Reading of Mankiw's Principles of Economics
Man Kun's Microeconomics Division tells us that due to the essential difference in the right to say about the price of market products, the product price of monopoly enterprises is higher than their marginal revenue, resulting in excess monopoly profits. This profit is at the cost of restraining effective demand, reducing social welfare, and generating unnecessary losses. It is an undesirable behavior in the market. Therefore, a fair and responsible government should intervene in market monopoly to safeguard public interests and improve the well-being of the people. In view of the various strange phenomena existing in the domestic monopoly industry, such as unclear rights and responsibilities, indistinguishable enterprise and government, high management costs, nominal losses, personal oil flow, price hearings, etc., the author believes that the government should at least do something in the following important aspects:
1、 Establish a clear modern ownership relationship. For domestic monopoly industries such as water supply, power supply, gas supply, fixed line, railway, aviation, petrochemical, etc., due to the huge one-time construction cost and high technical threshold and comprehensive coordination requirements, a national natural monopoly has been formed in history. These industry institutions are characterized by overstaffed personnel, high management costs and low operating efficiency, which have become a common problem restricting the development of the industry. It is impossible to cure the historical stubborn disease without starting from the fundamental point of promoting market competition through the reform of system ownership. The effective approach is to peel off the fixed property rights and management rights of these industries. The fixed property rights of pipelines, equipment, rails, oil wells and so on belong to the state alone. The management rights are fully listed and transferred to the society, expand the channels of private wealth investment, allow private capital to enter industries such as water, electricity, telecommunications, oil exploration, railway operation, and introduce the market competition mechanism. On the basis of divestiture of management right and property right, further refine the division of labor, promote the improvement of market regulation function, further divest the production right and sales right in the management right, and hand over both rights to socialized capital for public operation. At the same time, we will formulate the national emergency property requisition method, and reserve the power of national emergency requisition and trusteeship of public resources and strategic materials in case of war, major natural disasters and other emergencies, so as to protect the major national interests and survival safety.
Although the separation of ownership in natural monopoly industries can greatly save management costs and give greater play to the market regulation mechanism, the disadvantage is that because the property rights are owned by the state, enterprises often do not have the power to update scientific and technological development and upgrading, and the government will not take the initiative to upgrade equipment and update pipe network facilities. As a result, system reliability and operation efficiency are reduced due to equipment aging. In order to solve this contradiction, according to the ownership relationship, governments at all levels should prepare plans for the renewal, upgrading and development of facilities and equipment in relevant industries, and submit them to the state for approval or filing. Equipment renewal and facility construction should be implemented in strict accordance with the approved plans, and the adjustment and revision of the above plans must be regulated by legislation. At the same time, according to the principle of localized management, the local government shall establish a special organization or unit to be responsible for the all-weather daily maintenance (maintenance) management of state-owned fixed assets.
For other non natural monopoly industries such as finance, telecommunications (except fixed line telephone), further expand the scope of government franchise, allow social capital to set up private finance and private telecommunications businesses, gradually eliminate monopoly, finally fully realize market-oriented competition, and implement the same national treatment for state-owned and private enterprises in policy.
2、 Establish a strict incentive, accountability and evaluation mechanism. As an advocate of modern free economy, Mankun pointed out that the level of government operation in monopoly industries is low and inefficient. Although he also emphasized the necessity of government regulation, his intention to rely on market mechanisms is obvious. It is easy to draw the general conclusion that "the country is inferior to the people". The author believes that it is easy to produce certain misleading. The key to the problem is that, in addition to the lack of necessary market competition mechanism, the other key to the low efficiency of state-owned monopoly is that there is no incentive, accountability and evaluation mechanism with clear responsibilities and rights.
The important reason why private enterprises are more efficient is that their responsibilities and rights are clear. The responsibility of managers is to create profits for the board of directors. The quality of enterprise operation is directly related to the appointment, removal and income of managers. The responsibility and rights model is simple and effective. The reason why state-owned enterprises are inefficient is that the responsibilities and rights of enterprises are not clear, resulting in the absence of strict and scientific incentive and accountability mechanisms. First of all, there is no good talent selection system. Under the existing bureaucratic system that focuses on nepotism and seniority, it is difficult for management talents to stand out; Secondly, managers only need to be responsible to their superiors, not to the state. The characteristic of the rule of man in China is that the quality of enterprise operation does not affect the position and treatment of managers, but whether the top leaders are satisfied; Third, the responsibilities of government and enterprises are not divided. Managers need to ask for instructions frequently when making decisions. The government has seriously interfered with the operation of enterprises, often missing market opportunities. Fourth, the responsibilities of the Party and enterprises are not divided. It has become normal for party affairs to interfere with the normal operation of state-owned enterprises, and it is difficult for managers to use their management skills.
