On The Relation Of The North Paradox, Institutional Change And The Local Government's Competition Behavior

Douglass. C. North is a well-known American economist, the winner of the Nobel Prize on economy. He mainly contributes to the initiative research in the field of institution and the change of institution. It is his combination and integration of the theory of state with the theory of property rights that has made him one of the representatives of the new institutional economics. The state theory of the new institutional economics advanced by North has greatly enriched the state and government theory in politics and administration. This thesis mainly reviews North's institution, state models and state destinations, especially the North Paradox of which we can draw on some useful experience.North Paradox is the description of the contradiction of the state and the social economy. Say, state (or the central government) is the key to the economy increase, while it is also the source of the business recession.According to the theory of institutional innovation , the contradiction is from the two mutual objects. First, the state should boundary the base regulations for the competition andCo-operation that composes the property right structure, and should boundary the power structure in the elemental and product market. The second, the state will try to descend the trade cost of contractual through the provision of the public products, so that maximize the social product, While there is perdurable contradiction in the two objects.Domestic scholars debate heatedly with the theory of institutional change. There is not a uniform viewpoint about the institutional change fashion of China.Linyifu point that the Guided institutional change and the Constrained Institutional Change are the two main fashion of Chinese institutional innovation, and his academic is classic in the economy theory fields.It is easy to find that either North or Lin neglects the layer structure of chinagovernment and they all simplify the intricacy of the government system and bureaucratic structure. So they can't depict the china institutional change process of present stage.Of course, china government launches the institutional innovation through constrained methods, but they arrange the new institutions by the release of power and rights. Along with the speed up of the reformation, the local governments and enterprises possess the motivation of benefits maximize and they tend to pursuit institutional benefits. Yangruilong research this create his distinctive opinion about china institutional innovation. He points out the method that can resolve the famous North Paradox.We know that the concept of "state" in North's theory has the "economic characteristic. The limited ration predestines the double- sided function. This thesis insists that "North Paradox" is intangible neither in theory nor in actuality. During the china reformation of the economy system, china government is doubtlessly the main master and its constrained power is necessary for the whole reformation. According to the standard economy theory, the governmental interfere in economy always lead to less efficiency. But Chinese reform impresses the world deeply with the great achievement and success.The main idea of this thesis is an attempt to answer such a question, that what is the solution to reduce the negative effect and improve the institution efficiency in the Chinese institution innovation. The viewpoint is that: the local governments are the main force of institutional innovation as the local bureaucratic system and they have performed appropriately in recent years. Of course, the local governments will also face the trouble of North Paradox, but they tend to be attentive to the institutional efficiency and the execution of new regulations in Chinese special power structures and social pursuits. So, the local governments that possess independent behavior aims and act ability are the key to improve the efficiency of Chinese reform.