Plan and Market in Wuhan’s Epidemic / Sheng Hong

武汉东湖

It now appears that the eating problem of Wuhan residents during the new crown pneumonia epidemic is a serious problem. This problem did not exist during the period of our country’s fight against SARS, and this time other provinces in China, and many countries in the world. Why is this? Quite simply, the Wuhan Municipal Government has imposed restrictions on the sales of supermarkets and convenience stores to individual residents, and has not been able to provide an equally effective alternative for quite a long time. Residents rely on group purchases and self-seeking sources to rescue themselves; in the later period, the government The grassroots organizations will then decide on the rationing of residents, even exclusive and compulsory rationing. Strictly speaking, this kind of distribution of goods by the government is a small-scale return to the planned economy.

Reform and opening up are market-oriented reforms. The Chinese have been accustomed to the market economy for more than 40 years. It really looks like “invisible hand”, or “too perfect to know.” In fact, the market system is quite complicated. It just doesn’t need to be ordered or organized by the government or elites. It relies on people’s instinct to seek benefits and avoid harm, and on the basis of voluntary negotiations between people; therefore, it achieves complex goals and structures under very simple rules. In other words, the market can achieve the complex purpose of “what to produce, how much to produce, and for whom” as long as it follows the rules of equal negotiation, unanimity, and voluntary transactions. In the process of achieving this purpose, a complex structure of production enterprises, wholesalers, transporters, retailers, and finally consumers is formed.

What determines this complex structure is the market’s price system. Each market entity does not have an order from the government, but only determines the transaction behavior based on market prices and their own costs and benefits. In return, the decentralized decisions of many market entities can form a relative price system among various commodities. This is the common sense that microeconomics tells us. Teacher Mao Yushi made a more popular expression in his Principle of Optimal Distribution: As long as the marginal utility brought by the transaction is higher than the marginal cost, market entities are willing to trade until the marginal utility equals the marginal cost. At this time, the resource allocation is optimal. Making such calculations is very simple. Teacher Mao said that housewives “clearly know that the optimal living arrangements should make the marginal utility of each dollar increase equal.” Needless to say, others, Entrepreneurs, wholesalers, transporters and retailers are also clear. Therefore, it is the price system that the individual decisions are aggregated and converged to guide people’s decisions, and people’s decisions form the price system. This is an interactive, real-time information system, without the extra cost of collecting and transmitting information.

Such an effective resource allocation system was easily abandoned by the Wuhan Municipal Government in the name of epidemic prevention. According to reports, after the city of Wuhan was closed, supermarkets would no longer sell to individual residents, but only accept group purchases by residents. After February 15th, the control of the residents’ community was strengthened, and even group purchases by residents were not allowed. Only the grassroots government organizations can arrange dishes with nearby supermarkets (Xu Jinbo, February 16, 2020). This is equivalent to the material allocation system of the planned economy. Understanding it with the utmost kindness, the Wuhan government does not seem to realize that it simply cannot assume such a task. On its website, the Wuhan government patted its breasts to the public from the beginning, saying that “Wuhan’s commodities, food, and medical protective supplies are fully stocked and supplied smoothly,” allowing everyone to “don’t panic.” In fact, it really does not know how difficult it is to both want to replace the market and reach the level of the market. Of course, it is inevitable that they do not have a constitution in their hearts and that they do not have the constitutional rights of the people, so that they can easily violate the people’s economic freedom.

Now make a simplified assumption. Assume that there are 10 million people in Wuhan today, and daily needs of 300 kinds of food, fruits and vegetables, ingredients, seasonings, and other daily necessities. They have traded in pairs with 10 million producers or service providers including Wuhan, and they live in 10,000 communities, everyone’s tastes are different, and their needs at different times are also different. How to allocate to meet their needs? What are the costs of these producers and service providers? How much do their suppliers cost? If a central planner is to make a distribution plan, he has to solve a simultaneous equation of 3 × 1020 equations, and the calculation amount is an order of magnitude higher. And we need to know the utility function of each consumer, the cost function of each producer, and their changes over time, and finally find the dynamic price that will balance supply and demand at each instant. Even in today’s computer age, not only such simultaneous equations cannot be solved, as far as we know, the fastest computer in the world can only reach 3.39 × 1015 per second; more importantly, everyone’s inner utility function cannot be known, and the true cost of each producer is also difficult to know, if people do not go through real transactions.

