On the Reform Process

Fan Gang

Chinese Economy, 1996, vol. 29, issue 2, 60-95

Abstract: The primary purpose of this paper is not to seek some better road to reform, but to arrive at a systematic understanding of the various problems and phenomena that have emerged in the process of reform. In theory, to analyze and understand something involves nothing more or less than stripping off what lies on the surface of a subject and then boiling everything down to some fundamental essentials. The key to reforming the economic structure is the transformation of the relations of interests among people. We can, of course, use the language of the market to describe reform, in which case we would discuss issues of "supply" and "demand" in the economic system, and we can even place some kind of "price index" label on a system. Nonetheless, in the final analysis a structural reform itself is not a type of market process; rather, it belongs to the category of a "non-market choice." Therefore, we shall rely here more heavily upon a set of straightforward methods of analysis, namely those methods related to the theory of public choice. As a rule the creation of a new social economic structure on the foundations of an old structure is a greatly complex, time-consuming process, more so than the process, say, of producing the largest and most complicated aircraft carrier in the world. Therefore, we must strive our hardest to avoid [being trapped in] any "static" hypothesis. Instead, what we shall attempt to do here is to introduce a more active and developmental analysis into this study of the theory of structural reform and transformation.

Date: 1996
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