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Steven N.S. Cheung’s Reminiscenceof Himself – A Reply to Ning Wang
Steven N.S. Cheung1
1Emeritus Chair Professor of Economics, University of Hong Kong, Hong Kong,China
Citation Information: Man and the Economy. Volume 3,Issue 1, Pages 1–21, ISSN (Online) 2196-9647, ISSN (Print) 2196-9639,DOI: 10.1515/me-2016-0010, June 2016
Publication History
Published Online:
2016-06-01
1 Introduction
It is not correct to say that I was a C student inschool in Hong Kong. I did not pass even the first grade in high school. Later,in 1957–1959, I tried to make up some ground by attending high school classesin Toronto. There, I met a man by the name of Jason Wong. Knowing that nouniversity in Canada would accept me, Jason helped me apply to institutions inthe US. Thus it was that I entered UCLA in the fall of 1959, as anold-undergraduate of nearly 24. They had a lenient acceptance policy for theoverage. It is one of my deep regrets that I did not see Jason again. I met hisbrother Jeffery some seven years ago, only to learn that Jason had passed away.I owe Jason enormously, because he believed in me: That over-aged anduniversity-reject I may be, if given the opportunity I would surpass all the“properly-brought-up scholars” he knew.
I am sorry that I seldom communicated with Jasonduring my UCLA-Chicago-Seattle years. Then, I had no time for anything butstudy and research, research and study. My last contact with Jason was in 1982,when I sent him my just-published pamphlet, Will China Go Capitalist? Hereplied that it was from the hand of a grand master, and that should myprediction prove accurate, my name would go down in history.
2 Growing up in the wild
As a boy, I was never a lag-behind: Indeed, Iexcelled at almost everything I found interesting. But I was unlucky. Althoughborn into a well-to-do family, when I just turned six the Japanese invaded HongKong, and in 1942 my mother was forced to take seven of her ten children intoMainland China. We were refugees and starved for three long years. Here andthere my mother managed to put me in a school, a month or two at a time, forwhatever grade and in whatever classroom that had a place for me. In 1944–1945,for one whole year I did not get to eat a single bowl of rice, slept on thefloor in a mud hut, wandered around in the wild, and stole from the poorpeasants to feed my younger sister and myself.
At that time, my arms and legs were rotting due tomalnutrition. My mother was told that there was no chance my younger sister andI would survive. But she was a courageous woman, and decided to let me go huntfor food with my sister on my back. It would be better to take that chance thanto give up and die. Miraculously, we survived.
Two things made life bearable during that annushorribilis. In the small and poor village there was no pen and paper, butthere was a refugee who was a Classical scholar. This man had with him severalvolumes of Chinese literature, and whenever I scavenged enough straw and treebranches to feed the fire he would read the works out loud by its light. Inthis way, I memorized hundreds of Chinese poems and essays. The result is thatwhen I began to write in Chinese in 1983 my style of blending modern andclassical Chinese was already well honed, even though I did not remember how todo many of the characters because I learned classical Chinese by hearing andnot by reading. That a chair professor had to hire an editor to check the useof wrong characters was grist for Hong Kong gossip mills for years. (That didnot deter some universities in China today from assigning my prose writings fortheir literature classes!) I should add that in the process of re-learning thecharacters, I decided to try my hand at calligraphy. Though I began late, atage 55, my brush works are selling in the auction houses. I sell them fordonation. Not expensive, but they sell.
The second thing was that after a year wanderingaround the fields, I gained hands-on knowledge of Chinese farming. In the fallof 1966, when I used Chinese agricultural data to test sharecropping hypotheses(Cheung 1969a), I knew so much and was able to interpret the numbers with suchinsight and imagination that Armen Alchian, Gale Johnson, and Harry Johnson alljoined in warm applause. (Gale was so impressed with that he asked me to teacha course in agricultural economics at the University of Chicago!) This materialwas ultimately published as Chapter 8 of Theory of Share Tenancy (Cheung1969b). I could not have written that chapter without starving in a poorChinese village.
3 Failure in classroom and successin the street
From 1945 to 1954 I attended three schools, one in asmall town near Canton and two in Hong Kong, all old and reputableestablishments. I did poorly in all three. However, in each of these schoolsthere was one teacher who ignored my failures and told me that some day I wouldgo far. After I returned to Hong Kong in 1982 to assume the Chair of Economicsat the University of Hong Kong, I managed to arrange and meet two of these oldteachers, thanking them for their encouragements when I was failing thirtyyears earlier. When I finally found the whereabouts of the Canton teacher in2005, I was told he passed away in 2003. I owe this man, because when he failedme in the spring of 1948, he also told me that someday, somewhere, I would benoted for my thinking surpassing all the scholars he knew. Before my departure,he took me to a quiet corner on campus, asked me to sit with him on a bench,and explained to me that I failed because I thought so strangely. He said noone around could teach a student like me, including him. He speculated thatsomeday, somewhere, I might run into someone who could. It was turbulent time,and people were running because the communists were coming to Canton. I, too,left Canton for Hong Kong in 1948. I was 12.
My failures at school may well be offset by mysuccesses in the street. I was Chinese checker champion in Canton at the age of11, and by 15 for pocket money I played Chinese chess blindfolded againstseveral opponents at the same time. In 1952 I taught a younger school dropoutthe game of table tennis, and he later won the world championship in Hungary in1959. In Hong Kong I ruled the sea in fishing, the ground in marble playing andcoin throwing, the rooftops in kite flying, and the hills in bird catching. In1955, at 19, I picked up a camera and on the first day of trying I produced twoworks that won prizes and exhibited internationally. Only at school I failed.But because of my successes in the street I never considered myself a failureand wondered what I should do for a comeback.
4 Encouragements from my father
My father had only two years of schooling. He wroteChinese and English beautifully by self-learning. A quiet man, firm on hisprinciples, he was a successful businessman respected in the early stage ofindustrial development in Hong Kong and was given the honor as the father ofelectro-plating in that city. As the head of a large family he seldom talked tome when I was growing up. He died in 1954, the same year I got dismissed fromschool. I was 18.
About two months before my father passed away hesummoned me to his room in the hospital and gave me his first serious fatherand son talk. Only the two of us. He said he knew all along that I did poorlyat school, apologized that he had neglected me because he was occupied in hisbusiness. He said he had given up hope on me, but changed his mind. He said forabout a year he invited people who knew me to come to visit him, talked aboutwhat I did, and he reached the view that I was the most promising young man hehad ever known.
At the end, he said, “Doing poorly at school is notthe end of a career. The doctors told me I only have two or three more monthsto live. After I am gone I want you go to my business firm and learn, wait foranother chance to get yourself a good education. You must remember I respect ascholar more than any other profession.”
This another chance came three years later, when Itook a business trip to Toronto to negotiate with an exporter of nickel anodessubject to import restriction in Hong Kong imposed by the United States. Wewanted to find a way to get around that restriction. In only two days I came upwith a solution agreeable to the Canadian exporter. But then I decided not toreturn to Hong Kong, implicitly surrendering my right to inherit a share of myfather’s business in exchange for $100 Canadian a month of financial support.In Toronto I was floundering for not knowing what to do for an education. Oneyear later I met Jason Wong. I was 22.
Steven N.S. Cheung1
1Emeritus Chair Professor of Economics, University of Hong Kong, Hong Kong,China
Citation Information: Man and the Economy. Volume 3,Issue 1, Pages 1–21, ISSN (Online) 2196-9647, ISSN (Print) 2196-9639,DOI: 10.1515/me-2016-0010, June 2016
Publication History
Published Online:
2016-06-01
1 Introduction
It is not correct to say that I was a C student inschool in Hong Kong. I did not pass even the first grade in high school. Later,in 1957–1959, I tried to make up some ground by attending high school classesin Toronto. There, I met a man by the name of Jason Wong. Knowing that nouniversity in Canada would accept me, Jason helped me apply to institutions inthe US. Thus it was that I entered UCLA in the fall of 1959, as anold-undergraduate of nearly 24. They had a lenient acceptance policy for theoverage. It is one of my deep regrets that I did not see Jason again. I met hisbrother Jeffery some seven years ago, only to learn that Jason had passed away.I owe Jason enormously, because he believed in me: That over-aged anduniversity-reject I may be, if given the opportunity I would surpass all the“properly-brought-up scholars” he knew.
I am sorry that I seldom communicated with Jasonduring my UCLA-Chicago-Seattle years. Then, I had no time for anything butstudy and research, research and study. My last contact with Jason was in 1982,when I sent him my just-published pamphlet, Will China Go Capitalist? Hereplied that it was from the hand of a grand master, and that should myprediction prove accurate, my name would go down in history.
2 Growing up in the wild
As a boy, I was never a lag-behind: Indeed, Iexcelled at almost everything I found interesting. But I was unlucky. Althoughborn into a well-to-do family, when I just turned six the Japanese invaded HongKong, and in 1942 my mother was forced to take seven of her ten children intoMainland China. We were refugees and starved for three long years. Here andthere my mother managed to put me in a school, a month or two at a time, forwhatever grade and in whatever classroom that had a place for me. In 1944–1945,for one whole year I did not get to eat a single bowl of rice, slept on thefloor in a mud hut, wandered around in the wild, and stole from the poorpeasants to feed my younger sister and myself.
At that time, my arms and legs were rotting due tomalnutrition. My mother was told that there was no chance my younger sister andI would survive. But she was a courageous woman, and decided to let me go huntfor food with my sister on my back. It would be better to take that chance thanto give up and die. Miraculously, we survived.
