Research On The Mechanism Of Institution Changes Influenced By Inter-governmental Competition

As the interdynamic main form of human society, competition has been occupying very important position in the research of economics all the time. ,The contradiction between scarcity of resources and human limitless desires determined the competition relations between individual and organization. For pursuing their own interests,individual or organization often launches a fight each other. From Adam Smith and Marshall to Samulsons,no matter how the economists defined the economic as the science which studied resource distribution,or regarded that the study of people's choice is the main point of economics, we can not overlook and must have to study the function of the competition regarding some key questions of economics, for instance, the efficiency of resource allocation, the change of individual and collective benefits, etc. The competition harmoniously regulates the connection between supply and demand, price and element, having been playing an important role of the coordination in the course of market running. Without competition mechanism, the operation of market and the whole social economy is difficult to be run in a normal order. Without analysis concerning the impact on market and the whole social economical operation of the competition, we can't imagine that the mansion of economics can stand such a long time among the forest of social sciences.Although the competition is the research object that can't be avoided by all economics schools, the economists only paid more attention to those obvious economic subjects and economic resource when they discussed any topic related to competition in the past time. Mostly, the study on competition subject just stayed on the level of enterprise. Enterprise's competition, price change, resource reallocating and consumer's benefit change etc. were the main concern in competition theory. By contrast, economics paid very little attention to another important subject in market economy--- government competition. It is very difficult to give the intact inter-governmental competing theories like enterprise's competing theories in economics. Even economic affairs involved the inter-governmental competition, economics often mechanically applied the theory of enterprise competition without considering the difference between two of them. This can't but be a regret of the theoretical research, because in the real economic world , the " pure competition of economic organization " can not exist. No doubt, All competitions among the economic organizations always interweave with the competition among the political organizations. In another words, the competition activities of the economic subject will be impacted by governments unavoidably. Politicians fight for entrepreneurs, entrepreneurs contend for markets and currency, the politicians offer the platform, the entrepreneur chooses and changes the platform, all these form the competition pattern of the whole social economy. Simply, we can divide the competition in a market economy into two levels, namely the competition among governments and competition among economic subjects. These two kinds of competitions mix and interweave together, restricting and promoting each other, the political- economic course can be carried on in this context.If the profit is the base of enterprises'development, enterprises will compete each other in order to pursue more profits under the rare condition. The competition force among the governments is similar, too. No matter the government is the national level or the different local governments in one country,the legitimacy is the base of government,same as the profits to enterprises. Any government who loses legitimacy has to pass out of existence. Legitimacy comes from the performance when government fulfills the government- public agreement; it also needs various kinds of resources and all kinds of public products to support. In the world of rare resource, legitimacy is scarce, too. In order to pursue the positive legitimacy under the rare prerequisite, the governments have to complete just as the enterprises pursue profits. Although the two are competitions among organizations, the inter-governmental competition is quiet different from the enterprise competition. The remarkable difference is: the consequence of the competition among enterprises is the change of the technological content of the products, service quality and consumption price by technology and management innovation; while the consequence of the competition among the governments is the institution changes by innovation. The institution, as supplying public goods, is the most basic government' s function. The institution and its performance have determined the profit space of the enterprises and residents, somehow, influence government's legitimacy indirectly. In a word, the institution is a key point of determining the performance and government's survival and development during the competition among the governments. To prevail over competition, enterprises should carry on the innovation of the technology and management constantly, trying to low costs but occupy greater market share. To prevail over competition, the governments should carry on institution innovation constantly, gaining the support of the enterprises and voters through institution innovation, by obtaining the maintaining and increasing of one's own legitimacy while bringing about an advance in economic society. According to the new understandings of institution economists, the establishment of property relations, the construction and development of the law for the political system of the capitalism, should ascribe to the competition among governments under open conditions. Without competition among the governments, the capitalism would be still exploring in dark feudal era. Clearly, the competition under the exoteric condition forces rulers to have to keep and attract the creators of the wealth, eventually generate a government to protect the private right and respect the private property right, a government to restrict monopoly and individual monopolize, a government to be restricted by law and democracy. In a word, there are close connections between inter-governmental competition and institution changes. Institution changes are not only the approach of government competition but also the consequence of government competition. The process of institution changes reflects the government's ability under the competitive pressure; meanwhile, the performances of institution changes determine the survival of the government directly.But how institution changes launch under the competitive pressure? What is the key factor of this course? The conclusion of this thesis is: the stock and structure's change of knowledge from the competition study is the key to force the government to reform the institutions. This conclusion comes from the following logic analysis. First of all, institution is a kind of knowledge. As we have known, either