Study On Policy Instruments From The Perspective Of Transaction Cost

Being more and more accepted and well exerted, the Policy Instruments Theory, which is truly developing nowadays, tends to improve government’s decisions and executions. With a careful scrutiny, we see that most of the existing theories summarize from the "power", "coercion" and "intervention" views, thus could all be concluded to a sort of "Power Instrument Theories ". When it comes to the deep essence of policy instruments and new governance practices, nonetheless, there are obvious limitations in these theories. To blaze a trail, this paper systematically scans and explores the field involved in policy instruments from the "transaction cost perspective".Here the "transaction cost perspective" mainly can be illustrated in three aspects:Firstly, With the concept of Transaction Cost Economics and Transaction Cost Politics, "Transaction" here can be explained as exchange of resource and signature of contract in various areas of public policy, yet transaction cost is the "friction cost" which generated while trading and is different from the resource production cost. Secondly, On the basis of the relevant theory of transaction cost, we explain the nature, processes of policy tools, discussing the classification, selection, using, failure and innovation of policy instruments. Thirdly, different from traditional methods, which accentuate administrative compulsory, rule of man, the power and the intervention, Transaction cost perspective pay more attention to the principle of mutual benefits, contract, governance, and economy during the policy process and the use of policy instruments. In this way, Transaction cost perspective is the perspective of new governance, consultation policy and the rule of law.This paper argues, all the content that policy instruments accommodate can be attributed to the transaction relation. Regarding this as the logic basis, the government behaviors can be explored in perspective of the Transaction cost view step by step, and a "Transaction cost tool theory" which complement and compete "intervention tool theory" can be formed.The policy tool classification is the cornerstone of policy instruments theory. Based on the classification of influential policy instruments both domestic and international, policy instruments are classified into discrete transaction instruments, mixed transaction instruments and public transaction instruments according to the level of transaction. This kind of classification method can better reflect the policy tools. In light of this classification, the "policy toolbox" is more close to the practical application.The choice of policy instruments can best reflect the strategy and art in policy process. Many factors like value and system can influence policy instruments. Different preferences form different paths and models. Selecting the number of policy instruments is as important as selecting which policy instrument. The qualitative model of the selection of policy instruments depends on what kind of transaction it will be used to regulate and how much cost it will reduce. Quantitative model is determined by both the government’s capacity and willingness of supply and the society’s effective demand.Tools do not automatically achieve the goal, whose main body need to mastered before get close to the target, making it a complex and difficult process to Using policy tools to achieve policy objectives. The four principles "reciprocity, contracts, governance, managing" need to be grasped through executions of policy tools and policy activities such as negotiations, signing, implementation process. The public sector is part of the majority who use policy tools, their trading activity mainly include purchase type, reallocation type, regulation type, judicial type, sovereign type, infrastructure type these six kinds of types. In purpose to realize distinct policy objectives, different policy tools are recommended.The fact of the application of policy instruments is that all the policy instruments would fail and lead to the failure of policy. Trading, non trading and quasi trading policy instruments show different kind of failure. And the underlying causes of these failures are an obsessional problem. The use of external-transaction cost theory, internal--public choice theory, structural--coordination theory, respectively, reveals the reasons of these three types of policy instruments’failure, and provides a way for solving the problem.In the past three decades, both the West and the East are promoting the Governance Reform. The West has gradually established a new governance model and corresponding policy instruments use paradigm. Our country has experienced the evolution from planned economy to market economy; policy paradigm has also undergone a revolutionary change. Looking to the future, to promote national governance system and management modernization, make the market play a decisive role in the allocation of resources and better play the role of government, we must create Chinese characteristic "policy toolbox". This paper put forward the countermeasures of attaining policy tools innovation and overcoming tool failure from the perspective of transaction cost.