Property Rights, Government & Free State: Determinants Of Long-term Economic Growth In Economic System

Long-term economic growth is the basis for the constant development of human society. Today, peace and development has become the themes of times. The question "Which factors are determinants of economic growth ", that Adam Smith has been pondering over has become the object that every country and scholar seeking. Combined with the economic practices in different countries'development, we found that if we analyzed them from the long-term and global perspective, more general conclusions would be drawn. Through reviewing the theories about the determinants of economic growth, we have them into three categories: technological determinism, institutional determinism, and the others.As the others like cultural and geographical determinism, can't explain the economic phenomenon well, such as the economic development in South Korea and North Korea, Switzerland, Singapore, technological and institutional determinism are more persuasive. But we believe that the influence of institution and technology on economic growth is alternative, and their marginal effect are decreasing. In today's economic development level, institution has more important and far-reaching influence over economic growth then technology, which made it the determinant of economic growth.The Researches on institution and economic growth mainly focus on the factors,many of which explore sources from single factor or abstract institution itself, which are property rights, government, social division of labor, economic structure ,etc. Although many can explain the economic phenomenon from one perspective, less attention has been paid to the influence on economic growth by the interaction between various institutional factors on economic growth. North has found a preliminary theory about this, and we had his theory further developed .We proposed an important hypothesis on the basis of theoretical, empirical and comparative analysis, which is "property rights, government, free state are the determinants of long-term economic growth in economic system.Property rights are the basic factor of economic development. When property rights gradually get improved, its constraint and incentive mechanism in economic activities will be more stable, durable and universal. At the same time, transaction costs will decline, effective competition would certainly be a main social state, thus promoting the economic growth. With the original theory of property rights and the history of Iceland that an isolated system of property rights can't guarantee a lasting improvement of economic development in the long term, government, which can effectively define the property rights and guarantee their implementation, is necessary. Through the economic development of Latin America and China's economic performance under the planning system, we can see the impact of government on economic growth is bi-directional. Only continuous improvement of property rights can better prevent offside government functions, and promote economic growth. It needs a free state, in which property rights and effective government will be more strongly motivated. In this state, a number of institutional arrangements including property rights and government, can be made with the continuous development of adaptive changes in the economy, Division of labor can be refined which would promote effective competition, efficiency of resource allocation and the industrial structure can be improved. These, combined together, would ultimately promote economic growth. With the constant improvement of property rights, and a more clear relationship between government and the market, the pursuit of profit-maximizing economic agents will gradually open up their options, thus facilitating the expansion and deepening of the free sate.Property rights, government, and free state, as the basic factors of institutional arrangements can not replace each other, for they are interacted. Coordination between them is the key to sustained economic growth, any of them in the delay or lack of coordination with the other two, will hinder economic development. In China, ongoing reform of property rights, gradually opening and the changing role of government are the key factors in the decades of sustained economic growth. Only continue to deepen reform of property rights, constantly innovate government functions, accelerate economic globalization and improve industrial structure, China's economic growth would be sustainable, and its international competitiveness and great power status can be maintained and enhanced.