WEBVTT NOTE Is Harm of a Reciprocal Nature? The Outcome-oriented Equilibrium Thought Behind the Coasian Thesis 1 00:00:00.000 --> 00:00:03.280 It's really honored that I could present my paper here. 2 00:00:03.280 --> 00:00:08.200 This is actually my first time that I can attend such a conference. 3 00:00:08.200 --> 00:00:12.760 Not only so, this is also the first time that I came to the U.S. 4 00:00:12.760 --> 00:00:15.840 It's such an exciting experience. 5 00:00:15.840 --> 00:00:23.520 And I've already learned a lot about what is the American culture 6 00:00:23.520 --> 00:00:25.280 and the American spirit. 7 00:00:25.280 --> 00:00:27.160 Yeah, it's really exciting. 8 00:00:27.160 --> 00:00:34.160 So, my English is not so good as I just said the first time, all this first time. 9 00:00:34.160 --> 00:00:43.160 So, maybe I would sometimes run to rescue, somebody maybe help me to translate sometimes, sort of that. 10 00:00:43.160 --> 00:00:49.560 Okay, let's come to my topic today. It's about rural radical cause. 11 00:00:49.560 --> 00:01:02.600 I feel, when I hear, I really feel good because those presenters have talked about subjectivism, 12 00:01:02.600 --> 00:01:19.600 and Socialist Calculation Debate, I expect that I could enjoy to talk with the people here because there are so many sympathetic listeners here, I think. 13 00:01:19.600 --> 00:01:26.320 Now, my topic is the home of a reciprocal nature. 14 00:01:26.320 --> 00:01:32.720 Everybody knows that Coase wrote a paper in the 1960s 15 00:01:32.720 --> 00:01:38.760 that such a paper is arguably the most famous paper in the last century 16 00:01:38.760 --> 00:01:40.920 and also the most cited paper. 17 00:01:40.920 --> 00:01:48.040 In his paper, he proposed such a statement that 18 00:01:48.040 --> 00:01:57.480 The problem who haunts whom is of a reciprocal nature, and I think such a statement influenced 19 00:01:57.480 --> 00:02:04.560 much many, many people, especially in the field of law and economics, and many people 20 00:02:04.560 --> 00:02:11.480 feel instinctively that the reciprocal, I call it reciprocal thesis, of course. 21 00:02:11.480 --> 00:02:19.560 Most people feel such a thesis is unacceptable, maybe for some Austrians it is somehow feel 22 00:02:19.560 --> 00:02:22.800 instinctively immoral. 23 00:02:22.800 --> 00:02:30.400 I feel so, and as far as I know that some Austrian scholars have made a contribution 24 00:02:30.400 --> 00:02:39.280 on this, in this respect, for example, Walter Block, Gary Loss, has tried to reveal what's 25 00:02:39.280 --> 00:03:07.280 The absurdity behind cost reciprocal thesis since 1970s, but it seems that they feel their assertion, they argue against cost such reciprocal thesis, they argue against, but they feel their claim did not get enough attention. 26 00:03:07.280 --> 00:03:13.680 I wish I could push a little bit forward based on their work somehow. 27 00:03:13.680 --> 00:03:23.280 First, I'd like to talk about the essence of such doing, I mean, the three definitions of the problem. 28 00:03:23.280 --> 00:03:34.400 The problem, conventionally, who harms whom is the problem about, what is this, causality, responsibility problem. 29 00:03:34.400 --> 00:03:42.400 But by cost redefinition of it, it becomes a problem of a typical new classic economics problem. 30 00:03:42.400 --> 00:03:47.400 I call it resource allocation problem in new classic economics. 31 00:03:47.400 --> 00:03:58.400 Please pay attention that I get the new classic emphasized because I do not argue against resource allocation problem per se. 32 00:03:58.400 --> 00:04:16.400 If it is defined in the Hayek's sense, but as many people here would understand me that resource allocation problem in new classic economics is what we Austrians sometimes feel instinctively what there is some problem with it. 33 00:04:16.400 --> 00:04:30.400 So, Coase's redefinition of the problem, the literal problem, from the start, make his paper get trapped in new classic economics. 34 00:04:30.400 --> 00:04:38.400 And if people do not argue against this, you would find that a serious argument of Coase would follow. 35 00:04:38.400 --> 00:04:45.400 So we could not argue against any of those conclusions derived from such premise. 36 00:04:45.400 --> 00:04:53.000 So for me, the first question we need to ask is, is cost definition, redefinition of the 37 00:04:53.000 --> 00:04:55.960 lateral problem justifiable? 38 00:04:55.960 --> 00:05:02.920 This is very critical, I think, especially for Austrian economists. 39 00:05:02.920 --> 00:05:09.920 My main argument is that cost approach is basically very new classic. 40 00:05:09.920 --> 00:05:21.920 With the definition of the problem as a typical resource allocation problem, this is what he has been doing from the start of his 1960 paper. 