Two things made life bearable during that annushorribilis. In the small and poor village there was no pen and paper, butthere was a refugee who was a Classical scholar. This man had with him severalvolumes of Chinese literature, and whenever I scavenged enough straw and treebranches to feed the fire he would read the works out loud by its light. Inthis way, I memorized hundreds of Chinese poems and essays. The result is thatwhen I began to write in Chinese in 1983 my style of blending modern andclassical Chinese was already well honed, even though I did not remember how todo many of the characters because I learned classical Chinese by hearing andnot by reading. That a chair professor had to hire an editor to check the useof wrong characters was grist for Hong Kong gossip mills for years. (That didnot deter some universities in China today from assigning my prose writings fortheir literature classes!) I should add that in the process of re-learning thecharacters, I decided to try my hand at calligraphy. Though I began late, atage 55, my brush works are selling in the auction houses. I sell them fordonation. Not expensive, but they sell.
The second thing was that after a year wanderingaround the fields, I gained hands-on knowledge of Chinese farming. In the fallof 1966, when I used Chinese agricultural data to test sharecropping hypotheses(Cheung 1969a), I knew so much and was able to interpret the numbers with suchinsight and imagination that Armen Alchian, Gale Johnson, and Harry Johnson alljoined in warm applause. (Gale was so impressed with that he asked me to teacha course in agricultural economics at the University of Chicago!) This materialwas ultimately published as Chapter 8 of Theory of Share Tenancy (Cheung1969b). I could not have written that chapter without starving in a poorChinese village.
3 Failure in classroom and successin the street
From 1945 to 1954 I attended three schools, one in asmall town near Canton and two in Hong Kong, all old and reputableestablishments. I did poorly in all three. However, in each of these schoolsthere was one teacher who ignored my failures and told me that some day I wouldgo far. After I returned to Hong Kong in 1982 to assume the Chair of Economicsat the University of Hong Kong, I managed to arrange and meet two of these oldteachers, thanking them for their encouragements when I was failing thirtyyears earlier. When I finally found the whereabouts of the Canton teacher in2005, I was told he passed away in 2003. I owe this man, because when he failedme in the spring of 1948, he also told me that someday, somewhere, I would benoted for my thinking surpassing all the scholars he knew. Before my departure,he took me to a quiet corner on campus, asked me to sit with him on a bench,and explained to me that I failed because I thought so strangely. He said noone around could teach a student like me, including him. He speculated thatsomeday, somewhere, I might run into someone who could. It was turbulent time,and people were running because the communists were coming to Canton. I, too,left Canton for Hong Kong in 1948. I was 12.
My failures at school may well be offset by mysuccesses in the street. I was Chinese checker champion in Canton at the age of11, and by 15 for pocket money I played Chinese chess blindfolded againstseveral opponents at the same time. In 1952 I taught a younger school dropoutthe game of table tennis, and he later won the world championship in Hungary in1959. In Hong Kong I ruled the sea in fishing, the ground in marble playing andcoin throwing, the rooftops in kite flying, and the hills in bird catching. In1955, at 19, I picked up a camera and on the first day of trying I produced twoworks that won prizes and exhibited internationally. Only at school I failed.But because of my successes in the street I never considered myself a failureand wondered what I should do for a comeback.
4 Encouragements from my father
My father had only two years of schooling. He wroteChinese and English beautifully by self-learning. A quiet man, firm on hisprinciples, he was a successful businessman respected in the early stage ofindustrial development in Hong Kong and was given the honor as the father ofelectro-plating in that city. As the head of a large family he seldom talked tome when I was growing up. He died in 1954, the same year I got dismissed fromschool. I was 18.
About two months before my father passed away hesummoned me to his room in the hospital and gave me his first serious fatherand son talk. Only the two of us. He said he knew all along that I did poorlyat school, apologized that he had neglected me because he was occupied in hisbusiness. He said he had given up hope on me, but changed his mind. He said forabout a year he invited people who knew me to come to visit him, talked aboutwhat I did, and he reached the view that I was the most promising young man hehad ever known.
At the end, he said, “Doing poorly at school is notthe end of a career. The doctors told me I only have two or three more monthsto live. After I am gone I want you go to my business firm and learn, wait foranother chance to get yourself a good education. You must remember I respect ascholar more than any other profession.”
This another chance came three years later, when Itook a business trip to Toronto to negotiate with an exporter of nickel anodessubject to import restriction in Hong Kong imposed by the United States. Wewanted to find a way to get around that restriction. In only two days I came upwith a solution agreeable to the Canadian exporter. But then I decided not toreturn to Hong Kong, implicitly surrendering my right to inherit a share of myfather’s business in exchange for $100 Canadian a month of financial support.In Toronto I was floundering for not knowing what to do for an education. Oneyear later I met Jason Wong. I was 22.
5 Why I failed at school
As an old man now and recalling the past, it is notdifficult to explain why I did so poorly during my early schooling period. Tworeasons stand out. First is I got used to run around in the wilderness duringthe war, and continued to do so when the war was over. I liked to skip classes,to wander alone in the fields or to sit by the seashore, fishing, pondering, ordoing nothing. And there were the street games when other children showed up.In other words, when as a boy I was wild. A second reason is that whenever Iasked a question in class in Hong Kong, a teacher would often punish me forasking what he considered as an irrelevant question. Most teachers were hostileto me. This was a sharp contrast with what happened in the first night Iaudited Jack Hirshleifer in the fall of 1962. I raised a seemingly irrelevantquestion. Jack stood up and asked for my name. When he could not find it on hisstudent list because I was an auditor, he wrote down my name carefully, makingsure he got the spelling right, and then told his colleagues that he found amost unusual student from China.
6 From Bill Allen to Armen Alchian
In UCLA, my first major was business administration.But I found accounting boring. On the other hand, Bill Allen, who taughtEcon101, was such an entertaining and inspiring teacher that I soon shiftedover to economics. At 24, I was old compared to my classmates. I knew I had tostep on it. I took as many as five or six courses from Bill. Warren Scoville,my professor in economic history, inspired me to think about graduate work. Hedid not gush as Jason Wong did about my academic prospects, but Warren madesure I was always within earshot every time he remarked that if I tried for aPhD I would go far.
Some years later I learned from a colleague inSeattle that Scoville and Alchian were not close friends at UCLA. However, itwas Scoville who told me that if I decided to do graduate work I should go forAlchian. He said Alchian was one of the best economists in the world. So it wasUCLA and nowhere else when I graduated in 1961. Armen was visiting Stanford atthat time, so I had to wait for him to return. My original plan was to obtain amaster’s degree and go back to Hong Kong, but when the MA happened in 1962Armen still had one more year away. I therefore decided to go for the PhD, andwaiting for Armen I spent one year auditing, reading and thinking. With thatadditional year and the straight A’s gained in all the advanced courses, I waswell prepared when at last the time came to attend Armen’s classes.
7 My teachers at graduate school
My chief teacher in theory during the MA year wasRobert Baldwin, who introduced me to Marshall, Robinson, Hicks, and Samuelson.Baldwin said I was the best student he ever had. While waiting for Armen, Iaudited Jack Hirshleifer’s courses. Jack taught me Fisher and Friedman. Irepeated his lectures for six semesters. I became the class star, because Jackwould routinely invite questions and answers from me. Often, the lecturesbecame a dialogue between the two of us. Jack never told me I was his beststudent, although he said so to other people. In a letter he later wrote toDoug North in Seattle, however, Jack compared me with Fisher!
A special mention must be made of Karl Brunner. Karlapparently did not like me at the beginning, but changed his mind later on andwrote me a glowing letter on my works not long after I arrived Seattle. Karl isthe most rigorous economist I ever knew, and although in my UCLA days I thoughthe was unnecessarily rigorous, I grew to appreciate the man and his logicalmind more and more. I regret that when I began my sharecropping thesis in 1966,Karl had already left UCLA.
I do not share Karl’s approach, which was to applyformal logic right from the beginning, even when ideas were just taking shape.I prefer to begin with hunches and intuition, and then let the hypothesesemerge. Of course, when we come to the argument stage logic must be applied. Toexplain an observation I like to begin by thinking along many different lines,let the ideas float around for a while, and then settle down to rigorouslyanalyze one or two hypotheses. The analytical rigor of my works comes from theinfluence of Karl.
8 No one encouraged me to learnmathematics
I never took a course in mathematics or econometricsat UCLA. When as an undergraduate I asked Bill Allen what I should choose for aminor, math or history, he said history. In retrospect, that was an excellentadvice, as it is evident in the empirical richness in all of my subsequentwritings on economics. In graduate school, no teacher asked me to learn math,and I was confident that I could learn what was needed as I go along. I learnedcalculus in two weeks with the help of friends, to prove some propositions insharecropping. But I knew that the theory was correct before I applied themathematics, so the equations were for window dressing only. For some timeafterward I invented my own mathematics, but stopped doing so when GeneSilberberg told me that my creations, though correct, were ugly. John McGee andYoram Barzel did not encourage me to learn mathematics. They believed thatsince I was able to reason with imagination and intuition, the use of technicalmethods would hinder rather than enhance the workings of a strangelyinteresting mind. Both Harry Johnson and John Pippenger, after reading Chapter8 of my sharecropping book, said that it made them doubt the usefulness ofeconometrics. On the other hand, because I had to use econometrics to analyzecrude oil data when consulting for a petroleum company, I took two lessons fromBarzel and graduated. Later, Yoram remarked on several occasions that he hadnever seen a person learn so much so quickly.
9 Inside the chambers of Alchian andHirshleifer
To return to Armen. The economics Alchian taught wasall Alchian’s and no one else! I had already taken the graduate theory coursesfor credit, so I could only audit Armen’s lectures. Again I did so six times,beginning in 1963. Armen had two rules: Auditing students were not allowed tosit in the front row, and they were not allowed to ask questions in class. Itherefore chose a seat close to the door. As soon as Armen left the room Irushed out to ask questions during the five-minute walk to his office. Armenwould ask in return whether I had read certain articles relating to myquestions, and whenever I replied “no” he would stop talking. I therefore gotmyself prepared, reading up everything I could find as being related to thequestion I wanted to ask. Armen’s answers would then come, in the moststimulating and inspiring ways. This process went on for several months, andthen Armen decided to open his office door and ask me in. After a year or so,he would let me sit down and talk economics.
