The Choice and Realization Path of Industrial Regulation Mode in China

The Choice and Realization Path of Industrial Regulation Mode in China

First, the evolution of regulatory value orientation: from public interests to departmental interests.

The value judgment theory of regulation mainly focuses on whose interests regulation represents. Whose interests does regulation represent? This is a problem of value judgment in regulation theory, and it is also an important issue related to the overall social welfare of a country. The theory of supervision value judgment has mainly gone through two stages: the theory of supervision public interest and the theory of departmental interest.

(A) the theory of regulating public interests

The public interest theory of regulation originates from the economic thought of state intervention, especially the policy proposition of Harvard School's industrial organization theory (Posner, 1974). Due to the existence of market defects such as natural monopoly, artificial monopoly, external effects and information asymmetry, it is necessary for the state to intervene to correct or make up for these defects. In the case of natural monopoly, entry regulation only allows one manufacturer to produce, which meets the requirements of production efficiency, while price regulation can constrain manufacturers to set social optimal prices and meet the efficiency of resource allocation. Therefore, natural monopoly price and entry regulation may achieve double efficiency of resource allocation and production allocation. As far as externalities are concerned, increasing taxes on negative externalities and subsidizing positive externalities may lead to social preference in resource allocation. Under the above circumstances, government regulation has potential rationality. Theoretically, regulation may lead to the improvement of social welfare (Bain, 1952). If the free market can't produce good performance in effectively allocating resources and meeting consumers' needs, the government will supervise the market to correct this situation. This implies that the government is the protector of the public interest rather than the interests of a specific department, and will supervise any market failure.

However, there are a lot of facts in real life that are inconsistent with the prediction of public interest theory. The existence of supervision is not for the benefit of the public, but to meet the interests of the regulated industry. Stiger and Friedlandz( 1962) empirically tested the regulatory effect of price level, price discrimination and rate of return under the supervision of power industry in What Regulators Can Supervise: An Example of Power Sector, and found that government supervision did not achieve the expected lower electricity price in public interest theory. The theory of adjusting public interest has been challenged.

(B) the theory of regulating the interests of departments

Stigler (197 1), a representative of Chicago School of Industrial Organization Theory, has made an empirical analysis of American regulation, and found that regulated industries generally have higher profits. They infer from this that supervision does not exist for the public interest, but to meet the departmental interests of the regulated industry. Looking back on the regulation history of the United States at the end of19th century, especially the regulation of railway freight rate by members of 1887, it also reveals that regulation has nothing to do with market failure. At least before the 1960s, from the experience of regulation, regulation developed in the direction of benefiting producers, which increased the profits of manufacturers in the industry. In potentially competitive industries, such as truck industry and taxi industry, supervision allows pricing to be higher than cost and prevents entrants; In natural monopoly industries, such as electricity, there are facts that show that regulation has little impact on prices, and industries can earn profits above normal profits, so regulation is beneficial to producers, which is supported by empirical evidence. These empirical observations have led to the emergence and development of the interest theory of regulatory authorities. According to this theory, the provision of regulation meets the needs of industry, and the regulatory agencies are gradually controlled by industry, and regulation improves industrial profits rather than social welfare. Compared with the theory of public interest, the theory of departmental interest opens the "black box" of "the political process of regulation" in the traditional theory, which is very consistent with the history of regulation, so it is more convincing than the theory of regulating public interest.

Second, the evolution of regulatory objectives: from the pursuit of efficiency to the pursuit of fairness.

Chicago School, an industrial organization, has long pointed out that the primary goal of supervision is to maintain market competitiveness, overcome "microeconomic inefficiency" and promote economic benefits. That is, the goal of government regulation is to pursue efficiency. The government expands the supply and production of public utility products and services by introducing competition mechanism and various incentive control means (Wang Junhao, 200 1).

However, this simple pursuit of efficiency has led to many unfair problems. With the deepening of the regulatory reform of monopoly industries, the problem of universal service has gradually emerged and begun to attract the attention of governments all over the world. In the past era of state-owned monopoly, universal service has always been given to state-owned monopoly enterprises as a social obligation, and the necessary funds were provided through cross-subsidies within enterprises. However, after privatization and deregulation, many monopoly enterprises are no longer willing to bear the burden of "universal service" and no longer provide services to remote rural areas with high costs or the prices in remote rural areas are too high for farmers to afford. For example, tap water enterprises in some developing countries do not provide tap water supply services in rural areas, and rural residents cannot drink tap water; In many countries, the initial installation and telephone charges of rural telephones are very high, which makes it impossible for farmers to install and use telephones. In addition, in many developing countries, the phenomenon of "difficult and expensive medical treatment" leads poor families, especially those in rural areas, to look down on medical treatment (World Bank, 2004).

