Steven N. S. Cheung

Steven Ng-Sheong Cheung (Traditional Chinese: 張五常; Pinyin: Zhāng Wǔcháng; born December 1, 1935), a Hong Kong born economist, specializes in the fields of transaction costs and property rights. He is also the most expensive columnist in Hong Kong.^{[citation needed]} Known for his work on private property rights and transaction costs, he achieved his fame with an economic analysis on China open-door policy after 1980s.^{[citation needed]} In his studies of economics, he focuses on economic explanation that is based on real world observation (i.e. an observation first approach). He is also the first to introduce concepts from the Chicago School of Economics into China.^{[citation needed]}

He obtained his PhD in economics from UCLA, where his teacher was American economist Armen Alchian.^{[citation needed]} He taught in the Department of Economics at the University of Hong Kong from the 1980s to 1990s. During this period, Cheung reformed the syllabus of Hong Kong's A-level Economics examination, adding the concepts of the postulate of constrained maximization, methodology, transaction cost and property right, most of which originate from the theories of the Chicago school.^{[citation needed]}

US authorities have issued an arrest warrant for Cheung on tax-evasion and conspiracy charges. Cheung fled to mainland China from Hong Kong; China has no extradition treaty with the US.

Timeline

• 1935- Born in Hong Kong
• 1941- Fled to China
• 1959-1967 Studied Economics at UCLA, PhD dissertation
• 1967-1969 - Postdoctoral research at University of Chicago, Analysis of the Theory of Share Tenancy and Variable Rural Land Resource Allocation
• 1969- Teaching at University of Washington
• 1982- Head of School of Economics and Finances of Hong Kong University
• 1998-2003 - Allegedly sold fake antiques through his store, Thesaurus Fine Arts
• 2003- Indicted by U.S. federal grand jury for alleged tax evasion
• 2005- Thesaurus Fine Arts settlement was announced by Washington Attorney General
• 2003-Current - Reside and continue writing and researching in mainland China

Notable works

Doctoral Thesis

• Cheung, Steven N S (1969) The Theory of Share Tenancy, University of Chicago Press. Reprinted in June 2000 by Acadia Press.
• Cheung, Steven N S (2001) Economic Explanation, Arcadia Press, Reprinted in December 2002 by Aracadia Press
  • Book I, The Science of Demand

Selected Journal Articles

• Cheung, Steven N S (1969) "Transaction Costs, Risk Aversion, and the Choice of Contractual Arrangements," Journal of Law and Economics, Vol. 12, Issue 1, pp. 23–42.
• Cheung, Steven N S (1970) "The Structure of a Contract and the Theory of a Non-Exclusive Resource," Journal of Law and Economics, Vol. 13, Issue 1, pp. 49–70.
• Cheung, Steven N S (1970) "Enforcement of Property Rights in Children, and the Marriage Contract," Economic Journal, Vol. 82, Issue 326, pp. 641–57.
• Cheung, Steven N S (1973) "The Fable of the Bees: An Economic Investigation," Journal of Law and Economics, Vol. 16, Issue 1, pp. 11–33.
• Cheung, Steven N S (1974) "A Theory of Price Control," Journal of Law and Economics, Vol. 17, Issue 1, pp. 53–71.
• Cheung, Steven N S (1975) "Roofs or Stars: The Stated Intents and Actual Effects of a Rents Ordinance," Economic Inquiry, Volume 13, Issue 1, pp. 1–21.
• Cheung, Steven N S (1982) "Property Rights in Trade Secrets," Economic Inquiry, Volume 20, Issue 1, pp. 40–53.
• Cheung, Steven N S (1977) "Why are better seats 'underpriced'," Economic Inquiry, Volume 15, Issue 4, pp. 513–522.
• Cheung, Steven N S (1983) "The Contractual Nature of The Firm," Journal of Law and Economics, Vol. 26, Issue 1, pp. 1–26.
• Cheung, Steven N S (1995) "Economic Interactions: China vis-a-vis Hong Kong," Contemporary Economic Policy, Vol. 13, Issue 1, pp. 1–9.
• Cheung, Steven N S (1996) "A Simplistic General Equilibrium Theory of Corruption," Contemporary Economic Policy, Vol. 14, Issue 3, pp. 1–5.
• Cheung, Steven N S (1998) "Deng Xiaoping's Great Transformation," Contemporary Economic Policy, Vol. 16, Issue 2, pp. 125–35.
• Cheung, Steven N S (1998) "The Curse of Democracy as an Instrument of Reform in Collapsed Communist Economies," Contemporary Economic Policy, Volume 16, Issue 2, pp. 247–49.