41 00:05:21.920 --> 00:05:34.920 And I want to substantiate my argument that the white-cost approach is essentially no different from the resource allocation approach in nuclear economics. 42 00:05:34.920 --> 00:05:51.920 I gave out evidences from four aspects. First, evidence. New classic economists treat different people's conflicting interests as that of one person. 43 00:05:51.920 --> 00:05:57.920 This is for Austrian economists to feel instinctively wrong. 44 00:05:57.920 --> 00:06:15.920 For example, in his paper he said that the latter of the choice is clear, meat or crops, and later he says that he makes a comparison of different people's loss and gains. 45 00:06:15.920 --> 00:06:28.920 This is a very new classic, especially for those trained in Carnegie, for example, who have read the textbook, a new classic textbook. 46 00:06:28.920 --> 00:06:43.920 In most new classic textbooks, students are taught that the problem facing a society is that of choosing more butter or more bread. 47 00:06:43.920 --> 00:06:51.320 So, if you make such a comparison, you feel really the same. 48 00:06:51.320 --> 00:06:54.800 This is what Coase said. 49 00:06:54.800 --> 00:07:00.760 Evidence two, seeing the coordination problem 50 00:07:00.760 --> 00:07:04.040 around of different people's conflicting interests 51 00:07:04.040 --> 00:07:06.960 as about maximizing something. 52 00:07:06.960 --> 00:07:09.120 On this point, I think Buchanan has 53 00:07:09.120 --> 00:07:12.720 made outstanding contribution. 54 00:07:12.720 --> 00:07:19.720 He has emphasized again and again that the society is not about maximizing anything. 55 00:07:19.720 --> 00:07:27.920 But Coase, this is my quotation directly from what he has said, 56 00:07:27.920 --> 00:07:35.400 he explicitly defines the problem as that of maximization. 57 00:07:35.400 --> 00:07:43.160 Of course, his definition make many people feel very scientific. 58 00:07:47.840 --> 00:07:53.240 Evidence three, and this evidence from this aspect, 59 00:07:53.240 --> 00:07:56.560 I think many people haven't noticed. 60 00:07:56.560 --> 00:07:58.400 I feel it's curious. 61 00:07:58.400 --> 00:08:02.040 I cannot understand why. 62 00:08:02.040 --> 00:08:11.720 Coase talked about the problem in reference to a crucial word, what I mean, these quotations 63 00:08:11.720 --> 00:08:18.160 from Coase, it's all absurd, very, I think it's nonsense, all this is nonsense, but people 64 00:08:18.160 --> 00:08:19.160 accepted it. 65 00:08:19.160 --> 00:08:25.080 For example, he told that there would be low crop damage without crops. 66 00:08:25.080 --> 00:08:28.480 Then he told low smoke lucence without fires. 67 00:08:28.480 --> 00:08:36.240 Again, he said that if there is no doctor's work, then there would be no confectioners' home. 68 00:08:36.240 --> 00:08:44.960 So all these nonsense, but people let it go for so many years, I feel it's very acceptable. 69 00:08:44.960 --> 00:08:50.960 And also said that both parties cause damage. 70 00:08:50.960 --> 00:09:17.960 The essence of such cause argument is that, in my word, it is that when people, some people are involuntarily involved in a relationship with others, he is the victim, but in cause word, he would say, why are you there? 71 00:09:17.960 --> 00:09:25.600 If you were not in the vicinity of my activity, there would be no such home. 72 00:09:25.600 --> 00:09:31.720 He is simply blaming the fact that we are not living in a crucial world. 73 00:09:31.720 --> 00:09:36.160 And this is not the fault of anybody, but both parties. 74 00:09:36.160 --> 00:09:45.320 It's very ridiculous, but our profession has let it exist in our literature for so long time and nobody criticizes it. 75 00:09:45.320 --> 00:09:48.880 But I feel it's really no good. 76 00:09:52.480 --> 00:09:57.480 Evidence four, Coase talk about that no compensation 77 00:09:59.080 --> 00:10:01.960 would not necessarily undesirable. 78 00:10:01.960 --> 00:10:04.200 I think many people still remember this. 79 00:10:04.200 --> 00:10:09.200 He talk about the engine, the train engine, 80 00:10:09.200 --> 00:10:28.200 There is a fire and his argument against Pigou is that because Pigou has the thinking that 81 00:10:28.200 --> 00:10:38.080 the compensation is necessary, Pigou is instinctively influenced by the traditional causality responsibility 82 00:10:38.080 --> 00:10:45.120 idea and Coase would think that Pico hasn't seen his position through. 83 00:10:45.120 --> 00:10:52.320 So in Coase's idea, what matters is we choose two different situations. 84 00:10:52.320 --> 00:11:01.180 If one situation could produce higher value of production, it's better. 85 00:11:01.180 --> 00:11:10.260 So his argument is from the end result, end state of equilibrium, from the initial state. 86 00:11:10.260 --> 00:11:19.180 But I was from China, I was instinctively felt repulsed by such kind of argument. 