Research On The Regulation Of Natural Monopoly From The Efficiency Views

In the analysis under traditional framework, the natural monopoly has been "recognized" as a typical "market failure" because it excludes competition, and deviates from the Pareto efficiency. So government regulation is necessary to amend "market failure" and retrieve efficiency. This has become a "ironclad" conclusion. However, products and services provided by natural monopolizers resulted by regulation have been criticized because of inferior quality, high price, low efficiency and poor services. Traditional regulatory systems disappointingly fail to bring effciency to society as an alternative of market. In other words, regulation is only to "replace market failure with government failure." Thus, the natural monopoly industry regulation has become a worldwide puzzle. Scholars are arguing whether regulation is necessary and how regulation should be carried out. As well as the governments swing in policy makng. Exploration and interpretation of modern economic theory on natural monopoly regulation have not presented any clear answer or convincing explanation since initially described by John Stuart Mill over 200 years ago.Beginning with the confusion, this article carries on research onregulation of natural monopoly with an effort to re-explain the natural monopoly and its regulation, hoping to open the "Labyrinth" of natural monopoly, and discover the "dilemma" of so-called "market failure" and "government failure". The key to this path is the Efficiency Theory. Traditional natural monopoly and regulation theory existing in the traditional theoretical framework, takes pareto efficiency of the new classical economics as a yardstick to distinguish the rationality of natural monopoly and its regulation. In the traditional theory framework, it could neither find a way out of the labyrinth of natural monopoly, nor solve the dilemma of market failure and government failure. This dissertation proposes the Total Social Efficiency Theory as an innovation, and overturns the narrow standard of pareto efficiency, breaks the shackles of traditional theory, and finally finds out the path and the key to open the labyrinth by re-interpreting the natural Monopoly and Its regulation, solves all troubling problems based on the theoretical fulcrum.This dissertation redefines a series of important theoretical issues including production efficiency and allocative efficiency, division of labor and cooperation, competition and monopoly, government regulation of natural monopoly following the argument of the core viewpoint of this dissertation in the analytical framework of Total Social Efficiency Theory. It is divided into six chapters. Chapter 1 is an introduction. Other five chapters can be summarized into three parts, part 1 (as in chapter 2) seriously sorts out the exxisting theoretical literature, to identify gaps and deficiencies in previous studies; part 2 (including chapters 3 and 4), as a link, establishes and expatiates Total Social Efficiency Theory; part 3 (including chapters 5 and 6) is the application of Total Social Efficiency Theory. The regulation of natural monopoly is analyzed, the core viewpoint is argued and policies and measures are suggested in this part. The contents of this dissertation is as follows:Chapter 2 mainly comments efficiency theory, natural monopoly and regulation theory. Firstly, The Author reviews the former efficiency theory, natural monopoly, regulations theory, combs the theory development-vein and the struggle-viewpoint, then give a brief commentary to these theories, points out the insufficiency and the blank place of them. Efficiency theory is the core of modern economics, it starts from the classical efficiency theory, develops the mainstream neoclassic efficiency theory---Pareto efficiency, when carries on critique to Pareto efficiency theory, the new Austrian schools and the new institutional school's dynamic efficiency theory is noticeable. The static method and narrowness of Pareto efficiency neglects the colorful efficiency phenomenon of reality, lacks the explanation strength to the real world; the dynamic efficiency theory appears monotonous while denies the Pareto static state efficiency theory, cannot explain the comprehensive economic phenomena.Chapter 3 studies production efficiency and allocation efficiency. On the basis of definition and analysis of the efficiency concept, has studied influencing factor of production efficiency and allocation efficiency separately, the relationship between production efficiency and the production cost, the allocation effects and the transaction cost, competition and the monopoly in production and allocation, market mechanism and market behavior etc, conclusion that the production efficiency to decide the market mechanism, four kind of market all have effectiveness, the competition and the monopoly had the advantages respectively, Settled the theory to the following study.Chapter 4 statements the total social efficiency theory. The total social efficiency is the new Concept based on the preceding chapter, the concept which is on the production efficiency and allocation effects'unification of opposites and on the analysis "Marshall Conflicts". The core of this chapter is the total social efficiency index concept, on basis of its connotation and the extension, analysis four kind of shapes to society overall effectiveness index. The total social efficiency index is the sum total of production efficiency and the allocation effects, for the production efficiency and the allocation effects vary different four kind of shapes, namely total social efficiency index I (high production efficiency+high allocationefficiency), the total social efficiency index II (production low efficiency+allocation low efficiency), the total social efficiency index III (to high production efficiency+allocation low efficiency) and the total social efficiency index IV (production low efficiency+high allocationefficiency). The total social efficiency is the better concept which compared to the Pareto efficiency in scoring economic system efficiency condition and explaining the real world. In the total social efficiency index analysis frame, "Marshall Conflicts" has the solution in completely competition, monopoly competition, and oligopoly and monopolizes market shapes, it does not exist which market shape lack the efficiency or "Market failure". The total social efficiency theory has subverted the Pareto efficiency standard, is the theory pivot of this article, and is theory basis of the analysis natural monopoly, regulations and regulations reform.Chapter 5 analysis the natural monopoly's efficiency. From the efficiency view, proposed that the natural monopoly is refers to all related product scope and level, the production total cost has strict poor additive as well as the social total value,the total utility function or the social net income function has strictly superior additive, causing the entire industry to provide by one enterprise delivers the most effective industry which the market needs. Meanwhile through analysis to natural monopoly's total social efficiency index, natural monopoly may divide into natural monopolyâ… and natural monopolyâ…¡.Chapter 6 studies efficiency-based natural monopoly regulation. This chapter animadverts on traditional natural monopoly regulation theory under the analytical framework of Total Social Efficiency Theory.. And proposes different attitudes towards regulation of natural monopolyâ… (necessary natural monopoly), and natural monopoliesâ…¡(existing natural monopoly). natural monopolyâ… needs no regulation because of its total social efficiency (high production efficiency&high allocative efficiency), what should be regulated is natural monopolyâ…¡(monopolizers in reality). In analysis on the regulation of natural monopoliesâ…¡, this chapter studies on structure regulation (entry regulation, investment regulation and dropout regulation) and conduct regulation (price regulation, information regulation, quality regulation and universal service regulation) respectively under the criteria of overall social efficiency. It concluded the former regulatory system is inefficient, while the latter is efficient. Finally this dissertation suggests "efficiency-oriented reform on China's natural monopoly regulation", and declares amendment of regulatees, regulation base and regulatory approach, gradual opening-up of institutional barriers to regulation, improvement of regulation on improper monopolistic behavior, active promotion of incentive regulation, intensification of social regulation and dynamic adjustment of regulatory policy mix.