As a result, many countries began to pay attention to universal service and fairness. Taking the universal service in the telecommunications industry as an example, in the recent reform of the telecommunications sector in the United States, universal service is one of the key issues to be solved. In fact, a large part of the new telecommunications law of 1996 is about the reform of universal service, and its regulatory body, the Federal Communications Commission, has been working hard to promote this reform. In other countries that are undergoing telecom reform, many governments have taken universal service as a social obligation and tried to implement universal service policy in regulatory reform. At the end of 1980s, the Organization for International Economic Cooperation and Development (OECD) defined the universal service of telecommunications as "anyone can enjoy telecommunications services at an affordable price at any place, and the service quality and tariff standards are treated equally" in its report entitled "Universal Service and Telecommunication Tariff Reform". Specifically, the universality of service refers to national coverage, that is, whenever and wherever there is demand, there should be nationwide telephone service, and the price or tariff level of telephone service should be affordable to most users. Now, the issue of universal service has become an important goal for countries to formulate regulatory policies for monopoly industries.

Third, the evolution of regulatory content: from economic supervision to social supervision.

In the early stage of regulation, the content of government regulation mainly focused on the market entry and product pricing of controlled enterprises. These all belong to the category of economic regulation. However, with the development of society, regulators pay more and more attention to the supervision of social issues such as environmental protection, product quality and safety. This is the evolution of regulatory content.

Economic supervision

Economic regulation refers to that government agencies use legal authority to restrict the entry and exit, price, service quantity and quality, investment, financial accounting and other related behaviors of enterprises through permission and recognition (Masu Uekusa, 1992). The contents of economic supervision include market access, price setting and service quality supervision. Market access regulation is the government's regulation of various micro-subjects entering certain departments or industries, and it is also one of the most important contents in direct regulation policies. Its fundamental purpose is to limit excessive entry and ensure the minimization of the total social cost and the high efficiency of resource allocation. Price control mainly restricts the industrial price system and price level. For example, in order to maximize profits, enterprises in natural monopoly industries will set monopoly prices to grab profits, thus affecting the effective allocation of resources, which requires the government to control their prices; In addition, economic control also includes the control of the quality of service provided. The main purpose of economic regulation is to maintain the effective allocation of scarce resources, prevent monopoly enterprises or enterprises with private information from harming consumers and social welfare by virtue of their favorable position in transactions, make up for the lack of information, and reduce the cost of obtaining information (Masu Uekusa, 1992).

Social supervision

In recent years, countries have gradually implemented social control. This is a new regulation mainly by formulating corresponding standards, issuing licenses and collecting various fees. Social control by western governments rose in the late 1960s and early 1970s. Social control aims at ensuring the life, health and safety of residents, preventing public hazards and protecting the environment. It is mainly aimed at policies related to externalities in economic activities (Masu Uekusa, 1992).

Since1980s, economic laws and regulations have been relaxed, but social laws and regulations on health, safety and environmental protection have increased rapidly. Social regulation involves environmental protection, public health, safety and other fields, and the objects of regulation are rarely targeted at specific industries, but mostly at specific behaviors. According to Masu Uekusa's description of Japanese social regulation in micro-regulation economics, it can be reflected that the basic status of social regulation in market economy countries is mainly to ensure health and hygiene; Ensure safety; Preventing public hazards and protecting the environment; Ensure education, culture and welfare (Masu Uekusa, 1992).

Fourthly, the evolution of the object of supervision: from overall supervision to local supervision.

Regulation mainly refers to the regulation of natural monopoly industries. Natural monopoly industry is the main research object of regulation. The understanding of natural monopoly industries has also gone through a continuous evolution process. Many industrial sectors that used to think that natural monopoly must be regulated have cancelled or relaxed regulation. Behind this regulatory reform, the evolution and development of natural monopoly theory are implied in essence.

Natural monopoly is a traditional concept in economics. The early concept of natural monopoly is related to the concentration of resource conditions, which mainly refers to the monopoly formed by the concentrated distribution of resource conditions that makes competition impossible or unsuitable, and mainly refers to industries with economies of scale. Clarkson company. Miller (1982) thinks that the basic feature of natural monopoly is that within a certain output range, the production function is in a state of increasing returns to scale (decreasing costs). That is, the larger the production scale, the smaller the unit product cost. Large-scale production of one enterprise is more efficient than simultaneous production of several smaller enterprises. Such industries are natural monopoly industries in the traditional sense.

