kitchen effect". The government even comes to terms to the rich usually,which is very difficult to make economy escape from the human world of woes ina closed economy system. The outside competition could break out the institutionrigidity, however, which is asked to burden huge risk. Only the authority canburden the risk and achieve excess returns. Authority is the person who has thespecial ability and creativeness, skilled in using the competing process toachieve his object, and the forecasting and creative leader could break outcurrent model and change institution. This paper study the effect that authority break out institution rigidityand the change of policy after institution innovation according with the basichypothesis of economic research which either the individual or collectivebehaviors, the objective personal is the basic decider . The paper discussauthority's selections such as in or off power, and make the life cycle boththe authority and fiscal pressure integrate. Among this, the paper emphasison the influence on public policy due to the moral index, terms and preferenceof authority, and draw the conclusion that authority behavior is decided mostlyby fiscal pressure.Government of authority is certain to use policy manipulating short timein order to relax the fiscal pressure, which includes some ways: tax, publicdebts, seigniorage, monopoly right transfer and property reform and so on.Different policy has the different influence on government mental account, sothe policy applying does not need the same order. This order to choice is decidedby the private mental account, which directly decides the degree of contactcompletion. The process of applying public policy is a process that contactschanges, the fiscal pressure more, government does not abide the contact. The result of policy manipulating short time can led to obvious extremityand accumulating effect, so the institution construction follows. The paperinspects the problem of time-consistency, and point out that the conflict betweenthe policy manipulate short time and the institution construction long runbecause of fiscal constrain and benefit compete must exist. It is very difficultfor them to be coupling, however not impossible at least. If the externalitiesof policy manipulate short time could have promoted market forming, propertydecentralizing inequality-income declining and the dictatorship of authorityturns to democracy and so on, and there is one of the route to couple. Such theseobjective result moving steadily is an idealistic circumstance that could notget almostly. The creative effect for the Government, especially to the authorityis defined to adjust policy in order to make the social object be close to therealistic condition nearly. Particularly, the change of authority preferencesometime could produce creative effect. This paper insists on explaining economic performance objectively andinstinctually refuses to do rational construction. However, the core task forthe economist is to reveal objective law which leds to some kind of fixed behaviormodel. So I try my best to find such a road for reform that. Under the condition...