What, then, have I been doing over the past three months?

1. Obviously, I have been teaching courses at NSYSU. This semester I have an unprecedented teaching load of 12 hours per week (three students wanted a special seminar course, and I have difficulties refusing requests that imply that my ideas are not a total waste of time).
2. I’m editing a book that deals with spatial aspects and extensions of Austrian economic theory (to be published in 2012 as a new volume in the book series Advances in Austrian Economics). In addition to contributing myself, the volume will include chapters by a number of interesting economists and geographers, for example Randall Holcombe, Peter Gordon, Sandy Ikeda, Pierre Desrochers, and Jason Potts.
3. I have also been involved in several theoretical and empirical analyses of interstate migration flows in the US. The analyses focus on the effects of differences in institutional quality and agglomeration economies. This has resulted in three different papers, of which I presented one at a conference in Portsmouth, New Hampshire. The other two studies were more empirical and were co-authored by James Taylor and Kevin Hoeltschi, respectively.
4. I have contributed several chapters to a new book on the future of the cross-border Oresund region in Scandinavia, which will be published in 2012. The book looks at various competitiveness factors, including institutions, financial markets, infrastructure, and R&D.
5. I have also continued my exploration of various housing markets together with Zoltan Kettinger, who is a doctoral candidate at NSYSU. It will hopefully result in several interesting empirical results.
6. As usual, I have continued my education by reading several books and papers.

1. I have read or written the book.
2. It is a non-fiction book.
3. I  have learned something from reading or writing it.
4. I enjoyed reading or writing it.

Pejovich’s book is not only ideal as an introduction to (new) institutional economics; it also offers compelling arguments for English common law as opposed to continental European civil law, if one is prepared to accept the assertion that voluntary exchange is generally more efficient than governmental allocation of resources (yes, I am prepared to accept that assertion, for the simple fact that only voluntary exchanges can be relied upon to produce mutual ex ante gains from trade). Indeed, Pejovich’s definition of efficiency seems identical to Buchanan’s, who has argued forcefully to emphasize gains from trade rather than the “optimal” allocation of resources as the appropriate efficiency benchmark.

It thus comes as no surprise that Pejovich has included a brilliant little essay by Buchanan in the book, which discusses the various motivations behind the interventionist state. In that essay, he adds “parentalism” to the traditional categories of “managerial socialism,” paternalism, and redistribution. Parentalism refers to the desire of people to be looked after by the state, i.e. the state is seen as the source of jobs, product certification, a comfortable retirement, and a generally risk-free life. I certainly have met people who blames the government if they don’t have a job (especially in Europe) and others who blame the government from not preventing people from consuming dangerous imported goods (especially in Asia). It goes without saying that I share Buchanan’s and Pejovich’s dislike of “parental socialism”: I prefer decentralized entrepreneurial creation of jobs, parents as the source of parental security, and the freedom to choose whether to consume potentially dangerous goods (under the optional guidance of private regulators and experts such as scientists and physicians).

So Pejovich not only offers a basic introduction to the institutional ideas of Coase, North, and others; he also integrates the Buchanan-Tullock version of public choice theory. And when discussing entrepreneurship and uncertainty, there are strong Austrian (especially Hayekian) undercurrents. Especially valuable in this regard is the final part of the book, which discusses the role of entrepreneurial pathfinders in the evolution of informal institutions, and how the common law has the advantage of gradually absorbing informal institutions into the legal system.

This book is written in a way that should make it accessible to undergraduate students and the general college-educated reader. Unlike most popular books written by journalists, it is not a simplistic book. If you can read between the lines, there are obvious allusions to numerous sophisticated theoretical arguments, including (but not limited to) the work of Hayek on knowledge and cultural evolution; Coasean reasoning about transaction costs and externalities; Alchian-Demsetz propety rights theory; Schumpeterian and Kirznerian entrepreneurship; Knightian uncertainty; bounded rationality  a la Simon, and the economic history of transaction costs as explored by North. Indeed, it refers (explicitly or implicitly) to almost all of my favorite economists!

While I like almost everything about this book, there is one thing that I don’t like. Reading between the lines again, it seems that Pejovich is a cold warrior, like so many classical liberals who were born in communist societies (Pejovich was born in Yugoslavia). How else can one explain his positive comments about Ronald Reagan (my view: Reagan wasted enormous amounts of money on an arms race with the USSR that was unnecessary since central planning ensures the eventual collapse of the affected society), and the assertion (in a footnote) that the US and the UK have a lower economic freedom score that they should have, since they spend a lot of money defending other countries (this is even more preposterous: why should British or American taxpayers “defend” other countries?; I think the ideal defense policy from a classical liberal point of view ranges from that of demilitarized Costa Rica to the armed neutrality of Switzerland).