However, later research shows that for some industries, even with the increasing average cost, it is still possible to produce or serve by one enterprise. Economies of scale are neither necessary nor sufficient conditions for natural monopoly. The Last Month Of Summer (1982) and baumol, Panza, Williger (baumol, Panza &; Willig, 1982) thinks that the definition or the most striking feature of natural monopoly should be the subadditivity of its cost. Cost additionality focuses on whether one enterprise provides the output of the whole industry or whether this enterprise provides the same output with another enterprise. According to the latest definition, natural monopoly is characterized by the disadvantage of representing the cost function of the manufacturer. If the total cost of one manufacturer to produce the output of the whole industry is lower than that of two or more manufacturers, the industry is a natural monopoly industry.

Now people have a deeper understanding of natural monopoly industries. It is found that with the development of science and technology, industries that were originally considered as natural monopoly no longer have the characteristics of complete natural monopoly. More precisely, there is no absolute natural monopoly industry in reality. Any industry can be decomposed into multiple links, and these links do not all have the characteristics of natural monopoly. For example, traditionally, people think that the telecommunications industry, power industry, railway industry, postal industry, civil aviation industry and other industries are all natural monopoly industries. But in fact, not all links in these industries are monopolized. With the development of science and technology, many natural monopoly links no longer have monopoly characteristics and become competitive links. For example, the long-distance telephone, mobile communication and value-added services in the telecommunications industry no longer have the characteristics of natural monopoly, but the local telephone network and optical cable network are still considered as natural monopolies; The transmission and distribution network of power industry still has the characteristics of natural monopoly, but the power generation and sales links have become competitive links; In the railway industry, the railway network and station facilities are still natural monopolies, but supporting services such as passenger transport and freight transport can introduce competition; Competition has been introduced into the postal express service links in the postal industry, but at present, the postal network links still have the characteristics of natural monopoly; In the civil aviation industry, airports and air traffic control networks are still natural monopolies, but civil aviation services such as passenger transport, freight, aviation fuel and aviation materials can introduce competition (as shown in table 1).

The evolution of regulatory focus: from structural supervision to behavioral supervision.

Since monopoly enterprises will raise prices and harm consumers' interests, it is an inevitable logical choice for us to divide a monopoly enterprise into several competitive small enterprises so that each enterprise has no monopoly power. The viewpoint of structural control is to divide a large monopoly enterprise into several small competitive enterprises, so that these enterprises can compete, thus reducing prices and improving efficiency.

Structural supervision

Structural regulation is a way to control industrial concentration by adjusting industrial concentration (Chen Fuliang, 200 1). Structural regulation mainly focuses on large enterprises and their influence on industrial structure, focusing on the judgment of monopoly state, that is, whether enterprises actually occupy a considerable market share and form a dominant force in the market, making it impossible for other enterprises to compete with them, resulting in a serious shortage of market competition. Structural regulation often takes severe measures such as division, decomposition and dissolution, which makes large monopoly enterprises become several small enterprises or disintegrate, fundamentally changing the market structure and restoring the competitive order.

With the development of technical economy and the rapid development of global economic integration, the nature of natural monopoly industry itself is gradually changing. In fact, natural monopoly industries have both monopoly business and competitive business in the industrial chain, and the two can be completely divided. In this case, governments all over the world have started new structural supervision. The main mode is to vertically separate the monopoly and competition links of various industries, and horizontally split the competition links to form a number of competitive enterprises.

In the actual process of industrial restructuring, there are mainly the following three market structure modes: (1) completely vertically separated market structure mode. This market structure is characterized by vertical separation of natural monopoly and competition. Competition is introduced into competition, while natural monopoly still adopts monopoly market structure. In this market structure, natural monopoly is operated by independent enterprises and strictly supervised by the state. (2) The market structure mode of partial vertical separation. The characteristic of this market structure is that enterprises in natural monopoly links also participate in competition in the field of competition. This type of market structure is usually used to cultivate new entrants. The original enterprises still maintain the vertically integrated market structure, and introduce competition in the field of competition, and new competitors must access the monopoly links of the original enterprises. (3) Market structure mode of horizontal segmentation. The characteristic of this market structure is that it only divides the industry horizontally, not vertically. In this way, each enterprise operates both monopoly and competition fields.

