Review Of The Incomplete Contract Theory Of Benjamin Klein

Benjamin Klein Professor is one of the representatives of the transaction cost economics. He is also an active social activist. But the identity of law economist and consultant is better known compared to the academic status of the transaction cost economics. Over the years, the domestic theory community is lack of adequate understanding of Klein's positioning in transaction cost economics. In fact, he made a unique contribution in the field of incomplete contract theory, and played an important role in the improvement and expansion of the incomplete contract theory. The issues elaborated in his theory are highly controversial but put forward a number of valuable research topic for us. The theoretical conclusions provide reference for us understanding the reality of economic operation.This article aims to show up incomplete contract theory comprehensively and objectively by combing the incomplete contract theory of Klein, easy for theory community to understand Klein's incomplete contract theory extensively and go deep into understanding the incomplete contract theory and transaction cost economics. At the same time, the discussion of lack on Klein's theory caused researchers'attention and consideration of some basic problems of transaction cost economics, and promoted further theoretical research. Of course, the theoretical research serves for practice, the fundamental purpose of this paper is to provide a perspective for a more profound understanding of the real run of the social and economic relations by studying the incomplete contract theory. After all, under the current status of the legal system, Chinese contract is incomplete compare with the West, and Chinese economy offers the different institutional environment from the Western countries. Thus this study is the needs of China's reform and practice.This article includes eight chapters, a total of four parts. The first part is the section of theoretical basis, including1-3chapters. In this section, we propose the problems that need study, and have reviewed foreign and domestic research in order to understand the environment of theory and the key point of the research. This section also combs the origin and the development course of the theory of Klein incomplete contract, roughly sorts out the theoretical development of logical thinking. The second part is the core of theoretical research and comment section. This part follows the Klein's study on incomplete contract theory, logically. Firstly, we have made a detailed analysis of the core theories in its theoretical system, and finally made some comments on these theories. The third part is a comparative analysis. The main purpose of this section is to prominent Klein's incomplete contract theory by comparing the differences of a series of basic issues of contract theory with other researchers, to show the value of his theoretical studies. After familiar with the theoretical background, the logic of development, the basic content and theoretical characteristics of the author's theory, we can make conclusion on the author's theory. Therefore, in the fourth part, we make a comment on the theory's theoretical and practical value in China. This paper's reviewing of Klein theory is carried out based on three levels:Firstly, after the introduction to each core theory,make discussions on each single theory, explain the advantages and weaknesses on understanding of the theory; and then by comparing with Williamson and Hart's theory, we can easily find the rationality and weakness of its theoretical system; finally, overall its theory, by the combination of the Chinese case to verify the reasonable aspects of the theory; on the other hand, we propose that practice makes its theoretical challenge and question, in order to promote the discussion of issues related to the deep study.The main research contents is composed of the following several parts:The first part is an overview of Klein incomplete contract theory. Analyze the Klein incomplete contract definition; introduce the origin and course of development of Klein incomplete contract theory; Examine Klein how to gradually understand the incomplete contract theory in-depth; explain assumption of Klein theory, which is the basis of a theoretical premise.The second part is the core concept of the incomplete contract theory. This section is also the core content of this article, focus on the Appropriable Rents, rip-off, self-enforcing mechanism, price as a quality assurance and other core vocabulary of Klein incomplete contract theory Figure out the meaning of these concepts, and combing the theory of logic between them could really understand the theory of Klein. In these concepts, the Appropriable Rents and self-enforcing mechanism are more important, because Klein is called one of the masters of incomplete contract theory benefit by the two concepts. Making a deep analysis of the two concepts could find the true meaning of Klein theory.The third part is the comparison between Klein incomplete contract theory and the other contract theories. The Comparison has two purposes, one is to highlight the great significance and value of the research object, the second is convenient for reference by the comparison study between the rational and irrational. Because the fundamental purpose of the theoretical research is to draw more scientific and effective.Part4The enlightenment of Klein incomplet contract theory on modern China. Every theory has its own pros and cons, so does Klein's. So what it means to us when we combine his theory with Chinese trades practics. On the on hand, Klein theory has the universal applications, it is expected that his theory may play very important role in Chinese trade practices; On the other hand, we do not believe Klein's theory would help to give answers to the same type question in China, espacially in the differential trade conditions exists. However we still look forwad to the right judgement of Klein's theory given the carefull selection of tools and methods along with Chinese cases.This thesis is about the narrative evaluation of Klein theory, hopefully it would give the theoretical and practical value in the following aspects. The thesis thoroghly talks the root, the development, the core value, the characteristic and application of Klein incomplete contract theory. For the first time, it objectively gives out the panorama of his theory so that it can be precisely located in the trade cost economics. For the following areas of this theory, such as Holds-up, Appropriable Rents, Brand capital and Self-enforcing mechanismn, it reveals those basic definition and narrative theory. It not only helps us to be familiar with this theory, but also helps to get to know the inside information and especially the application range for the academic research.For the past few years, it is seen the incomplete contract theory as the research hot spot issue. Even though Klein theory has its own drawbacks, it is seen as the very important tool in solving problmes of the areas like, organiztion economics, political economics, corporate finance and other relevant institutional researches. However, what it disclose when it comes to the practical Chinese economy, to the matching of Chinese institutional condition and its operation condition, to the do's and don'ts of the application of its theory. Hopefully, this thesis gives the answers.The analysis may be not enough for the reasons like, the lack of introduction of Klein incomplete contract theory in China, so does the translation works. Particularlly, this is not very much valu in the empirical study of Klein's theory since it has not gone further step in such field.This thesis mentions the following research aspects.First is that how to view contracts. The researchers have reached a consensus about the incompleteness of contracts. but not the nature of it. So. what makes people honour the contracts? Is it the seperation of rights and obligations? Is it the perceptive reference of the both parties? It may helps a lot if there is a wide sphere of vision given the abandonment of law, eoconomic and behavioral theory.Second it that how to understand the foundation of incomplete contract theory. Though, thers is lots of debates on the foundation of Klein theory, it is persuaded that Klein theory helps to explain the limited rational thinking of contract parties, the difficulties in signing a contract and the Third party testimony. At the same time, the critics, like Maskin-Tirole Critism aslo help in pushing the theory forward. The known experience tells us that the interdiscipline research is the foundmental way in solving other controversial issues.Third is the adequate empirical study database. Hart and Holmstrom expressed the worry about the lack of empirical study of contractual economics. However, the recent study reveals that more and more empirical research have touched the concrete issue by econometrics study. The obstacle for the empirical test of incomplete contract theory is the limition of gathering appropriate data due to the confidentiality of information. So it becomes more and more important to establish the relevant institutions, full-scale informaiton channels, perfect system building and professional practice evalusitons.