But this is just a minor flaw. Overall, Pejovich’s short book is an outstanding introduction to institutional economics and public policy analysis.

Anyway, I constructed a national “Knowledge Society Index” consisting of the following factors (sources in parentheses): purchasing power (UNDP), life expectancy (UNDP), literacy (UNDP), educational enrolment rates (UNDP), absence of political corruption (Transparency International), freedom of expression (Freedom House), postmaterialist values (World Values Survey), tolerance of homosexuality (World Values Survey), and scientific output measured as number of journal papers originating in one of the world’s 500 top-ranking universities, controlling for population size (Shanghai Jiaotong University). This implies that only countries that have at least one of the world’s 500 most productive universities are included as real or potential “knowledge societies,” and that a knowledge society is seen as a society that is rich, healthy, generally educated, research-intensive, postmaterialist, tolerant, non-corrupt, and with effective freedom of speech. Being best in each individual category would imply a score of 100, but since different countries top different index components, the index looks like this (note: Greece, Hong Kong, and Israel are excluded due to incomplete data):

1. Sweden 88
2. Switzerland 85
3. Netherlands 79
4. Denmark 77
5. Finland 75
6. Canada 73
7. Norway 72
8. Australia 67
9. United Kingdom 67
10. Belgium 67
11. Germany 63
12. United States 62
13. New Zealand 59
14. Austria 58
15. Singapore 58
16. Ireland 57
17. Slovenia 56
18. France 54
19. Spain 52
20. Japan 51
21. Italy 50
22. Czech Republic 46
23. Portugal 45
24. Taiwan 45
25. Chile 44
26. South Korea 42
27. Argentina 38
28. Poland 38
29. Brazil 37
30. Mexico 37
31. Hungary 35
32. South Africa 33
33. Thailand 30
34. India 28
35. Russia 25
36. China 24

So Scandinavia, Switzerland, the Netherlands, and Canada are most consistent in exhibiting characteristics that one would expect in post-industrial, postmodern societies. My guess is that certain regions in the United States also would end up in this category. But Italy is clearly too corrupt and their universities are not very impressive, while Japan and France are too materialist and intolerant.

Economists before 1900: Adam Smith (1), David Ricardo (2), and Alfred Marshall (3).

Deceased 20th century economists: John Maynard Keynes (1), Milton Friedman (2), and Paul Samuelson (3).

Living economists over 60: Gary Becker (1), Kenneth Arrow (2), and Robert Solow (3).

Living economists under 60: Paul Krugman (I can’t believe this but, yes, he is the gold medalist), Greg Mankiw (2), and Daron Acemoglu (3).

Favorite economics journals: American Economic Review (1), Journal of Economic Perspectives (2), and Journal of Political Economy (3).

Favorite economics blogs: Greg Mankiw (1), Marginal Revolution (2), and Paul Krugman (3 [unfortunately]).

If you’re curious, below are my rankings, with survey ranks in parentheses:

1: Adam Smith (1), Carl Menger (12), and Alfred Marshall (3).

2: Friedrich Hayek (4), Ludwig Lachmann (-), and Joseph Schumpeter (5).

3: Douglass North (11), Ronald Coase (4), and Brian Loasby (-).

4: Certainly not Krugman, but other than that I think we need to wait and see.

5: Journal of Institutional Economics (-), Journal of Law and Economics(-),  and Public Choice (20).

6: Coordination Problem (8), Think Markets (-), and Marginal Revolution (2).

I doubt if my preferences surprise anyone as much as I was surprised by the popularity of Paul Krugman (he was mentioned by 60 of the 299 economists, with the runner-up (Greg Mankiw) only garnering 22 votes).

Source: Davis, W.L., B. Figgins, D. Hedengren, and D.B. Klein (2011), “Economics Professors’ Favorite Economic Thinkers, Journals and Blogs (along with Party and Policy Views),” Econ Journal Watch, 8(2): 126-146.

If you’re having problems establishing (or maintaining) a relationship because you are no good at saying appropriately romantic things to the person you desire, may I suggest a number of suitable utterances. These statements and questions are not only good for initiating desired mutual utility gains, they also demonstrate your knowledge of economics, which as we all know is the sexiest subject you can study in college.  Sarah Skwire and others at www.modifiedrapture.com created all but two of these 20 useful lines.

