Public Choice of Classic Chinese Literature

Water Margin (水浒传) is a book about 108 heroes who through one way or another become outlaws, it is one of the four great classics of Chinese literature and pretty jam packed with public choice messages (and the occasional cannibalism). Instead of a full summary of this thousand page long book I will instead point out three examples that I use in class.

Why corruption doesn’t grease the wheels-It is often suggested that bad laws make corruption good, when the empirical reality usually points to the opposite. But clearly it is true that given a bad law corruption allows for better outcomes. What gives?
It is because the bad laws exist for the corruption that results. Bad laws create extraction opportunities, if there wasn’t the corruption there likely wouldn’t be the law in the first place.
Water margin has an excellent demonstration of the principle. There is a rule that all new prisoners must receive 200 blows. Throughout the book we see that even a few blows can make a hero who is able to kill a man with three punches(to be fair that guy totally deserved the death punches) scarcely able to walk, 200 blows would kill anyone. So are all the prisoners killed? No, if you “bribe high and low” as all the heroes who become prisoners do(or have someone else do) the warden will say that you were sick during transfer and will delay your initial beating… indefinitely. The 200 blows law exists not for the stated reason of making the prisoners humble(I guess dead people are humble though…) but instead as a way for wardens and others working within the prison system to extract money from the prisoners(this increases the benefit of being a warden which increases how “nice” the warden will be to higher officials in order to get/keep the job).

Governmental incentives- One of the first major events of the book is a skillful robbery of money and gifts from one government official to his father in law who happens to be a higher up government official as a “birthday present”. The thieves justify their robbery by pointing out that the goods were taken from the people who worked hard, but instead of being used to help the people it is to secure the officials own position.
In general officials are shown as being primarily interested in furthering themselves and their families. Though some are honorable (the more honorable ones usually end up becoming outlaws by some twist of fate), the system that they work in is one of bribes and favors, if you don’t play it, good things are not in your future.
In the book even having a connection to a higher ranking official can grant large powers over the common man, and it is these powers that largely attract people to these positions. You catch the fish that are the most attracted to your bait, if the bait is power you shouldn’t be surprised when those who grab hold are often the ones that place the highest value on power.

Why revolutions often don’t produce good outcomes- New people in an old system produces old results. Violence and Social Orders is my favorite book for understanding economic development, honestly go and read it if you haven’t, I find it to be a factor of ten better than it’s rival Why Nations Fail(though the intended audience is also quite different). In it North, Wallis, and Weingast lay out a theory of what is required for a country to make the stable transition to a one with better institutions, the answer is not “put a new guy in place”. Instead the logic of closed institutions is such that even if your intentions as dictator are very good, you still need to restrict rights and create opportunities to extract from the people at large in order to satisfy members of your coalition that keep you in power(Dictators Handbook is a great book focusing on this point). There needs to be a fundamental change in the incentives faced by those in power and that only comes from a new structure (they outline 3 doorstop conditions). In the book we see the Heroes fight the government for hundreds and hundreds of pages, to eventually gain immense power. With this power they finally have a chance to change things! Well actually…they, facing the same incentives, end up basically doing the same things they had criticized the government for in the first place.

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