Theory of Market Rules

Author: Wei Chengyuan
Publisher:
Publishing Date: 2003-01-01
Features:
1. Four Levels of Market Rule Evolution
Market rules are social norms applicable to market behavior, evolving alongside markets and market activities. As markets and market activities historically develop, market rules have undergone an evolutionary process formed by four forms of carriers: customary rules, moral rules, organizational rules, and policy and legal rules.
1. Customary Form of Rules
Customary rules are the forms of market rules in the early stages of market and market economy relationships. They also integrate into the market organism as a highly self-reinforcing regulatory force, continuing in the market evolution process and becoming part of the overall market rules during subsequent periods of market development. In the early growth and development of markets, certain habits formed between and within tribes, as well as gradually developed exchange habits during long-term barter, automatically became constraints on commodity exchange behavior, marking the prototype of market rules. Once a market behavior pattern evolves into a market behavior habit, it acts as an automatic mechanism, naturally guiding and regulating market behavior relationships. Due to the relatively prominent role of customary order in daily life, those proven effective habits are often recognized by state authorities, becoming government regulations or even acquiring legal force, forming "customary law." In highly developed modern market economies like the Anglo-American common law systems, market transaction customs remain an important source for constructing market legal norms.
2. Moral Form of Rules
The development of social division of labor and exchange has led to significant advancements in social productivity, guiding humanity from the "heroic era" into a civilized world. Value standards such as right and wrong, good and evil, truth and beauty have accumulated in daily and exchange activities, giving rise to moral rules based on moral beliefs. Moral rules rely on internal cultural values to achieve self-discipline in market behavior. Modern market economy rules, such as the requirement to "act in good faith" in contract performance and the emphasis on "honesty," have evolved from this.
3. Organizational Form of Rules
With the development and refinement of markets, market organizations with specific purposes and functions, composed of certain groups, have emerged. These market organizations not only have certain division of labor and power structures, clear organizational boundaries, but also formal rules and regulations. These rules or organizational disciplines constrain the behavior of each role within the organization and their interactions, maintaining a specific orderly state. Such rules within market organizations, used to ensure normal and orderly operations, are referred to as "organizational rules." The main activities of market organizations generally revolve around the competition of commodity supply and the market competition of commodity sales, and their rules and regulations are primarily behavioral norms and standards for commodity operations and market competition. Therefore, these contents are an integral part of market behavior rules. In the modern market rule system, rules such as prohibiting market monopolies and ensuring standardized commodity quality and services directly regulate the commodity operations of market entities, including market organizations, and are increasingly penetrating into the entire process of commodity production, circulation, and post-production services. Additionally, with the extension of division of labor and exchange, the improvement of social civilization, and technological progress, the scale of production organizations has grown, giving rise to international economic and trade organizations beyond national boundaries. The charters and systems of these organizations often hold considerable authority, becoming behavioral norms for the global market and even serving as models for domestic market behavior norms.
4. Policy and Legal Form of Rules
This is the most coercive form of market rule carriers. Market policies and laws are decrees and ordinances on market behavior formulated or recognized by state administrative or judicial organs, reflecting the will of the ruling class and enforced by state coercion. Typically, the ruling class, based on its own interests, elevates existing important market relationships or relatively well-defined, repeatedly applicable basic behavioral norms into coercive systems with administrative or legal force, imposing corresponding administrative or legal penalties on violations. This ensures the deterrent power of state authority in market norms. Strictly speaking, only when a society is truly a rule of law society can people develop the concept and behavioral choices of consciously adhering to laws and other market systems, giving rise to what is known as a rule of law order or rule of law society. Therefore, the issue is not whether a country has policies and laws, but rather the level and progress of democracy and civilization in that society, and whether there is strict judicial behavior—this is what is meant by a market economy being a rule of law economy. Historically, the four levels of rules mentioned above have successively appeared, influencing and promoting each other, jointly guiding, coordinating, and regulating market behavior, and establishing the framework for market behavior choices in modern market economy societies. In other words, modern market rules have multiple carriers, including state legal norms, policy norms, market traditions, transaction customs, and commercial moral norms, as well as rules of market organizations, especially international economic and trade organizations. In the language of new institutional economics, these rule forms are divided into formal institutions and informal institutions.
2. The Meaning of Market Rules
Regarding what constitutes market rules, China's theoretical circles have offered numerous interpretations. From the perspective of different emphases in these interpretations, there are some differences in people's understanding of market rules and preferences for their connotations. The following are three representative interpretations:
The first emphasizes the state as the supplier of market rules and its formal institutional rule forms. For example, China's current political economy textbooks generally define: "Market rules refer to all regulatory systems that market entities must comply with to ensure orderly market operation, as formulated by the state based on the requirements of market operation laws. Essentially, they are market operation criteria stipulated in the form of laws, regulations, contracts, and conventions, used to constrain and regulate the market behavior of market entities, making market behavior orderly, standardized, and institutionalized." It also notably proposes that the framework of market rules includes market entry and exit rules, market competition rules, market transaction rules, and market arbitration rules.
The second considers both the state's formulation and recognition of rules, also emphasizing formal institutional rules and informal institutional rules. For instance, Professor Peng Xinglu and Professor Ye Quanliang argue, "Market rules refer to the market behavior criteria that are explicitly stipulated by the state or formed by custom for people to jointly follow." They believe market rules have three meanings: "legal norms, policy norms, and moral norms (including traditional customs)."
The third emphasizes that market entities themselves are the suppliers of market rules. For example, Gu Dongle and Song Zeyu, in their edited book The Path to Fair Competition, advocate: "Market rules refer to the sum of behavioral criteria formed by market entities in the market to achieve certain goals, which all must jointly follow. Since market rules primarily refer to various criteria used to regulate and adjust economic or behavioral relationships between market entities, they can also be referred to as market norms." They believe market rules have three connotations: coerciveness, authority, and custom.
Among these three interpretations, the first strengthens the role of the state in regulating modern market economies, outlining the content structure of market rules, but overlooks the social forces behind the supply of market rules and their informal institutional forms. The second better refines the two paths of the state in supplying market rules, considering both formal institutional rules and informal institutional rules, but still overlooks the social forces behind the supply of rules. The third emphasizes the objective basis for the formation of rules but insufficiently highlights the role, influence, and impact of the state in the market rule system.