1 You have got the curves to supply my demand.
2 Let’s go to bed and try to disprove the law of diminishing marginal utility.
3 You’re my favorite kind of moral hazard.
4 I have a feeling you really understand “the nature of the firm.”
5 I love you so much I’m willing to forgo my exit option.
6 Wanna talk about our private goods?
7 How about a little horizontal integration?
8 Now those are some tangible assets!
9 I’ll reveal my preferences if you will.
10 Bottom up or top down (Hayek vs. Keynes 2nd Round)
11 Hey, baby, let’s make our utility functions interdependent (S. Horwitz).
12 Care to help me violate some social norms?
13 Let’s reduce some entry barriers together.
14 You make my demand curve perfectly inelastic!
15 You’re my stimulus package.
16 Your invasive activity causes me no negative externalities.
17 How about a little mutual adjustment.
18 If you go down on my factor of production I’ll churn out a consumption good.
19 We’ve got to internalize the positive externalities that are caused by the nature of your firm.
20 May I use my invisible hand to explore our interactive consumption behavior after a merger?

HT: Steve Horwitz at Coordination Problem

On the other hand, it seems as if most people combine extremism in one domain with moderation in most other parts of life. For example, I know several academics who are extreme in their conviction that education is the most important thing there is, and hence that is should always be the first priority of both people in general and the government. I also know religious people who are adamant that faith is the most important thing in life, but who are political and cultural moderates in most other domains. And it’s instructive to notice how the extreme atheist Richard Dawkins combines extremism in the religious domain with very uncontroversial middle-of-the-road political opinions. Politics and religion aside, it is also clear that some people define their lives by their unwavering belief in and support for a particular soccer club, by a passionate interest in a particular music genre, or by an intense conviction that correct grammar is absolutely essential for the good life.

Having observed all this, I started to examine if I also have extremist attributes, given that I have voted for boring centrist political parties, that I am skeptical of both religious fundamentalism and Dawkinsian atheism, like soccer in general (but no specific club), enjoy listening to a variety of musical genres, and think that good writing is enjoyable but still think that substance is more important than style.

The short answer is that I, too, am an extremist. When I teach institutional economics, I like to point out that we need to distinguish between (political and/or legal) formal institutions and (cultural, unwritten) informal ones. And my extremism is that I am not prepared to question – and believe passionately in – the essential desirability of a great deal of circulation of ideas, people, and goods. In other words, I strongly favor free expression, free emigration and immigration, and free trade. My extremism manifests itself as an inability to concede any points to people who want to restrict free speech (think flag-burning, Nazi hate speeches, and pornography), free migration (think Arizona and anti-Muslim political parties in Europe), and the free flow of consumer and capital goods (think France and labor unions).

But I realize that a desirable lack of laws and regulations is not enough. Sustainability requires that there is cultural support for the free circulation of ideas, people, and goods. And the cultural support that matters is tolerance, which is one of the reasons why I am quite enthusiastic about Richard Florida’s work on the importance of tolerance for creativity. And therefore I think that tolerance is the essential social  value, not love (which is personal), nor politeness (which is nice but can distract from honesty), nor creativity (which can be nasty if the creator is intolerant).

Fortunately, I am an optimist when it comes to the future of “free circulation” and its tolerant underpinnings. Economic development means that intolerance and isolationism become increasingly costly (since creativity and innovativeness  become more important with increases in the overall complexity of the economy). Increasing tolerance of different races and culturally similar immigrants was an important aspect  of mature industrial societies. During the post-industrial revolution that we are witnessing at present, it is clear that an increasing number of people tolerate culturally dissimilar immigrants, sexual minorities, and less conventional lifestyle choices. Hopefully all (non-violent) lifestyle choices will become tolerated by almost everyone in the mature post-industrial society of the future.

http://econstories.tv/2011/04/28/fight-of-the-century-music-video/

The Fight of the Century features the following refrain:

Which way should we choose?

more bottom up or more top down

… the fight continues …

it’s time to weigh in

more from the top or from the ground

…let’s listen to the greats

Keynes and Hayek throwing down

And this is my favorite part:

Creating employment is a straightforward craft. When the nation’s at war, and there’s a draft. If every worker was staffed in the army and fleet. We’d have full employment and nothing to eat.