In the spring of 1966, when I completed the firstmajor theoretical chapter on sharecropping, I send copies to Jack and Armen.Driving up from Long Beach to UCLA, I dropped in to see Jack first. He praisedthe piece sky high. But when I went to see Armen, he returned my draft withdozens of question marks and corrections. I was almost in tears when I left.
Returning to Long Beach, I sat down to study Armen’scomments and questions. So concentrated was I that when I digested everythingit was eleven a.m. the next day. I then wrote Armen a short note, promisingthat the next draft would be much improved. A month later I sent out my seconddraft of the same chapter, and drove up to UCLA again. Jack: “Brilliant, Steve,brilliant.” Armen: “When you look for a job and ask me to write arecommendation letter, I will say you can think clearly and write clearly.”
And when I turned in my empirical chapter (the saidChapter 8), Armen queried the reliability of every source I cited. I had tocontact the Department of Agriculture and Forestry in Taiwan to ask how theirdata were collected. When every datum was verified to his satisfaction, Armenmade only one remark: “We knew all along you are good material to teach, andthat is why we inserted extra pressure on you. Now you know what good researchis all about.” My habit of paying attention to factual details stems from thatexperience.
Armen had the curiosity of a child and askedquestions with child-like simplicity and directness. That is why in a 1976conference to honor him, I submitted a paper asking a child-like question: “Whyare Better Seats Under Priced?” During coffee time I sat with Armen’s closefriend Bill Meckling, and Bill said to me, “Steve, do not ever change the typeof subject matters you choose to write or the style of your execution. You havesuch interesting taste that only Armen could produce a student like you.”
As an old man now and recalling the past, it is notdifficult to explain why I did so poorly during my early schooling period. Tworeasons stand out. First is I got used to run around in the wilderness duringthe war, and continued to do so when the war was over. I liked to skip classes,to wander alone in the fields or to sit by the seashore, fishing, pondering, ordoing nothing. And there were the street games when other children showed up.In other words, when as a boy I was wild. A second reason is that whenever Iasked a question in class in Hong Kong, a teacher would often punish me forasking what he considered as an irrelevant question. Most teachers were hostileto me. This was a sharp contrast with what happened in the first night Iaudited Jack Hirshleifer in the fall of 1962. I raised a seemingly irrelevantquestion. Jack stood up and asked for my name. When he could not find it on hisstudent list because I was an auditor, he wrote down my name carefully, makingsure he got the spelling right, and then told his colleagues that he found amost unusual student from China.
6 From Bill Allen to Armen Alchian
In UCLA, my first major was business administration.But I found accounting boring. On the other hand, Bill Allen, who taughtEcon101, was such an entertaining and inspiring teacher that I soon shiftedover to economics. At 24, I was old compared to my classmates. I knew I had tostep on it. I took as many as five or six courses from Bill. Warren Scoville,my professor in economic history, inspired me to think about graduate work. Hedid not gush as Jason Wong did about my academic prospects, but Warren madesure I was always within earshot every time he remarked that if I tried for aPhD I would go far.
Some years later I learned from a colleague inSeattle that Scoville and Alchian were not close friends at UCLA. However, itwas Scoville who told me that if I decided to do graduate work I should go forAlchian. He said Alchian was one of the best economists in the world. So it wasUCLA and nowhere else when I graduated in 1961. Armen was visiting Stanford atthat time, so I had to wait for him to return. My original plan was to obtain amaster’s degree and go back to Hong Kong, but when the MA happened in 1962Armen still had one more year away. I therefore decided to go for the PhD, andwaiting for Armen I spent one year auditing, reading and thinking. With thatadditional year and the straight A’s gained in all the advanced courses, I waswell prepared when at last the time came to attend Armen’s classes.
7 My teachers at graduate school
My chief teacher in theory during the MA year wasRobert Baldwin, who introduced me to Marshall, Robinson, Hicks, and Samuelson.Baldwin said I was the best student he ever had. While waiting for Armen, Iaudited Jack Hirshleifer’s courses. Jack taught me Fisher and Friedman. Irepeated his lectures for six semesters. I became the class star, because Jackwould routinely invite questions and answers from me. Often, the lecturesbecame a dialogue between the two of us. Jack never told me I was his beststudent, although he said so to other people. In a letter he later wrote toDoug North in Seattle, however, Jack compared me with Fisher!
A special mention must be made of Karl Brunner. Karlapparently did not like me at the beginning, but changed his mind later on andwrote me a glowing letter on my works not long after I arrived Seattle. Karl isthe most rigorous economist I ever knew, and although in my UCLA days I thoughthe was unnecessarily rigorous, I grew to appreciate the man and his logicalmind more and more. I regret that when I began my sharecropping thesis in 1966,Karl had already left UCLA.
I do not share Karl’s approach, which was to applyformal logic right from the beginning, even when ideas were just taking shape.I prefer to begin with hunches and intuition, and then let the hypothesesemerge. Of course, when we come to the argument stage logic must be applied. Toexplain an observation I like to begin by thinking along many different lines,let the ideas float around for a while, and then settle down to rigorouslyanalyze one or two hypotheses. The analytical rigor of my works comes from theinfluence of Karl.
8 No one encouraged me to learnmathematics
I never took a course in mathematics or econometricsat UCLA. When as an undergraduate I asked Bill Allen what I should choose for aminor, math or history, he said history. In retrospect, that was an excellentadvice, as it is evident in the empirical richness in all of my subsequentwritings on economics. In graduate school, no teacher asked me to learn math,and I was confident that I could learn what was needed as I go along. I learnedcalculus in two weeks with the help of friends, to prove some propositions insharecropping. But I knew that the theory was correct before I applied themathematics, so the equations were for window dressing only. For some timeafterward I invented my own mathematics, but stopped doing so when GeneSilberberg told me that my creations, though correct, were ugly. John McGee andYoram Barzel did not encourage me to learn mathematics. They believed thatsince I was able to reason with imagination and intuition, the use of technicalmethods would hinder rather than enhance the workings of a strangelyinteresting mind. Both Harry Johnson and John Pippenger, after reading Chapter8 of my sharecropping book, said that it made them doubt the usefulness ofeconometrics. On the other hand, because I had to use econometrics to analyzecrude oil data when consulting for a petroleum company, I took two lessons fromBarzel and graduated. Later, Yoram remarked on several occasions that he hadnever seen a person learn so much so quickly.
9 Inside the chambers of Alchian andHirshleifer
To return to Armen. The economics Alchian taught wasall Alchian’s and no one else! I had already taken the graduate theory coursesfor credit, so I could only audit Armen’s lectures. Again I did so six times,beginning in 1963. Armen had two rules: Auditing students were not allowed tosit in the front row, and they were not allowed to ask questions in class. Itherefore chose a seat close to the door. As soon as Armen left the room Irushed out to ask questions during the five-minute walk to his office. Armenwould ask in return whether I had read certain articles relating to myquestions, and whenever I replied “no” he would stop talking. I therefore gotmyself prepared, reading up everything I could find as being related to thequestion I wanted to ask. Armen’s answers would then come, in the moststimulating and inspiring ways. This process went on for several months, andthen Armen decided to open his office door and ask me in. After a year or so,he would let me sit down and talk economics.
In the spring of 1966, when I completed the firstmajor theoretical chapter on sharecropping, I send copies to Jack and Armen.Driving up from Long Beach to UCLA, I dropped in to see Jack first. He praisedthe piece sky high. But when I went to see Armen, he returned my draft withdozens of question marks and corrections. I was almost in tears when I left.
Returning to Long Beach, I sat down to study Armen’scomments and questions. So concentrated was I that when I digested everythingit was eleven a.m. the next day. I then wrote Armen a short note, promisingthat the next draft would be much improved. A month later I sent out my seconddraft of the same chapter, and drove up to UCLA again. Jack: “Brilliant, Steve,brilliant.” Armen: “When you look for a job and ask me to write arecommendation letter, I will say you can think clearly and write clearly.”
And when I turned in my empirical chapter (the saidChapter 8), Armen queried the reliability of every source I cited. I had tocontact the Department of Agriculture and Forestry in Taiwan to ask how theirdata were collected. When every datum was verified to his satisfaction, Armenmade only one remark: “We knew all along you are good material to teach, andthat is why we inserted extra pressure on you. Now you know what good researchis all about.” My habit of paying attention to factual details stems from thatexperience.
Armen had the curiosity of a child and askedquestions with child-like simplicity and directness. That is why in a 1976conference to honor him, I submitted a paper asking a child-like question: “Whyare Better Seats Under Priced?” During coffee time I sat with Armen’s closefriend Bill Meckling, and Bill said to me, “Steve, do not ever change the typeof subject matters you choose to write or the style of your execution. You havesuch interesting taste that only Armen could produce a student like you.”
10 Long Beach and Eldon Dvorak
Some remarks need be made about my job at Cal StateCollege at Long Beach during 1965–1967. In 1965, it was very easy to find ateaching job in economics. I received unsolicited offers from England,Australia and Alaska. I went to Long Beach because it was a one-hour drive toUCLA. I needed to consult Jack and Armen about my dissertation. My greatfortune at Long Beach was to share an office with Eldon Dvorak, the man wholater played an important role in the development of the Western EconomicAssociation. After only several months Eldon was telling colleagues that CalState Long Beach will someday be remembered of having employed Steven Cheung.Of course it was a hyperbole, but it did me no harm, and in 1966 Eldon and LongBeach students help me to earn the best teacher award in economics among the 18state colleges. This was good for my immediate academic future, becauseprospective employers would naturally query whether a Chinese could speakEnglish well enough to teach properly.