87 00:11:19.180 --> 00:11:25.300 Maybe some people here have some idea of what's going on in China, they say China's GDP is 88 00:11:25.300 --> 00:11:35.060 going fast, but there are disparities in wealth, how does that happen? Because our government 89 00:11:35.060 --> 00:11:40.700 sometimes would say, you should sacrifice your interest, because if you do so, we could 90 00:11:40.700 --> 00:11:52.260 get bigger pie. So we feel it's nonsense, but in Coase's paper, it is argued exactly 91 00:11:52.260 --> 00:12:13.060 Let me rehearse some of the resource allocation problems in nuclear psycho-economics. 92 00:12:13.060 --> 00:12:22.900 Because actually, on the surface, the target of my criticism is COAS, but my ultimate target 93 00:12:22.900 --> 00:12:26.340 of criticism is New Classic Economics. 94 00:12:26.340 --> 00:12:34.860 I think COAS is simply applying the approach in New Classic Economics. 95 00:12:34.860 --> 00:12:41.100 So I've got to speak a few words about the resource allocation problem in New Classic 96 00:12:41.100 --> 00:12:50.060 In New Classic Economics, it is a personified society, which means the policymaker who as 97 00:12:50.060 --> 00:12:58.340 a surrogate makes the ultimate choice to say whether it was worthwhile to give up more 98 00:12:58.340 --> 00:13:02.180 meat for crops, something like that. 99 00:13:02.180 --> 00:13:07.820 I emphasize that the word ultimate choice is why I do so. 100 00:13:07.820 --> 00:13:14.420 It is because many people do not feel there is any wrong with the resource allocation 101 00:13:14.420 --> 00:13:20.500 approach in new classical economics, because in new classical economics people will feel 102 00:13:20.500 --> 00:13:26.900 it is referred to decentralized economy. 103 00:13:26.900 --> 00:13:35.660 In general equilibrium theory, it is explicitly said that it is about decentralized economy, 104 00:13:35.660 --> 00:13:45.980 In the end, because new classical economists unconsciously endorse the idea that we could 105 00:13:45.980 --> 00:13:54.980 know the end equilibrium state, then it is ultimately the person who knows the end state 106 00:13:54.980 --> 00:14:03.140 of equilibrium who decides that free exchange between people is allowed or not. 107 00:14:03.140 --> 00:14:10.500 So this is the reason why I emphasize ultimate choice, especially in terms of Coase. 108 00:14:10.500 --> 00:14:19.700 Many people are misled into thinking that Coase is a free marketeer, but I think because 109 00:14:19.700 --> 00:14:28.940 Coase compared to Pico, he really emphasized free exchange to get problems resolved. 110 00:14:28.940 --> 00:14:38.100 But just like his New Classical predecessor, Coase also felt it is another person who has 111 00:14:38.100 --> 00:14:49.100 not said about if such voluntary exchange between person can lead to efficiency or not. 112 00:14:49.100 --> 00:14:55.620 So it's very, very, I think it's subtle, there is some subtlety with such argument. 113 00:14:55.620 --> 00:15:05.620 This is the reason why I will emphasize it is not a personified society who makes the ultimate choice. 114 00:15:09.620 --> 00:15:18.620 The economic problem of a society in the Hayek sense also coordinating among different purpose persons 115 00:15:18.620 --> 00:15:30.620 is understood as about rational calculation from the perspective of some given subject, or this equivalent, 116 00:15:30.620 --> 00:15:36.620 because it is a rational subject who is to decide for the society. 117 00:15:36.620 --> 00:15:41.620 Just three minutes, okay. 118 00:15:41.620 --> 00:16:02.620 And then another point is that the outcome, the reason I, my, the title of my paper is so long is that I emphasize the outcome centered because there in course and as in many new classic economist, they would think that the equilibrium outcome is low and it's empty. 119 00:16:02.620 --> 00:16:14.620 So people would, according to such law, to decide how to allocate the initial assignment of property rights. 120 00:16:14.620 --> 00:16:28.620 So the essence of the resource allocation problem in new classic economics is that reducing the coordination problem arising in the context of different purpose to people, 121 00:16:28.620 --> 00:16:33.620 to crucial rational calculation problems. 122 00:16:33.620 --> 00:16:35.620 So this is right. 123 00:16:35.620 --> 00:16:40.620 I always appreciate people here talking about socialist calculation debate. 124 00:16:40.620 --> 00:16:44.620 I think that cause should also learn from all this. 125 00:16:44.620 --> 00:16:56.620 But also I mean that if we do not say through what is cause advocate, this is our problem. 126 00:16:56.620 --> 00:17:17.620 Okay, maybe I just stop here. I have another longer version. If some people feel not convinced by my argument, maybe we could talk later, because I also argued somehow sympathetically in the course side. 127 00:17:17.620 --> 00:17:21.620 So, I just, okay.