Mandatory Institutional Change, Induced Institutional Change and Resolving the "Tragedy of the Commons" in Reform: On the Externality of Reform and Model Choice

Speaker：Liu Ruiming, Professor, Renmin University of China

Host：Zhang Li, Professor, Lingnan College

Time and Date：10:00, April 16, 2026 (Thursday)

Venue：Room 104, Mayingbiao Hall

Language：Chinese

Abstract：

This paper focuses on a key contradiction in the reform process: why do reforms that theoretically generate enormous social benefits often fall into the "tragedy of the commons" and fail to advance? The study examines the applicable conditions and transformation logic of two fundamental paths of institutional change—induced change and mandatory change—when promoting reforms. The research finds that when reforms exhibit strong positive externality characteristics, local governments face incentive distortions of "localized costs and externalized benefits," falling into a collective waiting "free-rider" dilemma, resulting in a typical "reform tragedy of the commons." In this context, relying solely on induced consultations among local governments often fails due to information asymmetry and contract enforcement difficulties. Against this backdrop, the central government initiating mandatory institutional change as an external authority becomes a necessary prerequisite for advancing reform.

However, central intervention itself faces a deep strategic trade-off: if adopting a "coordinated consultation" flexible intervention model, although it can leverage local information advantages to optimize responsibility allocation, it triggers persistent "war of attrition" among local governments regarding cost-sharing and benefit compensation, causing the reform process to continuously delay in negotiations; if shifting to a "administrative directive" rigid intervention model, while it can quickly break negotiation stalemates and ensure reform initiation, it may result in mismatched responsible parties due to information limitations, reducing resource allocation efficiency. Therefore, effective reform advancement is not simply choosing between "induced" and "mandatory," but requires strategic combination and dynamic switching of the two institutional change models based on externality intensity, information structure, and time urgency. This paper, starting from the micro-mechanisms of reform externality, reveals the internal logic of institutional change model selection, providing a new theoretical perspective for resolving reform delays and cross-regional reform coordination dilemmas.

Profile:

Liu Ruiming is a Wu Yuzhang Chair Professor at Renmin University of China, a Selected Participant in a National Major Talent Program, Executive Director of the State-owned Economy Research Institute, and Deputy Director of the Capital Development and Strategy Research Institute. He also serves as Associate Editor of Industrial Economic Review. His main research areas include transition economics and development economics.

As the first author or corresponding author, he has published more than 60 papers in journals such as Economic Research Journal, Management World, China Economic Quarterly, The Journal of World Economy, China Industrial Economics, and Research Policy. He has led multiple national and provincial research projects, including major projects from the National Social Science Fund and the National Natural Science Foundation of China. He has received academic honors including the "Ministry of Education Award for Outstanding Scientific Research Achievements in Chinese Higher Education Institutions," the "4th Zhang Peigang Development Economics Award for Young Scholars," the "6th Mundell-Huangda Prize EconomicsAward," the "1st Tan Chongtai Development Economics Award," and the "4th Hong Yinxing Economics Award."