(B) From structural supervision to behavioral supervision

With the continuous promotion of supervision practice, regulators found that simply supervising the supervised enterprises and simply splitting the structure could not effectively solve the problem of insufficient competition. It is correct to vertically split and split competitive links that do not belong to natural monopoly business. The competitive business is only "decomposed" according to processes and links, and each business is only cut into an independent enterprise. Although it helps to eliminate the phenomenon of "cross-subsidy", each enterprise after the split is still a monopolist, and changing from an original "comprehensive monopolist" to several "professional monopolists" may not necessarily promote competition (Qi Yudong, 2004).

Therefore, people think that what is important to regulate enterprises is not the market structure of monopoly enterprises, but their behavior. That is to prevent monopoly enterprises from abusing their dominant market position. This is the birth of behavior regulation theory. Behavioral regulation holds that it is important to regulate the market behavior of enterprises that dominate the market, rather than caring about industrial concentration. Behavior regulation includes: methods to prevent anti-competitive behavior of companies that dominate the market; Price control; Provisions on advertising and other competitive activities (Chen Fuliang, 200 1).

6. Evolution of supervision means: from traditional supervision to incentive supervision.

The progress of regulatory theory is also reflected in the evolution of regulatory tools. With the development of game theory, information economics and other tools, the regulatory tools of regulatory agencies have evolved from traditional regulatory tools to incentive regulatory tools.

(A) the traditional means of supervision

Traditional means of control mainly include price control, entry-exit control and investment control (Masu Uekusa, 1992).

Price control means that the government sets the price of competitors in a certain period of time and formulates and adjusts the price cycle according to the principles of economics. Traditional means of price control include marginal cost pricing, average cost pricing and Ramsey pricing. Access control is to ensure the stable supply of public services and avoid redundant construction, waste of resources or monopoly. It is necessary to control the number of enterprises in the industry in order to form a relatively competitive market structure that can achieve economies of scale. Investment control means that the government controls the number of industrial entities and determines the return on investment by encouraging or restricting economic entities to invest in specific industries. An important means of investment supervision is to supervise the return on investment of monopoly enterprises. The essence of this provision is the contract signed by the government, enterprises and consumers on the return on investment of enterprises. Under the control of the return on investment, as long as the return on capital of the controlled enterprise does not exceed the prescribed fair rate of return, the price of the enterprise can be freely determined. Under the control of return on investment, regulated enterprises lack incentives to reduce costs and improve production efficiency. Regulated enterprises will choose to use more capital to raise the price of products or services, thus increasing the total income of enterprises. In this way, under the given output, it will only lead to over-investment of the controlled enterprises, lack of motivation to reduce costs and improve productivity, and produce the so-called A-J effect (Averch and Johnson, 1962).

(B) Incentive supervision means

There is a fundamental flaw in traditional supervision, that is, traditional supervision assumes that the government regulatory agencies and the regulated enterprises have the same amount of information in the process of formulating and implementing the supervision plan, and the two sides are a symmetrical information game. However, the practice of supervision shows that the information that the supervision organization knows about the enterprise is far less than what the enterprise knows. The regulated enterprises will strategically use their information advantages and take actions that are not conducive to the regulatory agencies and consumers, thus making the supervision unable to achieve its predetermined goals (Stigler and Friedland,1962; Weiss and Crass, 198 1).

Since the early 1980s, with the rise of deregulation in developed countries such as Europe and America, many world-class economists have begun to apply the latest achievements of contract theory and game theory analysis methods to the analysis of regulation, expanding the traditional regulatory tools under the background of information asymmetry and providing new perspectives and tools for modern regulatory practice (Laffont, 1994). The new regulatory theory is based on the information asymmetry and inconsistent goals between the regulatory agencies and the regulated enterprises. With the help of the emerging mechanism design theory, considering the information constraints of regulatory agencies, the participation constraints and incentive constraints of enterprises, this paper studies how to achieve the optimal design of regulatory mechanisms. It mainly includes tools such as supervision based on principal-agent theory, price ceiling supervision, RPI-X supervision, franchise bidding system and yardstick competition under asymmetric information.

Seven, standardize the evolution of enterprise management model: from state-owned to private.