In fact, when the government banned individuals from buying food and vegetables, the price system was broken. As we mentioned earlier, the market price system is formed by the decentralized decision-making of many consumers, and then aggregation and convergence. Once the people are not allowed to buy vegetables on their own, their demand information cannot be revealed through a large number of decentralized buying and selling decisions, and it is impossible to form a price system. Without the price system, society would lose the signal system of supply and demand. It would not know who in a certain place needed what goods at any time, nor how much price at highest he or she would like to pay. Producers also lose the signal to make production decisions.

The question is, China has experienced 30 years of planned economy. How did we solve these problems at that time? Strictly speaking, there is no solution. Only by reducing the variety, rationing and shortage of commodities, the planning authorities managed to keep the masses on the edge of food and clothing. In the early stage of the formation of the planned economic system, including the transformation of industry and commerce, the number of commodity varieties in China continued to decrease. According to the data of Tianjin quoted in the new China business history draft, the commodity varieties of Tianjin Culture Station decreased from more than 600 in 1957 to more than 300 in 1960; Tianjin Department Store reduced from more than 300 varieties and 3700 patterns to more than 200 varieties and more than 1300 patterns (compiled by the Institute of commercial economy of the Ministry of commerce, 1984, P. 159). In 1957, a large number of commodity varieties had already reduced on the original basis. People who have experienced this period are most impressed by the fact that the color of our clothing is mainly blue, so it is called “blue ant”. In the ten years of the Cultural Revolution, people in the North could not see bananas and oranges. The great reduction of commodity varieties and patterns was obviously far away from the complex utility needs of consumers, which greatly reduced the quality of life of the people, but it could reduce the complexity of distribution of commodities to close to the ability of planners.

Even so, the planning authorities could not meet the needs of consumers, so they took a further step, namely, rationing. For example, food stamps, oil stamps, meat stamps, non-staple food quotas, peanut and melon seeds for the Spring Festival, radio, sewing machines, watches, bicycles and other so-called “four pieces” also need to be purchased with ticket, and so on. At the peak of the planned economy, around the time of the Cultural Revolution, there were more than 100 kinds of commodity quota tickets. Even so, it is often unable to reach the balance of supply and demand, so we often have to line up. For example, every year, people line up to buy rationed cabbage. In the field of investment goods, raw materials and intermediate products, there are more shortages, so that Hungarian economist Konner wrote a book, Shortage Economics to analyze the planned economy.

It’s been decades since those days. The new generation doesn’t know there will be such a thing, and the old generation gradually forgets. However, as long as this society has memories and historical intellectuals, it will not be unaware of the disaster brought about by the planned economy. As a level of government organization, Wuhan government should have long-term memory and long-term vision, and could not be so stupid to abandon the market economy. One possible explanation is that it wants to use Zhou Xianwang’s “harder” policy behavior to let the superiors, rather than the public, “think” that they are doing well.

As a result, the “return of small planned economy” in Wuhan shows all the disadvantages of planned economy, even more obvious and clear. First of all, this rationing system can not meet the people’s rich dietary needs in the market economy. According to a large amount of information, the “love food” provided by Wuhan government and its subordinate grass-roots organizations, in cooperation with nearby supermarkets, is a rationing combination with monotonous varieties, poor quality and high price, generally only four or five kinds of dishes. This is a lot worse than the residents are used to in the normal period. Not to mention whether these dishes match the taste of the residents. More importantly, the supply of meat is in short supply. Many residents didn’t eat meat for many days. And there seems to be only one kind of meat. This situation almost perfectly represents the characteristics of planned economy, such as “reducing varieties”, “rationing” and “shortage”.

Wuhan rationing system also has a prominent feature, which is not apparent in the planned economy period, that is, the price is on the high side. When the dish is not “love”, it is usually 30-50 yuan per bag. To be fair, given a planned economic system, it is also somewhat reasonable. Because, after abandoning the wholesale, retail and distribution system of market economy, the market distribution and transportation system which has been run in for many years has also been stopped. The cost of the distribution system of planned economy is much higher than that of market economy. If normal commercial vehicles are not allowed to enter the city, Wuhan will not be able to maintain the efficient distribution system of the original market economy. Using garbage trucks or emergency trucks to transport meat, of course, reflects the moral defects that government officials ignore people’s physical health and human dignity, but also exposes their dilemma of not being able to allocate transport vehicles in time and effectively. Unable to plan, low efficiency, high cost. Under this system framework, some Wuhan residents still understand the high price. However, on the other hand, because the government has abandoned the market, the supermarket designated by the government or the government is equivalent to an exclusive monopoly. In the absence of competition, the price will naturally become a monopoly high price. At this time, some people can only endure for a while, while others can obtain the source of goods through other ways, such as group buying, and sell them to the residents at a low price. This balances monopoly.