HT: James Taylor

WN (Wang Ning): First of all, happy birthday, professor Coase. As you know, Chinese economists are now holding a Conference in Beijing, “Coase and China”, to celebrate your 100th birthday. To my knowledge, no other western economist, probably with the exception of Karl Marx, has ever been so honored in China. The reason is twofold. It first has to do with the powerful influence of your ideas. Second, you clearly have a special feeling toward China. In Chinese culture, reciprocity is a high virtue. The first question many Chinese people have in mind is, what got you interested in China?

RC (Ronald Coase): I don’t know why I am interested in China. I have been interested for a long time, too long for me to remember. I read Marco Polo many years ago, probably as a schoolboy. It was an impressive book. I don’t think anyone can read the book without being impressed by the Chinese civilization. It went back many centuries. It made great achievements long before the rise of the West. That impression stayed with me forever.

WN: Did your relationship with Steven Cheung have any impact on your perception of China?

RC: None. I had the view about China long before I knew any Chinese. Of course, I had a very good relation with Steve. He spent two years at Chicago many years ago after his study at UCLA. We talked and we quickly became good friends. That was one of the best times in my whole life. I think it was beneficial for both of us. Unfortunately, Steve went to University of Washington (Seattle) after two years. I always thought that was a mistake.

WN: I remember Steve told me that that was probably the only decision he later regretted.

RC: Steve somewhere said that he grew up in Hong Kong and missed water. But that didn’t seem to me to be a good reason.

WN: Another reason I remember Steve gave somewhere in his writing was that he wanted to be independent. If he stayed at Chicago, he was afraid that he could not develop his own thinking give the strong presence of Milton Friedman, George Stigler, and other weighty figures at Chicago.

RC: That wouldn’t happen. I was able to do my work at Chicago just as freely as I was at Buffalo.

WN: I think you were right. Given Steve’s character, I don’t think anyone could stop him from developing his own thought.

RC: I am glad that I later strongly urged Steve to go to Hong Kong. I did not know how much good it would do. But given Steve’s influence in China, I think it was a good move.

WN: Steve certainly played a critical role in developing and explaining your ideas in China. From that point of view, his move to Seattle also helped to influence people like Doug North and Yoram Barzel. I remember North said many times that he learned transaction cost economics from Steve, and Steve learned from you.

RC: I never doubted that Steve would do great work no matter where he was. And good economics will attract good economists. But if he stayed in Chicago, he could have done much more.

WN: You are probably right. If Steve stayed, the Coase-Cheung team would last for more than a decade at Chicago even before Steve went back to Hong Kong. Given your character, you would not be aggressive enough to push your vision of economics at Chicago. But if you were teamed up with Steve, what you called good economics probably would have prevailed in Chicago.

RC: That’s right.

WN: You mentioned many times that you do not like the term, “Coasean economics”, and prefer to call it simply the “right economics” or “good economics”. What separates the good from bad, the right from wrong?

RC: The bad or wrong economics is what I called the “blackboard economics”. It does not study the real world economy. Instead, its efforts are on an imaginary world that exists only in the mind of economists, for example, the zero-transaction cost world.

Ideas and imaginations are terribly important in economic research or any pursuit of science. But the subject of study has to be real.

WN: Since the Coase China Society is named after you, we cannot avoid using Coasean altogether.

RC: I do not like the term Coasean economics. The right economics that I have in mind, or what you called Coasen economics, is what economics ought to be.

WN: Absolutely. The whole reason to establish the Coase China Society is exactly to bring it about so that the right economics will prevail.

WN: The second question many Chinese have in mind for you is, what you think other countries can learn from the Chinese experience of market transformation? Is there any general lesson to be learned from the China model?

RC: I don’t know. You don’t know what you can learn until you try to learn.

WN: I think this point is critically important. If I understood correctly, you are saying that learning from China or any other example is not like learning from a book or cooking recipe, but more like learning by doing. If the Chinese economic reform is an experiment, learning from China remains an experiment. Different countries will learn different things even if they learn from the same model.

RC: Exactly. What we do is all experiment.

WN: You remind me a saying made popular by Deng Xiaoping that reform is an experiment. But the experimental approach does not guarantee success. I have in mind Mao’s experiment with socialism, the Great Leap Forward, and so on.

RC: Nothing guarantees success. Given human fallibility, we are bound to make mistakes all the time.

WN: So the question is how we can learn from experiments at minimal cost. Or, how could we structure our economy and society in such a way that collective learning can be facilitated at a bearable price?

RC: That’s right. Hayek made a good point that knowledge was diffused in society and that made central planning impossible.

