Different people interpret what Ronald Coase meant in different ways. The author’s own interpretation is that the establishment and evolution of legal systems, market conventions, and behavioral norms are necessary steps for reducing transaction costs, defining property rights, and facilitating the development of a market system.
Perhaps we can also use this perspective to reexamine Shenzhen’s experience in the past and the lessons it may offer to Hong Kong today.
Shenzhen’s strategy for economic reform can, in some sense, be understood as having no fixed strategy at all. “Reform and opening-up” was itself a broad and highly abstract concept. In practice, how exactly should the country open up? How should reform be carried out? There was no detailed blueprint. Much of the process involved “crossing the river by feeling the stones” — advancing step by step and adapting along the way.
However, the concept of the Special Economic Zone was a stroke of genius. Its greatest strength may have been precisely its ambiguity, which gave the market room for imagination and allowed people to envision a hopeful future. Even things that were impossible elsewhere in China did not seem entirely impossible in Shenzhen. Many issues could be handled pragmatically according to actual conditions and common sense.
This was extremely important for building a market system, because it meant that Shenzhen’s legal structures, conventions, and institutions could evolve under market pressure or adapt in response to market signals.
The author will discuss this further in the next article.
