The Evolution Of Property Relations And Economic Growth

Economic and social systems evolve continually. For their survival and development, they need to evolve institutions always successfully so that they can solve problems that stem from the evolutionary systems. The capability of evolving institution always successfully is called social adaptation efficiency. The structure of property rights of a society and it's evolving with time and the changing comparative prices of resources have a dominant effect on the long-standing economic growth. People's choices of what they will do and ways of make money are decided by the structure of property rights they have. Only in the condition that the structure that they have make the productive work is always their optimal choices, the long-standing economic growth could be fulfilled. So the key capability of social adaptation efficiency is how to evolve an efficient structure with time and the changing comparative prices of resources. In the condition that the government decide the structure of property rights and enforce it, how the government work, this is to say that, whether the government will and can service people an efficient structure with time and the changing comparative prices of resources is key to the fulfillment of long-standing economic growth. And the ability to establish a competent government is the signal that the adaptation efficiency has been mastered. In this paper institution is defined as people's share-beliefs in their games and their evolving relationships with each other. Institution is composed of formal rules and informal rules and their enforcement characteristics. Institution defines the structure of property rights and then gives the incentive structure which is necessary for people's behavior formation. Through adaptive learning people make reflections to the structure. People choose their next step according the feedbacks of his former actions, and then format a stable behavior model at last. It has more obvious effectiveness on those people who are capable. People's actions are always interrelate in the condition of scarcity and interdependent. In order to make people benefit each other and to avoid hurts from another people, property rights are needed to define individual's behavior. The two ways that people often use to define and enforce property rights are violence and price, and the violence is always the potential background of the games that people involve to define and enforce property rights. In the circle of the game there comes the government, and then how the government work become the key of economic growth or the cause of economic stagnation. There comes the government failure and politics failure when the government doesn't competent it's work and such government has been established. The government is a special economic man and an opportunist too, not a benevolent supporter. Effective restricts and incentives to the power of government are key to make the government work well. Preference of the government decides that how the structure evolves when the government define and enforce it. Only in the condition that the government and the society always have common optimal choices, the government will service people an efficient structure. We can say it empirically that the government which can do this as good as possible is only the limited government under rules of law. The capability to establish a government of this kind a changing society is the function of its institutional knowledge and pressures from environment. It is the equal distribution of potential violence ability, or the beliefs of the equal distribution make the limited government possible in nature. However, even if the government prefers to service society an efficient structure, it not means that the government can do it always successfully. Institutional change is co-evolve of formal rules and informal rules, an efficient structure can be fulfilled only in the condition that the formal rules and informal rules can be embedded in each other. The ability of making the rules embeddedness is the function of ways of the government to make decisions. Due to the restrictions of path dependency and information costs, the government in changing society can never design a perfect structure for its people even if it has a strong desire to do that, the only way it can do that is to change its way of make decisions and let the structure emerging automatically. In fact, both of above institutional failures have a common cause that they are the results of unlimited power of the government. To avoid those failure people need a limited government. A typical characteristic of changing society is that it's social conditions change more frequently than others. It often make people in changing society broken the normal rules to define and enforce property rights, and it give more chances to rent-seeking actions of government. The function of the government in changing society is to prevent individual's violence in people's spontaneous actions to define and enforce property rights, and to improve and intensive the function of prices mechanism. The government need to restrain it's power to establish society trust, and that benefits itself in the long run. The government is the protector of the prices mechanism, not it's designer. According the real course of Chinese economic reform, it's marvelous achievements is not the result of the government plans but the result of its people's spontaneous hard-work out of plans, and we should pay more enough attention to this path. The aim of the reform of property relations in china and changing society is to establish a regular property relations, not to privatization. For the purpose, the government should to protect the spontaneous orders with law, and meanwhile to reform those monopoly organizations that come from former monopoly organizations due to path dependency. The most important and indispensable arts in people's common lives are thegovernment and its property relations. Only in societies mastered them can harvest prosperity and civilization. The results of this paper can be summed up of two propositions as fellow: Proposition 1: The necessary condition for the government services people an efficient structure of property rights is that the government and the society have common optimal choices. Proposition 2: The full condition for the government services people an efficient structure is that the formal rules provided by the government can be embedded into informal rules. An appendix explanation is that the competent government must be limited government. People in a changing society need a government respected their tradition and can adapt the changing environment conditions at the same time. To master the adaptation efficiency there need a long-term process.