| New institutional economics | |
|---|---|
| Born | December 1, 1935 |
| Nationality | United States |
| Institution | University of Chicago University of Washington University of Hong Kong |
| Field | Microeconomics |
| Alma mater | Wa Ying College Queen's College, Hong Kong University of California, Los Angeles |
| Influences | Adam Smith, Armen Alchian, Ronald Coase |
| Contributions | 1969 The Theory of Share Tenancy 1982 Will China Go Capitalist? |
Steven Ng-Sheong Cheung (Traditional Chinese: 張五常; Pinyin: Zhāng Wǔcháng; born December 1, 1935), a Hong Kong born economist, specializes in the fields of transaction costs and property rights. Known for his work on private property rights and transaction costs, he achieved his fame with an economic analysis on China open-door policy after 1980s. In his studies of economics, he focuses on economic explanation that is based on real world observation (an observation first approach). He is also the first to introduce concepts from the Chicago School of Economics into China.
He obtained his PhD in economics from UCLA, where his teacher was American economist Armen Alchian. He taught in the Department of Economics at the University of Washington from 1969 to 1982, and then at the University of Hong Kong from 1982 to 2000. During this period, Cheung reformed the syllabus of Hong Kong's A-level Economics examination, adding the concepts of the postulate of constrained maximization, methodology, transaction cost and property right, most of which originate from the theories of the Chicago school.
US authorities have issued an arrest warrant for Cheung on tax-evasion and conspiracy charges. Cheung fled to mainland China from Hong Kong; China has no extradition treaty with the US.
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Born in Hong Kong in 1939, he fled to China in 1941. From 1959 to 1967, he studied Economics at UCLA and prepared a PhD dissertation. From 1967 to 1969, he did postdoctoral research at the University of Chicago, analysing share tenancy and variable rural land resource allocation. From 1969, he taught at the University of Washington and, from 1982, was head of the School of Economics and Finances of Hong Kong University.
From 1998 to 2003, he allegedly sold fake antiques through his store, Thesaurus Fine Arts, until he was indicted by U.S. federal grand jury for alleged tax evasion. In 2005, his store got a settlement, as announced by the Washington Attorney General. Since 2003, he resides, writes researches in mainland China.
Unlike modern mainstream economists, Cheung's analysis does not rely on advanced mathematical techniques but solely on the two basic building blocks of price theory: one is the axiom of constrained maximisation and the other, the law of demand (one that already incorporates the law of diminishing marginal returns). One of the constraints which he emphasizes most is transaction cost (or better termed institutional cost).
His theory of share tenancy has enhanced the understanding of contractual arrangement, which was largely ignored by neo-classical economists. According to Cheung, sharecropping is not necessarily exploitative. It will achieve the same efficient allocation as labor markets under competition and zero transaction costs (Cheung, 1968).[1] In the presence of transaction costs, sharecropping can be efficient by lowering the monitoring costs of wage contracts and increasing risk-sharing benefits relative to rent contracts (Cheung, 1969).
This implication is revolutionary; sharecropping was perceived as an inferior arrangement for years. After the publication of The Fable of The Bees, our perception of externalities is no longer the same: as long as corresponding property rights are clearly delineated, OR transaction cost is zero, externalities can be internalized through private negotiation/contract arrangement without government's intervention. In 1983, Cheung published probably his most important journal article, The Contractual Nature of The Firm. While a firm cannot be defined easily, Cheung interprets it as a kind of contractual arrangement being used to replace the market (i.e. price mechanism) to reduce transaction costs (e.g. the cost of price searching).
Nobel Prize winners like Ronald Coase[2] and Joseph E. Stiglitz[3] have acknowledged the contribution by Cheung in their respective Nobel lectures. While referring to Cheung's "brilliant, valiant attempt" to prove that sharecropping does not matter to the incentives of the workers, Stiglitz credited Cheung's "unreasonable assumptions, especially concerning information" for motivating him to develop the alternative theory.
Chueng's contribution to economics and China's economic development can be roughly grouped in the following areas,
He had written many books (in Chinese) commenting on China's modernization programs from an economic point of view. In the 1980s, Cheung strongly supported an economic transformation of China as a market economy. However, in that decade, China went through serious inflation, leading to strong economic, political and social tensions.
However, after 1992, China continued to reform economically. Steven Cheung claimed that most of his predictions have come true. One of his major ideas, the replacing of state owned enterprises by private enterprises, turns out to be very consistent with the direction taken by Chinese political leaders and policy makers.
On January 28, 2003, Cheung was indicted on thirteen counts by a US federal grand jury. The charges consisted of six counts of filing a false income tax return, six counts of filing false foreign bank account reports, and one count of Consipiracy to Defraud the United States. Linda Su Cheung, the wife of Steven N.S. Cheung, was also indicted on the latter count.
Cheung and his wife were to be arraigned on February 20, 2003. However, they failed to appear. Consequently, arrest warrants were issued.
Originally a professor at University of Hong Kong, because of the extradition agreements between the US and Hong Kong, Cheung has since stayed in mainland China, a country that has no such agreements with America.
Currently, Cheung lives in Shenzhen. He now still writes books and works as a columnist for the Hong Kong newspaper Apple Daily. Occasionally, he pays visits to various universities in mainland China.
From 1998 to 2003 Steven N. S. Cheung Inc. owned an antique dealer in Seattle called Thesaurus Fine Arts, which specialized in Asian antique pieces. The store closed when a series of investigative reports in the Seattle Times revealed that many of the antiques were fake, and whose old ages had been certified by a lab owned by Steven Cheung. [source needed]
In 2004, the Washington State Attorney General filed consumer fraud charges against Thesaurus Fine Arts.[1] In 2005, Thesaurus Fine Arts settled] for up to $550,000 in fines, attorney fees, and restitution. However, as part of the settlement, Cheung himself was dropped from the case.
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