WN: The diffusion of knowledge creates another social problem: conflict between competing ideas. To my knowledge, only people fight for ideas (religious or ideological), only people are willing to die for their ideas. The animal world might be bloody and uncivilized. But animals, as far as we know, do not fight over ideas.

RC: That’s probably right. That’s why we need a market for ideas. Ideas can compete; people with different ideas do not need to slaughter each other.

WN: That seems to me the number one task for any government: to foster an active market for ideas and maintain civil order.

RC: That’s right.

WN: You have said many times that the Chinese economic reform was extraordinary and unexpected. The third question is what you think was mainly responsible for this unexpected transformation?

RC: We explain this in our book (How China Became Capitalist). The events were unexpected and could not be stated in advance. It must have something to do with certain personalities. If Deng never existed, the story would be quite different. Those developments, or what we called marginal revolutions in the book, such as the household responsibility system and the Special Economic Zones, might be expected. But when they happened, we were surprised.

WN: Indeed, the Chinese were also surprised themselves.

WN: Here comes the fourth question. You have high hopes that the future of economics is in China. What makes you think so?

RC: It is obvious. It is the size of Chinese population. A new idea is always accepted only by a small proportion of the population. But a small proportion of the Chinese is a big number.

It also has to do with the fact that China is now open for new ideas. The old way of thinking has been discredited. But new ways have not been developed yet. Both new good economics and new bad economics have a great chance in China. We want to see that good economics prevails.

China has another advantage. As we have argued in our book, there is still too much to learn from the Chinese experience of market transformation. There is a lot more to learn from how the market economy with Chinese characteristics operates and evolves over time. If the Chinese economists rise up to the challenge, they will contribute to the development of economics.

Here is a letter to Sheng Hong I wrote in 1988. There I said that I had a “firm believe that an understanding of what is happening, and has happened, in China will greatly help us to improve and enrich our analysis of the influence of the institutional structure on the working of the economic system”. I still hold the belief. Indeed, the belief has become even stronger over time.

In the past, economics was once mainly a British subject. Now it is a subject dominated by the Americans. It will be a Chinese subject if the Chinese economists adopt the right attitude.

WN: I am deeply moved by what you just said. That will give Chinese economists a strong motivation and confidence to develop their own way of thinking.

RC: That’s exactly what they ought to do. That’s another reason that I do not like the term Coasean economics. If the right kind of economics that I have in mind is first developed in China, it will be rightly called the Chinese school of economics by future historians.

WN: This I believe is a very, very important point. You are saying that Coasean economics or what you call the right economics is not developed yet. It is an open subject. And you believe that the Chinese economists have a great chance to develop the subject.

RC: Exactly. I think deference to authority is a bad trait of the Chinese. What Chinese economists should do is to develop their own thinking based on a careful and systematic investigation of the working of the Chinese market economy. My work, “The Nature of the Firm” or “The Problem of Social Cost”, does not provide an answer to questions that the Chinese economists should tackle. The most my work or the work of anyone else can do is to suggest possible directions to tackle the problems.

WN: I agree. I think more and more Chinese economists have recognized that they either have to strike out on their own way or have no way to go. The recent financial meltdown and economic crisis, and particularly the lack of coherent response among American economists, have helped them to realize the flaws of mainstream economics.

RC: The main function of the Coase China Society, in my view, is to facilitate the development of independent thinking among Chinese economists. The Society will not be run as a big organization, but a network of many clusters of scholars. Each scholar will pursue what he thinks is the most important question. Each cluster of scholars will form a small community, working on some aspect or some region of the Chinese economy. We shall encourage all kinds of research, historical, statistical, or analytical as long as it sheds light on how the Chinese economy works or changes. This is the only way to get a well-rounded view.

WN: Yes. The Society will collaborate with Chinese universities. A Chinese university can become a corporate member of the Society and specialize in studying the economic problems that are unique to where it is based. For example, Zhejiang University is well positioned to study the development of Wenzhou, Yiwu, and other phenomena unique to Zhejiang province.

RC: One way for the Society to advance the right kind of economics to China, and encourage Chinese economists to do the right kind of work, is to have a journal of its own. When I was editor of the Journal of Law and Economics, I was very active. I would attend seminars and conferences and talk to people to see what kind of research they were doing. I would solicit their articles if I thought they were good ones. And frequently, I would talk to people and encourage them to conduct certain studies with the promise to publish their article.

WN: This is indeed very different from the way journals are run now.

RC: I do not believe any other journal was run the same way then. Most journal editors wait for submitted articles and use external reviewers to select the articles for publication. This was not the way I worked. I knew what kind of articles I would like to publish, and I went around to find people to write them.