Teaching 12 hours a week at Long Beach was a heavyload, but Eldon, a senior member of the department, would arrange for me thebest possible schedule. In the early spring of 1966, I read a Chinese articlesaying that after land reform in Taiwan, introduced in 1949 to reduce andrestrict the landlord’s rental share to substantially below the market level,agricultural output increased sharply. This did not make sense to me, so I wentto the library to see what I could find to support or refute this claim by theTaiwanese government.
It just so happened that the library possessed acomplete set of the Taiwan Agricultural Year Book, containing extremelydetailed reports of annual yields of different crops in different localities.At first, I thought that for political propaganda, the Taiwan government hadinflated the figures to demonstrate the success of land reform. But afterseveral weeks I could detect no lies: Agricultural yields did jump aftercontrol of the landlord’s share percentage was imposed. It would be verydifficult to cheat when the data were so meticulous and detailed, and I couldfind no inconsistency after weeks of careful checking.
One evening in March 1966, I sat down and firstworked out the equilibrium of sharecropping without the sharing restriction,then injected the sharing restriction, and to my great surprise found thatagricultural yields would rise. It took me only one evening to come up withthis theory. After two more days spent going over the analysis repeatedly andfinding no flaw, I asked Eldon to sit down to listen carefully to what I havedone. I proceeded very slowly, step by step, and after each step I waited untilEldon fully understood and agreed. Eldon asked many questions along the way,and I would say, “Slow down, Eldon, slow down.” I would not continue until hefully understood my reasoning at every turn. After three hours Eldon said,“Steve, this theory of yours is going to be earthshaking.”
It is a simple theory, obvious almost, but verydifficult to accept. When I presented my findings to a UCLA seminar in May1966, everybody disagreed. When the first of my sharecropping analysis (Cheung 1968) appeared as a lead article in JPEin October 1968, the journal received a number of comments saying I was wrong.Bob Mundell, then JPE editor, asked whether I would like to reply, but Isaid no.
I will always remember Eldon fondly. In the spring of1967, he solicited a small grant of $500 to finance my one-man photographicexhibition at the Long Beach Museum of Art. He himself even made wooden framesfor the pictures in his own garage when the money ran out. It was to become themost successful art exhibition in the history of that museum, with headlinecoverage in the newspapers, viewers drawn from afar, and they twice extendedthe length of the exhibition period.
11 My association with Coase
In 1962, I made a copy of Coase’s 1960 paper onsocial cost and carried it in my pocket for months, read it over and over againuntil the sheets fell into small pieces. What happened was that I could notunderstand the meaning of externality. Though it was a popular topic at thattime for some reason I had never discussed externality with Armen, and evenstranger is that in 1967 I discovered that Coase himself had never heard ofthat term. No teacher at UCLA could answer my query on the meaning ofexternality, although they all claimed they knew what it was. My efforts tounderstand externality eventually led to the publication of a paper on thestructure of contracts in 1970, followed by a paper on bees in 1973 (Cheung1973), and a pamphlet on social cost in 1978 (Cheung 1978).
My deep understanding of Ronald’s 1960 paper igniteda friendship which has become legendary, and which in all likelihood will berecorded in the economic history of China. It began in the fall of 1967, when Iwalked into Ronald’s office at the Chicago Law School and introduced myself:“Professor Coase, my name is Steven Cheung, a student of Alchian, I had spentseveral years reading your paper on social cost.” He was sitting and reading,raising his head, and asked: “What did I say in that paper?” I replied, “Yourpaper is about the constraints subject to which contracts are made.” He stoodup, and said, “At long last somebody understands me. Let us go to lunch.”
12 A happy share of the take and aCoase error
It was the intellectual highlight of my life, to beable to walk up and down the Chicago campus with Coase and discuss economicsduring my tenure there in 1967–1969. Talking about the future of economics, Iexplained my view that Coase’s 1960 paper would change economics. Nearly half acentury has past, and if one does not mind the tedious task of going throughthe Chinese Internet, one would find that I am credited as the founder ofcontract economics, Coase the founder of transaction costs, and Alchian thefounder of property rights. I am happy with my share of the take, but would notmind trading with Ronald for his. As for Armen’s property rights, I find it toodifficult to obtain testable propositions and therefore use the associatedconcepts less and less over time. But Armen’s beautiful insights on pricing andcompetition are so interesting that I use them more and more. I may be the onlystudent who inherited fully Armen’s thinking. Picking a seat close to theclassroom door has paid-off handsomely!
An great moment came when, in writing a piece on thefuture of China in 1981 (Cheung 1982), I found a flaw in Coase (1960): If transaction costs are zero,there would be no market! Both Ronald and Ken Arrow later concurred with thisview. I did not know how important this discovery is until twenty years later,when I began to include the dissipation of rent as a part of transaction costs.But I had to wait until a few years ago to come up with a beautiful theorem oftransaction costs substitution: Markets emerge as the result of one type oftransaction costs (the cost of using the market) substituting for another type(the dissipation of rent).
13 The Chicago school
In the Foreword to a collection of my Englishwritings, Coase noted that when at Chicago I studied the thinking of eightgrand masters, including himself, and absorbed and extended their ideas andmade them my own. It was the Chicago School at its peak, with a gathering of economictalent surpassing any other group in history. I venture to predict that it willnever be seen again.
But the Chicago School was on the verge of decline.Uzawa left the same year I did (1969), Mundell a year or two later, thenFriedman and Director retired, Harberger moved to UCLA and Griliches toHarvard. Harry Johnson was seldom around. Although the replacements weresuperb, the departure of Milton and Aaron and Al spelled the end of a paradigm.The critical mass of the Chicago School disintegrated at that time. Puttingbrilliant minds together is a necessary but not sufficient condition to form anacademic school of historic significance. When Al Harberger tried to persuademe to stay in Chicago, he rightly pointed out to me that the 1967–1969 groupwas unsurpassed and in all likelihood will never be seen again.
At Chicago, I was a small figure surrounded bygiants. I shared an office with a wonderful Donald McCloskey, who taught me howto write better English. I adored and imitated the writing style of Stigler.George was a truly brilliant man. He belonged to the Business School, and Iloved to drop into his office to get knocked about by him. Once he dropped intomy office, with Don also sitting there to listen, and said, “Steve, I haveeverything essential for a great economist, but no original ideas!” I replied,“George, I am full of original ideas, but nothing else!” He knew all along Iadored him, and to show him that I, too, could handle the history of economicthought, I wrote a long chapter on the development of sharecropping theory,detailing the thinking on the subject from Adam Smith to Gale Johnson. After heread the manuscript I went to see him and told him that is how the history ofthought should be handled. George knew I scored one-up on him and said: “Butyou are wrong in saying that Marshall understood the concept of cost. He didnot!” And he went to the bookshelf to find a copy of Marshall’s Principles,and turned to the page in which there was one sentence demonstrating thatMarshall did not understand cost. Yes, Stigler was not only brilliant, he wasone of the finest scholars I had the honor of knowing.
Some remarks need be made about my job at Cal StateCollege at Long Beach during 1965–1967. In 1965, it was very easy to find ateaching job in economics. I received unsolicited offers from England,Australia and Alaska. I went to Long Beach because it was a one-hour drive toUCLA. I needed to consult Jack and Armen about my dissertation. My greatfortune at Long Beach was to share an office with Eldon Dvorak, the man wholater played an important role in the development of the Western EconomicAssociation. After only several months Eldon was telling colleagues that CalState Long Beach will someday be remembered of having employed Steven Cheung.Of course it was a hyperbole, but it did me no harm, and in 1966 Eldon and LongBeach students help me to earn the best teacher award in economics among the 18state colleges. This was good for my immediate academic future, becauseprospective employers would naturally query whether a Chinese could speakEnglish well enough to teach properly.
Teaching 12 hours a week at Long Beach was a heavyload, but Eldon, a senior member of the department, would arrange for me thebest possible schedule. In the early spring of 1966, I read a Chinese articlesaying that after land reform in Taiwan, introduced in 1949 to reduce andrestrict the landlord’s rental share to substantially below the market level,agricultural output increased sharply. This did not make sense to me, so I wentto the library to see what I could find to support or refute this claim by theTaiwanese government.
It just so happened that the library possessed acomplete set of the Taiwan Agricultural Year Book, containing extremelydetailed reports of annual yields of different crops in different localities.At first, I thought that for political propaganda, the Taiwan government hadinflated the figures to demonstrate the success of land reform. But afterseveral weeks I could detect no lies: Agricultural yields did jump aftercontrol of the landlord’s share percentage was imposed. It would be verydifficult to cheat when the data were so meticulous and detailed, and I couldfind no inconsistency after weeks of careful checking.
One evening in March 1966, I sat down and firstworked out the equilibrium of sharecropping without the sharing restriction,then injected the sharing restriction, and to my great surprise found thatagricultural yields would rise. It took me only one evening to come up withthis theory. After two more days spent going over the analysis repeatedly andfinding no flaw, I asked Eldon to sit down to listen carefully to what I havedone. I proceeded very slowly, step by step, and after each step I waited untilEldon fully understood and agreed. Eldon asked many questions along the way,and I would say, “Slow down, Eldon, slow down.” I would not continue until hefully understood my reasoning at every turn. After three hours Eldon said,“Steve, this theory of yours is going to be earthshaking.”
It is a simple theory, obvious almost, but verydifficult to accept. When I presented my findings to a UCLA seminar in May1966, everybody disagreed. When the first of my sharecropping analysis (Cheung 1968) appeared as a lead article in JPEin October 1968, the journal received a number of comments saying I was wrong.Bob Mundell, then JPE editor, asked whether I would like to reply, but Isaid no.
I will always remember Eldon fondly. In the spring of1967, he solicited a small grant of $500 to finance my one-man photographicexhibition at the Long Beach Museum of Art. He himself even made wooden framesfor the pictures in his own garage when the money ran out. It was to become themost successful art exhibition in the history of that museum, with headlinecoverage in the newspapers, viewers drawn from afar, and they twice extendedthe length of the exhibition period.