The following measures can be taken to deal with the malpractice of monopoly state-owned enterprises: (1) Establish the accountability system of state-owned enterprises' personnel negligence. The selection criteria for managers shall be scientifically formulated, and the employment shall be oriented to the society, reflecting fairness, impartiality and openness. If the improper employment causes losses to state-owned enterprises, the leaders of the superior competent departments of employment shall be strictly investigated for responsibility. （2） Develop a more unified, reasonable and scientific quantitative evaluation system. The State Council shall formulate an outline for the performance evaluation of monopoly state-owned enterprises, and the national ministries and commissions of various industries shall formulate detailed rules for the industry evaluation according to the outline and the characteristics of the industry, which shall be quantified into specific operations. The performance evaluation shall be directly linked to the appointment, removal and treatment of enterprise managers, and no monopoly enterprise or local department shall relax the evaluation standards at will. （3） Implement the non local evaluation system. Led by the special agency of the State Council, performance evaluation is carried out by a cross regional or even independent third party. Although it may increase a certain administrative cost, it can effectively eliminate the bad evaluation phenomenon of symbiosis of local interests; （4） Standardize the daily supervision of enterprise managers. While endowing enterprise managers with the power of human, financial and material management, the government appoints skilled technical cadres to be responsible for the daily supervision of the behavior of enterprise managers. The dispatched personnel refer to civil servants for management. Their income is separated from the enterprise by the financial burden. At the same time, the enterprise managers and supervisors implement the personal and family property publicity and audit system.
For private enterprises with social capital entering traditional monopoly industries, the government needs to strengthen contract management, implement daily behavior supervision, and resolutely safeguard the public interest. （1） Improve various management systems. Under the leadership of the State Council, various industry departments shall formulate business code of conduct, contract specifications and supervision rules, and issue evaluation standards that are detailed to the number. No monopoly enterprises and local departments shall relax the standards at will; （2） Implement a semi annual monitoring and evaluation system, focusing on monitoring and evaluating whether the enterprise is harming the public interest. The monitoring and evaluation results are directly linked to the franchise rights and rewards and punishments of the enterprise, and the monitoring and evaluation results are regularly disclosed to the public; （3） A strict system of publicity and audit of personal and family property shall be implemented for government supervision and assessment personnel.
3、 Build a scientific monopoly price control system. （1） Establish a lean, efficient, fast and objective price measurement organization for monopoly industries. The State Council established this organization, which is directly under the top management of the State Council. Its members are composed of competent professionals in price, statistics, accounting, auditing, etc. It has three departments: data collection, data analysis, and data accounting. Under the collection department, there are price research teams in each region. The research teams are directly under the control of the state treasury, which directly allocates funds for operation. The research teams dispatched to various places collect the cost data of local monopoly industries first-hand on the spot. These data are directly collected by the collection department of the State Council without the help of local governments and departments, and then submitted to the analysis department for analysis and evaluation. The price cost of various places is preliminarily determined, and then the preliminary cost is sent to the accounting department for verification. Finally, the cost of various places is determined. At the same time, Strict accountability shall be carried out for the details of information. （2） Establish a system to regularly disclose cost accounting data information to the public. The cost directly determined by the special agency of the State Council shall be publicized to the public on a monthly basis. The information shall be operated in a sunny way, subject to the supervision of the masses and the media, and if problems are found, they shall be investigated and corrected in a timely manner. （3） In line with the principles of fairness, efficiency, standardization and transparency, we should legislate to formulate the price determination, floating and adjustment policies for monopoly industries, improve the existing local price hearing procedures on the basis of information disclosure, and legally protect the price voice of the masses. （4） For the price cost accounting of finance, telecommunications (non fixed) and other non natural monopoly industries, on the premise of safeguarding the public interest, enterprises are allowed to have a certain margin of profit within the statutory scope to further absorb social funds and promote the competitive development of the industry. （5） The Microeconomics Volume shows that the natural monopoly industry will have negative profits because the marginal cost curve goes down the average cost curve, and the desired price equilibrium point will lead to negative profits for enterprises. Therefore, in order to maintain the normal survival of natural monopoly enterprises, the state can consider using the excess tax of non natural monopoly industries for financial subsidies in the state of zero profit of natural monopoly. Another solution is to keep the pricing level of natural monopoly industries in line with that of non natural monopoly industries, and maintain the low profit status of the price level. The excess tax of the low profit part is used for financial subsidies for low-income families. (Note: The profit in economics refers to the profit considering the impact of opportunity cost, not the profit referred to by the financial profession)
To sum up, the ice breaking journey of the domestic monopoly industry is a systematic reform involving a wide range of aspects and a deeper level. The above important reform contents, such as ownership, rights and responsibilities, and pricing, are interrelated and intertwined. The reform is quite difficult and requires the courage and wisdom of the management. In spite of this, the author believes that as long as our management is truly concerned with the well-being of the people and truly holds the idea of building a strong country with a prosperous people, the reform process of monopoly industries is still a long way to go. The question is, are we ready within the framework of the existing superstructure?
Reading of Mankiw's Principles of Economics