Micro-economic Intervention: Theoretic Foundations And Institutional Boundaries

The government economic functions in market economy could be distinguished into three forms named respectively after creating and preserving market economy institutions (interfering with certain production relations), macro-economic adjustment and micro-economic intervention, while from the perspective of public economic policy, they are mainly the latter two forms. In China, economic scholars pay more attention to macro-economic adjustment. They always lump together the latter two forms and generalize them just as macro-economic adjustment.The practice of the micro-economic intervention in those developed market economy has taken place great changes since 1980s: the natural monopoly and its policy boundary are narrowed. There arose a privatization and commercialization wave in the infrastructure and public utilities. The scope of pure public goods provided by government becomes much more small and the patterns of public goods provision by government have been varied. The merger of firms and monopoly are treated more leniently. As a whole, there is a growing tendency to loosen micro-economic intervention. Following the basic logic of market-oriented reform, government has withdrew from some micro-economic areas during the economic transition in China, on the other hand, the slogan of "macro-economic adjustment should be strengthened" is being abused on many occasions and has become amulet of excessive regulation and unbounded intervention. Against this background, it is essential to make a theoretical analysis of the micro-economic intervention issues.In Neoclassical Economics, market and government are two basic opposite institutions of allocating resources. It is generally believed that Competitive Equilibrium Model describes definitely the operation of market economy and the fields of government micro-economic intervention are those of market failure, i.e. the 'gap zone' between real market and Pareto Optimality. The theory of market failure therefore turns into the theoretic foundation of micro-economic intervention. At those mainstream economists' points of view, since there exists some deviation from Pareto Optimality or complete competition, such as monopoly, public goods, externality or informationasymmetry, government intervention is needed to correct economic inefficiency. What is called Complete Competition Model (CCM) and the ideal state of efficiency established by it seem provide appropriate yardstick for judging real market efficiency: if real market competition diverges from that ideal state, then different measures of intervention are required according to its degree.This land of technique has great defects, which arise from equilibrium interpretation of market by competitive equilibrium theory. The deductions from the disparity between real economic life and CCM have logic problems when they are used as guide of formulating economic policy. In this respect, modern Austrian economics school and their market process theory, which are founded by Menger and then developed by Mises and Hayek, could provide a new theoretic perspective for analyzing and justifying the micro-economic intervention. The gist of this dissertation is to reinterpret market and its operation with the aid of market process theory and the recent 30 years' development of market failure theory, to probe into the theoretic foundation of micro-economic intervention, to provide an institutional foundation for it by applying New-Institutional Economics, Evolutional Economics and Public Choice Theory, and to make analysis of some issues of micro-economic intervention in China's economic transition.The dissertation is composed of 5 chapters. The author's research work are following: 1.distinguishing definitely the government economic functions in the light of principles of modern economics, dividing micro-economic intervention into government regulation, public provision policy and industrial policy, reviewing the orthodox theory of micro-economic intervention and demonstrating its defects. 2 introducing the developm...