11 My association with Coase
In 1962, I made a copy of Coase’s 1960 paper onsocial cost and carried it in my pocket for months, read it over and over againuntil the sheets fell into small pieces. What happened was that I could notunderstand the meaning of externality. Though it was a popular topic at thattime for some reason I had never discussed externality with Armen, and evenstranger is that in 1967 I discovered that Coase himself had never heard ofthat term. No teacher at UCLA could answer my query on the meaning ofexternality, although they all claimed they knew what it was. My efforts tounderstand externality eventually led to the publication of a paper on thestructure of contracts in 1970, followed by a paper on bees in 1973 (Cheung1973), and a pamphlet on social cost in 1978 (Cheung 1978).
My deep understanding of Ronald’s 1960 paper igniteda friendship which has become legendary, and which in all likelihood will berecorded in the economic history of China. It began in the fall of 1967, when Iwalked into Ronald’s office at the Chicago Law School and introduced myself:“Professor Coase, my name is Steven Cheung, a student of Alchian, I had spentseveral years reading your paper on social cost.” He was sitting and reading,raising his head, and asked: “What did I say in that paper?” I replied, “Yourpaper is about the constraints subject to which contracts are made.” He stoodup, and said, “At long last somebody understands me. Let us go to lunch.”
12 A happy share of the take and aCoase error
It was the intellectual highlight of my life, to beable to walk up and down the Chicago campus with Coase and discuss economicsduring my tenure there in 1967–1969. Talking about the future of economics, Iexplained my view that Coase’s 1960 paper would change economics. Nearly half acentury has past, and if one does not mind the tedious task of going throughthe Chinese Internet, one would find that I am credited as the founder ofcontract economics, Coase the founder of transaction costs, and Alchian thefounder of property rights. I am happy with my share of the take, but would notmind trading with Ronald for his. As for Armen’s property rights, I find it toodifficult to obtain testable propositions and therefore use the associatedconcepts less and less over time. But Armen’s beautiful insights on pricing andcompetition are so interesting that I use them more and more. I may be the onlystudent who inherited fully Armen’s thinking. Picking a seat close to theclassroom door has paid-off handsomely!
An great moment came when, in writing a piece on thefuture of China in 1981 (Cheung 1982), I found a flaw in Coase (1960): If transaction costs are zero,there would be no market! Both Ronald and Ken Arrow later concurred with thisview. I did not know how important this discovery is until twenty years later,when I began to include the dissipation of rent as a part of transaction costs.But I had to wait until a few years ago to come up with a beautiful theorem oftransaction costs substitution: Markets emerge as the result of one type oftransaction costs (the cost of using the market) substituting for another type(the dissipation of rent).
13 The Chicago school
In the Foreword to a collection of my Englishwritings, Coase noted that when at Chicago I studied the thinking of eightgrand masters, including himself, and absorbed and extended their ideas andmade them my own. It was the Chicago School at its peak, with a gathering of economictalent surpassing any other group in history. I venture to predict that it willnever be seen again.
But the Chicago School was on the verge of decline.Uzawa left the same year I did (1969), Mundell a year or two later, thenFriedman and Director retired, Harberger moved to UCLA and Griliches toHarvard. Harry Johnson was seldom around. Although the replacements weresuperb, the departure of Milton and Aaron and Al spelled the end of a paradigm.The critical mass of the Chicago School disintegrated at that time. Puttingbrilliant minds together is a necessary but not sufficient condition to form anacademic school of historic significance. When Al Harberger tried to persuademe to stay in Chicago, he rightly pointed out to me that the 1967–1969 groupwas unsurpassed and in all likelihood will never be seen again.
At Chicago, I was a small figure surrounded bygiants. I shared an office with a wonderful Donald McCloskey, who taught me howto write better English. I adored and imitated the writing style of Stigler.George was a truly brilliant man. He belonged to the Business School, and Iloved to drop into his office to get knocked about by him. Once he dropped intomy office, with Don also sitting there to listen, and said, “Steve, I haveeverything essential for a great economist, but no original ideas!” I replied,“George, I am full of original ideas, but nothing else!” He knew all along Iadored him, and to show him that I, too, could handle the history of economicthought, I wrote a long chapter on the development of sharecropping theory,detailing the thinking on the subject from Adam Smith to Gale Johnson. After heread the manuscript I went to see him and told him that is how the history ofthought should be handled. George knew I scored one-up on him and said: “Butyou are wrong in saying that Marshall understood the concept of cost. He didnot!” And he went to the bookshelf to find a copy of Marshall’s Principles,and turned to the page in which there was one sentence demonstrating thatMarshall did not understand cost. Yes, Stigler was not only brilliant, he wasone of the finest scholars I had the honor of knowing.
14 Milton Friedman
Although Friedman became a close friend of mine inlater years (he came to Seattle with Rose to officiate at my wedding), he wastoo busy to give me much time when I was at Chicago. I learn from Milton thatan economist’s soul should command such a high price that he should not sayanything he does not believe in. Armen drew a line for me, dictating that whilean academic economist may make policy recommendations, he or she must not stepbeyond to participate in real action. I take pride for having followed Milton’srule and Armen’s rule all my academic life.
It may be interesting to add that I once workedbriefly as a professional portrait photographer in Toronto, and when attendinggraduate school at UCLA there was a group of photographers following me todevelop a new and interesting style. In the fall of 1988 I took a portrait ofFriedman in Hong Kong. He was so happy with the portrait that he instantly saidhe would never release another photo of him to the press. True to his words,that picture I took of Milton is now seen everywhere. I also took a portrait ofRose, and one for Milton and Rose. With the Internet spreading these images myfriendship with Milton and Rose will go down history. Of course the futurehistory may also remember that I took Milton and Rose to Beijing to meet oneGeneral Secretary in 1988 and another General Secretary in 1993, but the stayingpower of these meetings cannot compare with the photos I took of the legendary couple!
15 Frank Knight and Aaron Director
I had the great honor of meeting Frank Knight at aMundell cocktail party, and I seized the opportunity to tell the old professorhow much I adored his 1924 paper on social cost and learned from it. Icannot understand why the Nobel Committee did not give Knight the Prize in theseveral years after 1969 when he was still alive. It is my great honor that, inthe entry on “Frank Knight” in Wikipedia, the names of five economistsKnight influenced are mentioned: Milton Friedman, James Buchannan, RonaldCoase, George Stigler, and Steven Cheung.
Besides Coase, in the Law School at Chicago there wasAaron Director. I stood in awe of Aaron’s firm stand for truth. Hisintellectual power overwhelmed me. In the spring of 1969 I presented a paper onthe choice of contracts at Stigler’s workshop. A day later I was alone havinglunch at the Quadrangle Club. I saw Aaron walking slowly towards me. I politelystood up. Aaron said, “The paper you presented yesterday was the best I haveread in several years.” He then turned and walked away. I was standing therealone, and tears came down from my eyes. Aaron liked my works, and hispreference was one main factor dictating that my works bear the samecharacteristics over the years.
Since my UCLA days I was thoroughly familiar with Aaron’soral tradition on tie-in sales. In fact, it was my knowledge of tie-in salesthat helped me to work out the sharecropping theory in one evening. There havebeen at least three books that say my sharecropping theory is a derivative ofthe Coase Theorem, which may be true, but what ignited my solution was tie-insales.
During that evening at Long Beach, what puzzled mewas that in the traditional analysis of the market there is a quantity and aprice, but in a share contract there is no price. Therefore, there must beother stipulations for the contract to function. That is, the share contractmust have a structure. Now a tie-in sale is a structured contract. Viewed insuch light, all that was necessary for me to do is to add one more stipulationto a share contract to obtain the equilibrium identity with a wage contract ora fixed-rent contract.
Some years later in Seattle, I had dinner with Aaronat Yoram Barzel’s home. Aaron asked how I thought of his tie-in saleshypothesis. I replied that the interpretation of tying the paper cards to meterthe intensity of the machine use is certainly a brilliant idea, but theassociated price-discrimination hypothesis is wrong. The machine rental is thesame for all users, and the card price is also the same, so where is thediscrimination? If discrimination is inferred to entities that are notexplicitly priced, then everything we purchase in the market entails pricediscrimination. I also told him that the current interpretations of pricediscrimination in terms of different price elasticities are all rubbish!
Aaron then continued to ask how I would interpret thetying of cards to the machine. I replied that it must be a maintenancecontract: With a slightly higher price for each card used, the more intensivemachine user paid a higher implicit maintenance cost, while the explicitmaintenance charge was zero.
16 Decision to leave Chicago forSeattle
By the spring of 1969, when I was ready to seek myfirst real academic job, I had been trained and befriended by eight masters: atUCLA I had Alchian, Brunner, Hirshleifer, and Baldwin; at Chicago I hadFriedman, Stigler, Coase, and Director. No student ever, anywhere, would havesuch luck. That is why Yoram Barzel wrote in 1995: “On arrival in Seattle in1969 Steve was, in my current view, the top transaction-cost property-rightseconomist in the profession.”
Coase and some other friends were baffled as to why Ileft Chicago, and I cannot say I left with no regrets. It is true that HydePark was not a good place to live at that time, and Seattle has a beautifulsea. But given my dedication to research, these cannot be the true reasons forthat decision. Over the years I have come to understand the reason: I wantedsome time alone to do my own thinking. Chicago’s workshops, lectures, andpapers to referee were too intense, and I wanted to be left alone to think freefrom outside influences. Of course I like to consult colleagues when I come upwith something novel, but when thinking I want to be left alone. It was in1969, too, that I decided not to read other people’s writings, that there is aperiod to read and a period to think, and in the thinking period I should notread. When I came up with something new I often consulted colleagues as towhether it has been proposed somewhere or sometime before, and it was very rarethat an idea I came up was not original. Only once, when I wrote a draft on thetheory of inter-individual effects, that I was informed a key point I made inthat paper was noted in an earlier paper by Buchanan and Stubblebine (1962).