Of course, planned economy is compulsory, otherwise it will not be able to maintain operation. This requires specific people to impose coercive regulations on price, quantity, number of production and sales enterprises, and even limit consumers. This leads to rent-seeking opportunities. In order to protect the interests of rent-seeking, some government organizations abuse the coercive force. A video shows that the official community organization even forbids the residents to buy flour and enter the community, and has a rude attitude. It even describes its obligation to help the residents get food as its right to restrict the economic freedom of the residents, so as to exclude the residents’ self-help and avoid the legitimate behavior of high price exploitation. We have also seen many times that Wuhan urban management, industrial and commercial administration or other administrative departments abused their power during the epidemic prevention, directly robbed the goods, punished the businesses that provided the goods during the epidemic prevention, and in the name of no qualification closed the restaurants that still provided voluntary services.

The residents’ protest in Yingcheng, Xiaogan, was that the local government declared that the supply of living materials should be “implemented by the property organized by the community, and it is strictly prohibited for others to sell living materials without permission.” (Beijing News, March 13, 2020) this is a typical example of local governments transforming obligations into power and limiting people’s rights. The local government and the supermarket collude to use the monopoly position during the anti-epidemic period to distribute vegetables and meat at a high price. When the volunteers among the residents find a cheap source of goods, they abuse their power to arrest the volunteers and put down the competitors, so as to maintain their monopoly high price (Yuguangtongchen, March 12, 2020; Gaofei, March 13, 2020). This led to protests by Yingcheng residents against the illegal arrest by the police. This kind of thing is very common outside Wuhan. In a rural area of another province, a man who wanted to return to work along the coast found that he needed to pass seven checkpoints to get the certificate of returning to work, but he still couldn’t succeed. Finally, it was found that you can go as long as you pay the traffic police (Sister Dandan, February 17, 2020). It turns out that the rent-seeking effect of government regulation does not need to be taught, and someone will soon make money.

The planned economy will also bring great inconvenience to consumers. Although the operation related to transaction seems unimportant, in the market economy, most of them have become market-oriented behaviors, and we pay for them, but it brings convenience. Some of them bear the cost of distribution for promotion. We’ve forgotten the days when we were queuing up to buy the most popular goods. In today’s Wuhan, due to the sudden disappearance of the market, the professional distribution of those marketization disappeared. Instead, it changed into the distribution of street cadres and volunteers, because either the information was not smooth, or the vulnerable people needed to get it by themselves, they needed to make efforts to carry it, sometimes they had to climb multiple stairs, so that the vulnerable groups could not get it, or it was difficult to get it. It is reported that in some remote communities or old cities in Wuhan, due to the lack of the coverage of the government’s grass-roots institutions, there has been no food and vegetable ration for quite a long time. What’s more, it’s the situation of the elderly or the infirm. For example, a single mother with mental illness once came out to fight for food, but was beaten by the residents’ committee, and could not get food for a long time, resulting in the starvation of her one and a half year old child (funny, March 16, 2020).

Because this kind of grass-roots government organizations only cover local residents, some migrant workers, or people who travel to Wuhan on business, it is difficult to get rationing because of the epidemic in Wuhan. It is reported that some migrant workers live on the streets, many of them live on the leftovers in the garbage cans for a long time, and they even have difficulty drinking hot water due to the closure of commercial stores (night break, February 25, 2020). There are also some business or technical personnel on business trip to Wuhan who have only bought “love food” once in a month (Fengxiang bar, “Seven people stay in the Han for 47 days: having paid nearly 20000 Yuan for hotel rooms, and have bought ” love food ” only once).