I’ll give you an example. Bernard Siegan came to the University of Chicago Law School as a Fellow and proposed to write a paper on the pros and cons of zoning. I told him instead to find a place where zoning did not exist and to see what happened to land use in comparison to places with zoning. He wrote a great paper about land use in Houston which did not have zoning (The paper was published as “Non-Zoning in Houston, Journal of Law and Economics (1970)).

Another example is Steve’s article on bees. I knew there were contracts between beekeepers and orchard owners in Washington. I asked Steve to investigate it. He did a splendid study (The paper was published as “The Fable of Bees, in Journal of Law and Economics (1973)).

Richard Sandor wrote a paper on the setup of a plywood future contract, which, however, failed. Sandor was very upset because no one would publish a paper on a failed market. I was not upset at all since most markets failed. The paper just showed how difficult it was to set up a market. I published his paper (The paper appeared as “Innovation by an Exchange: A Case Study of the Development of the Plywood Future Contract, Journal of Law and Economics (1973)).

WN: I think this is one of the greatest public services you have done to the profession. But the opportunity cost was probably very high. At the prime time of your research, you devoted yourself to the Journal instead of your own research. You might have written another one or two articles as great as “The Nature of the Firm” or “The Problem of Social Cost.”

RC: I do not regret my decision at all. This was the main attraction for me to come to Chicago. I think this was the only way to develop a subject. If it were not for the Journal, many articles would not have been published or even written.

WN: Based on your experience, what should the Society do if it launches a new journal?

RC: You should have a clear view of what you want to accomplish, what articles you want to publish and what kind of research you want to encourage. You shall not worry about how other people think about your views. You cannot control what other people think. You will not monopolize the whole field. If you believe in your view, you have to be strong to defend it and promote it in the market for ideas until you are convinced that it is proved wrong. This is the only way to be independent.

WN: I totally agree. But I don’t think we have got the second Coase yet. When you started editing the Journal of Law and Economics, you were already well established in the profession. Your view, no matter whatever it was, would be considered seriously and readily command agreement.

RC: I do not think that was the case. I always find myself in disagreement with the prevailing view. Even today, my view of the subject is not accepted by the profession. You certainly do not need a second Coase to make the Coase China Society successful. Instead, you will have a Cheung, or Wang, or some other Chinese name.

WN: I have three more questions left. The first one is, many people have said that China has succeeded in transforming itself from a planned economy to a market economy without private property rights. How could that happen?

RC: All economies have different systems of property rights. The common classification of private versus public property rights, the former associated with capitalism and the latter with socialism, is too simplified a view. Britain and America have different systems of property rights. China under Mao and the Soviet Union were also different in the ways property rights were structured. A good system of property rights is the one that economic resources, including human talents, are efficiently utilized. I think China will develop its own system of property rights. Whether you call it socialist or capitalist does not matter.

WN: Here comes the second question. Your 100th birthday is approaching, what you have to say to Chinese economists?

RC: What I am going to say have nothing to do with my birthday. All they should do is to study the Chinese economy based on how it actually works. It might be historical, or statistical, or analytical. Whatever form it takes, it has to be based on the working of the Chinese economy.

WN: This seems a simple task.

RC: It certainly is not something like E = MC2. But the way the economic system works is complicated. It has many components. Each component is itself a mini-system. The way they interact with each other and the whole system works is very complex. A regression with aggregated statistical data will not tell you much about the way the economy works.

WN: This is the last question. What you hope the Coase China Society should do in the near future?

RC: The Society should get it running as soon as possible. I mean it should get the research going in China. I have met many Chinese economists and read many of their works. They are very capable and some of their work is very promising. The Society will succeed as long as it gets the Chinese economists to study the working of the Chinese economy. If a journal helps, we will launch a journal. If workshops or conferences are needed, we will run workshops and conferences. If it needs funding, we will get funding. I expect the Chinese government and Chinese businessmen to be very supportive of the Society and eager to fund the research.

WN: Thank you very much, professor Coase. I cannot wait to share your enthusiasm and high hopes with my colleagues in China. Your work and your love for China have inspired many Chinese economists and won their deep respect. I am sure the Coase China Society will live up to your expectation.

RC: I am now 100 years old. At my stage, life requires a constant effort. As I told you many times, do not get old. But I have no doubt that Chinese economists will do the right kind of work, and make their contribution to advance economics. This hope keeps me happy and I thank them.

HT: Mario Rizzo