Although Friedman became a close friend of mine inlater years (he came to Seattle with Rose to officiate at my wedding), he wastoo busy to give me much time when I was at Chicago. I learn from Milton thatan economist’s soul should command such a high price that he should not sayanything he does not believe in. Armen drew a line for me, dictating that whilean academic economist may make policy recommendations, he or she must not stepbeyond to participate in real action. I take pride for having followed Milton’srule and Armen’s rule all my academic life.
It may be interesting to add that I once workedbriefly as a professional portrait photographer in Toronto, and when attendinggraduate school at UCLA there was a group of photographers following me todevelop a new and interesting style. In the fall of 1988 I took a portrait ofFriedman in Hong Kong. He was so happy with the portrait that he instantly saidhe would never release another photo of him to the press. True to his words,that picture I took of Milton is now seen everywhere. I also took a portrait ofRose, and one for Milton and Rose. With the Internet spreading these images myfriendship with Milton and Rose will go down history. Of course the futurehistory may also remember that I took Milton and Rose to Beijing to meet oneGeneral Secretary in 1988 and another General Secretary in 1993, but the stayingpower of these meetings cannot compare with the photos I took of the legendary couple!
15 Frank Knight and Aaron Director
I had the great honor of meeting Frank Knight at aMundell cocktail party, and I seized the opportunity to tell the old professorhow much I adored his 1924 paper on social cost and learned from it. Icannot understand why the Nobel Committee did not give Knight the Prize in theseveral years after 1969 when he was still alive. It is my great honor that, inthe entry on “Frank Knight” in Wikipedia, the names of five economistsKnight influenced are mentioned: Milton Friedman, James Buchannan, RonaldCoase, George Stigler, and Steven Cheung.
Besides Coase, in the Law School at Chicago there wasAaron Director. I stood in awe of Aaron’s firm stand for truth. Hisintellectual power overwhelmed me. In the spring of 1969 I presented a paper onthe choice of contracts at Stigler’s workshop. A day later I was alone havinglunch at the Quadrangle Club. I saw Aaron walking slowly towards me. I politelystood up. Aaron said, “The paper you presented yesterday was the best I haveread in several years.” He then turned and walked away. I was standing therealone, and tears came down from my eyes. Aaron liked my works, and hispreference was one main factor dictating that my works bear the samecharacteristics over the years.
Since my UCLA days I was thoroughly familiar with Aaron’soral tradition on tie-in sales. In fact, it was my knowledge of tie-in salesthat helped me to work out the sharecropping theory in one evening. There havebeen at least three books that say my sharecropping theory is a derivative ofthe Coase Theorem, which may be true, but what ignited my solution was tie-insales.
During that evening at Long Beach, what puzzled mewas that in the traditional analysis of the market there is a quantity and aprice, but in a share contract there is no price. Therefore, there must beother stipulations for the contract to function. That is, the share contractmust have a structure. Now a tie-in sale is a structured contract. Viewed insuch light, all that was necessary for me to do is to add one more stipulationto a share contract to obtain the equilibrium identity with a wage contract ora fixed-rent contract.
Some years later in Seattle, I had dinner with Aaronat Yoram Barzel’s home. Aaron asked how I thought of his tie-in saleshypothesis. I replied that the interpretation of tying the paper cards to meterthe intensity of the machine use is certainly a brilliant idea, but theassociated price-discrimination hypothesis is wrong. The machine rental is thesame for all users, and the card price is also the same, so where is thediscrimination? If discrimination is inferred to entities that are notexplicitly priced, then everything we purchase in the market entails pricediscrimination. I also told him that the current interpretations of pricediscrimination in terms of different price elasticities are all rubbish!
Aaron then continued to ask how I would interpret thetying of cards to the machine. I replied that it must be a maintenancecontract: With a slightly higher price for each card used, the more intensivemachine user paid a higher implicit maintenance cost, while the explicitmaintenance charge was zero.
16 Decision to leave Chicago forSeattle
By the spring of 1969, when I was ready to seek myfirst real academic job, I had been trained and befriended by eight masters: atUCLA I had Alchian, Brunner, Hirshleifer, and Baldwin; at Chicago I hadFriedman, Stigler, Coase, and Director. No student ever, anywhere, would havesuch luck. That is why Yoram Barzel wrote in 1995: “On arrival in Seattle in1969 Steve was, in my current view, the top transaction-cost property-rightseconomist in the profession.”
Coase and some other friends were baffled as to why Ileft Chicago, and I cannot say I left with no regrets. It is true that HydePark was not a good place to live at that time, and Seattle has a beautifulsea. But given my dedication to research, these cannot be the true reasons forthat decision. Over the years I have come to understand the reason: I wantedsome time alone to do my own thinking. Chicago’s workshops, lectures, andpapers to referee were too intense, and I wanted to be left alone to think freefrom outside influences. Of course I like to consult colleagues when I come upwith something novel, but when thinking I want to be left alone. It was in1969, too, that I decided not to read other people’s writings, that there is aperiod to read and a period to think, and in the thinking period I should notread. When I came up with something new I often consulted colleagues as towhether it has been proposed somewhere or sometime before, and it was very rarethat an idea I came up was not original. Only once, when I wrote a draft on thetheory of inter-individual effects, that I was informed a key point I made inthat paper was noted in an earlier paper by Buchanan and Stubblebine (1962).
17 Thirteen years in Seattle
That is why after I arrived Seattle, I found a greatcolleague in Yoram Barzel. Yoram has a wonderfully subtle mind, capable ofcatching even the smallest flaws in an argument. I routinely tried him out whenI came up with something new, and when he did not object I knew I was on solidground. In my recent obituary on Doug North, I expressed my gratitude for theprotection he so kindly rendered to me. It was a time when publish or perishwas the rule, but Doug and Dean Beckman informed me that this would not applyto me. I was to do my own thing, and the rank of full professor was bestowedonly a few months after my arrival. The nine papers I produced during mySeattle period have by now all become classics.
In Seattle we had a good group of colleagues and somesuperb students. Two of my doctorate students, John Umbeck and Chris Hall, weregreat talents. But I was a terrible thesis adviser because of my tendency towander away from what I read with my wild imagination, and if a candidatefollows my wandering he would never finish his thesis. Furthermore, I made aserious error of judgment in thinking since it was so easy to dig up an Umbeckand a Hall (yes, Hall was a reject who I fought to get him back, and toldcolleagues to treat him like a star) there would be many of them forthcoming.This turned out to be wishful thinking: Umbeck and Hall were so unique that Iwas not able to see their likes again.
A special mention should be made of my paper on pricecontrol (Cheung 1974). Most people say that it is my bestpaper, a view I do not share. Nevertheless it is a piece which cost thegreatest effort per page, and the manuscript was not really completed butabandoned when Coase urged me to let it go to meet the JLE deadline. Inretrospect I should have listened to Harry Johnson, tear up the manuscript andwrite the piece all over again from page one. But I was truly exhausted.
This original piece did not begin with theinspiration of Coase, as some people thought, but from rooftop squatters inHong Kong. For pre-war premises subject to severe rent control post-war, thecontrolled rent came to about 10% of themarket rent. The other 90% had no exclusive claimant, andmust therefore tend to dissipate. However, rent dissipation was salvaged to alarge extent by the prevalence of partial subletting and rooftop squatting.Attempts to reduce rent dissipation are implied by the postulate of constrainedmaximization, but there are many ways to achieve that. Under what conditionscan we predict the emergence of partial subletting and rooftop squatting? Mypaper on price control offered two propositions to guide the prediction of thechoices to reduce rent dissipation.
As Yoram recently noted, my years in Seattle weremost productive for both of us. In my case, however, this is true for myEnglish writings only: After I took up the Hong Kong Chair in 1982 my Chinesewritings have continued with full force until the end of 2014. Friends withcommand of both languages assume the view that my contributions in Chineseexceed those in English by a factor of three.
I would have published much more during the Seattleyears except for two endeavors which stood in the way. The first is awell-funded investigation of patent rights and trade secrets and theirlicenses. This turned out to be too difficult a task: We purchased severalhundred licenses but did not know how to decipher them properly – the costs ofsoliciting expert help were too high. The second is my consulting commitments toa petroleum company. The data and documents made available to me werefirst-class, and the two reports I wrote to analyze crude-oil pricing andcrude-oil exchange prompted Alchian to say it was the best empirical work heever saw. However, as a matter of contract agreement they could not bepublished.
18 The Washington school ofeconomics
In 1990, Doug North (1990, p.27) wrote that there was a University of Washington approach to analyzetransaction costs, and that I was the originator. Doug’s assertion is perhapswhat led to the saying that there was, and in some sense still is, a“Washington School of Economics”, or a “Washington School of New InstitutionalEconomics”. Gary Shiu has observed that the School’s unique feature is theattention paid to the piece-rate contracts; Barzel would say property rights isthe central feature; and North would pick transaction costs.
In my view, the unique feature of the WashingtonSchool – if there has ever been one – lies in the attention paid to thedissipation of rent. This idea first emerged in the work of von Thünen in thenineteenth century, Pigou applied it in the example of two roads and privateand social cost in 1920, Knight then demolished Pigou in a brilliant 1924 paper, and Gordon applied Knight’s argumentsto ocean fishery in 1954. Gordon coined the term “dissipation ofrent”.
