Public goods provision and Chinese economic development
The China Centre lecture on Thursday 5 May 2022 was delivered by Professor Lawrence J. Lau, Ralph and Claire Landau Professor of Economics, Lau Chor Tak Institute of Global Economics and Finance, and former Vice Chancellor, The Chinese University of Hong Kong.
Professor Lawrence J. Lau’s lecture addressed the role of public goods in China’s development. He examined the theoretical arguments concerning the role of public goods in economic and social development, including the distinction between rivalrous public goods, such as seats on public transport, and non-rivalrous public goods, such as air quality.
The main body of Professor Lau’s lecture analysed the role of public goods in China’s development over the long-run since 1949 to the present day. These include little-studied areas of public goods provision, such as the introduction of simplified Chinese in the 1950s, which accelerated the spread of mass literacy. Professor Lau devoted special attention to the role of public goods in the era of Reform and Opening-up since 1978. He emphasised the contribution that public goods provision has made to the welfare of the mass of the Chinese population during this era. This includes provision of education, health, transport, telecommunications infrastructure, water supply, renewable energy, and re-forestation.
Professor Lau drew attention to the great reduction in the extent of absolute poverty in China since the late 1970s, which he considered to be a ‘clear public good’. He emphasised that the social and economic benefits of public goods provision constitute ‘positive externalities’, which bring benefits to the users of public goods that are not reflected in the price charged in order to access them. The ‘invisible hand’ cannot capture these benefits: ‘only the visible hand can lose money’.
The issues addressed in the Q&A session included the following: the role of housing in public goods provision in China; comparison of public goods provision in China and India; the impact of the Chinese government’s RMB 4 trillion infrastructure package during the global financial crisis; the significance of public goods provision in relation to the measurement of the rate of investment and consumption; how to measure the contribution of public goods provision to mass welfare in China; the theoretical and practical significance of ‘distribution in kind’ through public goods provision; the significance and purpose of China’s ‘dual circulation’ policy; the methods of financing public goods; the role of public goods provision within China’s ‘common prosperity’ policy; the prospects for China’s GDP growth rate over the long-term; the role of public goods in influencing social mobility; the role of public goods provision within China’s ‘Belt and Road’ strategy; the relationship between the ‘visible hand’ and the ‘invisible hand’ in economic and social development; and the role of information provision within public goods.
Born in 1944, Professor Lau graduated with a B.S. (with Great Distinction) in Physics from Stanford University in 1964, and received his M.A. and Ph.D. degrees in Economics from the University of California at Berkeley in 1966 and 1969 respectively. He joined the faculty of the Department of Economics at Stanford University in 1966, becoming Professor of Economics in 1976, the first Kwoh-Ting Li Professor in Economic Development in 1992, and Kwoh-Ting Li Professor in Economic Development, Emeritus in 2006. From 2004 to 2010, Professor Lau served as the Vice-chancellor (President) of The Chinese University of Hong Kong. From 2010 to 2014, Professor Lau served as Chairman of CIC International (Hong Kong) Co., Limited. He currently serves as the Ralph and Claire Landau Professor of Economics at the Lau Chor Tak Institute of Global Economics and Finance, the Chinese University of Hong Kong.
Professor Lau has been elected an Academician of Academia Sinica and a Fellow of the Econometric Society. From March 2008 to February 2018, Professor Lau served as a member of the 11th and 12th National Committee of the Chinese People’s Political Consultative Conference (and a Vice Chairman of its Economics Subcommittee).
Professor Lau specialises in economic development, economic growth, and the economies of East Asia, including that of China. He has authored, co-authored, or edited sixteen books, including The China-U.S. Trade War and Future Economic Relations, and The COVID-19 Epidemic in China, and published more than 210 articles and notes in professional journals.