Inefficient System Of Economics

Not as the developed country which has perfect institution already, because developing country's institution isn't perfect, so people don't have enough stipulation to the government. So the economy will be subjected to the interference of the inefficiency institution, the developing nation draw up more easily and bog down over a long time. The essence of the invalid institution is contradiction between the productivity and the production relationship that is announced by the political economics, the namely social productivity develops to the certain stage, and it has conflict with the existing production relationship or the property right.Similar to the Marxist political economics, the state theory of the new institutional economics also study institutional important function to national economy. North Paradox is the description of the contradiction of the state and the social economy. Say, state (or the central government) is the key to the economy increase, while it is also the source of the business recession. North Paradox reflected valid Institution keep the economy growth and a nation reserving by old invalid system to hold out for long time.How to encourage government to create valid institution? So that helps a nation escape from the mire pond of North Paradox. This has been the focus of the institutional economics. This text makes use of conception of Encompassing Interests which put forward by Olson. As Encompassing Interests extending continuously, I looking for path of dissolve the ineffective institution :In the first stage people face the invalid institution of the government establishment, they have small scope Encompassing Interests, creating an informal institution to substitute the invalid institution; The reform encourage the local government to have a larger Encompassing Interests, the local governments are the main force of institutional innovation as the local bureaucratic system and they have performed appropriately ;in the End, along with the democracy's development of the society, more and more enterprise and persons become organization, they use collective actions to check and supervision government, prevent government make the invalid institution, help the government become a service government and get rid of North Paradox.