When I reread Gordon’s classic paper in the spring of1969, I decided his equilibrium point made no sense. This led me to write apaper (Cheung 1970) on the structure of contracts and non-exclusive resource,providing a correct analysis of the equilibrium of rent dissipation. This wasin 1969, before I went to Seattle. In Seattle, further developments followed:(1) with non-exclusive or common property rights, under a variety ofcircumstances rent may not dissipate completely. Hence non-exclusive propertyrights may at time serve certain purposes; (2) if price is not used as acriterion for competition, all others criteria must to some degree entail thedissipation of rent; (3) reducing rent dissipation is implied by constrainedmaximization, hence to analyze the effects of government regulations we shouldapproach through this route. In fact, I later viewed the comrade-ranking systemin communist China as an arrangement to reduce rent dissipation. After I leftSeattle and I came up with (4): transaction costs must include all costs thatdo not exist in a one-man economy. Rent dissipation would not therefore occurin such a case, so that the dissipation must be a type of transactions cost.After some 20 years I obtained (5): the emergence of the market is the resultof using market transaction costs to replace rent dissipation, hence thetheorem of transaction costs substitution, which I noted earlier. Finally (6):if at the equilibrium margin there remain some rent which logically shoulddissipate but does not dissipate, the analysis must be wrong.
To my knowledge no other group paid so much attentionto rent dissipation and the associated equilibrium analysis. But in Seattle,Yoram and I and other colleagues discussed it as a matter of course. There areother salient features of the Washington School, such as the dedication toderive testable hypothesis and the complete disregard of utility analysis, butit is dissipation of rent that stands out as uniquely “Washington”.
That is why after I arrived Seattle, I found a greatcolleague in Yoram Barzel. Yoram has a wonderfully subtle mind, capable ofcatching even the smallest flaws in an argument. I routinely tried him out whenI came up with something new, and when he did not object I knew I was on solidground. In my recent obituary on Doug North, I expressed my gratitude for theprotection he so kindly rendered to me. It was a time when publish or perishwas the rule, but Doug and Dean Beckman informed me that this would not applyto me. I was to do my own thing, and the rank of full professor was bestowedonly a few months after my arrival. The nine papers I produced during mySeattle period have by now all become classics.
In Seattle we had a good group of colleagues and somesuperb students. Two of my doctorate students, John Umbeck and Chris Hall, weregreat talents. But I was a terrible thesis adviser because of my tendency towander away from what I read with my wild imagination, and if a candidatefollows my wandering he would never finish his thesis. Furthermore, I made aserious error of judgment in thinking since it was so easy to dig up an Umbeckand a Hall (yes, Hall was a reject who I fought to get him back, and toldcolleagues to treat him like a star) there would be many of them forthcoming.This turned out to be wishful thinking: Umbeck and Hall were so unique that Iwas not able to see their likes again.
A special mention should be made of my paper on pricecontrol (Cheung 1974). Most people say that it is my bestpaper, a view I do not share. Nevertheless it is a piece which cost thegreatest effort per page, and the manuscript was not really completed butabandoned when Coase urged me to let it go to meet the JLE deadline. Inretrospect I should have listened to Harry Johnson, tear up the manuscript andwrite the piece all over again from page one. But I was truly exhausted.
This original piece did not begin with theinspiration of Coase, as some people thought, but from rooftop squatters inHong Kong. For pre-war premises subject to severe rent control post-war, thecontrolled rent came to about 10% of themarket rent. The other 90% had no exclusive claimant, andmust therefore tend to dissipate. However, rent dissipation was salvaged to alarge extent by the prevalence of partial subletting and rooftop squatting.Attempts to reduce rent dissipation are implied by the postulate of constrainedmaximization, but there are many ways to achieve that. Under what conditionscan we predict the emergence of partial subletting and rooftop squatting? Mypaper on price control offered two propositions to guide the prediction of thechoices to reduce rent dissipation.
As Yoram recently noted, my years in Seattle weremost productive for both of us. In my case, however, this is true for myEnglish writings only: After I took up the Hong Kong Chair in 1982 my Chinesewritings have continued with full force until the end of 2014. Friends withcommand of both languages assume the view that my contributions in Chineseexceed those in English by a factor of three.
I would have published much more during the Seattleyears except for two endeavors which stood in the way. The first is awell-funded investigation of patent rights and trade secrets and theirlicenses. This turned out to be too difficult a task: We purchased severalhundred licenses but did not know how to decipher them properly – the costs ofsoliciting expert help were too high. The second is my consulting commitments toa petroleum company. The data and documents made available to me werefirst-class, and the two reports I wrote to analyze crude-oil pricing andcrude-oil exchange prompted Alchian to say it was the best empirical work heever saw. However, as a matter of contract agreement they could not bepublished.
18 The Washington school ofeconomics
In 1990, Doug North (1990, p.27) wrote that there was a University of Washington approach to analyzetransaction costs, and that I was the originator. Doug’s assertion is perhapswhat led to the saying that there was, and in some sense still is, a“Washington School of Economics”, or a “Washington School of New InstitutionalEconomics”. Gary Shiu has observed that the School’s unique feature is theattention paid to the piece-rate contracts; Barzel would say property rights isthe central feature; and North would pick transaction costs.
In my view, the unique feature of the WashingtonSchool – if there has ever been one – lies in the attention paid to thedissipation of rent. This idea first emerged in the work of von Thünen in thenineteenth century, Pigou applied it in the example of two roads and privateand social cost in 1920, Knight then demolished Pigou in a brilliant 1924 paper, and Gordon applied Knight’s argumentsto ocean fishery in 1954. Gordon coined the term “dissipation ofrent”.
When I reread Gordon’s classic paper in the spring of1969, I decided his equilibrium point made no sense. This led me to write apaper (Cheung 1970) on the structure of contracts and non-exclusive resource,providing a correct analysis of the equilibrium of rent dissipation. This wasin 1969, before I went to Seattle. In Seattle, further developments followed:(1) with non-exclusive or common property rights, under a variety ofcircumstances rent may not dissipate completely. Hence non-exclusive propertyrights may at time serve certain purposes; (2) if price is not used as acriterion for competition, all others criteria must to some degree entail thedissipation of rent; (3) reducing rent dissipation is implied by constrainedmaximization, hence to analyze the effects of government regulations we shouldapproach through this route. In fact, I later viewed the comrade-ranking systemin communist China as an arrangement to reduce rent dissipation. After I leftSeattle and I came up with (4): transaction costs must include all costs thatdo not exist in a one-man economy. Rent dissipation would not therefore occurin such a case, so that the dissipation must be a type of transactions cost.After some 20 years I obtained (5): the emergence of the market is the resultof using market transaction costs to replace rent dissipation, hence thetheorem of transaction costs substitution, which I noted earlier. Finally (6):if at the equilibrium margin there remain some rent which logically shoulddissipate but does not dissipate, the analysis must be wrong.
To my knowledge no other group paid so much attentionto rent dissipation and the associated equilibrium analysis. But in Seattle,Yoram and I and other colleagues discussed it as a matter of course. There areother salient features of the Washington School, such as the dedication toderive testable hypothesis and the complete disregard of utility analysis, butit is dissipation of rent that stands out as uniquely “Washington”.
21 Life is fading
I am now 80, in the evening of my life. Looking backI do not see how I could have lived more fully. I have studied economicsintensely for 57 years. Not as long as Coase, but long enough. What energy I haveleft I will devote to a final revision, and then I will send EconomicExplanation to MT Cheung to translate into English and fulfill the promisemade to English-reading colleagues. New insights have cropped up after thebook’s Chinese publication. The Jade Theorem can be further elaborated. Moreimportant is my new interpretation of the Say’s Law, which I managed toincorporate with Adam Smith’s idea of division of labor by arguing in terms ofan imaginary piece-rate contract. The new theory is so beautifully simple thatit is no less satisfying than the sharecropping solution I worked out thatevening in Long Beach half a century ago.
My relentless search to obtain facts and detailsthrough field instigations (often running around in the streets) has beencriticized as unworthy of a professor. My critics, including some felloweconomists, apparently did not understand that economics is an empiricalscience, so the practitioners of economic research must treat the real world asa laboratory. Facts found often diverge greatly from what we read – forexample, the economic system of China as I observed and analyzed it is milesdifferent from that described in official reports. I have long held the viewthat the most stupid thing a scientist can do is to try to explain things thatdo not exist. Even for the simple phenomenon of price discrimination, theeconomist’s neglect of the associated observations has led to a theory that islogically sound but empirically irrelevant. We cannot appreciate a picture by lookingat a portion of it.
22 A museum is contemplated as mylast project
Going into the facts and details is interesting, butit wears the researcher down. In my long and near-obsessive involvement witheconomics I have often taken to some sidetracks to keep me sane. So I haveattempted photography, calligraphy, prose writing, and art and relicscollection. I have had much luck in the last endeavor. This led to the idea ofsetting up a museum and the donation of the admission receipts to assist poorchildren in China. I have not forgotten my early experience as one of them, andI believe that if given the opportunity the poor children of today may grow upto become scholars like me. In recent years I have visited some poor villages,and was happy to see that children were enjoying far better living conditionsthan I during the war. But I think they should have better learningopportunities.
It began in the spring of 1975, when I told Yoramthat on my forthcoming sabbatical I would investigate the jade market in HongKong and explain information costs. I was not happy with currentthinking, and believed that the constraints should be investigated by lookingat items bearing high costs of information. I wanted to focus on the physicalattributes of goods, not individuals or market prices. My choice was to beginwith jadeite, well known for its high information costs at the various stagesof production and marketing, and then move to art works and finally to relics.
Three factors combined to lead to my plan, though thesignificance of the museum may exceed what a man can do. First, my mother hasendowed a foundation, which has provided sufficient funds to form a substantialcollection. (Remember collector items in China were very cheap before the turnof the century.) Second, I predicted that with China growing fast the marketfor art works and relics would soar. It did, and having a head start allowedthe foundation to trade and further acquire. Third, for centuries before theMing Dynasty, the burial practice in China was to put beautiful things in thetombs, particularly in the case of the rich and high-ranking officials.Beginning in the 1980’s, unearthed relics have revealed a civilization sobrilliant and so developed that it is beyond belief. I may be the earliestcollector of ancient Chinese relics because I started to investigateinformation costs in 1975. And because I concentrated on physical attributes, Isoon became a self-taught expert of art works and relics. Alongside theemergence of massive new finds beginning in the mid-1980, I worked out a theoryto determine what is authentic and what is not. In all of this, I was a man whohappened to process the right training and worked in the right place when itwas the right time for China to unveil her brilliant past.