Perhaps Wuhan officials will argue that the purpose of banning residents from buying vegetables directly in supermarkets is to prevent and control the epidemic. This is clearly wrong. Think about it carefully. What are the key points of epidemic prevention? It is to prevent people from gathering and contacting with each other, that is, to keep “social distance”. I have pointed out in the article “why the unconstitutionally administrative behavior will worsen the epidemic situation”, that the administrative system itself is an organization that operates by repeated close contact. Compared with the market behavior, the government administrative behavior is more likely to cause people’s aggregation and sustained close contact. Replacing the market with the government administrative department can only cause more aggregation and sustained contact between people. When people go to the supermarket to buy vegetables, they don’t have a fixed time, and they don’t repeatedly contact with a certain individual. Therefore, people are in “random contact”. If they wear masks, keep a distance with others, and use the self-service checkout which has been quite popular, the risk will be greatly reduced. If you are more careful, control the dynamic number of people in the supermarket and take the temperature automatically, it will be quite safe. And the rationing behavior of government basic level organizations and volunteers is to have a number of people keep in touch with each other, and be taken or distributed to households by community residents. At the peak, there are even many people gathering.

Novel coronavirus pneumonia in Wuhan has rebounded from more than 300 to more than 500 in from February 21st to 29th, according to an article. One of the reasons is “close contact within the closed and isolated community”, which “is directly related to the” last kilometer “of the supply of necessities.” Because whether it’s group buying, especially the government’s grass-roots organization rationing “love food” increases the contacts between people, and even causes gathering. This is quite similar to my judgment in the article “Why unconstitutionally administrative behavior will worsen the epidemic situation”, but it is more experienced. So some Wuhan residents said that in addition to the infected people who crowded hospitals, crowded supermarkets (rush to buy), group buying (or rationing and receiving “love dishes”) was the fourth batch of “infected people” (Zhang Li, March 3, 2020). Therefore, to restrict the normal operation of supermarkets, farmers’ markets and convenience stores, and prohibit commercial distribution vehicles from entering the city, not only bring inconvenience to Wuhan citizens, but also increase the possibility of being infected by the virus. If there is another incident like Yingcheng happened, it will cause a large-scale gathering of the people, and it is more likely that the police are improperly dispatched to make strong contact with the people.

Then make a comparison between China and the rest of the world. During the last SARS period in China, no city took such extreme measures, and the epidemic was finally controlled. In this fight against the COVID-19, other provinces other than Hubei, except for Wenzhou, did not abandon the existing market system, while controlled the epidemic. Look abroad again. Daegu, South Korea, is a severely affected area. Although the so-called “maximum blockade” has been implemented, it has not affected the basic travel of citizens. Supermarkets operate normally and “it is found that food materials and daily necessities can basically meet the needs” (Chen Qinhan, March 4, 2020). By March 22, South Korea had dropped to 64, after exceeding the peak of more than 800 new confirmed cases on March 3. Italy, known as “closure of cities” and “closure of country”, does not actually restrict the purchase of food and vegetables, but only limits the dynamic flow of supermarkets, and is expected to gradually decline over the peak of more than 6000 cases on March 21. We should also note that because Chinese mainland is still prohibit and warn people to disclose information about epidemic situation, we can not simply compare their data with other countries. Besides, we should pay attention to time. Daegu, South Korea, announced the “maximum blockade” on February 25, which took seven days to cross the peak of cases, while Italy announced the “closure” of the northern city on March 8, which was only 13 days before March 21. It took 22 days for Wuhan to reach its peak.

Figure 1 number of additional diagnosed cases per day in Wuhan, South Korea and ItalyPlan and marketNote: the starting point is the day when “city closure” or “maximum blockade” is implemented. It’s January 23 in Wuhan, February 25 in South Korea and March 8 in Italy. Confirmed cases are based on official data. The red dot is the highest number of cases. Wuhan’s peak did not choose the day with the largest number of cases, because it was the release of previous cases caused by the change of government personnel, and the time of the next day is accepted.

Of course, during the anti-epidemic period in Wuhan, the government may not know what to do. This is the free donation of food, vegetables and fruits from other provinces to Wuhan. At the beginning of the anti-epidemic campaign, this was undoubtedly the National People’s love for Wuhan. However, how to distribute these donated items is a problem. Because the donation is through the government, but the government does not have the function of allocating donation materials in the regular period. In the beginning, some local governments put donated materials into supermarkets for sale, but it seems morally inappropriate. So some government departments explained that they should support the hospital with the money they sold. It has also been criticized. But if they are not sold in the supermarket, some administrative departments privately distribute these donated items. Like Ezhou Public Security Bureau. In fact, Wuhan is a disaster area of infectious diseases, rather than a disaster area that is too poor to afford food, vegetables and fruits. Therefore, donated materials should be those in short supply to cure the disease. Among the conventional materials, the best support for Wuhan from other provinces should be to ensure the normal supply of Wuhan market, rather than free donation. Of course, the donation from other provinces may also be due to the improper abolition of the market and prohibition of commercial transport vehicles by Wuhan government. In any case, this is the result of the wrong actions of Wuhan government.

