The Advantages of Ambiguity? Development, Rule Formation and Property Rights During Transition in China

Abstract

Legally protected individual private property rights and a constrained state are doctrines of neoclassical economics-derived development theory. But what about China? It lacks strong rule of law, property rights can be collective, contested and ambiguous, and the state is relatively unconstrained and maintains a central role in the economy; yet it has seen impressive economic growth to take it to the world’s second largest economy. I argue that in the absence of legal/rational protections of individual property rights, political and social networks can provide alternative methods of property protection, allowing for economic development – with political protection substituting for legal. The novel claim I make is that ambiguity of property rights can provide opportunities and spaces for development and innovation, with the building of meaning and institutions found in a transitional state, where rules are unclear and contested, and where formal rules can “catch up” if apparent success can be demonstrated.

Keywords:

• Ambiguity
• China
• private property
• property rights
• economic development
• rural land
• de Soto
• state-owned enterprise
• good governance
• institutions
• institution building

Acknowledgments

Previous versions of this paper were presented to SASE 2014 (with Darryn Mitussis) and APSA 2015 (with Karl DeRouen). DeRouen assisted with Table 1. Thanks are due to both, and to Anne-Marie Brady and the editor and referees of this journal.

Notes

1. The term innovation includes: 1. innovation in terms of institutions and property arrangements and rules; 2. innovation in management technologies; 3. innovation in business and management processes, including products and marketing. Given the focus of this article, the first use is more common.

2. The Law on the Contract of Rural Land (2002) allows contract rights with a term of 30 years for agricultural land (Mao, 2012).