Working papers

Economic Reform and Constitutional Transition, by Jeffrey Sachs, Wing Thye Woo, and Xiaokai Yang

Endogenous Transaction Cost and Division of Labor, by Xiaokai Yang and Yiming Zhao

Trade Pattern and Economic Development when Endogenous and Exogenous Comparative Advantages Coexist, by Jeffrey Sachs, Xiaokai Yang, Dingsheng Zhang

Incomplete Contingent Labor Contract, Asymmetric Residual Rights and Authority, and the Theory of the the Firm, by Xiaokai Yang

The Crisis of Success and Feedback Quality in Managing Economic Crisis, by Xiaokai Yang

in the Model of Monopolistic Competition by Jeffrey Sachs, Xiaokai Yang, Dingsheng Zhang

Irrelevance of Inequality in Income to Economic Development, by Xiaokai Yang and Dingsheng Zhang

Economics, ecommerce

Also, internet virus and e-commerce fraud generate huge loses to world economy. Use of e-currency may create more opportunity for easy theft, just like monitarisation of commerce created more opportunity for pick-pocket in the past two centuries. All of the new phenomena call for institutional innovation and new policies that cannot be sorted out in the absence of government actions. Should the government institute a licensee system for e-commerce and an internet police system to address the new phenomena of e-commerce and internet economy?

Recent many economic theories and models are developed to investigate impersonal networking decisions and strategic networking decisions. Inframarginal analysis (total cost-benefit analysis across corner solutions in addition to marginal analysis of each corner solution) is a feature of the literature. The inframarginal analysis of networking decisions is much more powerful than conventional marginal analysis for explaining e-commerce phenomena.

Inframarginal economics

Inframarginal economics is to apply inframarginal analysis to studies of network effects of division of labor and various economic problems associated with different features of the network pattern of division of labor. To understand what is inframarginal analysis and the framework that distinguishes inframarginal economics from marginal economics and neoclassical economics that sometime also applies inframarginal analysis, we have to look at the difference between the core of classical mainstream economics and neoclassical economics.

The core of classical mainstream economics represented by William Petty and Adam Smith differed from neoclassical economics in two aspects. It focused on network effects of division of labor and it emphasized the role of the market (the invisible hand) in exploiting the network effects to reduce scarcity. As shown in Yang and Ng (Specialization and Organization, 1993) and Yang (Economics: New Classical Versus Neoclassical Frameworks, 2001), inframarginal analysis of individuals’ networking decisions is essential for formalizing the classical development economics. Here inframarginal analysis is the total cost-benefit analysis across corner solutions in addition to the marginal analysis of each corner solution. If the optimum value of a decision variable takes on its upper or lower bound, the optimal decision is a corner solution. Formally, it relates to nonlinear programming, mixed integer programming, dynamic programming, the control theory, and other nonclassical mathematical programming.

By Xiaokai Yang, September, 2001