Incomplete Contract and Control: Discussion Between President Chow and Nobel Laureate Economist Oliver Hart
|NCCU President Edward Chow has conversation with Hart. PC: Chi Chiuan Lai.|
|Masters gather together to join the discussion.
(From right) NCCU President Edward Chow, Asia University President Tsai Jin Fa, and CEO of Chang Hwa Bank Chang Ming Dao. PC: Chi Chiuan Lai.
|NCCU President Edward Chow take picture with Hart after discussion. PC: Chi Chiuan Lai.|
Campus Reporter/ GeuiYu Yi (衣桂瑜) & WenLing Wang (王文伶)
The 2017 Master Forum took place on October 16, bringing together the influential arrays of speakers-- statesmen, business leaders, scholars and authorities. National Chengchi University (NCCU) President Edward Chow (周行一) was invited to join the panel discussion with Oliver Hart, the 2016 Nobel laureate in economics. The in-depth discussion encompassed both international and domestic issues, such as the presidency of Trump, Taiwan’s contention on tax reform, pay raise on civic servants and referendum.
Hart addressed the keynote speech on “Incomplete Contract and Control.” In the theory of incomplete contracts, considering the impossibilities to predict all future eventualities, Hart emphasized the importance of specifying “residual rights of control” in the contract. Residual rights of control refer to rights to make decisions in certain circumstances, maximizing profit for entities involved. The theory of incomplete contracts provided the theoretical model, through which the point of residual rights of control is located. The theory can be applied to different cases, such as the negotiation between the startups and investors and the trade- off between the CEO and shareholders.
In the panel discussion, concerning the practical contributions and applications of the theory of incomplete contracts, NCCU President Edward Chow referred to international political and economic issues. The U.S. President Donald Trump once condemned the NAFTA (北美自由貿易協議) as the worst trade deal made by any country, withdrawing from TPP (跨太平洋夥伴協定) and further expressing his special contempt for the JCPOA (聯合全面行動方案；伊朗核協議). Following business strategies and patterns, Trump was considered tough and unyielding as NCCU President Edward Chow stated. Hart answered he could not fully agree to Trump’s acts. He further indicated that the ultimate goal of contracts and agreements was a win-win solution. Under a reasonable and agreeable condition, profit distribution could be readjusted. Thus, the denouncement of “the worst trade deal” was overstated.
In addition, Taiwanese people hold strong interest in the policy about tax reform and pay raise of civil servant. NCCU President Edward Chow questioned whether these policies can stimulate horizontal growth of people’s salary. Hart considered that wage stagnation is a common problem in every country, and t the government should reconsider its role. From the perspective of economic theory, government should not intervene too much with the company or forcibly regulate them to raise salary.
Another controversial issue in Taiwan,the abolition of nuclear energy, may be decided by referendum, upon which President Edward Chow mentioned a statement from The Economist that dealing polarized issue with referendum is not an ideal way. Responding to the issue, Hart agreed that democracy must consult people’s opinions , and asserted that the government should have foresighted vision with the system of referendum and citizen needs politicians to make political decision for them. He pointed out that all local law regulations belonged to “incomplete contract”, and though even the research can’t foresee how to enact a “complete contract”, we can at least discern the problem.
In the 2017 Master Forum, Hart not only had an in-depth conversation with President Edward Chow, but also had a fruitful discussion with authorities in industry academics. Master Forum has been holding for ten years and has invited 15 Nobel prize winners to Taiwan. Apart from Hart , Master Forum has invited many masters in different fields such as Eric S. Maskin, a master in game theory, to talk about designing system, and Paul Robin Krugman ,a renowned columnist in New York Times, to discuss about global economic prospect. Through launching the Master Forum, NCCU hops to keep continuous communication between masters and authorities in industry, government and university.