The great crisis in the 1930s, the Second World War and the final collapse of the colonial system in western countries had a very far-reaching impact on the economic systems of various countries. Countries are debating to what extent the government should intervene in the economy and which industries should be owned by the government. Until 1979, when Thatcher's Conservative government came to power in Britain, governments in developed countries thought that the government should play a more active role in the economy. The government should at least have basic industries such as telecommunications, postal services, electric power, gas, civil aviation and railways, and control strategic industries such as steel and national defense manufacturing. Since the Second World War, great progress has been made in the nationalization of most developed and developing countries in the world, and a large number of state-owned enterprises have emerged. In many developed countries, the public sector based on state-owned enterprises has become a decisive force in the national economy, and these state-owned enterprises operated well in the early post-war period. For example, France implemented the nationalization movement ten years after the war, and the government controlled important departments such as energy, transportation and finance, which greatly improved the degree of nationalization; In Britain, there were two nationalizations in the early postwar period and the late 1970s. By 1978, the government controlled all the coal mining and shipbuilding departments, as well as more than half of the aviation and oil production industries. In the former West Germany, state-owned enterprises in the postal, telecommunications and railway sectors accounted for 100% (Richard, 1999).

But in the late 1970s, this nationalization movement in western countries caused great controversy. People began to complain that the service quality of state-owned enterprises has not improved compared with private enterprises, and the trade unions of state-owned enterprises also criticized that state-owned enterprises are only a part of state capitalism. On the other hand, right-wingers believe that state-owned enterprises have strengthened the power of trade unions, thus forming a dual monopoly of state-owned enterprises and trade unions. In the late 1970s, due to the high cost, low efficiency and serious losses of some state-owned enterprises, the national fiscal deficit increased and the development of private capital was greatly affected. Western public opinion began to oppose the excessive concentration of large enterprises and strongly urged large enterprises to decentralize. Against this background, some countries have started privatization reform, among which Britain is the most representative.

Privatization reform in Britain is accompanied by deregulation. British Telecom, British Gas Company and Water Supply Company were sold in part or in whole, and the efficiency of the enterprises was improved to varying degrees after the sale. Since 1979 began to privatize on a large scale, many public enterprises in Britain, including electric power, telecommunications, aviation, steel, natural gas, tap water and railway transportation, have been privatized on a large scale, allowing private capital to enter the field of public utilities. In Britain, after the privatization of public enterprises, the efficiency and profits of enterprises have been greatly improved. In 1980s, the price of air transport industry dropped by 0.4% every year on average, and the price of British Telecom Company dropped significantly (OECD, 1999). The great success of British privatization reform has greatly stimulated the pace of privatization in other countries, and many countries have carried out more or less privatization experiments on monopoly industries such as infrastructure. The World Bank has also vigorously promoted this model around the world, and the privatization model of monopoly industries has achieved unprecedented development. Privatization reform has become an international popular mode of natural monopoly industry reform in various countries (World Bank, 2004).

8. Evolution of the concept of control: from strengthening control to deregulation.

Since the 1970s, the United States, Britain, Japan and other mature market economies have relaxed their control over natural monopoly industries such as telecommunications, electric power, railways, aviation, oil and gas transportation, gas and tap water. The primary purpose of deregulation is to introduce competition mechanism, reduce the cost of regulation and promote enterprises to improve efficiency and service (Masu Uekusa, 1992). Deregulation includes changing the prohibition of trade into free entry and canceling price control. That is to relax the market access of competitive business in natural monopoly industries, allow enterprises of corresponding scale to compete freely, and form a dynamic competition mechanism. Take the United States as an example American civil aviation began to deregulate in the late 1970s. The route deregulation law was promulgated in 1978, the route control was abolished in 198 1, and the price control was abolished in 1983. Through 20 years' practice, the air ticket price in the United States has generally decreased by 33%, the total factor productivity (FTP) of the whole industry has increased by 15%, the safety factor has also been greatly improved, and the service quality has also been significantly improved. In this situation, governments' understanding of regulation theory and practice is constantly changing, and deregulation reform is being carried out in natural monopoly industries in various countries in an orderly manner.

Nine. A brief conclusion

The evolution of western regulation theory presents the following eight characteristics: the value orientation of regulation has evolved from public interest to departmental interest; The goal of supervision has evolved from pursuing efficiency to pursuing fairness; The content of supervision has evolved from economic supervision to social supervision; The object of regulation has developed from overall regulation to local regulation; The focus of supervision has evolved from structural supervision to behavioral supervision; The supervision means has evolved from traditional supervision means to incentive supervision means; Standardize the evolution of enterprise management mode from state-owned to private; The concept of supervision has evolved from strengthening supervision to relaxing supervision. It is of great reference value for China to understand the evolution and development of foreign supervision theories and summarize the practical experience of supervision in various countries.