Transaction Cost Analysis Of State Power In The Contract Of Farmland Converted To Non-agricultural Uses

China's economy has experienced rapid growth since 30 years ago, but there are also a lot of serious social problems appeared during this era, the problems derived from the process of farmland conversion are especially striking. These problems can be summarized into four general areas: farmer's petition and frequent incidents of mass, the widening gap of development between urban and rural areas, the uncoordinated development of urbanization and industrialization, and the weak risk-resisting ability of the financial system. Any one of these four problems can affect China's political, social, and economic stability. This thesis will deeply analyze the fundamental institutional reasons for these problems from the perspective of transaction costs. If the transaction costs were zero, then the society would run smoothly, meaning everything would be in the suitable place, without any rent dissipation. So, according the logic of institutional economics, these problems must be caused by some special transaction costs that can't be eliminated by the relevant institutional arrangements. So the task of this paper is to analyze China's agricultural land property rights and China's administrative structure of the system of administration, and this paper found that the fundamental reason of the above four problems is born from the distorted allocation of land converted from agricultural land, because China's agricultural land property rights are incompatible with China's administrative structure of the system of administration, however, the more fundamental reason lies in the fact that state power has no comparative advantage as a contractor of a contract which established to facilitate transactions.