The development of an international financial center depends on the power of a free market
Among many social phenomena, international financial centers should be the most difficult to create artificially. Therefore, in Hong Kong’s development as an international financial center, the author believes that the first of the three main principles is to make full use of the power of the free market.
Author: GUDORDI | 2023-05-31
Ronald Harry Coase, winner of the 1991 Nobel Prize in Economics, spent his entire life researching on the fundamental issues of markets and companies. (Ronald H. Coase Facebook)
(“In the long run, the aggregate of decisions, exercising individual judgment in a free economy, even if often. mistaken , is less likely to do harm than the centralized decisions of a government; and certainly the harm is likely to be counteracted faster.”)
——John James Cowperthwaite
What are the possibilities for things in the world? How can we realize these possibilities? These are two problems that humans have been trying to deal with since the emergence of civilization. On this issue, in my earlier article “The Tao is Tao, but the Tao is Not Tao”, the author mentioned the concept often emphasized by FA Hayek, the master of political and economic philosophy and winner of the 1974 Nobel Prize in Economics. , called “Spontaneous order”.
Hayek's advice
In theory, all social phenomena can be understood as different orders – chaos can also be regarded as one of the orders. Among these various forms of order, some are controlled by “visible hands”, which can be understood as organizations generally called “The Firm” (The Firm) in modern property rights economics; other orders are beyond “the firm”. What can be controlled by the “visible hand” can only be promoted and managed by the power of the “invisible hand”. This can be understood as the organization generally called “The Market” in modern property economics; or it can be understood as the Austrian School of Economics. Refers to the “natural order”.
There is no doubt that many social phenomena can be created by “visible hands”. However, the more complex the phenomenon is and the more variables involved, the more difficult it is to create. And anything created by humans will often not last if it fails to develop a sustainable organic combination with all the naturally derived things around it. Although For a certain period of time, the superficial effects that the “visible hand” can achieve can be impressive. Therefore, Hayek’s point of view is that for many things in the world, we can only rely on the power of “natural order” to promote it. There are many things that we cannot do reluctantly, and insisting on achieving them at all costs often implies huge social costs and the infringement of personal freedom. This is believed to be what Hayek wrote in his 1944 masterpiece “Arrival”. One of the main points of “The Road to Serfdom” and his 1988 masterpiece (and his last major book) ” The Fatal Conceit – the Errors of Socialism ” is worth pondering. .
The contractual and interactive nature of markets and firms
Basically, the nature of markets and companies (which refers generally to all “visible hand” forces, not limited to private companies as generally understood) and their relative positions in the operation of the economic system are deep issues. Ronald Harry Coase, winner of the 1991 Nobel Prize in Economics, spent his entire life researching around this basic big question.
According to records, when Gauss was in his twenties, he received a scholarship to study at the University of Chicago. During this period, he heard a lecture by the master Frank Knight, which suddenly aroused a question in his mind: Since the power of the market is so huge, why? Do you see organizations like companies in the real world? Is it possible that the emergence of these corporate organizations is derived from the market itself? Then at the age of 26, Gauss published an article called ” Nature of the Firm” . It is said that no one knew what he was talking about at the time, and this article never seemed to attract anyone’s attention. Later, after Gauss published another classic article ” The Problem of Social Cost” (The Problem of Social Cost ) in 1960, People began to pay attention to Gauss’s previous works. Later, when Gauss won the Nobel Prize in Economic Sciences in 1991, the economics community gradually realized that Gauss had been obsessed with exploring this issue for the past few decades.
There are different interpretations of Gauss’s views and what his biggest discovery was. The author’s view is inspired by the paper ” The Contractual Nature of the Firm” published by Hong Kong economist Zhang Wuchang in 1983 . The inspiration that the author got from this paper is that the distinction between the market and the company is not so obvious, and it may not be that important, and the operation of the entire economic system can be understood as an extremely complex, layer-by-layer, and constantly changing process. Deepen and develop the contract system. The market has the power to spin off, create, and manufacture companies on its own, but at the same time, companies also have the power to drive the market and control the market. The relationship between the two is indeed highly interactive and complex. From this point of view, what a well-functioning economic system needs to do is to enable a virtuous cycle of interaction between the two.
In the long run, it is more reliable to rely on market forces as the leader. (Shutterstock)
It is advisable to make full use of the power of the free market
In general, although the market and companies have their own strengths, in the long run, it is more reliable to rely on market forces as the leader. Undoubtedly, the market often makes mistakes, but as Guo Bowei’s famous quote quoted at the beginning of this article pointed out, because traders make judgments based on their own cognition, they are relatively safer. On the other hand, we may still have a lot to understand and exploit the power of the free market. Since the free market has brought miraculous effects to Hong Kong in the past, it is better to use some new ones that we may be less familiar with and may not know how to control. Tools, it is better to focus on exploring and making good use of the potential of the free market with which we are relatively familiar. Moreover, among many social phenomena, international financial centers should be the most difficult to create artificially. Therefore, in Hong Kong’s development as an international financial center, the author believes that the first of the three main principles is to make full use of the power of the free market. The second principle is to use the concept of First Principle often mentioned by Elon Musk, the founder of Tesla and Space X. I will talk about it again.
“Hong Kong’s Legendary Future” Series 32
Contact the author: Gudordi@proton.me
