| What might be the impact of price adjustments for fighting socialist shortages? Under what conditions, would price adjustments as a policy option be effective in improving production and supply? And, what is the role institutional reform could possibly play in price reform?; This paper analyzes these issues. It creates a general disequilibrium model, for which "search cost" under shortages replaces the market price as the key variable linking demand to supply, and within which policy options such as price adjustments can be evaluated. Structurally, this model differs from conventional equilibrium and disequilibrium models in the literature. Derived, as it is, from the Chinese experiences, the model is flexible enough to accommodate various economic assumptions and conditions. It is a framework of general significance.; As distinguished from the representative models (e.g., Weitzman's 1991 model) in the literature, this paper suggests that socialist shortages are a real rather than a nominal problem; that the supply side not be ignored; and that price adjustments be effective in encouraging supply rather than discouraging demand. In addition, it concludes that institutional reform would create favorable conditions for price reform.; This paper also essentializes China's fourteen-year-old economic reform, a major historical event which is drawing more and more attention from the rest of the world. |