Hammurabi code only with seven rules or the complicated system in modern society, any institution is a kind of common knowledge about the coordination that the mankind evolves out in the long-term course of associating with each other. With the aid of this kind of common knowledge, countless and disperse individuals and organizations can coordinate and run together organically. Secondly, the competition always plays a key role all through the new finding of coordination knowledge and the constructing the scattered final type of coordination knowledge to a system by the society. In the course of the discovery of knowledge and the getting together of scattered knowledge, the competition is like a convex mirror. By trying errors in the competition, comparing and imitating, those scattered knowledge that can get more people support and approved common knowledge can survive at last and become the coordinate rules that help people associate. These rules not only reflect in the custom's formation, but also reflect in the course of government competition. Moreover, study is always the key to understand institution changes. Any institution change that is caused by competition among different organizations or different individuals must have to be associated with the study in the competition, the course of government competition is the course that governments study and discover new knowledge. Any institution, no matter it promotes the government's competitiveness or weakens the government's competitiveness; they all are the results of government's study. Imitation , elimination from the adaptive study and introspection are packed in the course while the governments inquire after, implement and correct the institutions。From the change of knowledge about idea and rules, the government and people change their game idea, the game rule and form a new game equilibrium. Finally, since the study in the competition is the key to influence institution changes, learning ability, learning content and study performance of a government determine its position in the competition. A politician good at study, a government good at study, government with public trust and effective study means of the studying type are the key to weigh government's success or failure in the competition. Here is an implicit meaning: no matter competition happens among countries or regions, no matter which kind of form launches in the competition field, the factor playing a decisive role is their learning abilities.Just as Hayek realizes, the variety of the human society is unparalleled. The difference and variety are the reasons why the mankind can make the unique achievement. Hayek's view also reflects in the institution change caused by government competition. Although imitation of competition and demonstration effect are so popular, different governments of countries or regions do not produce the same or even similar institutions. On the contrary, in different countries, the macroscopical economic systems, as well as micro economic system, all show their own characteristics and differences--- either in the form or in the efficiency. Study is, the most complicated point is that the knowledge we studied in the past will influence our choice and understanding to the new knowledge. As a government obtaining knowledge, changing knowledge and formatting knowledge in the societies, the institution changes'difference showing the course of inter-governmental competition is often associated with the complexity of study. As a competition method,,institution still keeps multi-level and multidimensional difference, though governments imitate each other. As a competition result, all institutions should be selected by criterion of choosing the superior and eliminating the inferior. However, some of those institutions which seem inefficient and really inefficient have not been totally screened. From the view of institution evolution characteristic, the institutions of different countries and regions evolve diversified result to correlate with cultural difference and historical characteristic partly, but from the view of knowledge change, the governments can not make the system totally unanimous in the form and efficiency when they imitate each other in the course of government competition, the different result of the institutions can all be regarded as the difference of study result from the competition. Dissipation in transmitting of knowledge, adaptability to study, alternative of content and different mental structure,all these make different governments of countries and regions produce different institutions in the course of competition. Therefore, as the competition result and competitive method ,institution's difference and variety is inevitable.The same as all the other things, the impact on institution changes of government competition has a dual characters, too. On one side of the competition among governments may cause good institution changes, producing and promoting economic growth, optimizing resource distribution, improving positive consequence such as public efficiency etc. On the other side of the competition among government may cause bad institution changes and, therefore, it may bring negative consequence such as regional protectionism, malignant tax war etc. Basically, negative influence is a kind of external-effect when a government adopts some means in competition. Though their purposes while government adopting and implementing these institutions are all for winning, for instance: maintaining one's own legitimacy, increasing the financial resources, creating the achievements etc., it is balefulness to the collective welfare in more people and bigger range. As long as the newly-increased incomes brought by the innovating of the government on a certain system exceed the negative effect exceed the negative effect that it brings to others, the impact on economic society of government competition is exactly passive. Only when government's competition has increased the whole social benefits, as well as has increased one's own competition strength, government competition is benign, worth affirming and developing. In order to make the competition produce the good result as much as possible, governments should obey relevant discipline. Competitive governments through competition cannot establish the discipline, or the spontaneous cost is too high, or the validity of spontaneous self- implementation is not enough. In order to reduce the negative effect of government competition, an external organization and mechanism with implementing ability by force are very necessary. Therefore, according to the competition occurring among nations, the mechanism and organization for cooperation is a kind of public goods, its quantity is always lower than the optimum, so international predicament of coordination becomes normality of economic life. But to a nation, the central government can take advantage of its privileges and effective legal system to reduce the negative effects among the regional government competition.