Because the Wuhan government improperly abandoned the market and tried to replace the market, resulting in a serious mismatch of resources, a large number of human and material resources allocation in the field which it should not and is not good at, but also can not get good results, causing the resentment of the people in Wuhan, as “Wuhan sister-in-law scolded” revealed. The community cadres who were scolded were really wronged. They were driven by the wrong decisions of their superiors and did what they could not do well. But in the field that the government should invest, we see a lot of work missing. For example, in helping vulnerable groups. According to reports, on the vehicles transporting the elderly for isolation and treatment, there were no community cadres for docking; many disabled people were not helped; some died in the home for several days but were not found; and the family infection caused by poor isolation conditions in the home was not solved. From the aspect of Wuhan government, we don’t see its sympathy for the suffering of vulnerable groups during the epidemic, its sorrow for the lost lives, and its review of the lack of work. In its view, it seems that this is the corner of its work. It has to do what it can’t do well. It doesn’t care about these people. This is the reversal of the role of the government. It would be much better if the staff who replaced or even excluded the healthy people who help themselves to count clearly the vulnerable people and focus on helping them.

Confucius said that the government should “benefit without expense”; only “benefiting people for the benefit people seek for” can it be achieved. The direct purpose of my writing this article is to hope that the Wuhan government will quickly remove the restrictions on residents’ purchase of food, fruits and vegetables, resume the normal operation of supermarkets, farmers’ markets and convenience stores, improve the daily life of Wuhan citizens, and make those retailers who rely on the flow of the market survive. There is no need for people in Wuhan to continue to pay the price for this restriction that increases the risk of infection. At the same time, in the long run, the “return of small planned economy” implemented in Wuhan once again makes us relive the low efficiency and injustice of planned economy, and makes the people of our society firmly determined to “not go back from reform”. Two years ago, those heroes who said that “big data” and “cloud computing” can realize the planned economy did not help the Wuhan government this time, which shows that they clearly understand that such a complex set of simultaneous equations is far beyond their ability, not to mention that they can not know the utility function of Wuhan people, which can not be realized at the philosophical level. Moreover, “market economy” has been written into the constitution. This time, Wuhan government abandoned the market in the name of epidemic prevention and restricted the purchase of residents, which constituted a violation of the constitution. The direct result shows that the market economy, the historically tested constitutional principle, is a kind of natural law. The administrative department violates the natural law with the arrogance of “no punishment for itself”. The natural law will tell it “wrong” in its own language: King is under the law.

Reference

“New Beijing Daily”, “why do hundreds of people gather on the basketball court in Xiaogan Yingcheng district? Official response, “March 13, 2020.

Chen Qinhan, “residents of Daegu, South Korea surrounded by epidemic and heresy: alarm rings, emergency evacuation”, Beijing News, March 4, 2020.

“In order to rework, I have been issued 7 certificates, but I still haven’t left the village”, Coldplay lab, February 17, 2020.

Sister Funny Fang, “Hubei one and a half year old girl starved to death at home! What’s the truth? Who is the real killer? “, NetEase, March 16, 2020.

“The people of Hubei didn’t get a dish you donated: black-heart property management and supermarket united ‘hurting’ people!”, Sina Weibo, March 13, 2020)

Mao Yushi, The Principle of Optimal Distribution, Jinan University Press, 2008.

Commercial Economy Research Institute of the Ministry of Commerce, new China commercial history, China finance and Economics Press, 1984.

Xu Jinbo, “more strict control over the access of Wuhan residents to residential areas to minimize the flow”, China News Agency, February 16, 2020.

“In Hubei, those unknown lives and deaths”, the little secret base, February 25, 2020.

With guangtongchen, “residents of Haishan community, Yingcheng City, Hubei gather to protest”, China digital age, March 12, 2020.

Zhang Li, Wuhan first line: “love food” becomes “sad food”, how to remedy it, Observer Network, March 3, 2020.

March 23, 2020 in Fivewoods Studio

Author: flourishflood

Economist, Confucianist

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