Unlike modern mainstream economists, Cheung's analysis does not rely on advanced mathematical techniques but solely on the two basic building blocks of price theory: one is the axiom of constrained maximisation and the other, the law of demand (one that already incorporates the law of diminishing marginal returns).^{[citation needed]} One of the constraints which he emphasizes most is transaction cost (or better termed institutional cost).^{[citation needed]}

His theory of share tenancy has enhanced the understanding of contractual arrangement, which was largely ignored by neo-classical economists.^{[citation needed]} According to Cheung, sharecropping is not necessarily exploitative. It will achieve the same efficient allocation as labor markets under competition and zero transaction costs (Cheung, 1968)^[1]. In the presence of transaction costs, sharecropping can be efficient by lowering the monitoring costs of wage contracts and increasing risk-sharing benefits relative to rent contracts (Cheung, 1969). This implication is revolutionary; sharecropping was perceived as an inferior arrangement for years. After the publication of The Fable of The Bees, our perception of externalities is no longer the same: as long as corresponding property rights are clearly delineated, OR transaction cost is zero, externalities can be internalized through private negotiation/contract arrangement without government's intervention. In 1983, Cheung published probably his most important journal article, The Contractual Nature of The Firm. While a firm cannot be defined easily, Cheung interprets it as a kind of contractual arrangement being used to replace the market (i.e. price mechanism) in order to reduce transaction costs (e.g. the cost of price searching).

Original thinking

Nobel Prize winners like Ronald Coase^[2] and Joseph E. Stiglitz^[3] have acknowledged the contribution by Cheung in their respective Nobel lectures.

Contribution to economics and China's economic development

Chueng's contribution to economics and China's economic development can be roughly grouped in the following areas,

1. New Institutional Economics
   1. how different kinds of contractual arrangement affect transaction costs, which are often ignored by New Classical economists
   2. realizing the importance of transaction costs (as Cheung often mentions in his writings, if there is no transaction costs (the original starting point assumption by Coase), there is no difference in using different institutional arrangements (e.g. market or government)).
   3. the nature of the firm (a government, to a certain extent, is a firm and can be more efficient than the market in some areas),
2. Methodology
   1. emphasis on economic explanation (according to Cheung, economic explanation is the ONLY objective of the study of economics);
   2. the analysis of relevant and observable real world constraints: Adam Smith's tradition,
   3. downward sloping demand curve: Neoclassical tradition,
   4. theories must be refutable (Cheung considers many mainstream concepts not observable, leading to the non-refutable nature of many theories (e.g. utilities, welfare)
   5. focus on capturing the underlying and relevant constraints to explain economic phenomena that might seem odd and strange on the surface.
3. China's economic development
   1. Considerable influence among the Chinese speaking population (most of his work after 1982 are written in Chinese);
   2. Prediction of China's institutional reform (which, in general, has been quite accurate)
   3. Analysis of the deficiencies in the Chinese state owned enterprises

Comments on China's modernization

He had written many books (in Chinese) commenting on China's modernization programs from an economic point of view. In 1980s, Cheung strongly supported an economic transformation of China as a market economy. However, in that decade, China went through serious inflation, leading to strong economic, political and social tensions.

However, after 1992, China continued to reform economically. Steven Cheung claimed that most of his predictions have come true. One of his major ideas, the replacing of state owned enterprises by private enterprises, turns out to be very consistent with the direction taken by Chinese political leaders and policy makers.

Tax fraud charges and US arrest warrant

On January 28, 2003, Cheung was indicted on thirteen counts by a US federal grand jury. The charges consisted of six counts of filing a false income tax return, six counts of filing false foreign bank account reports, and one count of Consipiracy to Defraud the United States. Linda Su Cheung, the wife of Steven N.S. Cheung, was also indicted on the latter count.

Cheung and his wife were to be arraigned on February 20, 2003. However, they failed to appear. Consequently, arrest warrants were issued.

Originally a professor at University of Hong Kong, because of the extradition agreements between the US and Hong Kong, Cheung has since stayed in mainland China, a country that has no such agreements with America.

Currently, Cheung lives in Shenzhen. He now still writes books and works as a columnist for the Hong Kong newspaper Apple Daily. Occasionally, he pays visits to various universities in mainland China.

Selling fake antiques

From 1998 to 2003 Steven N. S. Cheung Inc. owned an antique dealer in Seattle called Thesaurus Fine Arts, which specialized in Asian antique pieces. The store closed when a series of investigative reports in the Seattle Times revealed that many of the antiques were fake, and whose old ages had been certified by a lab owned by Steven Cheung.

In 2004, the Washington State Attorney General filed consumer fraud charges against Thesaurus Fine Arts. In 2005 Thesaurus Fine Arts settled for up to $550,000 in fines, attorney fees, and restitution. However, as part of the settlement Cheung himself was dropped from the case.

References

External links

• Steven Cheung's official blog (in Simplified Chinese)
• Steven Cheung's video interviews (with Chinese subtitles)
• Department of Justice Statement on Warrants
• Seattle Times investigative reports on Thesaurus Fine Arts