My mother’s preference was to donate to the church.But there are few churches in the poor villages in China, so I think it isbetter that the money should go to the children. Not many people believed mewhen I say the museum will be a great draw so entrance money will yield a tidysum. But then nobody believed me when I said I would do well in economics. I amCaptain Incredible!
References
Cheung, Steven N.S. 1968. “Private Property Rights and Sharecropping,” Journal of Political Economy 76(6): 1107–22.
Cheung, Steven N.S. 1969a. “Transaction Costs, Risk Aversion, and the Choice of Contractual Arrangements,” Journal of Law and Economics 12(1): 23–42.
Cheung, Steven N.S. 1969b. The Theory of Share Tenancy. Chicago: University of Chicago Press.
Cheung, Steven N.S. 1970. “The Structure of a Contract and the Theory of a Non-Exclusive Resource,” Journal of Law and Economics 13(1): 49–70.
Cheung, Steven N.S. 1973. “The Fable of the Bees: An Economic Investigation,” Journal of Law and Economics 16(1): 11–33.
Cheung, Steven N.S. 1974. “A Theory of Price Control,” Journal of Law and Economics 17(1): 53–71.
Cheung, Steven N.S. 1978. The Myth of Social Cost. London: Institute of Economic Affairs.
Cheung, Steven N.S. 1982. Will China Go Capitalist? London: Institute of Economic Affairs.
Cheung, Steven N.S. 2014. “The Economic System of China,” Man and the Economy 1(1): 65–113.
Cheung’s work in Chinese
Cheung, Steven N.S. 1984. 卖桔者言 (A Tangerine Seller Speaks). 香港: 花千树。
Cheung, Steven N.S. 1985. 中国的前途 (The Future of China). 香港: 花千树
Cheung, Steven N.S. 1986. 再论中国 (On China again). 香港: 花千树。
Cheung, Steven N.S. 2014. 经济解释 (Economic Explanation). 北京: 中信出版社。
Other references
Buchanan, James, and Wm. Craig Stubblebine. 1962. “Externality,” Economica 29(116): 371–84.
Coase, Ronald. 1960. “The Problem of Social Cost,” Journal of Law and Economics 3(1): 1–44.
Gordon. 1954. “The Economic Theory of a Common-Property Resource,” Journal of Political Economy 62(2): 124–42.
Knight, Frank. 1924. “Some Fallacies in the Interpretation of Social Cost,” Quarterly Journal of Economics 38(4): 582–606.
North, Douglass. 1990. Institutions, Institutional Change and Economic Performance. New York: Cambridge University Press.
Editor’s note: this text is Professor Steve Cheung’s responses toa set of written questions I sent to him for an interview for this specialissue. Instead of answering my questions point to point, Steve graciouslyoffers us a thoughtful self-contained essay (for this reason the originalquestions are not included here), an narrative on his distinct views ofeconomics, and, particularly valuable for young readers, the fortuitous paththat made him the economist we all know and admire.
Related Content
Steven Cheung and Coasian Economics: A Personal Reflection by Ning Wang (2016)
Comments (0)
Please log in or register tocomment.
Have you read our house rules for communicating on De Gruyter Online?
I am now 80, in the evening of my life. Looking backI do not see how I could have lived more fully. I have studied economicsintensely for 57 years. Not as long as Coase, but long enough. What energy I haveleft I will devote to a final revision, and then I will send EconomicExplanation to MT Cheung to translate into English and fulfill the promisemade to English-reading colleagues. New insights have cropped up after thebook’s Chinese publication. The Jade Theorem can be further elaborated. Moreimportant is my new interpretation of the Say’s Law, which I managed toincorporate with Adam Smith’s idea of division of labor by arguing in terms ofan imaginary piece-rate contract. The new theory is so beautifully simple thatit is no less satisfying than the sharecropping solution I worked out thatevening in Long Beach half a century ago.
My relentless search to obtain facts and detailsthrough field instigations (often running around in the streets) has beencriticized as unworthy of a professor. My critics, including some felloweconomists, apparently did not understand that economics is an empiricalscience, so the practitioners of economic research must treat the real world asa laboratory. Facts found often diverge greatly from what we read – forexample, the economic system of China as I observed and analyzed it is milesdifferent from that described in official reports. I have long held the viewthat the most stupid thing a scientist can do is to try to explain things thatdo not exist. Even for the simple phenomenon of price discrimination, theeconomist’s neglect of the associated observations has led to a theory that islogically sound but empirically irrelevant. We cannot appreciate a picture by lookingat a portion of it.
22 A museum is contemplated as mylast project
Going into the facts and details is interesting, butit wears the researcher down. In my long and near-obsessive involvement witheconomics I have often taken to some sidetracks to keep me sane. So I haveattempted photography, calligraphy, prose writing, and art and relicscollection. I have had much luck in the last endeavor. This led to the idea ofsetting up a museum and the donation of the admission receipts to assist poorchildren in China. I have not forgotten my early experience as one of them, andI believe that if given the opportunity the poor children of today may grow upto become scholars like me. In recent years I have visited some poor villages,and was happy to see that children were enjoying far better living conditionsthan I during the war. But I think they should have better learningopportunities.
It began in the spring of 1975, when I told Yoramthat on my forthcoming sabbatical I would investigate the jade market in HongKong and explain information costs. I was not happy with currentthinking, and believed that the constraints should be investigated by lookingat items bearing high costs of information. I wanted to focus on the physicalattributes of goods, not individuals or market prices. My choice was to beginwith jadeite, well known for its high information costs at the various stagesof production and marketing, and then move to art works and finally to relics.
Three factors combined to lead to my plan, though thesignificance of the museum may exceed what a man can do. First, my mother hasendowed a foundation, which has provided sufficient funds to form a substantialcollection. (Remember collector items in China were very cheap before the turnof the century.) Second, I predicted that with China growing fast the marketfor art works and relics would soar. It did, and having a head start allowedthe foundation to trade and further acquire. Third, for centuries before theMing Dynasty, the burial practice in China was to put beautiful things in thetombs, particularly in the case of the rich and high-ranking officials.Beginning in the 1980’s, unearthed relics have revealed a civilization sobrilliant and so developed that it is beyond belief. I may be the earliestcollector of ancient Chinese relics because I started to investigateinformation costs in 1975. And because I concentrated on physical attributes, Isoon became a self-taught expert of art works and relics. Alongside theemergence of massive new finds beginning in the mid-1980, I worked out a theoryto determine what is authentic and what is not. In all of this, I was a man whohappened to process the right training and worked in the right place when itwas the right time for China to unveil her brilliant past.
My mother’s preference was to donate to the church.But there are few churches in the poor villages in China, so I think it isbetter that the money should go to the children. Not many people believed mewhen I say the museum will be a great draw so entrance money will yield a tidysum. But then nobody believed me when I said I would do well in economics. I amCaptain Incredible!
References
Cheung, Steven N.S. 1968. “Private Property Rights and Sharecropping,” Journal of Political Economy 76(6): 1107–22.
Cheung, Steven N.S. 1969a. “Transaction Costs, Risk Aversion, and the Choice of Contractual Arrangements,” Journal of Law and Economics 12(1): 23–42.
Cheung, Steven N.S. 1969b. The Theory of Share Tenancy. Chicago: University of Chicago Press.
Cheung, Steven N.S. 1970. “The Structure of a Contract and the Theory of a Non-Exclusive Resource,” Journal of Law and Economics 13(1): 49–70.
Cheung, Steven N.S. 1973. “The Fable of the Bees: An Economic Investigation,” Journal of Law and Economics 16(1): 11–33.
Cheung, Steven N.S. 1974. “A Theory of Price Control,” Journal of Law and Economics 17(1): 53–71.
Cheung, Steven N.S. 1978. The Myth of Social Cost. London: Institute of Economic Affairs.
Cheung, Steven N.S. 1982. Will China Go Capitalist? London: Institute of Economic Affairs.
Cheung, Steven N.S. 2014. “The Economic System of China,” Man and the Economy 1(1): 65–113.
Cheung’s work in Chinese
Cheung, Steven N.S. 1984. 卖桔者言 (A Tangerine Seller Speaks). 香港: 花千树。
Cheung, Steven N.S. 1985. 中国的前途 (The Future of China). 香港: 花千树
Cheung, Steven N.S. 1986. 再论中国 (On China again). 香港: 花千树。
Cheung, Steven N.S. 2014. 经济解释 (Economic Explanation). 北京: 中信出版社。
Other references
Buchanan, James, and Wm. Craig Stubblebine. 1962. “Externality,” Economica 29(116): 371–84.
Coase, Ronald. 1960. “The Problem of Social Cost,” Journal of Law and Economics 3(1): 1–44.
Gordon. 1954. “The Economic Theory of a Common-Property Resource,” Journal of Political Economy 62(2): 124–42.
Knight, Frank. 1924. “Some Fallacies in the Interpretation of Social Cost,” Quarterly Journal of Economics 38(4): 582–606.
North, Douglass. 1990. Institutions, Institutional Change and Economic Performance. New York: Cambridge University Press.
Editor’s note: this text is Professor Steve Cheung’s responses toa set of written questions I sent to him for an interview for this specialissue. Instead of answering my questions point to point, Steve graciouslyoffers us a thoughtful self-contained essay (for this reason the originalquestions are not included here), an narrative on his distinct views ofeconomics, and, particularly valuable for young readers, the fortuitous paththat made him the economist we all know and admire.
Related Content
Steven Cheung and Coasian Economics: A Personal Reflection by Ning Wang (2016)
Comments (0)
Please log in or register tocomment.
Have you read our house rules for communicating on De Gruyter Online?
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